On Friday, Ford Motor Co. and General Motors Co. observed an increase in their stock prices as thousands of workers initiated a strike. However, their bonds have been experiencing selling pressure over an extended period.
A strike was initiated early Friday by nearly 13,000 U.S. auto workers, following the expiration of the national contract just before midnight, and the failure of negotiations between the three automakers and the United Auto Workers (UAW) to reach an agreement.
Opting for targeted strikes, workers at a Ford plant in Michigan, a GM plant in Missouri, and a Stellantis N.V. plant in Ohio were the first to halt their operations. UAW President Shawn Fain indicated that others could potentially join the strike later, calling on all 150,000 members to be prepared for possible strike action.
This strike across all three U.S. carmakers marks a departure from tradition, as the union had typically focused its strike efforts on a single company to preserve its strike fund and picket-line strength.
Ford's stock witnessed a 0.5% increase, while GM's stock rose by 1.4%.
However, as illustrated by the charts from data solutions company BondCliQ Media Services, the bonds of these automakers have experienced a prolonged period of selling, far outweighing buying activity over the past 10 days. Bondholders are often considered to possess a high level of financial acumen as they scrutinize a company's financials and cash flows, ensuring the repayment of principal upon bond maturity.
According to FactSet data, Stellantis has approximately $26.5 billion in total debt, of which around $19.7 billion consists of bonds. Ford carries a debt load of $143 billion, including $124 billion in bonds, while GM's debt totals $118 billion, with approximately $107 billion in bonds.
Fitch Ratings, on Friday, suggested that the strike's immediate financial impact on the automakers is expected to be limited, considering only three plants are currently involved.
Stephen Brown, a senior director at Fitch, commented, "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. 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 had previously factored in the potential impact of strikes when upgrading its ratings for Ford and GM. It elevated Ford's rating from BB+ to BBB-, shifting it from speculative, or "junk" status, back into the realm of investment-grade ratings.
Brown further noted, "Ford, GM, and Stellantis all have robust liquidity positions that will help them 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."
On Friday, Stellantis' stock demonstrated a 2.2% increase and has achieved a remarkable 36% gain year-to-date, outperforming GM's 1.2% gain and Ford's 9.0% gain. This performance surpasses the S&P 500's 17% gain during the same period.
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