United Auto Workers President Shawn Fain has given the CEOs of the Detroit Three until Friday at noon to deliver new offers that show “progress” toward meeting the union’s demands.
To quote the family-friendly part of a meme Fain tweeted Tuesday night, “Tick Tock…”
A tentative agreement late Tuesday between Unifor, the Canadian auto union, eases one threat for the Detroit automakers. They now know what their Canadian labor pattern will be – assuming workers ratify the deal.
But in the United States, there were few signs of movement. Negotiators for the companies were not born last night. The UAW’s negotiating strategy pushed them into a bidding war with themselves. The companies know it, and they want to hit the brakes.
Both sides appear willing to let the next shoe drop on Friday before making concessions. UAW workers who organized a convoy from Stellantis’ Jeep plant in Toledo to Ford’s Bronco and Ranger factory in Wayne, Mich. said they’re determined to keep up the fight.
But so is management. “We are developing responsible contingency plans for further work stoppages,” Ford said late Tuesday, blaming the UAW for the failure to reach a deal. Stellantis and GM are pushing back harder on Fain’s contract campaign.
Biden Administration officials are scrambling to find a relevant role, while Republican Donald Trump plans a trip to Detroit to court votes from the UAW rank-and-file in America’s swingiest state.
As the UAW talks mark time, let’s take a step back to look at what the Detroit Three contract clash reveals about the state of the companies that Fain still calls “the Big Three.”
Fain’s warning Monday that he will widen the UAW walkouts – and the now-averted strike threat against Ford by Canadian auto workers – put the spotlight on how vulnerable General Motors, Ford and the former Chrysler part of Stellantis are compared to the days when they were truly “the Big Three.”
The UAW has leverage because GM and Ford now rely for 90% of their global profits on one type of vehicle – body-on-frame, combustion trucks – sold in one country – the United States.
Fain could choke off those profits by texting the word “strike” to a handful of local union presidents in Kentucky, Indiana, Michigan and Texas. (GM and Stellantis build trucks in Mexico but rely on U.S. plants for engines and other parts.)
Large pickups sell for an average of $65,500 in the U.S. market. That’s a higher average price than Tesla or European luxury brands such as Porsche, according to Cox Automotive data.
Barclays estimates the Detroit Three average $15,000 per vehicle in profits from the Ford F-series, Chevrolet Silverado/ GMC Sierra and Ram truck model lines. If the F-series franchise was a stand-alone company, it would have more revenue than Starbucks or Netflix.
From a profit perspective, GM and Ford are North American regional automakers, selling vehicles with the same basic architecture – ladder frame construction, rear-wheel drive, big combustion engine up front – as the cars and trucks they sold in the 1960s.
Stellantis has a large and profitable European business and makes money in Latin America. Even so, 60% of the company’s 23 billion euros of operating income in 2022 was generated in North America.
For Fain, striking Detroit’s pickup truck factories is the only move that matters.
The Detroit Three’s dependence on big trucks built by UAW labor is not new. However, the world around the unionized Detroit truck businesses has changed dramatically since the last UAW strike in 2019.
The Biden administration and the governor of California have proposed sharply reducing or phasing out sales of new combustion vehicles by the middle of the next decade. GM and Ford have electric trucks, and Stellantis has one planned. But electric F-150s and Silverados won’t return the same profits as their petroleum-burning forbears for years, if ever.
Fain points to the “quarter of a trillion dollars” in truck-powered profits as he makes the case for a 40% raise for UAW members, matching the growth rate the union reckons for Detroit Three CEO pay.
Detroit’s well-paid CEOs are looking ahead to a world where they are forced out of the tariff-protected, combustion pickup market they dominate into a business where Tesla and Chinese automakers have a commanding lead in EV battery technology and software, manufacturing costs and overall profitability.
Wall Street sees this too. That’s why Tesla’s market cap is roughly 14 to 16 times the value of any one of the Detroit Three.
The $60+ an hour UAW workers earn in wages and benefits are supportable when the products they build return Mercedes profit margins.
But take those labor costs up 40% or more, and replace trucks with unprofitable EVs, and you can see why Detroit’s CEOs are using words like “bankruptcy.”
The union has other risks to calculate. In 1979, the UAW had nearly 1.5 million members. Today, there are fewer than150,000 UAW workers at the Detroit Three, and 383,000 in the union as a whole. Many current UAW members are in government, or service jobs, or academia. More active UAW members don’t work for the Detroit Three than do.
All the Detroit Three’s stakeholders will face a common challenge once the contract fight is done: Avoiding the fate of U.S. Steel – another once-mighty U.S. enterprise that failed to keep up with the times.
