What the ongoing UAW strike means for EVs

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The United Auto Workers strike against General Motors, Ford and Stellartis is now in its fourth day, with no deal in sight. The strike comes as all three automakers make aggressive moves to restart existing factories to produce electric vehicles. Delays could lead to production and delivery delays for current and future EV models, as well as higher prices for consumers.

About 13,000 workers began the strike at midnight Friday after the UAW failed to reach a contract by a deadline. UAW President Sean Fein set the new deadline for September 22nd on Monday evening.

The UAW does not strike all 150,000 of its members at once. The union is targeting specific factories at a time in what Fein calls a “stand up strike.” The first was GM’s truck and van plant in Wentzville, Missouri; Ford’s Ranger pickup and Bronco SUV plant in Wayne, Michigan; and Stellantis’ Jeep Wrangler and Gladiator plants in Toledo, Ohio.

On Monday, Unifor, the union representing autoworkers in Canada, also said it would strike against Ford by midnight if a deal is not reached. A strike in Canada could affect some operations at Ford’s US plants.

At the heart of the battle is a shift to electric vehicles. EVs require fewer parts and require fewer workers to assemble the vehicles, so union members are fighting to secure their livelihoods along with better working conditions. Traditional OEMs are spending money to electrify their product lines and are eager to keep costs down so they don’t lose market share to Tesla. Tesla is already profitably producing EVs through its unorganized workforce.

“Let’s be clear: This is a potentially dire situation for GM and Ford as both 313 giants are in the early stages of a major EV transformation for the next decade that will define future success,” wrote Dan Ives, an analyst at Wedbush Securities. . “With EV competition increasing across the board, the timing couldn’t be worse.”

Production delays, rising cost of EVs

Analysts say the prolonged strike will delay the production and rollout of new electric vehicles. One will last more than four weeks, with production timelines and EV roadmaps pushed back to 2024, according to Ives, with several delays on the horizon for GM, Ford and Stellantis. This, of course, will bode well for Tesla in the near term as consumer demand for EVs continues.

Ford, Stellantis and GM are already struggling to bring their EVs to market. Ford had to suspend production of its electric F-150 Lightning pickup in February after a battery caught fire in a vehicle parked near the factory for a quality inspection. The company previously reported a 2.8% drop in EV sales in the second quarter after halting production at the Mexico factory that assembled the Mustang Mach E. Stellantis does not intend to start selling fully electric vehicles in the US until 2025. And GM’s new battery factory in Ohio has been slow to produce batteries, delaying electric versions of the Chevrolet Silverado and other vehicles.

Among the UAW’s major demands are a 36% hourly wage increase, a reduction to the 32-hour work week, a return to traditional pensions, the elimination of compensation tiers and the restoration of cost-of-living adjustments.

If, after negotiations, some of the UAW’s major proposals are approved, it will cost OEMs billions of dollars in increased annual costs. Ives said these costs will ultimately be passed on to end consumers as they drive up EV prices over the next 12 to 18 months.

Some analysts didn’t buy the idea that meeting the union’s demands would put the three automakers in such dire straits.

“If you look at how much it costs to build an EV, labor is only a small part of the equation. Batteries are the most,” Madeline Janis, executive director of the advocacy group Jobs to Move America, told the New York Times. “The idea that the UAW is going to price Ford, GM and Stellantis out of the market is simply not true.”

Ford, GM threaten to cancel EV transition

“Union demands will force Ford to cancel investments in electric vehicles,” said Ford CEO Jim Farley. “We really want to have a conversation about a sustainable future. It is not compelling to choose between going out of business and rewarding our workers.”

Ford said that if the union gets everything it wants, its workers’ total compensation will be twice that of Tesla’s employees. That would be higher than the labor costs of Toyota and other foreign-owned automakers in the US that use non-union workers.

“First of all, the labor cost is about 5% of the cost of the vehicle. They can double our wages and not raise vehicle prices and still make billions in profit. It’s a choice,” Fenn countered in a CBS interview over the weekend. “And they want to compare how pathetic Tesla pays their workers to how pathetic other companies pay their workers. That’s what this whole argument is about. Workers in this country should decide if they want a better life for themselves instead of going paycheck to paycheck while everyone else walks away with loot.”

Ford reported in July that its EV business would lose $4.5 billion this year. But even with that projected loss, Ford raised its full-year guidance for 2023 to $11 billion to $12 billion in adjusted revenue from $9 billion and $11 billion.

Speaking to CBS Mornings last week, GM CEO Mary Barra said higher pay raises would hinder the automaker’s ability to continue producing vehicles with combustion engines and develop EVs.

“This is a critical occasion where investment is very important,” she said.

The disparity in CEO to worker pay is a hot topic

Unions are unlikely to be swayed by auto executives’ arguments against giving workers radical pay rises. What unites union members to this cause is the huge pay gap between officials and their workers.

“We have asked for a 40% salary increase and we have asked for a 40% salary increase because the CEO’s salary has increased by 40% in the last four years. They’re already millionaires,” Fein said during an interview with CBS.

Barra’s $29 million pay package in 2022 was about 362 times the salary of the average GM employee. Farley received total compensation of $21 million in 2022, which is 281x the salary of Ford’s average employee. And Stellantis CEO Carlos Tavares earned 23.46 million euros in 2022, which is almost 365x the salary of the average employee.

Dividends and share buybacks have also been paid to shareholders of all three companies.

Adjusted for inflation, wages for autoworkers in the US have fallen 19% since 2008, according to the Economic Policy Institute.

The UAW has since scaled back its demand for a wage increase and won a 36% wage increase. Stellantis recently offered a 21% raise over four years, and Ford and GM offered 20% pay raises. The union rejected all three proposals.

Workers want EVs in the future

“Our tax dollars are financing a large part of this transition to EVs,” Fein said on CBS. “But this transition has to be a just transition, and a just transition means, if our tax dollars are going to finance this transition, Labor can’t be left behind. And as it currently stands, workers are being left behind. Companies want to talk about being competitive. It’s not about being competitive. Competitive is code word for race to the bottom. What they want is to pay us poverty wages, so they can make billions more in profit. And they can continue to enrich shareholders and CEOs and corporate executives, while workers pay the price and get left behind. This must stop in this country.”

Automakers have enjoyed record profits over the past decade, but they can’t afford to fall behind in the race to compete with Tesla and foreign automakers.

Today Tesla has the upper hand with its non-union workforce, but the UAW’s momentum could be contagious. The UAW did not respond to TechCrunch’s inquiry about whether it is contacting workers at other carmakers such as Tesla and Hyundai, which plans to build EVs at a massive new factory in Georgia. The union also did not say whether Tesla workers had begun reaching out in an effort to organize.

Tesla CEO Elon Musk is famously anti-union and has come down on the UAW’s efforts to unionize Tesla workers. Musk also fired dozens of workers in New York after launching a union campaign.

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