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What’s at Stake as US Autoworkers Threaten to Strike

Sep 26, 2023

Under the leadership of its fiery new boss, the main union representing US auto workers is pushing for a big reset of the relationship between Detroit’s automakers and its labor force. United Auto Workers President Shawn Fain argues that the companies have had it too good at labor’s expense in recent years. In negotiations for a new four-year contract with the three largest American legacy carmakers, he’s demanding pay raises and the return of benefits conceded in the years leading up to the recession in 2009. He also wants to ensure middle class compensation for workers through the shift to electric vehicles. With the automakers expected to resist a return to the pricey benefits of the past even if they do offer nice pay raises, a strike is a real possibility.

1. What are these negotiations?

Every four years, the UAW negotiates a new master agreement on behalf of nearly 150,000 members working at General Motors, Ford and Stellantis, which owns the operations of what used to be Chrysler LLC. Traditionally, the UAW has targeted one of the three to negotiate a deal with first, setting a pattern for the other two to follow. This year’s talks follow four years of record profits at GM and Stellantis and healthy profits at Ford.

2. What are the pay issues?

The UAW has requested that the carmakers increase the compensation of their hourly workforce by 46% over the life of the four-year agreement. Full-time UAW workers currently start at $18 an hour and max out around $32. The union wants to elevate starting pay to a level much closer to the top rate. And after the relatively high inflation of 2022, it wants to restore a cost-of-living allowance (COLA) tied to inflation, a benefit that went away in 2007. It also wants the companies to use fewer temporary workers and to give those employees a quicker path to full pay and benefits. Stellantis says 12% of its UAW workers are temporary, with a starting wage of $15.78 and maximum pay of $19.78 after four years. GM and Ford say they use far fewer temporary employees in their plants.

3. What benefits is the UAW seeking?

The UAW is seeking to restore benefits its members lost in the years leading up to the recession of 2009, when GM and Chrysler went bankrupt and took government bailouts. Fain argues those concessions set up the companies to earn record profits over the last decade. He’s described the union’s demands as “the most audacious list of proposals” the companies have received in decades. They include the restoration of traditional pensions and retiree health care, and the reduction of the work week to 32 hours from 40.

4. How do EVs factor in?

Because EVs require fewer parts and less labor to build than gasoline-powered vehicles, the transition to them will inevitably lead to closures of plants making engine parts for traditional cars. As consumers gradually shift to EVs, US car companies are investing billions in joint ventures with Asian companies to build plants in the US to make the batteries that are the main component of EVs. A major sticking point of the negotiations will be the wages and benefits of workers in these new plants and whether the UAW can represent them. So far, just one EV battery plant, Ultium LLC in Ohio, a joint venture between GM and South Korea’s LG Energy Solution, has been unionized, but it isn’t subject to the UAW’s master agreement with the big three automakers. Ultium starts maintenance workers at $15.50 and production workers at $16.50, with a top rate around $20.

5. What are the considerations for the car companies?

Combining wages and benefits, the Detroit Three have total labor costs of about $64 an hour. That compares to all-in labor costs of $55 an hour at the non-union assembly plants of international automakers such as Toyota Motor Corp., according to sources at Ford who are familiar with competitive labor rates. Labor costs at Tesla Inc. are even lower at $45 to $50 an hour, the people said.

6. Who is Shawn Fain?

Promising a “more aggressive approach” with carmakers, Fain was narrowly elected UAW president in March. He was the first directly elected leader in the union’s history following a widespread corruption scandal that resulted in the conviction of 13 UAW officials, including two past presidents who went to jail. He’s criticized members of the Democratic Party for taking the labor vote for granted in the past, and he’s made clear they will have to earn his endorsement. He’s said President Joe Biden can do more to ensure carmakers fairly compensate workers transitioning to EV battery factories. And he’s criticized Biden’s Inflation Reduction Act for offering companies subsidies for clean energy projects without requiring the use of union labor. Biden, who has called himself the most pro-union president in US history, is counting on labor to support him in his 2024 reelection bid.

7. How would a strike affect carmakers?

If talks with any one of the carmakers break down, the union may call a strike against it, as it did against GM in 2019. That 40-day walkout cost GM about $3.6 billion in earnings before interest and taxes, or about half a month’s worth of sales, according to RBC Capital Markets. While Fain has had particularly harsh words for Stellantis, he’s repeatedly said all three Detroit automakers are the target. Striking all three nationally could quickly drain the UAW’s strike fund. To avoid that, the union could strike individual plants at each carmaker, or strike one nationally and picket others at the local level.

8. What would be the broader effects of a strike?

A halt in production caused by a strike would put pressure on vehicle inventories, already low due to pandemic-related parts shortages, and drive up near-record car prices. There would also be ripple effects up the auto supply chain, for example on steelmakers, who might be forced to idle production if car assembly plants go down. A strike by the 150,000 hourly workers at GM, Ford and Stellantis would cause an economic loss of more than $5 billion after just 10 days, according to a study by Anderson Economic Group, a Michigan based consulting firm.

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