What the continuing UAW strike means for electric vehicles

The United Auto Workers strike against General Motors, Ford and Stellantis is in its fourth day, and no agreement is in sight. The strike comes as all three automakers have taken aggressive steps to retool existing factories to build electric vehicles. Delays could delay production and delivery of current and future electric vehicle models, while increasing prices for consumers.

Nearly 13,000 workers began protesting at midnight Friday after a deal was not reached by a deadline set by the UAW. UAW President Shawn Fain on Monday evening set a new deadline of September 22.

The UAW does not strike all of its 150,000 members at once. In a tactic Fain calls a “standing strike,” the union targets specific factories at a time. The first were the GM truck and van plant in Wentzville, Missouri; Ford’s Ranger pickup and Bronco SUV plant in Wayne, Michigan; and Stellantis’ Jeep Wrangler and Gladiator factory in Toledo, Ohio.

On Monday, Unifor, the union that represents auto workers in Canada, also said it would strike against Ford at midnight if a deal is not reached. The strike in Canada could affect Ford’s operations at some of its U.S. plants.

At the center of the fight is the shift to electric vehicles. Electric vehicles require fewer parts, and therefore fewer workers to assemble the vehicles, which is why union members are fighting to secure their livelihoods in addition to better working conditions. Traditional OEMs are investing money in electrifying their production lines and are keen to keep costs low so as not to lose market share to Tesla. Tesla already produces electric vehicles profitably using its non-union workforce.

“Let’s be clear: This is a potentially nightmarish situation for GM and Ford, as both 313 stalwarts are in the early stages of a massive electric vehicle transformation process for the next decade that will define future success,” wrote Dan Ives, an analyst at Wedbush Securities. . “In this crucial time of electric vehicle execution, model rollout, distribution, marketing, with increasing electric vehicle competition at all levels, the timing couldn’t be worse.”

Production delays and rising cost of electric vehicles

Analysts say a prolonged strike would delay the production and deployment of new electric vehicles. One of the more than four weeks would see production deadlines and roadmaps for electric vehicles pushed back to 2024, with many more delays on the horizon for GM, Ford and Stellantis, according to Ives. Of course, this would be a boon for Tesla in the short term, as consumer demand for electric vehicles continues.

Ford, Stellantis and GM are already struggling to bring their electric vehicles to market. Ford was forced in February to suspend production of its F-150 Lightning electric pickup after a battery caught fire in one of the vehicles parked near the factory for a quality check. The company also reported a 2.8% drop in electric vehicle sales in the second quarter after halting production at the Mexican factory that assembles the Mustang Mach e. Stellantis doesn’t plan to start selling fully electric vehicles in the U.S. until 2025. And GM’s new battery plant in Ohio has been slow to produce batteries, delaying versions electrics in the Chevrolet Silverado and other vehicles.

The UAW’s main demands are a 36 percent hourly wage increase, a reduced work week to 32 hours, a return to traditional pensions, the elimination of pay levels and the reinstatement of cost-of-living adjustments.

If, after negotiations, some of the UAW’s key proposals were accepted, it would end up costing OEMs billions of dollars in additional annual costs. Ives said these costs would ultimately fall on the end consumer, as it would cause electric vehicle prices to increase over the next 12 to 18 months.

Some analysts do not accept the idea that responding to union demands would put the three automakers in such a dire situation.

“If you look at the breakdown of what it costs to build an electric vehicle, labor is a very small part of the equation. Batteries are the most important,” Madeline Janis, executive director of the advocacy group Jobs to Move America, told the New York Times. “This idea that the UAW is going to drive Ford, GM and Stellantis out of the market is not true.”

Ford and GM threaten to abandon the transition to electric vehicles

“Union demands would force Ford to abandon its investments in electric vehicles,” said Ford CEO Jim Farley. “We really want to have a conversation about a sustainable future. Not a solution that forces us to choose between going out of business and rewarding our workers. »

Ford said that if the union got everything it wanted, its workers’ total compensation would be twice that of Tesla employees. It would also be higher than the labor costs of Toyota and other foreign automakers in the United States that use non-union labor.

“First of all, labor costs represent approximately 5% of the cost of the vehicle. They could double our wages without increasing the price of vehicles and still make billions in profits. It’s a choice,” Fain retorted in an interview with CBS this weekend. “And the fact that they want to compare this to the pitiful way that Tesla pays its workers and other companies pay their workers. That’s what all this arguing is about. The workers of this country must decide if they want a better life for themselves, instead of fighting to earn one paycheck after another while everyone else walks away with the spoils.

Ford announced in July that its electric vehicle business would lose $4.5 billion this year. But even with that projected loss, Ford raised its full-year 2023 forecast to between $11 billion and $12 billion in adjusted profit, up from $9 billion to $11 billion.

Speaking to CBS Mornings late last week, GM CEO Mary Barra said an excessive pay raise would hamper the automaker’s ability to continue producing vehicles with combustion engines while also developing electric vehicles.

“We are at a critical moment where investment is very important,” she said.

The pay gap between CEO and employee is in the spotlight

Unions are unlikely to be swayed by the arguments of auto industry leaders who oppose giving workers radical pay rises. It is the significant salary gaps between these same leaders and their workers that mobilize union members to the cause.

“We asked for 40% salary increases and the reason we asked for 40% salary increases is because in the last four years alone, the CEO’s salary has increased by 40%. They’re already millionaires,” Fain said in an interview with CBS.

Barra’s $29 million salary in 2022 was about 362 times the median salary of a GM employee. Farley received nearly $21 million in total compensation in 2022, approximately 281 times the average salary of Ford employees. And Stellantis CEO Carlos Tavares earned €23.46 million in 2022, about 365 times the average employee salary.

Shareholders of all three companies were also rewarded with dividends and share buybacks.

Adjusted for inflation, wages for U.S. auto workers have fallen 19% since 2008, according to the Economic Policy Institute.

The UAW has since reduced its wage increase request to 36 percent. Stellantis recently proposed a 21% raise over four years, and Ford and GM proposed 20% pay increases. The union rejected all three proposals.