Elon Musk and Tesla poised to benefit from ‘highly likely’ UAW strike against Detroit’s Big 3—and the timing is just right

Elon Musk, the head of Tesla, doesn't support unions typically, but he might be happy with Shawn Fain's current actions. Shawn Fain, the leader of the United Auto Workers, is standing firm against Detroit's three largest automobile manufacturers while making bold demands in contract negotiations. If an agreement isn't reached, around 146000 UAW workers are expected to go on strike as soon as Friday.

This would be advantageous for Tesla as traditional car manufacturers are increasing their focus on electric vehicles.

An analyst from Wedbush named Dan Ives stated that if there is a strike, the electric vehicle (EV) roadmap and production could be postponed until 2024, causing delays during an important time for GM, Ford, and Stellantis. However, Ives believes that Tesla would benefit from any stoppage of work at its competitors.

A professor of business from the University of Michigan named Erik Gordon mentioned to WNEM that this upcoming strike might turn out to be the most severe and dramatic one noted in the past 50 years. A Barclays analyst named Dan Levy also expressed his thoughts on the matter by saying that this strike is very probable to occur.

If a strike were to occur, it would not only decrease production for the car companies located in Detroit, but it would also have a negative effect on their profits. A strike against General Motors, Ford, and Stellantis lasting for 10 days would result in a financial loss of almost $1 billion, as stated by the Anderson Economic Group.

According to Sam Fiorani, an analyst who spoke to the Associated Press, the Detroit automakers had close to 2 million automobiles available at the close of July. However, if there were a work stoppage that lasted three weeks or more, the surplus stock would quickly disappear. This would result in an increase in the prices of vehicles and more sales going to non-union brands.

Naturally, Tesla is one of those prominent brands.

Musk is against labor unions. Workers at Tesla make around $45 per hour in both wages and benefits. Meanwhile, unions affiliated with the Detroit Three earn between $64 and $67 per hour, as stated by Reuters. Tesla's advantage over its competitors includes various manufacturing methods and not having to give a share of profits to dealers.

Back in March, a group of three judges made a verdict that Musk acted against the law by warning employees about losing their stock options if they decided to have union representation. Fast forward to July, and a higher court that handles appeals announced that they would take another look at the case.

In 2018, Musk tweeted a message that got to the core of a bigger issue. He expressed that his Tesla team could choose to join a union at their car plant if they wanted to. However, he questioned why they would want to pay union fees and forfeit stock options for no reason. Musk also emphasized how the safety record at the plant had improved significantly and how all employees were already receiving health benefits.

During February, employees at a Tesla manufacturing plant located in Buffalo were terminated soon after commencing their attempts to form a union. Workers United claimed that the dismissals were an unlawful act of revenge. On the contrary, Tesla disputed this allegation and claimed in their blog that they had already decided to release the workers prior to the organizing attempt due to unsatisfactory work performance.

This year, Tesla has been causing a stir in the automotive industry by slashing prices, which has caused frustration amongst its own customers. These customers may have recently purchased a Tesla at a higher price, only for the price to suddenly drop, or they may have been planning to sell a used Tesla which quickly lost value due to the price cuts.

Furthermore, the big car manufacturers in Detroit are also anxious about the emergence of electric vehicle competitors from China, who are presently exporting to Europe and other regions, but not yet to the United States. During a finance event in May, Ford CEO Jim Farley expressed concern that the Chinese will dominate the industry.

In June, Bill Ford Jr., who is the executive chairman of Ford, said that they are not currently present but they will arrive soon and it's important for us to be prepared.

Tesla could possibly be better prepared compared to its counterparts in Detroit, and there is no indication of any strike affecting its operations in the near future.

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