Explainer: Clock ticks down towards potential UAW strike against Detroit Three automakers
14/09/2023 17:43
Sept 14 (Reuters) - The United Auto Workers (UAW) union
expects to go on strike against the Detroit Three automakers on
Thursday if no agreement is reached over new contracts in what
would be the first-ever coordinated labor action against the
companies.
The current contracts at General Motors GM.N , Ford Motor
F.N and Chrysler parent Stellantis STLAM.MI are set to
expire at 11:59 p.m. ET on Thursday.
Detroit automakers, like their global counterparts, have
been focused on cost reductions, which in some cases include job
cuts, to help accelerate a shift to electric vehicles (EVs) from
gasoline-powered vehicles.
WHO IS THE UNION NEGOTIATING WITH?
The UAW, which represents 46,000 GM workers, 57,000 Ford
employees and 43,000 Stellantis workers, kicked off negotiations
with the companies in July.
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. This time, UAW
President Shawn Fain targeted all three companies
simultaneously.
Contract talks between the UAW and the Detroit automakers
have gone on until the strike deadline and beyond in past years.
WHAT ARE THE CURRENT OFFERS FROM THE DETROIT THREE?
Ford Motor has proposed a 20% hike in pay over the contract
term, General Motors 18%, and Stellantis 17.5%, Fain said. That
is less than half the pay hikes the union has sought, but higher
than the companies' initial offers.
Ford CEO Jim Farley said in a letter to employees seen by
Reuters: "bargaining is a two-way street and we continue to
implore the UAW to stay at the table, work together to reach an
agreement, and avert a strike."
WHAT DOES THE UAW HAVE TO SAY ABOUT THE OFFERS?
The union has rejected all the three offers. It is asking
for 40% raises and major improvements in benefits.
"To win, we're likely going to have to take action," UAW
Fain said on Wednesday. He reiterated 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.
The union also wants defined benefit pensions for all
workers restored, 32-hour work weeks and additional
cost-of-living hikes, job security guarantees and an end to the
use of temporary workers.
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 strike would 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 full strike would hit earnings at each affected automaker
by about $400 million to $500 million per week assuming all
production was lost, Deutsche Bank has estimated. Some losses
could be recouped by boosting production schedules later, but
that possibility fades if a strike extends to weeks or months.
In fiscal 2019, GM's fourth-quarter profit took a $3.6
billion hit from a 40-day UAW strike.
A 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 .
A 10-day strike by the UAW could cost manufacturers,
workers, suppliers and dealers more than $5 billion, according
to an analysis by the Anderson Economic Group, an economic
consulting firm.
HOW WIDESPREAD WOULD A STRIKE BE?
It is unclear just how many workers would walk off the job
in the event of a strike. Fain said the plan would be for a
series of work stoppages targeting individual U.S. plants if no
deal is reached.
Stopping work at a key engine or transmission plant, for
example, could have a cascading effect by depriving other
factories of parts they need to produce vehicles. Another option
would be to strike at profitable pickup truck or SUV assembly
plants.
(Reporting By Nathan Gomes in Bengaluru; Editing by Sriraj
Kalluvila)
((david.gaffen@thomsonreuters.com; +1-646-223-6064; Reuters
Messaging: david.gaffen.reuters.com@reuters.net))