The Never-Ending Story During his weekly update on Friday, UAW President Shawn Fain exonerated Ford, GM and Stellar (Baa2 p, BBB e, BBB+ e) of new strikes. However, the union is changing tactics again, as shown by Thursday’s stoppage at the Ford assembly plant, and will no longer wait for the usual Friday update to announce new measures. This decision, which will make it more difficult for manufacturers to predict the actions of the UAW, is a direct result of the slowness with which negotiations on new agreements are progressing, according to the UAW. About a fifth of all UAW members employed by the Big Three are now on strike (and there are also workers affected by temporary layoffs as a result of the strike) while the union’s strike fund is estimated at over USD 700m.
Research Opinion: On the part of the manufacturers, it is worth noting that the current “baseline assumption” of the rating agencies is for a 6-8 week strike and, for now. we see that the labor dispute presents very limited risks to the ratings of GM, Ford, and Stellantis (although it will take some time). This is because the manufacturers have strong liquidity positions. Pro forma available liquidity of USD 45-70mm between the three variances estimated negative impact on free cash flow of USD 4-5mm (each) from a 4-6 week disruption to production, using as an example the 40-day strike at GM in 2019 and the stoppage of production at Ford for 6-8 weeks in 1H20 due to the Covid-19 pandemic. It is also worth noting that the UAW’s strike strategy affected only one area of production. We have a recommendation NEUTRAL for Stellantis but we note that the EUR STLA bond is trading very narrowly against the better-rated EUR VW.