SPAC King Chamath Palihapitiya Says Tesla Can Now Completely Run Away With Car Market In The Wake Of UAW Strike: A Labor Deal 'Will Destroy The Legacy Automakers'

SPAC King Chamath Palihapitiya weighed in on the ongoing United Auto Workers’ union strike that has crippled operations at the plants of Detroit’s Big Three, namely Ford Motor Co. F, General Motors Corp. GM and Stellantis N.V. STLA.

What Happened: “The unions have decided to cut their nose off to spite their face,” Palihapitiya said in a post on X on Friday.

If the labor deal happens, it will “destroy the legacy OEM automakers,” he said. The options before the automakers would be to automate and replace unionized people with robots or to de-unionize, he said, adding “[neither] are possible.”

If the plan gets implemented, Palihapitiya said he expects automakers to “bleed money,” adding that such an instance would be the “tipping point towards structural long-term insolvency.” The capital markets will unlikely allow the automakers to raise long-term capital, unless the automakers pay exorbitant rates, he said.

Read Also: 10 Big 3 Auto Suppliers To Watch With UAW On Strike

“On top of this, the demand risk for these OEMs is that hyper automated/non unionized competitors like $TSLA can now completely run away with the car market because they will be able to aggressively lower prices,” the venture capitalist and founder of Social Capital said.

“Ford, Stellantis etc will be forced to raise prices to pay for this labor deal,” he added.

Why It’s Important: Among the demands of the UAW are:

• A 40% increase in hourly pay over four years
• A reduced 4-day, 32-hour workweek
• A faster path to top pay
• A shift back to defined benefit pensions
• Cost-of-living adjustments
• Five-plus weeks of vacation
• More paid holidays
• Extended parental leave

Ford said it would have lost $14.4 billion over last four years if the current demands had been in effect, instead of recording nearly $30 billion in profits, according to Charlie Bilello, chief market strategist at Creative Planning.

Deepwater Asset Management’s Gene Munster said even if the automakers agree to a 25% pay hike, manufacturing labor costs for the Big Three will become 40% to 45% higher than Tesla’s, putting them distinctively at a disadvantage.

Read Next: With UAW On Strike, Biden Says EV Shift Should Benefit Both Workers, Automakers

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