Ford Motor
is avoiding the worst of unions’ wrath in heated 2023 labor negotiations. That should have investors asking why. And asking whether that’s a good thing for the stock down the road.
Ford (ticker F) is on a labor roll. The United Auto Workers didn’t expand its strike against the company Friday, citing progress made. The union opted to strike at more
General Motors
(GM ) and
Stellantis
(STLA) facilities. Canadian auto workers represented by Unifor ratified a new labor agreement with Ford on Sunday. No strike was needed.
“Historically Ford has had the best relationship with the UAW and has probably done a better job communicating with the union,” says Benchmark analyst Mike Ward. “Eventually, the agreements end up similar but Ford has the most US employees so it makes sense for it to try to set the agreement aligned with its needs.”
His people-point is interesting. Ford has about 173,000 employees worldwide, about 86,000 in the U.S. Of the 86,000, about 57,000 are represented by the UAW. About 33% of Ford employees are UAW.
That number for GM is about 28%. It has about 167,000 employees worldwide, about 92,000 in the U.S., and about 46,000 U.S. workers represented by unions. The vast majority of the unionized employees are represented by the UAW. Stellantis has about 300,000 employees globally. About 95,000 are in North America and of those about 41,000 are represented by the UAW. Only about 14% of Stellantis workers are represented by the UAW.
Keeping a lot of workers happy is a good idea. What’s more, if Ward is right and U.S. labor agreements are very similar then having the best relationship with the same costs is an advantage.
Stellantis has its own advantage in UAW negotiations. Most of its operations are outside of the U.S. The Chrysler parent generated $191 billion in 2022 global sales. Less than half came from North America, according to FactSet. GM generated about $144 billion in automotive sales in 2022. Almost 90% came from North America. (GM does have joint venture income from China.) Ford, for its part, generated about $149 billion in auto sales in 2022 with more than 70% generated in North America.
There is simply more at stake for GM and Ford given how the businesses have developed. That’s another reason to pay closer attention to UAW relationships.
Still, Ford is doing a little better than GM lately. “Could be the family trying to make up for the fraught history between the company and the union or just because they think about the issue differently,” says Datatrek cofounder and former auto analyst Nicholas Colas. “Ford could just be trying to preserve the relationship now.”
Ford’s reputation with labor wasn’t always positive. Company founder Henry Ford was anti-union. What’s more, Ford was the last of the major auto makers to agree to a contract with the UAW in 1941.
Ford CEO Jim Farley appears to see things differently than Henry Ford or his current CEO peers. GM CEO Mary Barra and Stellantis CEO Carlos Taveres value labor relations too, but Farley speaks a little differently. He doesn’t typically mix the needs of the corporation in when he’s talking about the needs of employees.
“Ford stands apart from all the other automakers and most other major industrial companies,” said CEO Jim Farley on the company’s second-quarter earnings conference call in July. “‘We believe, as [UAW leadership does], that Ford should do our part to support the middle class, create vibrant communities, and build a strong American and industrial base.”
GM’s message is a little different. “Where our employees are at right today, it’s a good middle-class wage, that we’ll work through the negotiations and manage that and manage the overall cost like we do every time,” said Barra in November 2022. Barra added in a September 14 video that GM has made “compelling and unprecedented” offers and that the company has been bargaining “in good faith.” pointing out that GM is trying to compete against non-unionized auto makers around the globe.
Tavares mentions the competitive landscape too when talking about labor. “It is important for our employees that we protect not only the profitability of the company that led to the payment of $14,000 of performance bonus on the basis of the 2022 results,” he said on his company’s results call in July.
Maybe Ford’s current advantage boils down to management personality.
Whatever the reason, it hasn’t really shown up in Ford stock yet. Ford shares are up about 5% over the past 12 months, while the
S&P 500
is up about 18% over the same period. GM stock is down 5%. Ford is better than that, but Stellantis shares are up about 57%.
Ford stock trades for about 6.6 times estimated 2024 earnings. Better than the 4.8 times multiple of GM stock and the 3.4 times multiple of Stellantis shares. That’s one thing Ford can boast about. Still, a multiple below 7 times isn’t very good. The S&P 500 trades for about 17.7 times estimated 2024 earnings.
Strong labor relations can’t hurt, but they don’t determine the direction of car stocks in the short or long-run. That might be a lesson for the UAW. How the car stocks trade is a reflection of how investors view the health of the overall industry.
Both sides should want to participate in a healthy, growing industry.
Write to Al Root at allen.root@dowjones.com
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