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General Motors and Stellantis Engage in Negotiations with United Auto Workers to Strike Agreements Similar to Ford’s

by Gabriel Martinez
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labor negotiations

General Motors and Stellantis, the company behind the Jeep brand, are in discussions with the United Auto Workers (UAW) union this Thursday with the aim of forging a labor contract that resembles the recently concluded agreement with their industry competitor, Ford.

The announcement of Ford’s agreement led approximately 17,000 striking employees to discontinue their picketing and they are expected to resume work in the near future. However, a body of around 57,000 Ford employees still awaits the opportunity to cast their votes on the tentative deal.

Should General Motors and Stellantis fail to align with the precedent set by Ford, it is probable that UAW President Shawn Fain would escalate the partial strikes that initiated on September 15, according to Art Wheaton, the Director of Labor Studies at Cornell University. “Fain appears uncompromising when it comes to diverging from the established pattern with the other two automotive manufacturers,” noted Wheaton.

Additional work stoppages would inflict substantial financial harm, particularly for General Motors, which operates profitable pickup truck manufacturing facilities in Fort Wayne, Indiana, and Flint, Michigan. These plants stand at risk of being shut down by union actions, added Wheaton.

Both General Motors and Stellantis are experiencing financial losses due to the ongoing strikes and are keen to conclude them. General Motors disclosed this Tuesday that they are incurring losses of approximately $200 million weekly, which includes the impact on their highly profitable factory in Arlington, Texas, responsible for the production of large, truck-based SUVs like the Chevrolet Tahoe.

If ratified, the Ford agreement would provide significant financial benefits for the top-tier assembly plant workers, who would receive a 25% wage increase over the contract’s lifespan. When accounting for cost-of-living adjustments, employees could see their hourly pay rise by more than 30% to exceed $40 by the time the contract terminates on April 30, 2028. The contract also proposes accelerated paths to full-time employment for temporary staff, the elimination of certain wage tiers, augmented pension benefits, and enhanced 401(k) contributions for those not currently receiving them. Voting on this deal could commence as early as next week.

General Motors is anticipated to be the next automaker to reach an agreement, primarily because it has consented to incorporate new electric vehicle battery factories within the framework of the UAW’s national contract, effectively bringing them under union jurisdiction. The union views these factories as crucial employment hubs as the automotive industry shifts from internal combustion engines to battery technology.

As for Ford, it remains unclear what commitments were made with respect to battery factories. The company had expressed skepticism about the feasibility of unionizing workers at plants that have yet to be constructed.

All three automakers have voiced concerns about inflating labor costs to a degree that would necessitate price hikes, thereby diminishing their competitive edge against non-union companies like Tesla and Toyota.

Ford’s Chief Financial Officer John Lawler revealed in a third-quarter earnings call that the recent strike had eroded the company’s pretax earnings by $100 million for the quarter. The disruption, lasting six weeks, has led to a production shortfall of 80,000 vehicles, cutting full-year pretax earnings by an estimated $1.3 billion. The additional labor costs resulting from the UAW agreement will add between $850 and $900 per vehicle, although it is yet uncertain how much of this cost will be transferred to consumers.

Due to the uncertainties bred by the ongoing strikes, Ford has retracted its financial outlook for 2023 until the union ratifies the new contract, noting that the industrial action has introduced volatility among parts suppliers and has complicated the resumption of production at closed Ford plants.

Garrett Nelson, an analyst at CFRA, warned that the labor contract’s financial implications for Ford are substantial and “will adversely affect the company’s profit margins as well as its competitive positioning relative to Tesla and other non-union automakers.”

A recent study by Moody’s Investor Service predicts that the increased labor costs could potentially inflate annual expenses by $1.1 billion for Stellantis, $1.2 billion for General Motors, and $1.4 billion for Ford in the final year of the contract, assuming a 20% hike in hourly labor costs.

Wheaton pointed out that the automakers are generating billions in profits and are in a position to absorb the heightened labor costs, which he estimates constitute 6% to 8% of the total cost of manufacturing a vehicle.

Frequently Asked Questions (FAQs) about labor negotiations

What companies are currently in negotiations with the United Auto Workers union?

General Motors and Stellantis are in discussions with the United Auto Workers (UAW) union. They are aiming to forge a labor contract that resembles the recently concluded agreement with their industry competitor, Ford.

What are the financial implications of the strikes for General Motors?

General Motors disclosed that they are incurring losses of approximately $200 million weekly due to the ongoing strikes. These strikes have also impacted their highly profitable factory in Arlington, Texas.

What does the Ford agreement offer to assembly plant workers if ratified?

The Ford agreement, if ratified, would provide top-tier assembly plant workers with a 25% wage increase over the contract’s lifespan. When accounting for cost-of-living adjustments, the hourly pay could rise by more than 30% to exceed $40 by April 30, 2028.

Are the companies worried about the impact of labor costs on vehicle pricing?

Yes, all three companies—General Motors, Stellantis, and Ford—have voiced concerns about inflating labor costs to a degree that would necessitate price hikes on their vehicles, affecting their competitive edge against non-union companies like Tesla and Toyota.

What does the UAW see as the future of employment in the auto industry?

The UAW sees new electric vehicle battery factories as crucial employment hubs for the future. This is because the automotive industry is expected to transition from internal combustion engines to battery technology.

What is the estimated annual increase in labor costs according to Moody’s Investor Service?

A recent study by Moody’s Investor Service predicts that annual labor costs could rise by $1.1 billion for Stellantis, $1.2 billion for General Motors, and $1.4 billion for Ford in the final year of the contract, assuming a 20% increase in hourly labor costs.

What are the major concerns among the auto industry companies?

Major concerns include the financial impact of ongoing strikes, the potential increase in labor costs affecting vehicle pricing, and the ability to compete with non-union automakers such as Tesla and Toyota.

How has the recent strike affected Ford’s financial performance?

Ford’s Chief Financial Officer John Lawler revealed that the recent six-week strike has eroded the company’s pretax earnings by $100 million for the quarter and led to a production shortfall of 80,000 vehicles, cutting full-year pretax earnings by an estimated $1.3 billion.

More about labor negotiations

  • General Motors Official Statement on Labor Negotiations
  • Stellantis Press Release on UAW Talks
  • United Auto Workers (UAW) Official Website
  • Ford’s Tentative Labor Contract Details
  • Art Wheaton’s Commentary on Labor Negotiations
  • Moody’s Investor Service Study on Auto Industry Labor Costs
  • CFRA Analyst Garrett Nelson’s Insights on Labor Costs
  • John Lawler’s Third-Quarter Earnings Call Transcript

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