UAW Strikes Stellantis’ Michigan Truck Plant; 6,800 Walk Out (3)

United Auto Workers union members at Stellantis NV’s lucrative truck plant in Sterling Heights, Michigan, walked off the job Monday morning, a surprise hit designed to extract further concessions in the sixth week of the strike against Detroit’s three biggest automakers.

The plant, which makes the Ram 1500 pickup, the automaker’s bestselling model, employs about 6,800 union members, the UAW said in a statement. That brings the total number of workers on strike at Stellantis to 14,750, and more than 40,000 across all three car companies.

The UAW escalated its strike against Stellantis as it called out the automaker for lagging behind Ford Motor Co. and General Motors Co. in addressing its demands.

“Currently, Stellantis has the worst proposal on the table regarding wage progression, temporary worker pay and conversion to full-time, cost-of-living adjustments (COLA), and more,” the UAW said in a statement Monday.

Stellantis said it was “outraged” at the strike escalation even after it sweetened its offer to the union last week with a 23% wage increase and a 50% increase in its retirement contributions. The UAW is now asking for a 25% raise, Bloomberg reported last week.

“The UAW has decided to cause further harm to the entire automotive industry as well as our local, state and national economies,” the company said in an emailed statement. “These actions not only decrease our market share, but also impact our profitability and therefore, our ability to compete, invest and preserve the record profit sharing payments our employees have enjoyed over the past two years.”

Negotiations are still active and the union is waiting for a counteroffer from Ford, and plans to respond to the latest offers from GM and Stellantis shortly, according to a person familiar with the union’s plans. UAW President Shawn Fain will likely give another update later this week, the person said.

Fain last week raised hopes that a deal was close while also warning that getting to the finish line could require striking more plants to pressure the companies into some final concessions.

“We’ve got cards left to play and they’ve got money left to spend,” Fain said Oct. 20. “That’s the hardest part of the strike. Right before a deal is when there is the most aggressive push for that last mile.”

Stellantis’ US shares rose 0.9% at 2:56 p.m. in New York. The have rallied 34% this year while GM stock has fallen nearly 12% and Ford shares have been little changed.

In going after the Sterling Heights plant, Fain is ratcheting up pressure on Chief Executive Officer Carlos Tavares, who has transformed the underdog of Detroit to the most profitable by tightly managing costs. Stellantis’ adjusted operating margin in the first half of this year was 14.4%. Ford reported an adjusted EBIT margin of 8.3% in the first half, and GM reported a 9.7% margin.

The Ram truck plant in Sterling Heights is the company’s largest US assembly plant. Stellantis had a 114-day supply of the Ram 1500 pickup as of Oct. 17, well above the 62-day industry average, according to Cox Automotive.

Sterling Heights was forecast to produce 300,000 vehicles this year, according to researcher AutoForecast Solutions. Stellantis makes an older, less expensive version of the Ram 1500, the Ram Classic, at its plant in Warren, Michigan. It produces Classics and a heavy-duty version of the Ram truck in Saltillo, Mexico. The company sold more than 468,000 Ram trucks in the US last year, making it the highest-volume model.

“Taking out one large plant from Stellantis is a big hit” because it has fewer US plants than GM or Ford, said Sam Fiorani, vice president for global forecasting at AutoForecast Solutions.

Temporary Workers

About 12% of Stellantis’ production workforce is made up of lower-paid temporary workers, the highest proportion of the Detroit Three. Under the current contract, temp workers at Stellantis start at $15.78 an hour. They have no guaranteed path to a full-time production job, which starts at $18.04 and tops out at $31.77 after eight years. Ford and GM temps start at $16.67 an hour, and the companies are required to convert them to full time after a certain period.

Stellantis has offered to boost temp worker pay to $20 an hour, compared with a $21 an hour offer at Ford and GM. The union is still negotiating with all three for a path for future temps to be converted to full-time work, Fain said Friday.

Going into the negotiations, Stellantis, formed from the 2021 merger of Fiat Chrysler and France’s PSA Group, pushed to expand its pool of temp workers to help navigate the transition to electric vehicles. Tavares says EVs will cost 40% more to make than combustion cars, a burden he can’t pass to consumers.

In addition to SHAP, as the Sterling Heights facility is known, roughly 5,800 workers walked off the job at a Stellantis Jeep plant in Toledo, Ohio, at the outset of the strike Sept. 15, and another 2,150 workers at its parts distribution centers have been on strike since Sept. 22.

WATCH: In the face of mounting competition from the likes of Tesla and China, the UAW and carmakers alike are fighting for their future.

Source: Bloomberg

Taking down SHAP means a weekly production loss of 5,600 trucks, which will more than double the impact of the strike on Stellantis to more than $200 million in lost profits a week, according to estimates from Wells Fargo analyst Colin Langan.

Before Monday’s walkout, the strike had already cost Detroit’s three major automakers more than $2 billion in lost earnings before interest and taxes, according to an analysis by Deutsche Bank analyst Emmanuel Rosner. The estimated $399 million loss at Stellantis had been the least among the three, with GM racking up $802 million in lost profits and Ford foregoing $888 million in earnings before interest and taxes, Rosner wrote in an Oct. 23 note.

The UAW’s selective strike strategy has been successful in preserving its strike fund, according to Langan. Before the union struck the Ram plant, Langan estimated the UAW strike fund would fall to $750 million by the end of this week, from about $825 million before the strike began Sept. 15.

“That implies that the UAW can continue the current pace of strikes for 36 more weeks,” Langan wrote.

(Updates with Stellantis comment in sixth paragraph)

--With assistance from Josh Eidelson and David Welch.

To contact the reporters on this story:
Gabrielle Coppola in Detroit at gcoppola@bloomberg.net;
Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net

To contact the editors responsible for this story:
Chester Dawson at cdawson54@bloomberg.net

Anne Cronin

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