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Auto Labor Talks May Really Be More Perilous This Time Around

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New variables include unprecedented wage demands, the transition to EVs, and fiery new union leadership.

Viewed through one lens, the United Auto Workers rally in Warren, Michigan, on Sunday was simply more of what the union’s leadership always has offered as contract talks heat up: rhetoric about auto executives’ exorbitant pay and how the CEOs have balanced the companies’ huge financial gains on the groaning backs of their under-compensated blue-collar workers.

But flip to another perspective, and it’s possible that this fall really does seem different as the UAW’s September 14 strike deadline looms for the Detroit Three automakers. Among unique and possibly fateful variables this time around are the huge gains in compensation being enjoyed across the U.S. economy as the general labor squeeze continues in the wake of the pandemic; how automakers have made jobs easier for white-collar workers who now often can work remotely; the industry’s accelerating transition to lower-labor-content all-electric vehicles; and the fiery new, outsider leadership of the union who are spoiling for a fight — or at least wanting to look as though they welcome one.

“I don’t want to hear that talk anymore” about how the companies expect workers to “settle for scraps” while they rake in profits and dole out generous executive benefits, UAW President Shawn Fain reportedly told a crowd of hundreds of auto workers who rallied in the city in Macomb County that is one of the traditional centers of U.S. auto production. “We deserve this. You deserve this.”

“This” is the union’s expressed demands for a 46% wage increase over four years from each of the Detroit Three — General Motors, Ford, and Stellantis, which owns what was Fiat Chrysler — as well as a cost-of-living allowance, a return to defined-benefit pensions, more health-and-safety protections and additional paid time off.

At least one Detroit Three CEO admits this this round might be dicey. “We are facing an unprecedented time,” Ford CEO Jim Farley said on a Detroit radio show recently. Noting that Ford employs more hourly workers than the other major automakers in the U.S., he said that “the future of the economies of our region and our company, and many companies, hang in the balance. This is a monumental time.”

Of course, this all sounds similar to the paths that have been followed by Detroit Three labor negotiations every few years for most of a century, often punctuated by a national strike of one of the automakers, then followed by the next step in a gradual ratcheting up of labor costs that helped culminate in the bankruptcies of GM and Chrysler. The rumblings from the “auto talks,” and the results, often had deep and wide effects on the entire American economy and the middle-class way of life.

But several things are decidedly different this time around. For one thing, UAW quiescence of more than a decade seems to be at an end. Traditionally, the union would demand, say, a 5% annual wage increase and get maybe 3% a year with inflation adjustments, something like that. The domestic industry’s near-death experience of the Great Recession in 2008 helped constrain UAW demands over the next several years, as did annual profit-sharing checks that typically amounted to several thousand dollars per worker.

A several weeks’ walkout against GM in 2019 seemed to satisfy union militants for a while. And the last few years of rooting out corruption in the UAW’s previous brain trust robbed the union of any kind of focus on collective bargaining. But this year’s election of Fain — a former Stellantis electrician who ran against the incumbent on a platform against corruption and contract concessions — brought to the helm someone who has vowed all along to get tougher with the bosses.

What Fain has demanded seems impossibly, bombastically large even by UAW standards, even in good times. Simply fulfilling his demands — which won’t happen — would add $80 billion to each automakers’ labor costs, some reported estimates have said, a toll that would wipe out all their profits and possibly doom them.

But even acquiescing to greater than historical compensation increases for UAW members would greatly disadvantage the Detroit Three at a time when foreign rivals are building more and more plants in North America, including many that are taking advantage of how the U.S. government is subsidizing production of batteries and EVs in this country. Right now, foreign-based automakers operating in America pay roughly $55 an hour in wages and benefits, and Tesla pays an estimated $45 an hour, while GM, Ford and Stellantis msut shell out about $65 an hour.

The Detroit Three’s hundreds of U.S. suppliers, from Fortune 500 giants down through mom-and-pop machine shops, also would come under tremendous pressure both to pay more to their own employees, especially the unionized ones, and to cut their costs to automakers whose profitability would be pressed.

On the other hand, sustaining a strike would have its costs for an automaker, its suppliers and the whole U.S. economy. A 10-day strike alone against a Detroit Three member would result in more than $5 billion in economic losses, per an analysis by Michigan-based Anderson Economic Group, including the financial hit to suppliers and dealers. A strike on all three companies would be “akin to taking down 2% of U.S. GDP and could incite intervention analogous to what occurred in the rail sector” earlier this year to avert a nationwide strike, according to a Bank of America analysis.

At the same time, it’s easy to see that Fain and his colleagues are stoking militancy in a unionized workforce that has become both more fearful and more expectant in the last few years. This is an era when restaurant workers get 20% tips just for showing up, and when factory employees certainly get the message that they are a rare, valuable and endangered species. Yet they don’t get to work from home like many of their white-collar colleagues.

But the union now numbers only about 150,000 members working at the Detroit Three, and overall UAW membership is only a fraction of its peak of 1.5 million in 1979. What’s more, the industry’s forced transition to production of EVs, which is now underway and accelerating, promises a drastic reduction in the number of hourly workers required to produce those vehicles, compared with traditional internal-combustion models. Ford already has simply cleaved its business in half, one to operate in the gasoline-powered sphere, and the other to serve as its spearhead into the future.

Union leaders are promising their members some form of protection from that planned obsolescence. And Farley added that UAW leadership and his company “see eye to eye on building the middle class, especially in the Midwest, as we transition to EVs. How we get there seems pretty tough right now, but we’re going to … roll up our sleeves with a can-do approach.”


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