The United Auto Workers (UAW) union called 12,000 workers at three auto plants on strike early Friday after they failed to reach an agreement on their wage demands.
This is the first simultaneous UAW strike against Detroit’s big three, General Motors, Ford and Stellantis (which controls Chrysler) in the union’s 88-year history, giving it extraordinary potential to influence an American economy already under strain the high inflation.
It is also evidence of President Joe Biden’s claim that he is the most pro-union president in American history.
In principle, there were three factories that have called off the protest, although the union may expand the protest to additional factories in the coming days, depending on progress (or not) at the bargaining table, the UAW president said.
“If companies continue to negotiate in bad faith or continue to hesitate or continue to make offensive offers to us, then our strike will continue to grow,” Fain said. The union’s strategy, he said, will “keep companies guessing” about how the union might escalate the fight.
These are the keys to figuring out why they went on strike and what possible impact it could have:
What do employees demand?
The UAW is demanding a 36% wage increase over four years, and manufacturers have responded with offers that represent about half of that increase.
A high-level worker at an assembly plant currently earns about $32 an hour. To help companies control costs, workers have accepted for years that their salaries would lose purchasing power relative to inflation. While highly skilled assembly workers earn $32.32 per hour, temporary workers start at just under $17.
Still, full-time employees received profit-sharing checks that ranged from $9,716 at Ford to $14,760 at Stellantis.
Members of the United Auto Workers participate in the Labor Day parade in Detroit on September 2, 2019.
The UAW is also seeking to reinstate cost-of-living wage increases, eliminate differential pay levels for factory jobs and a 32-hour work week, and restore traditional pensions for new employees, who now only receive 401 retirement plans. k). Currently, UAW workers hired after 2007 do not receive defined benefit pensions. The health benefits are also less generous.
Perhaps most importantly for the union, it will be allowed to represent workers at 10 electric vehicle battery factories, most of which are built by joint ventures between South Korean automakers and battery makers.
The union wants these plants to receive the best wages from the UAW. That’s partly because workers who now make internal combustion engine components will need jobs as the industry shifts to electric vehicles.
How did the companies react to the lawsuits?
Ford CEO Jim Farley said he generously offered a raise with the reinstatement of inflation adjustment as well as more vacation time. He also said salary levels would be finalized, something the union questioned.
On Thursday, GM said it had increased its offer to a 20% pay increase, including 10% in the first year, over four years. Chief executive Mary Barra said in a letter to staff: “We are working at full speed and have proposed a further, increasingly strong offer with the aim of reaching an agreement this evening.”
Ford is also offering a 20% raise. The last known offer from Stellantis (formerly Fiat Chrysler) was 17.5%.
Fain has dismissed these proposals as inadequate to protect workers from inflation and reward them for building the vehicles that have made Detroit’s Big Three so profitable.
The companies rejected pension increases for retirees who hadn’t received a pension in more than a decade, Fain said, and sought concessions on annual profit-sharing checks that often exceed $10,000.
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Why companies defend themselves against lawsuits
The companies rejected the union’s demands as too costly.
Car manufacturers claim that they need to make large investments in the development and construction of electric vehicles as well as in the construction and design of internal combustion engine vehicles.
They say a costly labor deal could force them to raise prices compared to their non-union foreign competitors. And they say they made fair proposals to the union.
Ford said if the UAW lawsuits continued over the past four years, the company would have lost $14 billion.
Outside analysts say that when salaries and benefits are taken into account, workers at the three companies’ assembly plants are now paid about $60 an hour, while workers at Asian automakers’ U.S. plants are paid between $40 and $45.
Will the strike increase car prices?
At some point it is possible. GM, Ford and Stellantis continued to operate their factories 24 hours a day to store supplies on dealer lots. But that also means putting more money in the pockets of UAW members and strengthening their financial reserves.
At the end of August, the three automakers combined had enough vehicles to meet 70 days of demand. After that they become scarce. Buyers in need of vehicles would likely turn to competitors.
Vehicles are already in short supply compared to the years before the pandemic, which led to a global shortage of computer chips that crippled car factories.
Sam Fiorani, an analyst at AutoForecast Solutions, a consulting firm, said manufacturers had about 1.96 million vehicles available at the end of July. Before the pandemic, that number was 4 million.
“A work stoppage of three weeks or more – Fiorani – would quickly deplete excess supply, increase vehicle prices and lead to more sales to non-union brands.”
How could this strike hurt the economy?
The automobile industry accounts for about 3% of the U.S. gross domestic product (its total output of goods and services), and Detroit automakers account for about half of the total U.S. auto market.
In the event of a strike, workers would receive about $500 a week in strike pay, far less than what they earn while on the job.
This would deprive the economy of millions of dollars in wages.
Car manufacturers would also suffer damage. If a strike against the three companies lasted just 10 days, it would cost them nearly $1 billion, the Anderson Economic Group estimates. During a 40-day UAW strike in 2019, GM alone lost $3.6 billion.