Tesla Is a Winner From the UAW Strike, But Not the Biggest. 2 Other Stocks to Watch.

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The current strike will likely reset the domestic bar on labor costs.

The contentious labor negotiations between the United Auto Workers and the Detroit-Three auto makers will reverberate across the industry for years to come. Most obviously, a new deal with substantially higher labor costs for U.S. hourly workers threatens to put General Motors, Ford Motor, and Chrysler parent Stellantis behind competitors.

The Tesla-Big Three dynamic is a little like what has happened at FedEx —primarily a nonunion employer—and United Parcel Service —where many workers are represented by the Teamsters. Early in the pandemic, Wall Street cited a labor cost advantage for UPS. Now FedEx’s big wage increases paid earlier in the pandemic are in the past, and UPS—like the Detroit Three—is facing cost headwinds after the Teamsters approved a new contract in August with annual wage increases in the 5% to 6% range.

The car business isn’t insulated from foreign competition though, which means both Tesla and the Detroit-Three have to pay attention to foreign auto makers. The car market is also more fragmented than parcel shipping, making consistent price increases to offset cost inflation more difficult. Average total compensation for a UAW worker, including pension and healthcare, totals some $120,000 a year, according to the Federal Reserve. About half of that is wages. That makes the total UAW labor spending in the range of $20 billion a year.

 

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