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Detroit’s Big 3 Automakers Face Possible Strike Action

The United Auto Workers (U.A.W.) union and the three major automakers in Detroit have less than two weeks to negotiate a new labor contract, and the possibility of a strike is becoming increasingly likely.

U.A.W. President, Shawn Fain, has warned union members to be prepared to go on strike if their demands for improved wages and benefits are not met.

A strike by any of the companies, particularly if it is a prolonged one, could have a significant economic impact on several states in the Midwest and affect the profits of General Motors (G.M.), Ford Motor, and Stellantis. In 2019, G.M. workers went on strike for 40 days before reaching an agreement.

A strike against all three automakers, which the union has never done before but Fain has expressed willingness to call for this year, could have a noticeable impact on the overall U.S. economy.

Patrick Anderson, the CEO of the Anderson Economic Group, stated, “If that happens, even a short strike would impact economies throughout Michigan and across the nation.”

The contract negotiations coincide with automakers’ massive investments in transitioning to electric vehicles, which require fewer assembly workers compared to traditional gasoline-powered vehicles. The terms of the new contract will determine how autoworkers and companies fare in an electric vehicle-centric industry.

Additionally, significant wage and benefit increases could provide momentum to the union movement, which has been gaining strength across multiple industries.

There are also political implications at play. President Biden has advocated for a contract that supports the middle class for the U.A.W. and has appointed a White House liaison to the union and automakers. However, the U.A.W. has not endorsed Biden’s re-election bid yet, partly due to concerns about the union’s share of electric vehicle-related jobs created with federal subsidies.

While an agreement before the September 14 contract expiration is still possible, there is a chance that negotiations could continue past that date without a strike. However, Fain has consistently emphasized September 14 as a deadline for potential strike action. Fain was elected as the U.A.W. president last year with a promise to take a more confrontational approach in negotiations.

Sam Fiorani, the Vice President of global vehicle forecasting at Auto Forecast Solutions, commented, “President Fain has declared war, and that usually means there’s going to be a battle, and that battle would be a strike… it’s pretty unlikely there won’t be a strike.”

The entire auto industry, including foreign-owned companies with U.S. operations, accounts for approximately 3 percent of the country’s gross domestic product. A 10-day strike against the three Detroit automakers would result in total wage losses of $859 million and manufacturers’ losses of $989 million.

In August, Fain presented each company with a list of demands, including higher wages, improved benefits, regular cost-of-living wage increases, and equal pay for veteran and newer workers. Fain suggested a potential 40 percent wage increase, highlighting the substantial rise in compensation packages for the chief executives of the companies in recent years.

Fain also called for contract provisions that would require automakers to pay workers for community service if their plant shuts down, aiming to discourage factory closures and protect local economies from the loss of major employers.

While the automakers can afford some of the demands, granting them all could impact their competitiveness, according to Fiorani.

However, in a video message on Facebook, Fain stated that the union and automakers still have significant differences. Ford offered a 9 percent wage increase and lump-sum payments that would increase a worker’s income by 15 percent over the four-year contract. Fain mentioned that while the lump-sum payments helped, they did not improve long-term income.

Disagreements between the U.A.W. and Ford also include profit-sharing bonuses, the use of temporary workers, cost-of-living wage increases, and retiree healthcare, among other matters.

Fain claimed that G.M. and Stellantis have not provided counteroffers to the union’s proposals and that the U.A.W. filed a complaint with the National Labor Relations Board accusing the two companies of not negotiating in good faith.

Fain expressed, “I know this update is infuriating, and believe me when I say I’m fed up. Our goal is not to strike. Our goal is to bargain a fair contract, but if we have to strike to win economic and social justice, we will.”

G.M. responded to the N.L.R.B. complaint, stating they were “surprised by and strongly refutes” the charges. G.M.’s Vice President of Global Manufacturing, Gerald Johnson, affirmed that they have been negotiating in good faith with the U.A.W.

Stellantis expressed disappointment in Fain’s focus on filing legal charges instead of bargaining. The company stated that they would vigorously defend against the complaint and remain committed to negotiating in good faith.

In recent weeks, workers have organized rallies and gatherings in preparation for picketing. Christine Bostic, a battery tester at a G.M. electric vehicle plant, said, “I think the membership is energized. If it comes to a strike, I’m ready for that.”

To mitigate the impact of a strike, the U.A.W. has built a strike fund of $825 million. The union plans to provide striking workers with $500 a week and cover their health insurance premiums during the strike.

Unusually, Fain has joined the union’s negotiating teams in talks with each automaker in recent days. Typically, the U.A.W. president only becomes directly involved in the final stages of negotiations.

During discussions with Stellantis, tensions have been high, and Fain publicly denounced the company’s list of cost concessions by playfully throwing it into a wastebasket in a Facebook video.

Decades ago, the U.A.W. had over a million members, and a strike by the union could significantly impact the U.S. economy. However, the union is now much smaller, with G.M., Ford, and Stellantis employing approximately 150,000 U.A.W. workers and accounting for just over 40 percent of car and truck sales in the U.S. market.

Nevertheless, the U.A.W. enters this year’s negotiations from a stronger position than in the past. Previously, the Detroit automakers faced fierce competition from foreign companies operating non-union plants in the South, which provided a significant cost advantage. In previous contracts, concessions were necessary for G.M., Ford, and Stellantis to remain competitive.

However, in the past decade, all three companies have reported record profits due to the concessions they obtained from the union and the popularity of high-margin trucks and large SUVs.

For instance, Ford made $3.7 billion and G.M. made $5 billion in the first half of this year. Stellantis reported profits of 11 billion euros (about $11.9 billion).

Previously, the U.A.W. selected one company, like G.M. four years ago, as the “target” for negotiations. This time, Fain has suggested the union may target all three companies, although many analysts believe Stellantis will eventually become the primary focus. The strained talks between Stellantis and the U.A.W. revolve around a plant in Belvidere, Illinois, that the union wants Stellantis to reopen.

Reopening the Belvidere plant is a critical objective for Fain, as G.M. closed a plant in Ohio four years ago despite the U.A.W.’s efforts to prevent it. Fain promised members that his more assertive approach would yield better results this time around.

The federal government could also play a role in the battle. The U.S. Energy Department has made grants and loans available to auto companies totaling $12 billion for the conversion of existing gasoline-powered vehicle factories into facilities for producing hybrid and electric vehicles.

Stellantis, G.M., and Ford have plans to introduce more electric models in the coming years and may need to retool some plants accordingly. Stellantis is already building an electric vehicle battery plant in Indiana.

Fiorani suggested Stellantis could consider converting the Belvidere plant for electric vehicle production. He stated, “For the U.A.W. to truly win something, it has to be electric vehicles that Stellantis would plan on making for several years.”

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