The United Auto Workers (UAW) strike is spreading and deepening, and a very prominent ally has joined the union’s side. On Tuesday, the share prices of the Big Three automakers, all of which are directly affected by the protest, sank as a result.
Investors clearly considered numerous electric vehicle (EV) stocks as better bets. In consequence, the price of Lucid Group (LCID 3.51%) rose by 3.5%, that of next-generation truckmaker Nikola (NKLA 7.53%) improved by almost 8%, utility vehicle manufacturer Canoo (GOEV 2.71%) saw a 2% bump, and Polestar Automotive (PSNY 10.09%) leaped 10% higher.
On Tuesday, no less an official than President Joe Biden joined a UAW picket line. Symbolically, he did so at a General Motors distribution warehouse in the vicinity of Detroit, the heart of the U.S. auto industry.
Biden is unabashedly on the side of the protestors. He told them during his appearance to “Stick with it.”
“You deserve the significant raise you need,” he added. The UAW is seeking a 40% hike in pay, among other demands.
Biden’s appearance is notable: According to labor historians, no serving president has ever joined a strike in progress. What perhaps makes the difference is the high support labor movements currently enjoy in the U.S., and the Democrats’ need to do well in blue-collar states in the 2024 election.
Another factor in Biden’s move could be recent labor successes, most prominently the Writers Guild’s action against the Alliance of Motion Picture and Television Producers. Over the weekend, those two sides reached a tentative agreement to end their dispute.
Automaker investors might be getting a bit too hopeful by plowing funds into EV titles. Lucid and its ilk aren’t directly affected by the strike just yet. However, if it continues to spread and lengthen, such a stoppage would put more hurt on the entire automotive business — parts makers and suppliers included. That, in turn, would likely dent the operations of EV companies, no matter which niche they occupy.
No strike is beneficial for an industry, and that’s especially true for one that depends so heavily on armies of laborers like the automotive sector. The EV makers might have had a good day on Tuesday in contrast to the sinking Big Three (namely GM, Ford, and Stellantis), but we shouldn’t necessarily count on the EV bulls continuing to advance if the strike keeps motoring on.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends General Motors and Stellantis and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.