Recent news of layoffs at Ford and child labor allegations in a Hyundai Alabama subsidiary prompted a closer look at the Auto industry. Our analysis finds that Social Sentiment (Human Capital, etc.) lags significantly from an industry perspective when compared to similar industries in the Consumer Discretionary sector and other manufacturers like Capital Goods.
As the earnings calls wind down for this quarter, we looked to news once more for our weekly ESG spotlights with an eye on social issues that were sparsely discussed in transcripts. As it relates to our 5 ESG Themes for 2022, Human Capital has been an issue of great interest this year and has been prominent in recent weeks.
While investigating a disturbing story that has been developing in recent weeks regarding Hyundai (HYMTF) and their alleged use of child labor by a subsidiary in Alabama, the event prompted us to analyze Social Sentiment for the Automobile Industry as a whole. We found it to be lagging behind other similar industry groups for the past year. Even Ford (F) announced this week it is laying off 3,000 employees as it restructures towards EVs, making the tradeoff between people and progress all the more apparent.
With a Sentiment score of -28.7 on Social factors for the Automobile and Components group, this is well below the overall market average of 23.7. Even stacked up against an industry group like Consumer Durables and Apparel that often has labor issues, Automobiles have a lower score. Other manufacturing industries like Capital Goods, which includes companies like John Deere and Boeing, scored higher from an overall industry average when compared to Automobiles.
Human Capital alone is one explanation for Automobiles Social woes as the industry experienced 509 negative events in the past 365 days. Comparably, Consumer Durables and Apparel experienced only 98 negative Human Capital events in the same time period, and Capital Goods 443. The Automobile industry also had higher occurrences of negative Diversity and Inclusion Events than the latter two industries, primarily due to Tesla’s recent issues and lawsuits around racial discrimination.
The Auto industry is highly organized and the United Auto Workers union, who organized the John Deere strike last fall and GM strike in 2019, has recently raised pay for workers on strike from $275 a day to $400 a day. Also this month, Volkswagen workers in Mexico rejected a pay raise, holding out for a better deal that is more competitive with the current inflationary environment. While car manufacturing has seen a marked improvement from an Environmental lens in shifting towards electric vehicles, it is important to remember that these companies employ hundreds of thousands of workers in an industry that has always been highly organized when it comes to labor.
The power of these Unions presents a real risk to these companies when it comes to restructuring operations and corporate strategy towards electric vehicles. While Tesla has been in the spotlight the most for negative events, Hyundai’s recent foray into the press for child labor shows that when it comes to Human Capital, it is more widespread than one company in this industry.
The market isn’t interested in another ESG story. Investors want to understand what companies are actually doing—what companies are investing. What commitments are they making towards these investments, and what milestones are they reaching? This data needs to be in real time, not just from stale annual CSR reports. This webinar, featuring our materiality dataset, demonstrated how investors can cut through the greenspeak to understand what companies are actually doing when it comes to ESG for Climate Week 2022. Watch Recording
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This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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