The United Auto Workers (UAW) union and Detroit’s big three automakers are racing against time, with less than two weeks left to negotiate a new labour contract, and the possibility of a strike is looming large on the horizon. Shawn Fain, the president of the UAW, has been rallying the rank-and-file members, urging them to be ready to walk off the job if the union’s extensive list of demands for improved wages and benefits remains unaddressed.
Shock and Awe
A strike against even one of these automakers, particularly if it drags on, could send shockwaves through several Midwestern states and potentially dent the profits of General Motors (GM), Ford Motor, or Stellantis. Recall that in 2019, GM workers staged a 40-day strike before reaching an agreement. What makes this year’s negotiations even more precarious is the union’s openness to the idea of a simultaneous strike against all three automakers, something unprecedented in UAW history. Such a move could have a substantial impact on the broader U.S. economy. Anderson, the CEO of the Anderson Economic Group, has warned, “If that happens, even a short strike would impact economies throughout Michigan and across the nation.”
These tense negotiations are playing out against the backdrop of a massive industry shift towards electric vehicles (EVs), which require fewer assembly line workers compared to traditional gasoline-powered vehicles. The outcome of the new labour contract negotiations will significantly influence both autoworkers and companies in this increasingly EV-centric industry. Simultaneously, any substantial wage and benefit gains achieved by the UAW could provide substantial momentum to a growing union movement across various industries.
At the political level, President Biden has been vocal in his support for the UAW, asserting that “the U.A.W. deserves a contract that sustains the middle class.” He has even appointed a White House liaison to mediate between the union and the automakers. However, the UAW has not yet endorsed his re-election bid, partly due to concerns over the allocation of EV-related jobs created with federal subsidies.
While there remains a possibility of reaching an agreement before the contract expiration date on September 14, both sides are gearing up for a potential strike. Shawn Fain’s election as UAW president last year signalled a more aggressive and confrontational approach in negotiations compared to his predecessors. Sam Fiorani, Vice President of Global Vehicle Forecasting at Auto Forecast Solutions, notes, “President Fain has declared war, and that usually means there’s going to be a battle, and that battle would be a strike. The U.A.W. leadership is in a position now where they have to prove to the members that they are fighting for them, so it’s pretty unlikely there won’t be a strike.”
Broader Reach
The auto industry contributes around 3 per cent of the United States’ gross domestic product (GDP). A 10-day strike against the three Detroit automakers would result in total wage losses of $859 million and manufacturers’ losses of $989 million, according to estimates by Patrick Anderson’s firm.
The demands from the UAW include higher wages, improved benefits, a return to regular cost-of-living wage increases to counter inflation, and the elimination of a wage structure that results in newer hires earning significantly less than veteran workers. In some cases, a wage increase of up to 40 percent has been suggested by the union.
Additionally, the UAW is calling for contract provisions that would require automakers to pay workers for community service if a plant closes, serving as a deterrent to factory closures and a means to protect local economies from major employer losses.
As negotiations continue, the possibility of a strike remains a pressing concern for the U.S. automotive industry and the broader economy.