The odds of a United Auto Workers strike are 90%-plus, Evercore ISI analyst Chris McNally said Thursday.
"A good compromise is when both sides are unsatisfied," McNally wrote in a note. "We are likely going to have a bunch of discontented people."
What Happened: The union is demanding a 36% increase in salary.
The so-called "big three" auto manufacturers - General Motors (NYSE: GM), Ford (NYSE: F) and Stellantis (NYSE: STLA) - made offers that are roughly half that.
If Evercore is correct, this would be the first simultaneous strike for the UAW in its 80-year history - meaning all three Detroit companies will see some 146,000 UAW members walk out of their factories. The deadline for a deal is midnight Thursday.
UBS agrees with Evercore: "We believe the probability of a strike is high," analysts at the investment bank wrote in a note.
And if only certain local unions strike while others continue to work under the terms of the expired contract, that could be more disruptive than a "full-blown strike," UBS explained.
"Supply chain coordination could prove difficult, and it could extend the length of the UAW strike fund, which we estimate would be exhausted after about 10 weeks of a full strike at all [three original equipment manufacturers]," the analysts added.
Why It Matters: A UAW strike would cost the U.S. economy billions.
It would add further strain to an economy that's just starting to offset high inflation. It would also present a major challenge to President Joe Biden, who is campaigning for reelection in 2024 and often takes a pro-union stance.
An auto strike will especially have an impact on Michigan, which is a key state won by Biden in 2020.
The strikes would reportedly be targeted to a few factories per company, but that doesn't mean company brass are any less upset.
Ford CEO Jim Farley questioned Wednesday whether UAW president Shawn Fain's focus on strikes and publicity events hindered negotiations.
Farley also defended Ford's offers, calling them "increasingly generous." Among the adjustments Ford said it will make are the elimination of wage tiers, reinstatement of cost-of-living pay increases and more vacation time.
Automakers called attention to significant investments being made in electric vehicle development, which will have to be produced in addition to internal combustion vehicles.
Tesla Inc (NASDAQ: TSLA) - the only major auto manufacturer not represented by a union in the U.S. - does not have this challenge.
There's also the question of CEO pay. Farley, for example, received total compensation of about $21 million in 2022 (281 times the median total compensation of all Ford employees).
General Motors CEO Mary Barra's take-home pay for 2022 was about $29 million, while Stellantis CEO Carlos Tavares received about $25 million.
"The Big Three CEOs saw their pay increase by 40% over the last four years, while our pay only went up by 6%," Fain said at a recent news conference.
What's Next: It remains to be seen which plants will experience strikes or whether union demands will budge. The initial request was for 40% raises over four years. It was later adjusted to around 36%.
F, GM, STLA Price Action: The "Big Three" automakers were all trading in the red Thursday. Ford shares hovered at around $12.50, down 1.11%; GM was trading at $33.31, down 1.07%; and Stellantis (formerly Fiat Chrysler) was trading at around $18.80 a share - down 0.82%.