The Implications of a 13,000-Worker Strike Across Leading U.S. Automobile Manufacturers

Approximately 13,000 employees in the automotive sector have ceased work at three specific factories following unsuccessful negotiations between union leaders and Detroit-based car makers.

The United Auto Workers (UAW) union is demanding significant wage increases and enhanced benefits from General Motors, Ford, and Stellantis. The union aims to reclaim concessions made in previous years when these companies were financially distressed.

A minor fraction of the union’s 146,000-strong membership abandoned their posts at a General Motors facility in Wentzville, Missouri; a Ford factory in Wayne, Michigan; and a Stellantis Jeep plant in Toledo, Ohio, as of 11:59 p.m. Eastern time last Thursday.

UAW President Shawn Fain asserts that the strategically targeted strikes will provide the union with leverage during contract negotiations and introduce an element of unpredictability concerning its next actions.

The strategy also has the potential to prolong the union’s $825 million strike fund.

Both parties commenced discussions on wages and benefits last week, and although some progress seemed to be in the offing—with General Motors enhancing its offer mere hours before the strike deadline—these developments were insufficient to avert work stoppages. This strike has the potential to substantially disrupt automobile production in the United States.

Outstanding Contractual Issues and Consumer Impact During a Protracted Strike

What Are The Employees Demanding?

The union is requesting a 36% increase in general wages over a four-year period. At present, top-tier assembly plant workers earn roughly $32 per hour. Additional demands from the UAW include the abolishment of varying wage tiers for factory jobs; a 32-hour workweek with pay equivalent to 40 hours; the reinstatement of traditional defined-benefit pensions for new employees, who currently only have access to 401(k) retirement plans; and the revival of cost-of-living wage increases, among other benefits.

A crucial point for the union is the representation of employees at 10 electric vehicle battery factories, most of which are joint ventures between the automakers and South Korean battery manufacturers. The union is demanding these facilities pay top UAW wages.

Presently, UAW members hired post-2007 do not receive defined-benefit pensions, and their healthcare benefits are comparatively limited. For years, the union acquiesced to forgo general pay increases and lost cost-of-living adjustments to aid companies in controlling expenses. Even as top-scale workers earn $32.32 per hour, temporary workers initiate at slightly below $17 an hour. However, full-time employees have received profit-sharing checks this year, ranging from $9,716 at Ford to $14,760 at Stellantis.

Fain has openly admitted that the union’s demands are ambitious, but he argues that the highly profitable automobile manufacturers have the capacity to significantly elevate workers’ wages, thereby compensating for concessions made during the financial crisis of 2007-2009 and the ensuing Great Recession.

What Are The Companies Offering?

The car manufacturers have made some advances toward meeting UAW’s wage demands, but significant disparities remain. Last Thursday, General Motors proposed a 20% wage increment, 10% of which would be in the first year, spanning over four years. Ford has similarly offered a 20% salary boost. The last known proposal from Stellantis was 17.5%, although subsequent offers have been made.

Fain dismissed these proposals as insufficient to shield workers from inflation and to duly reward them for their contributions to the Detroit Three’s profitability.

The companies have rejected the union’s demands as cost-prohibitive. They argue that they will be making substantial capital investments in the near future to maintain production of internal combustion engine vehicles while concurrently developing electric vehicles and constructing future-oriented battery and assembly plants. They contend that a generous UAW contract would elevate vehicle retail prices and make Detroit automakers less competitive against European and Asian rivals.

The Path Forward

Fain indicated that no negotiations would take place on Friday, as union leaders would be joining the rank-and-file on picket lines. The scale of the strike could potentially escalate, depending on the progression or stagnation of discussions at the bargaining table.

“If the companies continue to bargain in bad faith or stall or continue to deliver insulting offers, then our strike will continue to expand,” stated Fain. The union’s tactical approach, he added, will introduce unpredictability as to how the labor dispute might intensify.

Impact on Vehicle Pricing

In the long term, yes. The Detroit Three have been operating their plants continuously to build up inventory. However, this is also strengthening the financial resilience of UAW members. As of the end of August, these companies had a 70-day vehicle supply. Beyond that, scarcity is expected, which could drive consumers toward non-union competitors who could charge premium prices.

The current vehicle scarcity is exacerbated by a global shortage of computer chips, which has severely impacted automotive manufacturing. Industry analyst Sam Fiorani estimated that a work stoppage exceeding three weeks would rapidly deplete existing inventories, thereby escalating vehicle prices and driving consumers toward non-union brands.

Economic Repercussions

A prolonged strike could adversely impact the economy, particularly in the Midwest, where the majority of automobile plants are located. The auto industry constitutes approximately 3% of the U.S. GDP, and Detroit’s Big Three represent about half of the entire U.S. car market.

In the event of a strike, workers would receive roughly $500 per week in strike pay, a substantial reduction from their regular wages, leading to a considerable withdrawal of millions of dollars from the economy. If the strike against all three companies lasted merely 10 days, the cost would approach a billion dollars, as estimated by the Anderson Economic Group. During the 2019 UAW strike that lasted 40 days, GM incurred a loss of $3.6 billion.

The unfolding labor dispute could also serve as a litmus test for President Joe Biden’s assertion that he is the most pro-union president in U.S. history.

Balance of Power

The situation is fluid. While the companies have ample liquidity to withstand a strike, the union’s $825 million strike fund would be depleted in just under three months should all 146,000 members walk off their jobs. Targeted strikes aim to extend the longevity of the fund, should the strike continue into the winter months.

The union faces a disadvantage in its inability to organize factories owned by foreign automakers, as those companies offer lower compensation than Detroit firms. Nonetheless, organized labor has recently secured significant contract agreements in other sectors. For instance, the Teamsters won a top hourly wage of $49 after five years in its agreement with UPS.

As of this year, 247 strikes involving 341,000 workers have been reported, marking the highest number since Cornell University initiated strike tracking in 2021, although still significantly lower than figures recorded during the 1970s and 1980s.

Frequently Asked Questions (FAQs) about U.S. auto workers strike

More about U.S. auto workers strike

• United Auto Workers Official Website
• General Motors Labor Relations
• Ford Corporate Labor Information
• Stellantis Labor Relations
• U.S. Bureau of Labor Statistics on Auto Industry
• Economic Impact of Auto Industry on U.S. Economy
• History of Labor Strikes in the U.S. Auto Industry
• Overview of the U.S. Auto Industry
• Impact of Labor Strikes on Auto Pricing
• President Joe Biden on Union Policies
• Inflation and Wage Demands in the U.S. Auto Industry
• Analysis by Anderson Economic Group on Strike Costs