The potential strike by U.S. auto workers in September presents a significant challenge for President Biden. Balancing his support for electric vehicles (EVs) with his pro-union stance is crucial for his administration. The United Auto Workers (UAW) is concerned that EV factories may not generate as many jobs as traditional plants and that new battery factories, incentivized by the President's tax policies, may offer lower wages.
The implications of a work stoppage by nearly 150,000 UAW workers at GM, Ford, and Stellantis would extend beyond politics, resulting in an estimated economic loss of over $5 billion after 10 days, according to the Anderson Economic Group. Recent history underscores this concern: the six-week strike at General Motors in 2019 cost the automaker $3.6 billion, leading to broader repercussions across the industry. Michigan, which employs about half of the unionized workforce in the auto industry, experienced a recession during that quarter as a result of the strike.
This year's labor negotiations occur in a unique context, with Detroit automakers facing uncertainty in an industry undergoing transformation. While they have been earning significant profits from high-priced trucks and SUVs, they are also investing billions in developing future EVs, which consumers are still hesitant to adopt.
Notably, President Biden has entered the discussion, urging both sides to find common ground. He supports a fair transition to a clean energy future, emphasizing the need for steps to avoid plant closures and measures that harm workers.
The UAW is seeking to regain concessions made during difficult times, with demands for 40% raises, reinstated cost-of-living adjustments, and greater job security for temporary workers. Automakers aim to close the cost gap with non-union companies such as Tesla and Toyota. Currently, labor costs (including benefits) at GM, Ford, and Stellantis amount to around $64-$67 per hour, while foreign automakers average approximately $55 per hour, and Tesla's labor costs range from $45-$50 per hour.
It is worth mentioning that UAW workers now only build less than half of the cars produced in the United States. Consequently, both the UAW and Detroit automakers have diminished industry influence compared to the past.
Ultimately, both a strike and a settlement that allows Detroit to fall behind Tesla and other competitors would incur significant costs. The outcome will have ramifications not only for the automotive industry but also for the economy and the President's vision of promoting clean energy while supporting the labor movement.