The auto industry may see its largest strike in years if the United Auto Workers (UAW) – the largest auto professional union in the country – does not reach an agreement with the “Detroit Three” automakers Ford, General Motors, and Stellantis by September 14. Union members are set to vote on whether or not to authorize a strike, with leaders asking local offices to report votes by August 24.
If authorized, a strike could have a significant direct financial impact on the automotive industry. Even a brief labor stoppage could also create a broad range of ripple-effect consequences for manufacturers, autoworkers, and car buyers.
The UAW May Decide To Strike If an Agreement Isn’t Reached
The current agreement that covers nearly 150,000 UAW members employed by the Detroit Three is set to expire on September 14. In a press release, the UAW suggested that the current agreement is imbalanced in favor of automakers and at the expense of autoworkers.
“In 2007-09, the Great Recession turned the auto industry upside down,” said the release. “To save it, autoworkers took massive cuts to their wages and benefits. The companies introduced ‘tiers,’ worse pay for the same work. Pensions were eliminated. Post-retirement healthcare vanished for new hires. Jobs were cut. The companies got billions in taxpayer dollars, while autoworkers took deep cuts and made life-changing sacrifices to keep the industry alive.”
Talks between the two sides have become increasingly tense as the September deadline draws near. Reuters and other outlets reported that UAW president Shawn Fain threw a contract proposal from Stellantis into a trash can in response to the company’s proposed concessions for autoworkers. In a Facebook Live session, Fain denounced proposed cuts to healthcare for workers, vacation time, and employer 401(k) contributions, and criticized suggestions to lift limits on the number of temporary employees that can be employed by the company.
“Stellantis proposals are a slap in the face,” Fain said during the session. “Management has chosen to spit in our faces.”
Stellantis Chief Operating Officer Mark Stewart offered a different perspective. In a letter to employees, he said that the company was “committed to working with the UAW to reach an agreement based on economic realism.”
“The theatrics and personal insults will not help us reach an agreement,” wrote Stewart. “Now is the time to come to the table with open minds and a commonsense approach. At this very early stage, no one should jump to any conclusions about the outcome of the process.”
Autoworker Pay Hasn’t Kept Up With Profits, Inflation
In its press release, the UAW points to several figures to illustrate reasons for new contract demands. These figures compare growth in auto industry profits and CEO pay to pay increases for workers.
“The Big Three automakers have made a quarter of a trillion dollars in North American profits in the past decade,” said the press release. “CEO pay is up 40% in four years; autoworker wages are up 6% in that time. Inflation is up 18%.”
Automoblog did not have access to specific data for the “Big Three” automakers, but according to data from the U.S. Bureau of Economic Analysis (BEA), domestic manufacturers as a whole saw their highest profits in at least 22 years in Q4, 2022. In fact, the 29 most profitable quarters since 2001 have all come since 2010. Since Q1 2010, domestic auto manufacturers have combined to make $706.9 billion in profit.
But as profits have swelled, the average American autoworker wages have failed to keep up with cost-of-living increases. Between Q1 2010 and Q1 2023, the average hourly pay rate for all domestic autoworkers has increased 32%. Over that same period, the cost-of-living consumer price index (CPI) has increased by 38%.
The UAW Has Presented a List of Demands
Cost-of-living wage increases are one subject of UAW demands, but there are several other issues central to the union’s proposal. Early in August, Fain made the uncommon move of creating the list of union demands public. Among the most notable of these demands were:
Eliminating tiers for wages and benefitsDouble-digit raises for all union workersEnding the suspension of cost-of-living pay adjustments, which began during the Great Recession (2007 – 2009)Restoring denied-benefit pension and retirement healthcare for all members, which have not been provided to workers hired after 2007Increasing pensions for currently-retired workers for the first time since 2003Solidifying the right to strike over plant closuresIntroducing a “working family protection program” that would require companies to pay laid-off workers to do community service work if they shut down a plantConverting current temporary workers into permanent employeesPlacing stricter limits on the use of temporary workers going forwardIncreasing paid vacation time
While automakers involved with the negotiations have yet to agree on these demands – or in the case of Stellantis, outright rejected them – Fain said that the demands are related to providing better working and living conditions for UAW members.
“Ultimately that’s what this contract is about. It’s about securing a higher quality of life for the working class,” he said.
Even a Short Strike Could Cost Automakers Billions
The last time the UAW went on strike was 2019, when contract negotiations between the union and Detroit manufacturers fell apart. This breakdown led to a 40-day strike against GM. The automaker said that the work stoppage cost the company $3.6 billion.
If the strike is agreed to and executed, even a brief stoppage could have a substantial economic impact on manufacturers. According to Anderson Economic Group (AEG), a Michigan-based consulting firm that tracks labor events, a 10-day strike against all of the Detroit Three could cost the manufacturers $5 billion.
Tyler Thiel, vice president at AEG, said that a strike could be more impactful now than it was four years ago due to ongoing supply chain and manufacturing issues.
“Consumer and dealer losses are typically somewhat insulated in the event of a very short strike,” Theile told CNBC. “However, with current inventories hovering around only 55 days, the industry looks different than it did during the last UAW strike.”
With automaker inventories still recovering from years-long shortages of semiconductors and other critical components, a strike presents a greater risk of affecting manufacturers’ abilities to deliver vehicles to dealerships and buyers. As a result, a work stoppage is more likely to impact manufacturers’ bottom line more quickly.
A Strike May Not Impact New Car Prices, However
There is the possibility that a UAW strike could drive up prices for car buyers. However, historically that hasn’t been the case.
Five of the most significant autoworker strikes came in 1970, 1998, 2007, and 2019. When comparing the dates of those strikes to new car price CPI data from the BLS, there was no significant price increase in the six-month periods following any of the stoppages.
The impact of a 2023 strike on end-consumer prices could, however, be different for the same reasons that AEG predicts it could be more substantial for automakers. If a stoppage – especially a prolonged one – depletes inventory significantly, the resulting supply shortage could cause prices to increase.
A Strike Could Have Wide-Ranging Effects – If It Happens
Ultimately, the exact impact of a strike is difficult to predict, especially before it goes into effect. However, in addition to the direct financial impact, a work stoppage could have several potential side effects.
Auto Manufacturers Could Meet UAW Demands
The ideal outcome, from the UAW perspective, is that the threat of economic losses prompts automakers to concede to some or all of the union’s demands. This would mean a substantial increase in labor-related costs for manufacturers, but the added costs would likely fall short of the impact of a prolonged work stoppage. It would also, of course, mean significant increases in pay and benefits for nearly 150,000 autoworkers.
The Strike Could Spread To Related Industries
During the strike of 2019, the International Brotherhood of Teamsters elected to show solidarity for the UAW by refusing to deliver GM vehicles. High-profile strikes are taking or have taken place around the country in recent months, staged by unions for trade groups such as the Writers Guild of America, Screen Actors Guild, and United Parcel Service. With 71% of Americans saying they support unions in a recent Gallup Poll, the likelihood of other unions such as the Teamsters supporting UAW strikers is presumably high.
Automaker Stock Prices Could Drop
A strike or even an intensified risk of a strike could also negatively impact stock prices for Ford, GM, and Stellantis. Financial experts are already preparing for the potential fallout. Earlier in August, Garrett Nelson, an analyst with the Center for Financial Research and Analysis (CFRA) dropped his rating for GM to “strong sell.”
“We move to strong sell on the growing risk of a UAW strike, given reports that the company and union remain extremely far apart in labor negotiations,” said Nelson.
Nelson said that GM has a more significant earnings risk related to a strike than either Ford or Stellantis. However, if enacted, a strike would likely put stock prices of the other two members of the Detroit Three in jeopardy. In addition, investors may become shy about the impact to revenue and profits.
Non-Union Automakers Could Benefit
Another potential effect – and one that is perhaps more likely than others – is that non-union automakers could benefit from a strike against the Detroit Three. While current labor costs for union workplaces averages $64 – $67 per hour, foreign automakers such as Honda Motor, Toyota Motor, and Hyundai Motor currently pay an average of $55 per hour. Tesla pays even less, at an average of $45 – $50 per hour.
A strike that impacts the Detroit Three’s ability to deliver vehicles and keep prices where they are would not be likely to have a similar effect on foreign automakers and non-union domestic manufacturers. As a result, non-union automakers could potentially offer more attractive price points and more available vehicle supply.
At the time of publication, a strike looks likely but not certain. Even if the UAW chapters vote to authorize a strike – the most likely outcome – it won’t materialize if the two sides reach an agreement before the September 14 deadline.
If a strike does come to fruition, it could have a profound impact on an industry that has seen a high degree of tumult in recent years. If Fain and messaging from the UAW are to be believed, the union is fully prepared for a strike. But at the same time, automakers have thus far indicated a willingness to fight for their position as well. For now, the Detroit Three, the UAW, and anyone paying attention to the automotive industry will simply have to wait and see.
Original article: How a UAW Strike Could Impact Auto Industry, Car Buyers
