At midnight Thursday, United Auto Workers President Shawn Fain launched targeted walkouts at General Motors, Ford and Stellantis North America (aka Chrysler.) No one should have been surprised (though some investors acted as if they were on Friday.) Fain has been telegraphing this for weeks. And yet the moment was riveting – even if the financial impact on the automakers is limited, for now.
Fain’s re-framing of these contract negotiations as a fight for all working-class Americans has raised the stakes for the UAW – and for U.S. President Joe Biden, who intervened in the talks as they headed toward breakdown.
The automakers have escalated in turn, saying that accepting the UAW’s demands would put them on the road to ruin. Ford CEO Jim Farley used the word “bankruptcy.”
Beyond Detroit, the U.S. economy’s glide toward a soft landing could be at risk if the UAW ramps up a broader strike, economists said.
Whatever happens next, the unprecedented, coordinated walkouts at GM’s Wentzville, Mo. Pickup plant, Ford’s Michigan Assembly Bronco and Ranger pickup factory and Stellantis’ Wrangler factory in Toledo, Ohio mark a new era in the Detroit auto industry’s history.
Let’s break down the conflict:
The UAW and the Detroit Three CEOs are really fighting over two things. Behind the myriad details of the UAW-Detroit Three contracts, here’s what the strike is really about: Who gets the billions in profits being spun out by the automakers’ combustion truck and SUV franchises, and who will benefit from the billions in electric vehicle subsidies on offer from Washington.
Fain wants UAW workers to get a much bigger share of both pots of money, in the form of higher pay, more time off and the restoration of defined benefit pension plans. That last is a huge ask – potentially putting billions in liabilities on the automakers’ balance sheets.
The automakers have offered to share more of the truck and Inflation Reduction Act wealth – proposing raises of up to 20% over the life of the next contract.
But GM, Ford and Stellantis have also promised a fistful of dollars to Wall Street. Ford, for example, told investors it plans to allocate 25% of its free cash flow to buybacks and dividends over the next three years. (See page 114 here.)
Nevermind the EVs. The UAW’s choice of strike targets underscores the importance of truck and SUV profits. The UAW ordered the first walkouts at plants that build combustion trucks and SUVs – not EVs like the Ford F-150 Lightning or the Chevy Bolt.
Fain, for now, has spared the most profitable operations – factories that build Ford’s Super Duty, GM’s heavy duty Silverado pickup factory in Flint, Mich. and Stellantis’ Ram truck and large Jeep SUV plants in Michigan. UAW profit sharing checks depend on those plants. If you see strikes at Ford Kentucky Truck or GM’s Flint assembly, you’ll know things are getting rough.
EV jobs and subsidies are a key issue. Fain has criticized the automakers for setting up battery factories in joint ventures with Asian partners that are not unionized, and not covered by the existing UAW contracts under U.S. labor law. He has also blasted the Biden administration for handing out subsidies to non-union battery makers that pay workers far less than UAW-Detroit Three top wages.
UAW leaders and members are also worried – with good reason – that the Biden Administration’s goal to push EVs to 67% of the U.S. market by the mid-2030s threatens jobs at UAW-represented engine and transmission plants.
Suppliers are a weak link. The Detroit Three have billions to weather a strike. Many of their suppliers do not. That could work to the UAW’s advantage. A long strike could force the automakers to bail out critical suppliers, or risk more supply chain fails. The White House is considering extending aid to suppliers, if needed.
What will it take to reach a settlement? Time, and both sides climbing out of the trenches they’ve dug.
In 2019, it took 40 days for UAW leaders and GM negotiators to end a strike. The deal came together as many rank-and-file UAW-GM workers were running out of money. The UAW has since increased strike pay to $500 a week, but that’s still a fraction of full wages, let alone the overtime many have been earning.
Look for signs that the automakers are prepared to fully abandon tiered wage systems. What the union calls “tiers” result in junior UAW members earning less than veterans doing the same jobs. The automakers have offered to cut the waiting time for top wages in half to four years, but not to the 90 days the UAW wants.
Ending tiers is at the top of the UAW’s demands. The Teamsters did it at UPS. Could Fain win ratification for a contract that eliminates tiers but kicks the pension fight to another year? Great question.
