Raphael Stevens

Automaker Stellantis has threatened to move production of the current Ram 1500 pickup truck from a factory in suburban Detroit to Mexico, a union leader said Sunday.
Such a move would likely receive some political pushback. It also would potentially impact the union’s membership, as EVs require fewer people to produce them.
UAW President Shawn Fain said he believes relocating the truck production would “be a huge mistake on the part of Stellantis to try it.”

UAW Vice President Rich Boyer addresses union members during a “Solidarity Sunday” rally on Aug. 20, 2023 in Warren, Mich.
Michael Wayland / CNBC

WARREN, Mich. – Automaker Stellantis has threatened to move production of the current Ram 1500 pickup truck from a factory in suburban Detroit to Mexico, a union leader said Sunday.
United Auto Workers Vice President Rich Boyer, who heads the union’s Stellantis unit, said the automaker has discussed the move during ongoing contract negotiations that are occurring simultaneously but separately between the UAW and General Motors, Stellantis and Ford Motor.

Boyer said the company’s plans would include producing a new all-electric Ram pickup truck at the Sterling Heights Assembly Plant, which currently produces most of the Ram light-duty pickups.
Such a move would likely receive some political pushback. It also would potentially impact the union’s membership, as EVs require fewer workers to produce them. There’s also no guarantee that an all-electric pickup would be as successful as the current internal combustion engine (ICE) model, meaning less job security for members.
Boyer, speaking to hundreds of union members during a “Sunday Solidarity” rally, didn’t hold back his displeasure about the potential plans, calling out Stellantis CEO Carlos Tavares for not caring about U.S. auto workers.
“He don’t give a s*** about the American auto worker,” Boyer said wearing a red UAW shirt with “UNITED WE STAND DIVIDED WE FALL.” “They have said they want to take the Ram 1500 ICE and send it to Mexico.”

Workers build 2019 Ram pickup trucks on ‘Vertical Adjusting Carriers’ at the Fiat Chrysler Automobiles (FCA) Sterling Heights Assembly Plant in Sterling Heights, Michigan, October 22, 2018.
Rebecca Cook | Reuters

Stellantis, which already produces some Ram pickups in Mexico, did not confirm nor deny the potential move, saying in a statement: “Product allocation for our U.S. plants will depend on the outcome of these negotiations as well as a plant’s ability to meet specific performance metrics including improving quality, reducing absenteeism and addressing overall cost.

“As these decisions are fluid and part of the discussions at the bargaining table, we will not comment further.”
UAW President Shawn Fain said he believes relocating the truck production would “be a huge mistake on the part of Stellantis to try it.”
“Those are our jobs and that’s our vehicle. We expect to keep that work,” he said.
Speaking with CNBC after the event, UAW’s Boyer described the ongoing negotiations with Stellantis as “slow and confrontational.”
Fain, who began leading the union earlier this year and has taken a more confrontational tone with the negotiations, said he would like to reach tentative agreements with the companies in the coming weeks ahead of the deals expiring at 11:59 p.m. ET, Sept. 14.

UAW President Shawn Fain addresses union members during a “Solidarity Sunday” rally on Aug. 20, 2023 in Warren, Mich.
Michael Wayland / CNBC

“When Labor Day hits, we better have agreements. If we don’t, there’s going to be problems,” Fain said, declining to predict the likelihood of a strike against one or all three of the automakers. “We’re not married to anything right now.”
Fain earlier this month publicly threw a recent proposal from Stellantis into a trash bin during a Facebook Live event with members.
Contract talks between the union and automakers usually begin in earnest in July ahead of mid-September expirations of the previous four-year agreements. Typically, one of the three automakers is the lead, or target, company that the union selects to negotiate with first and the others extend their deadlines. However, Fain has said this year may be different. More

Aldi announced this week it plans to acquire Winn-Dixie and Harveys Supermarket.
With the deal, the German retailer would take over operations of about 400 stores in Florida, Alabama, Georgia, Louisiana and Mississippi.
Even before the deal, the deep discounter had aggressive expansion plans.

Getty Images

No-frills discounter Aldi is the latest grocer to shake up the industry with big moves.
The German retailer announced this week that it plans to acquire about 400 Winn-Dixie and Harveys Supermarket locations across the Southern U.S. As part of the deal, it would take over operations of the stores, which are in Florida, Alabama, Georgia, Louisiana and Mississippi, and put at least some of them under the Aldi name.

The deal is expected to close in the first half of next year.
Aldi is already expanding aggressively across the country. It has more than 2,300 stores across 38 states. Separate from the acquisition, it is on track to open 120 new stores by year-end.
The proposed deal comes as Kroger’s $24.6 billion acquisition of Albertsons is pending. Companies including Amazon and Target are also trying to snap up more grocery market share as inflation-weary consumers continue to buy food and essentials but become more frugal when it comes to other merchandise like clothing and electronics.
Like Trader Joe’s and fellow Germany-based rival Lidl, Aldi relies heavily on its own brands. About 90% of products it carries are Aldi’s private label, which allows it greater scale and lower costs in areas like marketing and the supply chain. Aldi also gets creative to keep costs low, including by reducing the size of a pasta sauce lid and other packaging and using electronic shelf labels that save on labor and materials.
As inflation cools, that could present a new challenge for Aldi — if shoppers revert to old habits like shopping at neighborhood grocery stores that may have higher prices, or opt for a favorite name-brand cereal or more variety. It’s also had to race to keep up with competitors’ online options, prompting Aldi to expand curbside pickup to more stores.

The privately held retailer did not share financial details of the acquisition. But the deal has big implications for publicly traded competitors including Walmart and Kroger, as well as regional grocers.
CNBC spoke to Jason Hart, the CEO of Aldi U.S., about why the company is doing the deal and how it sees Aldi fitting into a fast-changing grocery landscape. His comments were edited for brevity and clarity.
Why was Aldi interested in acquiring Winn-Dixie and Harveys Supermarket? Why acquire rather than build your own hundreds of stores in similar locations?
This acquisition provides us speed to market with quality retail locations, great people and a solid core business in a region of the country, the Southeast, where we’ve already had and experienced significant growth and success, but we also see much more opportunity and there’s much more consumer demand to meet.
Doing this [expanding] on our own organically, that has been our plan, and that has been our trajectory over a number of years, and in the Southeast as well. …. This acquisition really gives us the opportunity to accelerate all of those plans.

Jason Hart, Aldi U.S. CEO
ALDI Creative Quarter Studio/ Katrina Wittkamp

What should shoppers expect to see at those stores on the other side of the acquisition?
We’re currently evaluating which locations we’ll convert to the Aldi format to better support the communities that we’ve now got the opportunity to serve more closely. We’re going to convert a significant amount to the Aldi format after the transaction is closed and over the course of several years.
For those stores we do not convert, our intention is that a meaningful amount of those will continue to operate as Winn-Dixie and [Harveys] Supermarket stores.
In stores that you choose not to convert with the acquisition, will people start to see some of those Aldi products on Winn-Dixie shelves?
We can certainly see and imagine some future synergies and learnings from each other, whether that’s consumer insights, product ideas, merchandising ideas, but at this point, we just don’t have any definitive plans to announce.
What do you think your stores offer that other players like Walmart, Kroger and even Dollar General don’t?
We carry a limited number of SKUs [stock keeping units, the term used to describe each type of product carried by a retailer] first and foremost — a couple of thousand SKUs in our stores versus our competition that may have many times that — that drives higher volume per SKU, driving scale that provides efficiency both in our business and for our suppliers.
The dozens of brands and sizes and small variants of the same product — the result of that [in rival stores] is tens of thousands of products that isn’t necessarily the result of customer demand. It’s more so the brand’s demand for shelf space within those stores. And the result actually can frustrate customers by overcomplicating the shopping experience. At Aldi, we simplify that shopping experience for the customer, offering great quality and great prices.
Why do you think we’re seeing so many big moves in the grocery industry right now?
The way that consumers are shopping is changing quite dramatically. And also the drive to value. And obviously, there are alternative retail formats that are growing quicker than the traditional formats. We’re very proud to be one of those alternative formats that’s really disrupting the industry.
Consumers seem to be willing to try other ways to fill their grocery list, whether that’s through e-commerce, whether that’s through trying out discounters like Aldi, [and] trying out different products like private label.
When consumers are seeing these changes, and seeing other retailers and other products meet their needs, they change their shopping habits.
What are the trends with online and in-store sales now as the pandemic is more in the rearview mirror?
We’re now seeing equal growth in both our bricks-and-mortar sales and in our e-commerce sales. I would anticipate if I was to look at the crystal ball of the future, it’s going to go back to e-commerce growing slightly more than what bricks and mortar is both in the market and for Aldi. More

While most restaurant companies crushed earnings expectations, a number of them fell short of Wall Street’s estimates for their quarterly revenue.
Falling traffic hurt chains like Wendy’s and Chipotle Mexican Grill.
McDonald’s benefited from its successful Grimace Birthday Meal promotion and strong value perception.

A McDonald’s restaurant near Times Square, NYC on July 29th, 2023. 
Adam Jeffery | CNBC

Restaurant companies navigating some of the same challenges in the second quarter fell into two categories: winners and losers.
Some chains said their higher menu prices alienated diners, while others said consumer behavior hasn’t changed even as their food and drinks grow more expensive. Promotions drove customers to certain restaurants — or fell flat as diners focused on value. And low-income customers visited some restaurants more frequently, but skipped visits at other eateries.

Broadly, foot traffic to restaurants has fallen. Sales growth has slowed as many eateries hold off on another round of the price hikes that drove strong revenue a year ago. Customers have become more selective about how they spend their money, including where they eat, leading to a sharpening divide in chains’ performance.
While most restaurant companies crushed earnings expectations, a number of them fell short of Wall Street’s estimates for their quarterly revenue. McDonald’s and Wingstop both reported second-quarter earnings, revenue and same-store sales growth that topped analysts’ expectations, a rarity this quarter for restaurant companies.
On the other end, Papa John’s, Wendy’s, and Chipotle Mexican Grill were among the flock of companies that disappointed investors with weaker-than-expected sales. All three companies’ stocks haven’t recovered yet.
Here are three trends that defined the quarter and determined its winners and losers:

Restaurant traffic

Two metrics shape a company’s same-store sales growth: how much customers spend on every order, and how often they visit the restaurant chain.

As eateries delay more price hikes and customers watch their wallets, restaurants have to rely on the second benchmark — traffic — to bolster their same-store sales. And Wall Street is watching closely.
“Investors certainly want lots of traffic as a sign of health for the concepts,” TD Cowen analyst Andrew Charles told CNBC.
McDonald’s, Chipotle, Texas Roadhouse and Wingstop were among the few chains that reported U.S. traffic growth in the latest quarter.
On the other end, Restaurant Brands International said U.S. traffic slipped for three of its chains: Popeyes, Burger King and Firehouse Subs. Rival Wendy’s reported its domestic transactions fell 1% in the second quarter.
Looking ahead, traffic could fall even more in the second half of the year.
“And as we move through 2H23, menu pricing will likely fall fast as inflation no longer justifies the prices, and barring a rapid traffic reversal, the comps should optically fall just as fast,” Barclays analyst Jeffrey Bernstein wrote in a note to clients Aug. 11. “This does not bode well for restaurant stock performance in coming months, in our view.”

Value perception

Inflation is cooling, and more economists are predicting a “soft landing” rather than a recession. But consumers are still looking for value.
Broadly, the fast-food sector has benefitted from consumers trading down from fast-casual restaurants into their cheaper burgers and tacos. But consumer perception of value differs across chains.
For example, McDonald’s CEO Chris Kempczinski said the chain is performing well with consumers who make less than $100,000, and with those who make under $45,000. On the other hand, Wendy’s CEO Todd Penegor said the burger chain saw diners who make less than $75,000 pull back on their purchases.
Likewise, Wingstop said its customers’ perception of its value is improving, coinciding with falling chicken wing prices.
“We are seeing positive trends in value scores with guests, in an environment where many brands are measuring decline,” Wingstop CEO Michael Skipworth told analysts.
Fast-casual rival Chipotle has also benefited from diners’ perception of its burrito bowls’ value. Chipotle has seen low-income consumers return to its restaurants more than they were a year ago, CFO Jack Hartung told analysts.
Still, Chipotle’s low-income customers aren’t visiting as frequently as they were before inflation began accelerating. The chain has paused price hikes for now, but will decide closer to the fourth quarter if it will raise them again.
One fast-casual chain has struggled with consumers’ value perception. Noodles & Company said its traffic cratered by double digits in the first part of the quarter as customers pushed back against its higher prices, which rose 13% from the year-ago period. In response, Noodles dropped its prices by 3% and pivoted its marketing to focus on value.

Promotions

As restaurants and customers focus on value, discounts and combo meals have stolen most of the marketing thunder. Limited-time menu items also helped some restaurants’ sales — but weren’t enough to offset weakness for others.
On one end of the spectrum was McDonald’s. The burger chain’s Grimace Birthday Meal fueled buzz on social media and traffic to its restaurants.
“This quarter, the theme was, if I’m being honest, Grimace,” CEO Kempczinski said on the company’s conference call.
The promotion featured the limited-time purple Grimace milkshake and core menu items, like the choice of a 10-piece McNugget or a Big Mac. It leaned on nostalgia for the mascot.
But not all promotions helped restaurants’ top line.
For example, Papa John’s released Doritos Cool Ranch-flavored Papadias for $7.99 in May. The limited-time menu item also drove social media buzz and traffic to restaurants, according to executives. However, the new Papadias couldn’t compete with the chain’s pepperoni-stuffed crust pizza it released a year earlier for $13.99.
“That traffic increase wasn’t enough to offset check decline, and therefore you had weaker same-store sales,” BTIG analyst Peter Saleh said. More

UAW labor talks could cost the automakers billions of dollars in additional labor costs, work stoppages or, in a worst-case scenario, both.
Contracts between the Detroit automakers and union expire at 11:59 p.m. ET on Sept. 14.
The new UAW leadership team has dubbed these talks the union’s “defining moment” and has hinted at the likelihood of worker strikes.

United Auto Workers members on strike picket outside General Motors’ Detroit-Hamtramck Assembly plant in Detroit, Sept. 25, 2019.
Michael Wayland / CNBC

DETROIT — The Oracle of Omaha is cutting exposure to the U.S. automotive industry amid union negotiations — potentially for good reason.
Warren Buffett’s Berkshire Hathaway this week said it nearly halved its stake in General Motors in the second quarter. While the firm didn’t disclose its reasoning, the year-end is expected to be a challenging one for the U.S. automotive industry amid contentious contract talks between the United Auto Workers union and GM, Ford Motor and Stellantis.

The talks, which cover nearly 150,000 U.S. autoworkers, could cost the automakers billions of dollars in additional labor costs, work stoppages or, in a worst-case scenario, both.
The new UAW leadership team has dubbed these talks the union’s “defining moment.” President Shawn Fain has already deployed harsh messaging and a few theatrics, including throwing contract proposals by Stellantis in a trash bin, and this late in the process there’s been little to no talk about “give and take” or “win-win” deals.
“They’re ready to strike if a deal does not happen,” said Melissa Atkins, a labor and employment partner at Obermayer. “Going in with that mindset, I anticipate it being very contentious … and just given the history, there probably will be a strike.”
Aggressive efforts by the union are great for organized labor and the embattled UAW, which is attempting to regain its footing after a yearslong federal corruption probe landed several top leaders in prison for bribery, embezzlement and other crimes — but not for the companies or their shareholders.
Here are the numbers investors should know ahead of the expiration date for current contracts between the Detroit automakers and UAW at 11:59 p.m. ET on Sept. 14.

$80 billion

Contract proposals made by the UAW at this point would add more than $80 billion in labor costs for each of the biggest U.S. automakers over the length of the contract, Bloomberg News first reported earlier this month.
“One might think of these UAW contracts as a set of three large purchase orders to secure the labor needed to assemble future vehicles, parts, and components — contracts that are collectively worth roughly $70–$80 billion over the course of the next four years,” Kristin Dziczek, automotive policy advisor for the Federal Reserve Bank of Chicago’s Detroit branch, wrote in a Wednesday blog post.

United Auto Workers President Shawn Fain greets workers at the Stellantis Sterling Heights Assembly Plant, to mark the beginning of contract negotiations in Sterling Heights, Michigan, U.S. July 12, 2023. 
Rebecca Cook | Reuters

The demands include a 46% wage increase, restoration of traditional pensions, cost-of-living increases, reducing the workweek to 32 hours from 40 and increasing retiree benefits.
If the UAW gets those demands, without any changes to other benefits, the all-in hourly labor cost for the automakers would more than double from at least $64 per hour to more than $150 per hour, according to media reports.
That would be a significant increase over wage hikes seen during the previous four-year agreements, according to estimates from the Center for Automotive Research. The 2019 deals were projected to increase average hourly labor costs over the length of the contracts by $11 per worker for then-Fiat Chrysler, now Stellantis, and $8 per worker at GM and Ford.
Under the current pay structure, UAW members start at about $18 an hour and have a “grow-in” period of four years to reach a top wage of more than $30 an hour.

$5 billion

A work stoppage by nearly 150,000 UAW workers at GM, Ford and Stellantis would result in an economic loss of more than $5 billion after 10 days, according to Anderson Economic Group, a Michigan-based consulting firm that closely tracks such events.
AEG estimates the total economic loss by calculating potential losses to UAW workers, the manufacturers and the auto industry more broadly if the sides cannot reach tentative agreements before the current contracts expire.
In another analysis, Deutsche Bank previously estimated that a strike would hit earnings at each affected automaker by about $400 million to $500 million per week of production.
Strikes could take various forms, including a national strike, where all workers under the contract cease working, or targeted work stoppages at certain plants over local contract issues. A strike against all three automakers, as Fain has alluded to, would be the most impactful but also the riskiest and most costly for the union.

$825 million

The UAW has more than $825 million in its strike fund, which it uses to pay eligible members who are on strike. The strike pay is $500 per week for each member — up from $275 per week last year.

Speaking in front of a backdrop of American-made vehicles and a UAW sign, President Joe Biden, then a presidential candidate, speaks about new proposals to protect U.S. jobs during a campaign stop in Warren, Michigan, Sept. 9, 2020.
Leah Millis | Reuters

Strike pay is available after the eighth day of a work stoppage, and a bonus check is paid the week prior to the Thanksgiving and Christmas holidays. Recipients must be in good standing with the union and participate in picket lines to receive the assistance.
UAW members can also seek outside employment, however if their pay is $500 or more per week, they will no longer receive strike pay. They will continue to receive medical and prescription drug assistance, according to the union’s website.
Assuming 150,000 or so eligible workers, the weekly strike pay would be about $75 million. A fund of $825 million, then, would cover about 11 weeks. One caveat: that doesn’t include health-care costs that the union would cover, such as temporary COBRA plans. 
The UAW is scheduled to hold a procedural strike authorization vote next week, which would grant union leaders the ability to strike, if warranted. The measure historically passes overwhelmingly.

1.5 million

If the union decides to strike against all three Detroit automakers, production losses would quickly add up.
S&P Global Mobility estimates a 10-week strike would mean lost production of roughly 1.5 million units, according to an investor note from Mizuho Securities USA.
A 40-day strike against GM during the last round of negotiations in 2019 led to a production loss of 300,000 vehicles, the company said at the time. It also cost the automaker $3.6 billion in earnings, GM said.
Industry experts argue a strike against all or any of the automakers would likely affect the operations and bottom lines of the companies more quickly than four years ago since the U.S. auto industry is still recovering from supply chain problems caused during the coronavirus pandemic.
Vehicle inventory levels for the automakers also are lower than they were four years ago.
Heading into 2019 contract negotiations, U.S. vehicle supply was 3.73 million — essentially enough units to last 86 days of selling under normal conditions at the time, according to Cox Automotive. The industry is currently just under 2 million units, with 56 days of sales supply.
“In 2019, there was quite a slack in there. There’s almost no slack now,” AEG CEO Patrick Anderson said Thursday during a webinar with the Automotive Press Association. “If we are to get a strike, within the first week, the numbers start to get serious for each of the automakers.” More