The clash between the American Auto Workers Union (UAW) and the American car manufacturers General Motors, Ford and Stellantis – led to worker strikes. The strike, the first in 88 years, raises many questions about the motivations, strategies and potential consequences for both the UAW and the automakers.
Why did the UAW strike against the car manufacturers?
The strike arose following negotiations regarding salary increases and benefits for the members of the UAW union. According to the UAW, previously signed contracts have failed to keep pace with inflation, reducing workers’ spending power. The UAW demanded significant wage increases and improved benefits.
What is the strike strategy and how many workers are involved?
In this case it is not one long strike, but targeted strikes. This approach can stop the production lines in less than a week, and save the union’s resources, which are estimated in the strike fund in the amount of 825 million dollars (the purpose of which is to provide financial support to the union members and compensation for part of their lost wages and to continue to ensure the existence of the strike).
The strikes currently targeted are taking place at the General Motors plant in Missouri, which is responsible for the production of vehicles such as the Chevrolet Colorado pickup truck; the Stelantis plant in Toledo, which is responsible for the production of common models such as the Jeep Wrangler; and the Ford plant in Michigan, which is responsible for the production of the Ford Ranger pickup truck and the Bronco SUV. The number of strikers is estimated at 12,700 workers, which make up 8% of the 146,000 members of the union.
What is the interest of each party?
The UAW, representing auto workers, is pushing for significant wage increases and improved benefits for workers. On behalf of the union, they emphasize that the car manufacturers can afford to meet their demands and seek to ensure economic justice.
Detroit automakers, however, are concerned about the potential financial burden of complying with these requirements. They want to secure their place in the rapidly developing automotive industry, especially in the transition to electric vehicles. Higher labor costs could pose challenges to the competitive effort of companies such as Tesla, which benefit from lower labor costs.
How did the Detroit automakers respond to the UAW demands and where do the negotiations stand?
In response to the union’s demands, which included an immediate 20% increase and four additional 5% increases over four years, the three car manufacturers offered partial wage increases, with the understanding that agreeing to the full terms could have long-term economic consequences. The CEO of General Motors, Mary Barra, offered the most significant offer on behalf of the car manufacturers, which included a 20% increase, with 10% of it starting immediately.
The union continued to insist on its demands, along with further improvements in benefits, based on the significant salary increases of automobile CEOs in recent years. According to Reuters, negotiations continue to proceed at a slow pace. Talks with General Motors resumed today and with Stanlantis and Ford are expected to resume tomorrow. It seems that UAW President Sean Payne is determined to bring significant gains to the union and will not give up easily.
What is Biden doing to solve the strike?
The New York Times report shows that President Biden sided with the labor union, and even sent two of his top aides to Detroit to call on the three largest American car companies to share their profits with the workers. In brief remarks from the White House, Biden acknowledged that automakers had made “significant offers” during contract negotiations, but he left no doubt that he intended to keep a 2020 promise to always have the unions’ backs. However, unlike previous strikes, Biden has no special legal authority to intervene.
Just before the strike vote, Biden called Sean Payne, president of the UAW, as well as top executives from the auto companies. Aides said the president told the parties to ensure workers get a fair contract and he urged both sides to stay at the negotiating table.
How will the strike affect the market?
According to economists, a prolonged strike, if it lasts for weeks or even months, could be a blow to the American economy. Anderson Economic Group estimates that if all UAW workers at Ford, General Motors, and Stellar went on strike for 10 days, it would cost the U.S. economy $5 billion. If the strike lasted two weeks, $440 million in lost income would be lost. If the strike lasts eight weeks, there will be a $9.1 billion hit to statewide revenue.
“The giant strike of the three largest car manufacturers in the US could significantly affect the electric vehicle market in two key aspects: production capacity and sales,” said Dr. Amit Sarosi, a strategic consultant specializing in global business changes and effects. Serosi added that broader effects on the automotive industry in general and effects on a political strategic level. “In terms of production, the strike causes a delay in the production lines of tens of thousands of electric vehicles. From a political strategic point of view, the strike could create many obstacles on the way to the transition to electric vehicles, as part of the policy outlined by the Biden administration.”
Additional effects of a long strike could be layoffs of workers, a drop of 10.6 million dollars in tax revenues and an increase in car prices, due to a shortage. So, for example, if the strike lasts only ten days, about 25 thousand vehicles will not be produced.
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