Breakfast on Wall Street: no contracts, no beer
No contract, no beer
Industrial action is returning to the forefront after the historic strikes of 2023 which threatened to upend large parts of the economy. Among those involved were the pilot associations of major airlines like American (AAL) and Southwest (LUV), the UPS Teamsters Union (UPS), Starbucks United Workers (SBUX), and the International Association of Machinists and aerospace workers from Spirit AeroSystems. (SPR). Don’t forget the devastating walkouts that hit Hollywood – with writers and actors leading a historic double strike – as well as the unrest within the United Auto Workers union, which saw staff at Ford (F), General Motors ( GM) and Stellantis (STLA) join the picket lines.
Following: Things are getting turbulent at Anheuser-Busch InBev (BUD), with more than a quarter of its U.S. workforce, or 5,000 employees, threatening to walk away from their jobs at 12 breweries across the country. “Without a contract by February 29, there will be no beer in March,” warned the Teamsters union, which is fighting for substantial wage increases, job security and other benefits. Just a week ago, 400 Teamsters members went on strike at a Molson Coors (TAP) brewery in Fort Worth, Texas, meaning workers could soon walk out at two of the nation’s largest brewers.
AB InBev is particularly vigilant due to the long recovery following the Dylan Mulvaney controversy last April. The marketing campaign involving the transgender influencer sparked a backlash and boycott that led Modelo Especial to supplant Bud Light as the top spot in the U.S. beer market, and BUD’s stock price only recently returned to its previous levels. While securing a union contract remains a top priority, Anheuser-Busch outlined a continuity plan and precautionary measures that could see beer production outsourced to other facilities if necessary.
Thought bubble: Conditions are ripe for discontent as wages in many sectors have not kept pace with inflation and the rising cost of living. At the same time, record sales and profits were recorded at the biggest brewers. This prompted AB InBev (BUD) and Coors (TAP) to announce billion-dollar stock buybacks to please Wall Street, although these announcements only made more employees feel be excluded from their fair share. Forcing companies to negotiate last year also resulted in strong deals with better working conditions, especially when backed by a U.S. administration that calls itself “the most pro-union in American history.”
Slam on the brakes
Apple (AAPL) has reportedly canceled work on its electric vehicle initiative – Project Titan – and shifted some employees to work on generative artificial intelligence. This comes amid rising costs and competition that worries many automakers, as detailed in Breakfast on Wall Street: Winning the Race. Apple has spent billions of dollars on Project Titan, which CEO Tim Cook once called “the mother of all AI projects.” The iCar was initially rumored to be fully autonomous, but it was ultimately downgraded significantly from Level 4 to Level 2+, which SA analyst Arne Verheyde said was a considerable setback given the “market already very saturated. (223 comments)
A wider war?
As Russia’s invasion of Ukraine enters its third year, European Commission President Ursula von der Leyen said the region should prepare for the risks of a wider war and consider use windfall profits from frozen Russian assets to buy weapons for Ukraine. “We must act quickly,” she warned, while US Treasury Secretary Janet Yellen called on the G7 coalition to release $285 billion in frozen Russian assets to support Kiev. Separately, Germany said European countries would not send troops to Ukraine after French President Emmanuel Macron said the option had not been “ruled out.” In response, Kremlin spokesman Dmitry Peskov warned that sending troops would lead to direct confrontation. (2 comments)
Shorts are set on fire
Beyond Meat (BYND) Ripped 73.5% higher AH on Wednesday after announcing better-than-expected fourth-quarter results, as strong international sales more than offset weak U.S. demand. CEO Ethan Brown noted that in 2024, the company plans to “significantly reduce” operating costs and cash usage, while employing pricing measures and right-sizing its footprint. production to support margin expansion. The plan also includes “a renovation of Beyond IV’s core platform” and certain non-cash charges related to inventory and assets that are no longer consistent with its path to profitability. While BYND was trading in double digits for the first time this year, short interest in the stock was close to 40%, which likely contributed to this big move. (57 comments)
