The United Auto Workers (UAW) union and the three Detroit automakers are hurtling toward a labour standoff, with the deadline for a new labour contract rapidly approaching. The threat of a strike is becoming increasingly plausible, raising concerns about the repercussions it could have on the U.S. auto industry and the broader economy. UAW President Shawn Fain has been galvanizing the union’s members, emphasizing the need for them to be ready to strike if their extensive list of demands for better wages and benefits is not met by the automakers. This heightened tension has raised the spectre of a strike that could significantly disrupt the operations of General Motors (GM), Ford Motor, and Stellantis.
Lingering Effects
A strike against any one of these automakers, particularly if it becomes a protracted dispute, has the potential to send economic shockwaves throughout the heartland of the United States, impacting not only autoworkers but also the profitability of these major corporations. The memory of the 40-day GM strike in 2019 still lingers, reminding all parties of the economic costs and disruptions that come with such labour disputes.
Perhaps even more concerning is the prospect of a simultaneous strike against all three automakers, a move never before taken by the UAW. Such a coordinated action could have a substantial and visible impact on the broader U.S. economy, affecting various industries and regions.
Patrick Anderson, CEO of the Anderson Economic Group, warns that “even a short strike would impact economies throughout Michigan and across the nation.” This underscores the stakes involved in these labour negotiations. What adds complexity to these negotiations is the backdrop of the automotive industry’s monumental shift towards electric vehicles (EVs). As automakers collectively invest billions of dollars in EV technology, the terms of the new labour contract will significantly shape the future for both autoworkers and companies in this rapidly evolving industry.
EVs require fewer assembly line workers compared to traditional gasoline-powered vehicles. As a result, the negotiations will have a critical bearing on job security and compensation for autoworkers in an industry where the skill sets required are evolving. Furthermore, the UAW’s demands for substantial wage and benefit improvements have broader implications. If the UAW succeeds in securing these gains, it could provide momentum to the larger labour movement, which has been steadily gaining strength across various sectors in recent years.
A Ticking Clock
This high-stakes negotiation also carries political weight, with President Biden expressing his support for the UAW’s quest for a contract that sustains the middle class. However, the UAW has yet to officially endorse his re-election bid, partly due to concerns about the distribution of EV-related jobs created with federal subsidies.
While there remains a chance for a negotiated settlement before the contract expiration date on September 14, both sides are bracing for the possibility of a strike. UAW President Shawn Fain’s willingness to take a more aggressive approach in negotiations has intensified the likelihood of labour action.
Sam Fiorani, Vice President of Global Vehicle Forecasting at Auto Forecast Solutions, notes, “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.” The implications of a strike are significant. The U.S. auto industry contributes approximately 3 per cent of the nation’s gross domestic product (GDP). A 10-day strike against the three Detroit automakers could result in total wage losses of $859 million and manufacturers’ losses of $989 million.