- America’s auto workers represented by the UAW have gone on strike for higher pay, foregone benefits and job security.
- Automakers are losing enormous sums on the transition to expensive electric vehicles forced by the Biden Administration’s regulations.
- Car prices are rising rapidly, with internal combustion engine vehicle sales underwriting massive EV losses.
- With Biden’s inflation and higher interest rates, car sales are coming under pressure, especially the electric vehicles he is forcing to be built.
Thousands of autoworkers walked off the job at three Midwest plants in an unprecedented strike, as the United Automobile Workers (UAW) and Detroit’s three big carmakers (GM, Ford, and Stellantis) remained miles apart on contract talks. Thousands of workers have joined picket lines to demand higher wages, job security and clarity on how employers will deal with new or disruptive technologies. Carmakers are anxious to keep costs down as they ramp up electric vehicle manufacturing, while striking workers want to preserve jobs as the industry shifts to batteries. The UAW is one of the nation’s largest unions and its demands for a four-year 40 percent hike in wages have been rejected by Ford, GM and Stellantis. Inflation has put a huge dent in the real wages and salaries of union workers. Adjusted for inflation, wages for autoworkers in the United States have fallen 19 percent since 2008, according to the Economic Policy Institute, a left-leaning research group. Much of it was due to the government bailout of the automobile industry undertaken in 2009 following the collapse of the housing market.
The union’s demands include:
- A 40 percent pay raise over four years, which would bring wages for many full-time workers to roughly $32 per hour.
- Reinstatement of cost-of-living adjustments, which have become a central plank in contract negotiations amid high inflation.
- A shorter, four-day workweek, a demand that has grown in popularity since the pandemic.
Besides pay issues, workers are trying to defend jobs as manufacturing shifts from internal combustion engines to batteries. Because electric vehicles have fewer parts, they can be made with fewer workers than gasoline vehicles, making many jobs obsolete. Plants that make mufflers, catalytic converters, fuel injectors and other components that electric cars do not need will have to be overhauled or shut down.
This is the first time the UAW has called a strike at all three big carmakers simultaneously. (Typically it is just one, as in 2019 against GM). Union leaders are focusing on factories that make the most profitable models, including the Ford Bronco and the Chevrolet Colorado pickups. It has also warned that the strike could be expanded at any moment.
Automakers’ Concerns
A lengthy strike could dent the Big Three’s profits at a time when the companies are investing heavily in electric vehicles to catch up to Tesla and Chinese rivals. Mary Barra, GM’s chief, warned that meeting all or most of the union’s demands could hobble the company’s prospects. “Make no mistake: If we don’t continue to invest, we will lose ground, and it will happen fast,” she said. According to Ms. Barra, an excessive pay raise would undermine GM’s ability to continue producing vehicles with internal combustion engines while also developing electric vehicles. “This is a critical juncture where investing is very important,” she said.
The traditional automakers are investing billions to develop electric vehicles while still making most of their money from gasoline-driven cars. In fact, these automakers are losing money on every electric vehicle they make and profits from their gasoline car sales are subsidizing their EV production. Vehicle costs for consumers have hit new records as internal combustion vehicles cover the losses of EV sales. The established carmakers — General Motors, Ford Motor and Stellantis, which owns Chrysler, Jeep and Ram — are trying to defend their profits and their place in the market in the face of competition from Tesla and foreign automakers. The European Union, for example, is struggling with Chinese electric vehicle sales and is investigating their subsidization to help protect their own automakers.
Ford has indicated that its electric vehicle business will lose $4.5 billion this year. According to Jim Farley, the company’s chief executive, union demands would force Ford to scrap its investments in electric vehicles. “We want to actually have a conversation about a sustainable future,” he said, “not one that forces us to choose between going out of business and rewarding our workers.” If the union got all the increases in pay, pensions and other benefits it is seeking, its workers’ total compensation would be twice as much as Tesla’s employees. Ford lost over $60,000 per electric vehicle sold in the first quarter of this year.
The three companies are struggling to get their electric vehicle business going. A new G.M. battery factory in Ohio has been slow to produce batteries, delaying electric versions of the Chevrolet Silverado pickup and other vehicles. Ford had to suspend production of its electric F-150 Lightning after a battery caught fire in one of the pickups that was parked near the factory for a quality check. And Stellantis will not begin selling fully electric vehicles in the United States until next year.
Automakers are building most aggressively in the South where the UAW has less clout. One of the union’s demands is that workers in the new factories be covered by the automakers’ national labor contracts — a demand that the automakers cannot meet because those plants are owned by joint ventures. The union also wants to regain the right to strike to block plant shutdowns.
Unions and their supporters are unlikely to express much sympathy for auto executives. Ms. Barra, Mr. Farley of Ford and the chief executive of Stellantis, Carlos Tavares, have received tens of millions of dollars in compensation packages in recent years. The companies’ shareholders have been rewarded with dividends and share buybacks. At the same time, however, union officials are aware of the changes in the industry and do not want to handicap GM, Ford and Stellantis as the companies try to recover ground from Tesla, which has resisted attempts to unionize its factories. The Detroit carmakers also face challengers like Rivian, a start-up that makes electric pickup trucks and sport utility vehicles in Illinois, as well as foreign-owned rivals like Mercedes-Benz and Toyota, whose U.S. factories, mostly in the South, are not unionized. A long work stoppage could help Tesla and foreign automakers gain ground on GM, Ford and Stellantis.
So far this year, electric vehicles have accounted for 7 percent of the U.S. new car market and they are on track to surpass sales of one million this year. EV sales are difficult to project as the dealer stocks of electric vehicles that are almost twice that of gas autos show, which makes it difficult to commit to a long-term contract in an industry that is very uncertain and unpredictable over the next five years. And with the Biden Administration’s regulatory onslaught via the Corporate Average Fuel Economy standard pushing automakers to make money-losing electric vehicles or face hefty fines, the auto industry, the auto workers and the American public are facing harder times.
Conclusion
Besides pay in an inflationary U.S., auto workers and the UAW are worried about job security as Biden pushes the nation toward expensive electric vehicles through regulatory activity, and as electric vehicles need fewer parts than gasoline vehicles and thus fewer employees. The UAW has called for a major strike simultaneously against all 3 Detroit automakers and has rejected their proposals so far. It is a difficult situation as electric vehicle sales are unpredictable and the traditional automakers are losing on money on every electric vehicle they produce, having to subsidize their EV sales with profits from gasoline auto sales. When government forces a major change on industry under an accelerated timeline, it is likely that there will be major losers, and auto workers may be taking the brunt of it.
