Explainer: Auto industry on tenterhooks ahead of potential UAW strike against 'Detroit Three'

Lear

11/09/2023 15:48

(Updates July 12 story with latest developments)
    By Nathan Gomes
       Sept 11 (Reuters) - The United Auto Workers (UAW) union
expects to go on strike against the Detroit Three automakers
later this week if no agreement is reached over new contracts,
setting the stage for one of the largest worker actions this
year.
    The current contracts at General Motors  GM.N , Ford  F.N 
and Chrysler parent Stellantis  STLAM.MI  are set to expire this
Thursday at 11:59 p.m. ET.
    The potential strikes come as Detroit automakers, like their
global counterparts, have been focused on cost reductions, which
in some cases include job cuts, to help accelerate a shift from
gasoline-powered vehicles to electric vehicles (EV).
    
    WHO IS THE UNION NEGOTIATING WITH?
    The UAW kicked off negotiations with GM, Ford and Stellantis
in July, but is yet to agree on a deal.
    According to GM's annual filing, about 46,000, or 44%, of
its U.S. employees were represented by unions, and a majority of
them by the UAW.
    Ford's annual filing showed about 57,000 of its hourly
employees in the United States were represented by the UAW,
while the UAW represents about 43,000 U.S. hourly workers at
Stellantis.
    The UAW has historically picked one of the Detroit Three to
negotiate with first as the so-called target that sets the
pattern on which subsequent deals are based.
    UAW's new president, Shawn Fain, had promised that things
would be different this time and has said that "there will be a
strike at all three, if need be".
    
    WHAT ARE THE CURRENT OFFERS FROM THE DETROIT THREE? 
    Ford has offered a 9% wage increase through 2027 and 6% lump
sump payments. Company officials later confirmed that the
automaker boosted its offer to 10% in wage hikes along with the
lump sum payments.
    GM followed with a 10% wage hike and two additional 3%
annual lump sum payments over four years. 
    Stellantis last week offered its U.S. hourly workers a 14.5%
wage hike over four years, but no lump sum payments.
    
    WHAT DOES THE UAW HAVE TO SAY ABOUT THE OFFERS?
    The union has rejected all three offers. 
    "We want a deal. We are ready for a deal. But it's got to be
a deal that honors our sacrifices and contributions," UAW
president Shawn Fain said last week on Facebook Live.
    He added that there would be a strike at all the three
automakers if no agreement is reached before the deadline.
    
    WHAT ARE THE UNION'S DEMANDS?
    The UAW is pushing automakers to eliminate the two-tier wage
system under which new hires earn as much as 25% less than
veterans.
    Fain has said repeatedly the union will push to restore pay
improvements tied to the cost of living and retiree benefits cut
during the 2008-2009 economic crisis.
    The UAW also wants strong salary increases given the
financial success of the automakers, citing generous executive
payouts and large U.S. federal subsidies for EV sales.
    Fain also is aiming to get agreements that would allow the
UAW to represent hourly workers at joint-venture EV battery
plants opened or planned by the Detroit Three.
    The UAW has been wary of the industry shift to EVs and 
called on the Biden administration to soften its proposed
vehicle emission cuts that would require 67% of new vehicles to
be electric by 2032.
    EVs require fewer parts to build and industry officials have
said that will result in a need for fewer workers. Fain has said
there should be no jobs lost because of the EV shift.
    
    WHAT DO AUTOMAKERS WANT?
    The Detroit Three want to close the cost gap they have with
foreign automakers with non-unionized U.S. factories.
    Ford sources estimate that their U.S. labor costs are $64 an
hour, compared with an estimated $55 for foreign automakers and
$45 to $50 for EV leader Tesla  TSLA.O .
    The companies also want greater flexibility in how it uses
its U.S. workers to increase efficiency and cut costs as the
industry shifts to EVs.
    
    WHAT IS AT STAKE?
    A potential strike could hit at a time when automakers are
ramping up efforts to maximize gasoline and EV vehicle
production to capitalize on demand for new vehicles.
    A strike would be another blow, following supply-chain
disruptions that hurt production and profits during the
pandemic.
    In fiscal 2019, GM's fourth-quarter profit took a $3.6
billion hit from a 40-day UAW strike that shut down its
profitable U.S. operations.
    Impacts of the potential strike could also trickle down and
squeeze quarterly profits for auto part suppliers such as Aptiv
 APTV.N , Lear Corp  LEA.N  and Magna  MG.TO .
    Contract talks between the UAW and the Detroit automakers
have gone on till the strike deadline and beyond in past years.
    
    WHAT DO ANALYSTS EXPECT?
    Analysts rate the chances of a strike at more than 50%.
    "Time is quickly running out on what may be an extended
walkout against all Detroit Three OEMs " Evercore ISI analyst
Chris McNally said.
    A ten-day strike by the UAW could cost manufacturers,
workers, suppliers and dealers more than $5 billion, according
to a new analysis by the Anderson Economic Group, an economic
consulting firm.

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Automakers' contract negotiations will decide potential EV
future for idled Illinois plant     urn:newsml:reuters.com:*:nL1N38C3B5
EXPLAINER-Why U.S. labor unions are gaining leverage in contract
talks with big employers     urn:newsml:reuters.com:*:nL4N38R308
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 (Reporting by Nathan Gomes in Bengaluru and Ben Klayman in
Detroit; Editing by Shounak Dasgupta)
 ((Nathan.Gomes@thomsonreuters.com))