Focus: Behind Detroit's battery fight: Profits, UAW's power and Tesla

Panasonic Holdings

19/10/2023 20:27

(Adds updated employment and wage information for Ultium)
    By Joseph White
       DETROIT, Oct 19 (Reuters) - The United Auto Workers and
the Detroit Three automakers are stuck in a standoff over wages
and union representation at future electric vehicle battery
plants, with Tesla  TSLA.O  and Chinese rivals looming over the
bargaining tables.
    UAW President Shawn Fain is pushing negotiators for General
Motors  GM.N , Ford  F.N  and Chrysler-parent Stellantis
 STLAM.MI  to open the doors for the union to organize future
battery plant workers, and to raise wages at their respective
joint-venture battery plants to match assembly workers' pay. 
    UAW and Detroit Three negotiators are exploring different
options, including deploying workers displaced from
UAW-represented factories to new battery operations, said people
familiar with the discussions, who asked not to be identified. 
    But a breakthrough has eluded bargainers as costly strikes
drag on. "The UAW is holding the deal hostage over battery
plants," said Ford Chief Executive Jim Farley on Sept. 29.
    Without disclosing details, Fain told UAW members on Oct. 6
that GM had agreed to include workers at Ultium LLC joint
venture battery factories under the umbrella of its national
agreement with the UAW - even though Ultium is a separate
company that GM could choose to exclude from the talks. Since
then, the union has not announced an agreement on battery plant
issues with GM or the other automakers.
    In effect, Fain is demanding that workers get a greater
share of the $35 per kilowatt-hour in U.S. government battery
cell manufacturing subsidies the plants hope to reap from U.S.
President Joe Biden's Inflation Reduction Act (IRA). 
    The flow of cash from the IRA could be substantial. For
example, GM's Ultium LLC battery plant in Northeast Ohio now has
1,750 workers and plans to expand that workforce to 2,000
employees this year, GM said on Thursday. The joint venture has
previously said the operation could produce up to 35 gigawatt
hours of batteries annually. With the current workforce, that
averages to about 9.6 kilowatt-hours for each hour in a worker's
40-hour week. 
    Running at full capacity, the plant could generate an
average $337 in subsidies per worker per hour in return for
wages that range from $20-25 per hour for production workers and
up to $34.60 an hour for maintenance workers, GM and Ultium said
Thursday. The actual subsidies would depend on the real
production of usable batteries, and achieving domestic content
targets for the materials. Automakers would split the subsidies
with their battery partners.
    The automakers see the IRA subsidies as necessary to cover
more than just direct labor costs. Automakers want the federal
money to offset billions invested in new factories, domestic
battery supply chains and vehicle development in order to comply
with regulatory demands to slash their carbon output, people
familiar with the discussions said.
    GM told investors last year that U.S. subsidies could add
$3,500 to $5,500 per vehicle in pre-tax profit for each EV it
sold.
    
    COMPETITIVE WITH TESLA AND CATL
    Automakers have said their labor costs must be competitive
with Tesla and other battery manufacturers whose U.S. operations
will get the same federal subsidies, but have more flexible work
rules and pay less than the $32 an hour top wage earned by UAW
workers in Detroit Three factories. 
    Detroit automakers also worry that Chinese battery makers
such as CATL, whose costs are substantially lower than theirs,
could eventually breach trade barriers that have discouraged
them from entering the U.S. market. 
   CATL has a deal with Ford to produce low-cost lithium-iron
batteries at a Michigan factory, though that project is now on
hold.
    Fain has rejected the automakers' concerns about Tesla as a
"race to the bottom." 
    GM's proposal to the UAW would create an independent
bargaining unit under the UAW master contract for Ultium
production workers, people familiar with the discussions said. 
    The company would use data on the labor costs at competing
battery makers, including Tesla, as benchmarks to determine what
wages and working conditions should be at Ultium factories to
assure they are producing battery cells at competitive costs,
the sources said.
    Stellantis has discussed opening jobs at joint venture
plants to workers displaced from operations such as the
shuttered Jeep assembly plant in Belvidere, Illinois, people
familiar with the situation said. 
    Stellantis and Samsung SDI  006400.KS  have announced plans
to build two EV battery plants in Kokomo, Indiana, employing up
to 2,800 workers in total. The first factory is scheduled to
start production in early 2025. 
    Ford officials have not disclosed details of their proposals
for battery plant wages or unionization. 
    "It's a very complex area, because these are joint ventures.
The plants aren't even built yet. We haven't hired the workforce
yet. The workforce isn't unionized yet. Yet, we are very open to
working with them on a way forward on the battery plants," Ford
executive Kumar Galhotra said on Oct. 12 of talks with the UAW.

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Ford, UAW leaders spar as auto strike costs rise     urn:newsml:reuters.com:*:nL1N3BM1CS
UAW says new strikes at Detroit Three will come without notice  
  urn:newsml:reuters.com:*:nL1N3BJ1PZ
EXPLAINER-UAW chief ratchets up pressure on Detroit Three as
deal talks drag on      urn:newsml:reuters.com:*:nL4N3BJ4G9
FACTBOX-Top issues in Detroit Three's negotiations with UAW   
 urn:newsml:reuters.com:*:nL4N3BG3JY
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 (Reporting By Joe White, Editing by Nick Zieminski)
 ((Joe.White@thomsonreuters.com;))