What's at stake as 13,000 workers go on strike at major US auto makers

About 13,000 auto workers have walked off the job at three targeted factories after their union leaders couldn't reach a deal with Detroit's automakers.

The United Auto Workers union is seeking big raises and better benefits from General Motors, Ford and Stellantis. They want to get back concessions that the workers made years ago, when the companies were in financial trouble.

A small percentage of the union's 146,000 members walked off the job at a GM assembly plant in Wentzville, Missouri; a Ford factory in Wayne, Michigan, near Detroit; and a Stellantis Jeep plant in Toledo, Ohio, at 11.59 pm Eastern time on Thursday.

 

Shawn Fain, the combative president of the UAW, says the targeted strikes will give the union leverage in contract talks and keep the auto companies guessing about its next move.

It could also make the union's USD 825 million strike fund last much longer.

Both sides began exchanging wage and benefit proposals last week. Though some incremental progress appears to have been made General Motors made a new, richer offer just hours before the strike deadline it was not enough to avoid walkouts. The strike could cause significant disruptions to auto production in the United States.

Here's a rundown of the issues standing in the way of new contract agreements and what consumers could face in a prolonged strike:

WHAT DO WORKERS WANT?

The union is asking for 36 per cent raises in general pay over four years a top-scale assembly plant worker gets about USD 32 an hour now. In addition, the UAW has demanded an end to varying tiers of wages for factory jobs; a 32-hour week with 40 hours of pay; the restoration of traditional defined-benefit pensions for new hires who now receive only 401(k)-style retirement plans; and a return of cost-of-living pay raises, among other benefits.

Perhaps most important to the union is that it be allowed to represent workers at 10 electric vehicle battery factories, most of which are being built by joint ventures between automakers and South Korean battery makers. The union wants those plants to receive top UAW wages. In part that's because workers who now make components for internal combustion engines will need a place to work as the industry transitions to EVs.

Currently, UAW workers hired after 2007 don't receive defined-benefit pensions. Their health benefits are also less generous. For years, the union gave up general pay raises and lost cost-of-living wage increases to help the companies control costs. Though top-scale assembly workers earn USD 32.32 an hour, temporary workers start at just under USD 17. Still, full-time workers have received profit-sharing checks ranging this year from USD 9,716 at Ford to USD 14,760 at Stellantis.

Fain himself has acknowledged that the union's demands are "audacious." But he contends that the richly profitable automakers can afford to raise workers' pay significantly to make up for what the union gave up to help the companies withstand the 2007-2009 financial crisis and the Great Recession.

Over the past decade, the Detroit Three have emerged as robust profit-makers. They've collectively posted net income of USD 164 billion, USD 20 billion of it this year. The CEOs of all three major automakers earn multiple millions in annual compensation.

WHAT HAVE THE COMPANIES PROPOSED?

The automakers have moved closer to the UAW's demands on wages, but a big gulf remains.

On Thursday, GM said it boosted its offer to a 20 per cent wage increase, including 10 per cent in the first year, over four years. CEO Mary Barra said in a letter to employees, "We are working with urgency and have proposed yet another increasingly strong offer with the goal of reaching an agreement tonight."

Ford is also offering a 20 per cent boost in pay. The last known offer from Stellantis (formerly Fiat Chrysler) was 17.5 per cent, but the company has since made another.

Fain has dismissed these proposals as inadequate to protect workers from inflation and reward them for building the vehicles that have made the Detroit Three so profitable.

The companies have rebuffed the union's demands as too expensive. They say they will spend vast amounts of capital in the coming years to continue to build combustion-engine vehicles while at the same time designing electric vehicles and building battery and assembly plants for the future, and can't afford to be saddled with significantly higher labor costs.

They also contend that a lavish UAW contract would force up the retail prices of vehicles, pricing Detroit automakers above competitors from Europe and Asia. Outside analysts say that when wages and benefits are included, Detroit Three assembly plant workers now receive around $60 an hour while workers at Asian automaker plants in the US get USD 40 to USD 45.

WHAT HAPPENS NEXT?

Fain said there will be no negotiations Friday because union leaders will join rank-and-file workers on picket lines.

The union could pick more plants to strike in the coming days, and it all depends on progress or lack of it at the bargaining table, the UAW president says.

"If the companies continue to bargain in bad faith or continue to stall or continue to give us insulting offers, then our strike is going to continue to grow, Fain said. The union's strategy, he said, "will keep the companies guessing about how the union might escalate the fight.

WILL A STRIKE CAUSE CAR PRICES TO RISE?

Eventually. GM, Ford and Stellantis have been running their factories around the clock to build up supplies on dealer lots. But that's also putting more money into the pockets of UAW members and strengthening their financial cushions.

At the end of August, the three automakers collectively had enough vehicles to last for 70 days. After that, they would run short. Buyers who need vehicles would likely go to nonunion competitors, who would be able to charge them more.

Vehicles are already scarce when compared with the years before the pandemic, which touched off a global shortage of computer chips that hobbled auto factories.

Sam Fiorani, an analyst with AutoForecast Solutions, a consulting firm, said the automakers had roughly 1.96 million vehicles on hand at the end of July. Before the pandemic, that figure was as high as 4 million.

"A work stoppage of three weeks or more," Fiorani said, "would quickly drain the excess supply, raising vehicle prices and pushing more sales to non-union brands."

COULD A STRIKE HURT THE ECONOMY?

Yes, if it's long and especially in the Midwest, where most auto plants are concentrated. The auto industry accounts for about 3per cent of the US economy's gross domestic product its total output of goods and services and the Detroit automakers represent about half of the total US car market.

If a walkout occurs, workers would receive about USD 500 a week in strike pay far short of what they earn while they're working. As a result, millions of dollars in wages would be removed from the economy.

The automakers would be hurt, too. If a strike against all three companies lasted just 10 days, it would cost them nearly a billion dollars, the Anderson Economic Group has calculated. During a 40-day UAW strike in 2019, GM alone lost USD 3.6 billion.

The strike could also test President Joe Biden's claim that he's the most pro-union president in US history.