FXCM US.AUTO Stock Basket in Focus as United Auto Workers Strike

Almost 13,000 United Auto Workers (UAW) members went on strike at three American assembly facilities belonging to General Motors, Ford Motor, and Stellantis. This after the union and the automotive companies failed to come to an agreement regarding a fresh labour contract on Thursday evening.

The strike action is at a Ford Motor (F.us) plant in Michigan, a General Motors (GM.us) plant in Missouri and a Stellantis NV (STLA.us) plant in Ohio. The union picked these plants as targets for their planned strikes. UAW President Shawn Fain, who's been in negotiations with all three car companies simultaneously, revealed this strategy on Wednesday night. He has been quite firm in not giving in much to the union's demands.

Usually, the union chooses to concentrate their strikes on one car company at a time, which helps them save money for strikes and have a more robust picket line. But this time, they are changing their approach by going on strike at all three major US car manufacturers. Fain suggested that they might expand the strike to involve more plants to keep the car companies unsure about their plans. They have also encouraged all 150,000 UAW members to be ready in case they are called upon to strike.

Outside the Ford facility, Fain said, "We got to do what we got to do to get our share of economic and social justice in this this strike. We're going to be out here until we get our share of economic justice. And it doesn't matter how long it takes."

The union has significant demands, including substantial 40% hourly pay raises, a shorter 32-hour workweek, a return to traditional pensions, the elimination of various pay tiers, and the reinstatement of cost-of-living adjustments. Additionally, they aim to enhance benefits for retirees and improve vacation and family leave benefits.

The car manufacturers have put forward substantial proposals to address several of the UAW's significant demands, but not all of them. Their offers include a roughly 20% wage increase, introducing cost-of-living adjustments, revising profit-sharing bonuses, and enhancing vacation and family leave benefits. Nonetheless, the union believes these offers fall short of their expectations.

Typically, targeted strikes concentrate on crucial plants, causing other facilities to halt operations due to parts shortages. While this approach is not novel, Fain's strategy for conducting these work stoppages differs. He aims to begin with selective strikes at specific plants and may expand the strikes depending on the negotiation progress. Furthermore, the choice of specific assembly plants for these strikes is unconventional.

US AUTOMOTIVE Stock Basket

Keep an eye on FXCM's US AUTOMOTIVE stock basket which includes Ford, GM and Stellantis NV. Interestingly the basket also includes Tesla, whose workforce is not unionised. I.e., Tesla stock may be a beneficiary of the strike action.

Currently, the basket's green 5-day EMA is above its orange 10-day EMA, in a bullish formation. Its RSI is also on the bullish side of 50 (blue rectangle). However, the strike action will create headwinds for the basket, and may affect its trend if prolonged.