Fitch Ratings said Friday the targeted strikes by auto workers represented by the United Auto Workers union will have a limited financial impact on the Big Three carmakers, with only one of each of their plants affected for now.
Nearly 13,000 U.S. auto workers went on strike early Friday after the three automakers and the UAW failed to reach an agreement before their national contract expired just before midnight.
Workers at a Ford Motor Co.
F,
plant in Michigan, a General Motors Co.
GM,
plant in Missouri and a Stellantis N.V.
STLA,
plant in Ohio are the first to put down tools, although UAW President Shawn Fain has said others could join later and asked all 150,000 members to be ready if and when they’re called to strike.
A strike at all three U.S. carmakers is a break with tradition, as the union for many years has elected to center strike efforts at one company to protect its strike fund and picket-line firepower.
For more, read: UAW strike: 12,700 Ford, GM and Stellantis auto workers walk off the job
“It seems likely the UAW will try to ratchet up pressure on the automakers over time by shifting the strike to more impactful plants and adding more plants to the strike,” Stephen Brown, a senior director at Fitch, said in emailed comments. “The impact on the automakers of striking individual plants could be similar to the semiconductor-induced disruptions that we saw over the past few years.”
Fitch has already incorporated the potential impact of strikes in its recent decision to upgrade its ratings of Ford and GM, he said.
“Ford, GM and Stellantis all have robust liquidity positions that will help them to withstand a potentially drawn-out period of production disruption. Based on June 30 figures, we estimate Ford has over $50 billion of cash and credit facility capacity, while GM has nearly $40 billion,” said Brown.
Fitch upgraded its ratings on Ford to BBB- from BB+ in early September, restoring it to investment grade from speculative, or “junk,” status. The move “reflects Fitch’s view that the supply chain challenges and resulting production volatility of the past two years have largely abated. It also reflects Fitch’s expectation that the company’s [earnings before interest and taxes] margins, [free cash flow] margins and leverage will all remain stronger over the intermediate term than those outlined in Fitch’s previous positive rating sensitivities,” the agency wrote at the time.
Fitch also upgraded GM in September to BBB from BBB-.
“GM continues to maintain a strong liquidity position and a balanced capital allocation policy that prioritizes financial flexibility and low leverage,” it said at the time.
Ford shares were up 0.3% Friday, while GM was up 1.3% and Stellantis was up 1%.,
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