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The three Detroit carmakers and the United Auto Workers labour union were locked in negotiations over a new contract hours before the current one expires, raising the prospect of a strike.
The union has threatened industrial action against Ford, Stellantis and General Motors after its four-year contract expires at 11:59pm on Thursday. A walkout affecting all three Detroit car companies at once would be a first in the UAW’s 88-year history.
Shawn Fain, UAW president, has said the union’s members would strike at selected locations starting on Friday rather than at all the companies’ plants. Based on progress at the bargaining table, more and more locations would go on strike.
The union is planning what it calls a “Stand Up Strike”— a reference to the historic Sit Down Strike in the 1930s that helped form the UAW — as a way to keep companies guessing.
“Something people have asked is, why aren’t we striking at every facility across the Big Three?” Brian Shepherd, the UAW’s chief organiser, said on Thursday. “But that option is still on the table. The Stand Up Strike is really to give the national negotiators maximum flexibility.”
Talks between the Detroit Three and the UAW have been unusually contentious compared with other four-year cycles. Fain was swept into office this year in the wake of a union corruption scandal. He has adopted a confrontational approach, pointing out the ’ billions in profits being made by the carmakers while workers have seen mostly concessions over the past decade.
Another point of tension is the auto industry’s transition towards electric vehicles. The carmakers need billions of dollars to invest in new plants and tooling to build battery-powered cars and trucks.
At the same time, they are forming EV battery joint ventures with non-unionised companies where workers are paid less than unionised counterparts. The UAW is seeking to ensure that auto industry jobs continue to be higher paid and unionised as the industry electrifies.
The UAW has lowered its demand for a wage increase to 36 per cent over four years, while the carmakers have raised their original offers to range as high as 20 per cent. The UAW also wants to end the two-tier wage system, where newer workers take four years to reach the same pay as longtime employees, but carmakers are not agreeing.
Ford chief executive Jim Farley said on CNBC on Thursday that if his company had agreed to the UAW’s request, “we would have lost $15bn dollars and gone bankrupt by now”.
A strike would potentially be a drag on the US economy and test the pro-union bona fides of President Joe Biden, especially in the battleground state of Michigan.
Oxford Economics estimated that if the three companies’ nearly 150,000 unionised workers eventually went on strike, the move could shut down roughly a third of US auto production, weighing on the labour market and boosting certain prices like those for new vehicles.
That would directly curtail US gross domestic product by as much as 0.3 per cent on an annualised basis, the consultancy said. Including indirect effects, the hit to GDP would be a bigger 0.7 per cent hit for as long as the stand-off lasts.
Michael Pearce, lead US economist at Oxford Economics, projected an overall decline in industrial production of up to 40 per cent based on past strikes, but said of the broader economic impact: “Any hit should be fully unwound once the dispute is over, so the impact on full-quarter GDP would likely be negligible.”
Michigan consultancy Anderson Economic Group estimated that workers would lose $859mn in wages during a 10-day strike that included all UAW workers at the three companies, while the companies would lose $989mn.
Both sides are prepared. The UAW has a $825mn strike fund it would tap to pay workers $500 a week. Fitch Ratings analyst Stephen Brown called the companies’ liquidity — cash and marketable securities, plus revolving credit lines — “pretty robust”, with GM at $39bn, Ford at $51bn and Europe-based Stellantis at €66bn.
Fain said on Wednesday that the focus of carmakers and “the corporate media” on wide economic damage was misplaced, given that chief executives’ pay at the three carmakers had risen 40 per cent in the past four years, funds spent on stock buybacks climbed 1,500 per cent and pay for UAW workers went up 6 per cent.
“They pretend that the sky will fall if we get our fair share,” he said. “When they say we’ll wreck the economy, it’s not the economy we’ll wreck, it’s their economy. The billionaire economy. That’s what they’re worried about . . . They want to scare the American people into thinking autoworkers are the problem.”