UAW Strike is Likely as Big 3 Are Far From a Deal

There is the possibility of a UAW (United Auto Workers) strike starting this Friday. If the strike lasted ten days it would cause $5.6 billion in losses to US GDP and would send Michigan into a recession. A strike could also help non-union carmakers like Tesla and foreign car makers.

Shawn Fain, the combative president of the United Auto Workers union, has threatened to strike any of the three companies that hasn’t reached an agreement by the time its contract with the union expires at 11:59 p.m. Eastern time Thursday.

Both sides began exchanging wage and benefit proposals last week. Though some incremental progress appears to have been made, a final agreement could come too late to avoid walkouts by UAW workers at factories in multiple states. Any strike would likely cause significant disruptions for auto production in the United States.

UAW Demands

The UAW has asked for 46% raises in general pay over four years — an increase that would elevate a top-scale assembly plant worker from $32 an hour now to about $47. In addition, the UAW has demanded an end to varying tiers of wages for factory jobs; a 32-hour week with 40 hours of pay; the restoration of traditional defined-benefit pensions for new hires who now receive only 401(k)-style retirement plans; and a return of cost-of-living pay raises, among other benefits.

Perhaps most important to the union is that it be allowed to represent workers at 10 electric vehicle battery factories, most of which are being built by joint ventures between automakers and South Korean battery makers.

Ford, GM and Stellantis Offers

Ford proposed a cumulative 10% pay raise over the course of the four-year contract, plus several lump-sum payments, including $6,000 to cover inflation.

GM has offered 10% as well, with similar lump sums.

Stellantis (formerly Fiat Chrysler) offered 14.5% wage increases over four years, without lump sums in the wage package. But it proposed lump sums to cover inflation. All offered contract-ratification bonuses but rejected the shortened work week the UAW requested.

Ford calculates that with their offer that average annual pay, including overtime and lump-sum bonuses, would rise from an average of $78,000 a year last year to more than $92,000 in the first year of a new contract.

Outside analysts say that when wages and benefits are included, Detroit Three assembly plant workers now receive around $60 an hour while workers at Asian automaker plants in the U.S. get $40 to $45.

At the end of August, the three automakers collectively had enough vehicles to last for 70 days. After that, they would run short. Buyers who need vehicles would likely go to nonunion competitors, who would be able to charge them more.

Vehicles are already scarce when compared with the years before the pandemic, which touched off a global shortage of computer chips that hobbled auto factories.

“A work stoppage of three weeks or more,” Sam Fiorani, AutoForecast Solutions analyst said, “would quickly drain the excess supply, raising vehicle prices and pushing more sales to non-union brands,” Fiorani said.

Analysts are skeptical that the union will walk off the job at every Big Three factory. The UAW’s $825 million strike fund would run out in under three months if all 150,000 autoworkers went on strike at once. Analyst think the UAW could target only the engine plants of the Big Three, which would effectively cripple vehicle production without requiring all workers to strike simultaneously.

The automakers will likely respond by temporarily lay off workers throughout the system or cut their pay.