Explainer: Auto industry on tenterhooks as UAW kicks off talks with 'Detroit Three'
12/07/2023 19:42
By Nathan Gomes
July 12 (Reuters) - The United Auto Workers (UAW) union
will start contract talks with the Detroit Three automakers
beginning Thursday, ahead of the mid-September expiration of
current four-year labor deals.
UAW's leaders are set to forgo the traditional media event
of shaking hands with top executives at General Motors GM.N ,
Ford F.N and Stellantis STLAM.MI to open talks. The union
leaders plan to meet with auto workers on Wednesday at three
Detroit-area plants.
The talks 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 is negotiating with GM, Ford and Stellantis. The
U.S. labor union will officially open talks first with
Stellantis, followed by Ford on Friday and GM on Tuesday.
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, has promised things will be
different this time and analysts have said the odds have risen
for strikes, including simultaneous walkouts at multiple
automakers.
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.
He also has said the union, which represents about 150,000
U.S. hourly workers at Detroit's Three, is not afraid to go on
strike at any of the automakers without a fair contract.
"They've made a quarter of a trillion dollars in North
American profits over the last 10 years and they can afford to
make things right for our members," Fain said on Tuesday.
The UAW has been wary of the industry shift to EVs and
recently 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 HAVE TO SAY?
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.
GM said on Monday it has "a long history of negotiating fair
contracts with the UAW" and its "total compensation package ...
is one of the best in the industry".
Ford CEO Jim Farley in an opinion piece published in the
Detroit Free Press last week said "success in this new world
will require us to adapt. Some jobs will be disrupted, and some
will be created." Late last month, Ford had another round of
salaried-worker job cuts.
Stellantis said its "focus will be on negotiating a contract
that will ensure our future competitiveness in today's rapidly
changing global market and preserve good wages and benefits that
recognize the contributions of our represented workforce."
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.
Fewer cars produced would hit inventories at vehicle dealers
that are also trying to cash in on the demand.
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 .
WHAT DO ANALYSTS EXPECT?
"We don't expect companies to raise FY guidance given the
uncertainty ahead of UAW negotiations in September. We see a
strike as likely," Wells Fargo analyst Colin Langan said.
"We expect the UAW's new leadership will want to prove
itself to the rank-and-file membership by trying to squeeze
everything it can from the automakers," Fitch Ratings analyst
Steve Brown said.
Fain who took helm of the union in March, has been a UAW
member for more than two decades.
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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))