Is Tesla (NASDAQ:TSLA) about to see its workers unionize?
According to recent reports, the United Auto Workers (UAW) union has set its sights on several other prominent automakers after its historic victory against Detroit’s “Big Three.” The union has confirmed that it plans on targeting some 150,000 workers across 13 companies as part of its new campaign, described by The Wall Street Journal as “one of the largest organizing drives in its history.” The list of automakers includes Tesla as well as newer electric vehicle (EV) startups like Lucid (NASDAQ:LCID) and Rivian (NASDAQ:RIVN).
Given the turbulence that Ford (NYSE:F), General Motors (NYSE:GM) and Stellantis (NYSE:STLA) experienced during the recent UAW strikes, some investors may be worried about what this news means for EV stocks. These concerns are understandable. However, it won’t necessarily be bad news if the UAW campaign reaches the EV sector. In fact, it could ultimately be beneficial for some companies.
What’s Happening With EV Stocks?
It hasn’t been a good day for EV stocks in general. Many of the sector’s biggest names are down today, starting with Tesla. The EV leader just began deliveries of its Cybertruck but, so far, that news hasn’t been enough to boost shares. Today’s negative momentum is likely being driven more by a lack of optimism around the Cybertruck than the recent UAW update, though.
While news of the union campaign doesn’t seem to be impacting EV stocks too much today, it still warrants a closer look. Tesla CEO Elon Musk has made it clear that he does not support unions. In fact, Musk drew ire in 2018 for an anti-union tweet sparked by a report of undisclosed safety violations at a Tesla factory. In the same thread of posts, Musk openly criticized the UAW.
Given the CEO’s history with the UAW, he more than likely won’t react well to the union’s mission of organizing Tesla workers. But it makes perfect sense that the UAW would set its sights on Tesla in particular. The company’s questionable history with worker safety speaks for itself. The Drive reports that “data collected by Forbes shows that Tesla has accumulated more than three times the number of Occupational Safety and Health Administration (OSHA) violations that its top 10 competitors amassed from 2014-2018.”
The Road Ahead
Even if Musk attempts to strike back at the UAW, it’s important for investors to face the facts. And one fact is that the prospect of Tesla workers unionizing doesn’t mean TSLA stock will suffer in the long run. In 2021, an academic study found compelling evidence that pro-union policies can actually decrease a company’s risk of its stock price crashing:
“We find that the effect of unionization on crash risk is stronger among firms with greater risk-taking, more overinvestment, and higher opacity. These results suggest that unionization reduces stock price crash risk by limiting risk-taking, constraining overinvestment, and improving information flow.”
Ultimately, adapting pro-union policies could end up benefiting both companies and investors. Musk will probably argue against any claims made by the UAW rather than take responsibility for the problems his company has caused for workers. But investors should be careful to see the bigger picture here. EV stocks can still succeed if their workers end up unionizing. Indeed, leading companies in other sectors have embraced pro-union policies before and still generated healthy returns for investors. Regardless of what Musk says, the UAW’s new campaign shouldn’t instantly be seen as bad news.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
