What Hedge Funds Think about these Two Companies Stuck In Negotiations With United Automobile Workers?

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Difficult days ahead for Fiat Chrysler Automobiles NV (NYSE:FCAU) and Deere & Company (NYSE:DE) as both auto-makers are negotiating new deals with the United Automobile Workers (UAW). Having reached a tentative deal with the union two weeks ago, Fiat Chrysler Automobiles saw its workers reject the deal for the first time in 33 years, despite the union leadership having claimed the deal was a fair bargain. Deere & Company announced today that it has reached a tentative deal with the UAW and it’s now up to members to vote for or against the new six-year agreement. No details of the agreement were made public. Hedge fund bullishness towards both stocks has cooled down a bit during the 2015 second quarter.


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UAW members employed by Fiat Chrysler Automobiles NV (NYSE:FCAU) were not pleased with the wage structure of the agreement, claiming the deal does not include a clear plan to end the two-tier wage structure, in which workers that have joined Fiat Chrysler Automobiles after 2007 receive lower wages than veteran workers. They also claim that these workers would be unable to reach the top wage of $28.50 per hour under the terms of the new agreement. The United Automobile Workers union has allowed new employees to be paid lower wages in 2007, when US automakers were going through a difficult financial spell, however the agreement did not stipulate a maximum number of second-tier workers and when these measures would be abolished, terms that were expected to be included in the new deal. Workers are also unhappy about the company being allowed to shift production of some vehicles to low-wage Mexico, as well as certain aspects of healthcare benefits.

UAW leadership has found itself in hot water as discontent among members has been increasing for some time. “It’s really clear that there were three different parties in this round of negotiations: The company, the union leadership and the membership,” said Kristin Dziczek, director of the labor and industry group for the Center for Automotive Research. As United Automobile Workers also represents approximately 10,000 Deere & Company (NYSE:DE) employees, the rejection of the deal could put the union leadership under more pressure, as it prepares for negotiations with General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F).

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The popularity of Fiat Chrysler Automobiles NV (NYSE:FCAU) has somewhat decreased during the second quarter, with the number of hedge funds with a long position decreasing to 35 from 40. Their cumulative investment carried an estimated value of $1.33 billion, down by 10.8% during the quarter, and accounted for 7.2% of the company’s common stock. Cliff Asness dumped more than half of his stake in Fiat Chrysler Automobiles, leaving his fund, AQR Capital Management, with 4.33 million shares. Kevin D. Eng, the manager of Columbus Hill Capital Management, has also chosen to reduce his exposure to the auto maker, slashing his position by 53% to a little over 1.3 million shares. Steven Cohen, on the other hand, is bullish on the stock, adding a further 1.25 million shares to his previous stake during the second quarter. His fund, Point72 Asset Management, has reported ownership of 1.35 million shares in its latest 13F filing.

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