Biden says auto workers need 'good jobs that can support a family' in union talks with carmakers

JOSH BOAK
Mon, August 14, 2023 


President Joe Biden waves as he arrives on the South Lawn of the White House, Monday, Aug. 14, 2023, in Washington. 

(AP Photo/Evan Vucci)

WASHINGTON (AP) — President Joe Biden is asking major U.S. automakers and their workers' union to reach an agreement that takes “every possible step to avoid painful plant closings” as the sector transitions to electric vehicles.

The president has not yet been endorsed by the United Auto Workers as he seeks reelection, despite his broad support from organized labor going into the 2024 campaign. The UAW represents 146,000 workers at Ford, General Motors and Stellantis, which are commonly known as the big three automakers. The workers' contracts expire at 11:59 p.m. Sept. 14.

Biden said in a statement Monday that as the market moves away from gasoline-powered vehicles, the auto industry still must provide “good jobs that can support a family” and ensure that “transitions are fair and look to retool, reboot, and rehire in the same factories and communities at comparable wages, while giving existing workers the first shot to fill those jobs.”

“The UAW helped create the American middle class and as we move forward in this transition to new technologies, the UAW deserves a contract that sustains the middle class,” Biden said.

GM said in a statement that it's bargaining in “good faith” with the UAW on “a contract that provides job security and supports good wages and benefits for our team members while enabling companies to compete successfully domestically and globally.”

Shawn Fain, president of the union, has asked for an end to different wage tiers among workers. He is also seeking double-digit pay raises and restoration of cost-of-living pay, defined benefit pensions for all workers, and restoring retiree health coverage. The union has proposed a 32-hour workweek, instead of the conventional 40.

Facing the risk of a potential strike, automakers have said they face development costs as the industry shifts to EVs and spends billions of dollars constructing battery plants.

The UAW vs. The Big Three: Why the union's wish list isn't 'going to happen'

UAW demands deemed 'suicidal,' but union says workers have made 'enormous' sacrifices over the last 15 years.


Pras Subramanian
·Senior Reporter
Mon, August 14, 2023

UAW president Shawn Fain raised some eyebrows during a Facebook Live video address in early August to the union faithful.

In an hour-long talk, Fain, a 20-year UAW veteran and a former shop chair at Stellantis' Kokomo, Indiana, plant, told members what he had planned for the Big Three automakers — GM (GM), Ford (F), and Stellantis (STLA), formerly Chrysler — for this year's contract negotiations. The bottom line was this: After all the sacrifices the UAW made over the years, the days of rolling over were done. The bill was due.

"I’ve been told I am crazy to raise member expectations this high as we head into bargaining," Fain said in his address. "I refuse to allow employers, the billionaire class, and sellouts to play on our fears."

The stakes couldn't be higher for the UAW and the Big Three.

The current contract ends on September 14, at which point a work stoppage could occur if they don't strike a deal. The negotiations, if Fain's speech was any indication, will be the most contentious in recent memory. Why? Fain and current UAW leadership believe the union has given up too much in the past.

The increased rancor has already made a mark. Shares of GM, Ford, and Stellantis all dropped steeply last week, largely because Wall Street is concerned that a work stoppage would seriously impact automakers as they navigate a generational and costly electric transformation.

'These demands aren’t going to happen'

The demands set out by Fain and UAW leadership include "substantial wage increases," which amount to a 46% rise over three years; eliminating compensation tiers for new and old workers (which the UPS Teamsters secured); restoring cost of living adjustments; providing a new pension plan; and reducing work weeks to 32 hours from the standard 40.

Making such demands in public ahead of contract talks isn't typical for the UAW and the Big Three automakers.

In the past, the UAW and Big Three went behind closed doors to negotiate after a contract was hammered out. The UAW then presented the proposed contract to its members for a vote.

Publicly releasing contract demands could backfire for the union, putting pressure on the leadership to avoid compromise and therefore up the likelihood of an impasse with the Big Three negotiators.

No more Mr. Nice Guy: United Auto Workers president Shawn Fain outside the General Motors Factory Zero plant in Hamtramck, Mich., last month. (AP Photo/Paul Sancya.)

But the tough-guy talk may be a plus: Fain, in essence, may be preparing the rank and file for a long, rough fight — a fight brought on by the costs facing the Big Three given these demands. According to Bloomberg, the cost of the UAW demands could amount to $80 billion over the course of the contract, which typically lasts three to four years.

Fain's demands caught the automakers' leadership off guard.

"Everyone understands these demands aren’t going to happen — it would be suicidal for the companies to agree to this," one industry source told Yahoo Finance.

The UAW's wish list would amount to $25 billion-$30 billion per automaker over the life of the contract.

"That adds $35 to $40 per hour to active labor cost — an increase of roughly 60%," the source said. The impact being that automakers would return to the "bankruptcy era" and more than double the labor costs for GM, Ford, and Stellantis versus non-union automakers like Tesla (TSLA).

Less at stake because of its international blue print? The Chrysler Technology Center (Stellantis), in Auburn Hills, Mich. (AP Photo/Carlos Osorio)

When reached for comment, a UAW spokesperson noted the industry source's take misrepresented a few key points.

"The Center for Automotive Research in Ann Arbor estimates that labor is just 5.1% of the cost of the average vehicle. That's a very important data point to take into account when the automakers claim that our demands will be catastrophic," UAW spokesperson Jim McNeil said.

McNeil also noted that the rising MSRPs of Big Three vehicles have not been driven by labor. "[A recent study] published by the BLS shows that dealer markups have been driving up the costs of new cars, NOT labor costs."

Finally, McNeil pointed to a recent statement made by Fain talking about the costs borne by UAW workers over the past decade and a half.

"Overall, the starting pay for a Big Three worker today is almost $21,000 less than it was in 2007 when adjusted for inflation," the statement said. "UAW members made enormous sacrifices to save the automakers during the Great Recession, but we’ve never been made whole."

A strong sell from Wall Street: The GM Detroit-Hamtramck assembly plant. (AP Photo/Carlos Osorio)

A 'good faith' process

For its part, Big Three leadership has been striking more of a conciliatory tone, at least publicly.

GM President Mark Reuss recently told Yahoo Finance that GM is negotiating a deal "that works for everybody in good faith.”

Meanwhile, Ford Chairman Bill Ford has said that the UAW isn’t the "enemy" and that he wants to find common ground.

But Stellantis, which just this week saw Fain throw its contract proposal into the trash in another Facebook Live video, said the UAW needs to focus on "reality."

"[The UAW] demands could endanger our ability to make decisions in the future that provide job security for our employees," Stellantis North America COO Mark Stewart said in a statement to employees, according to Reuters. "This is a losing proposition for all of us."

Wall Street wary

Wall Street, it seems, is anticipating the worst.

Last week CFRA analyst Garrett Nelson double-downgraded GM to Strong Sell and slashed his price target to $28 from $40. Nelson wrote in a client note, "the growing risk of a UAW strike, given reports that the company and union remain extremely far apart in labor negotiations ... [and] newly-elected UAW President Shawn Fain appears to be aggressive and eager to make his mark with the Detroit Three."

Nelson also said that the last UAW strike in 2019, which lasted 40 days, impacted GM’s earnings by $1.89 a share.

"GM and Ford may be in the penalty box for" a while: United Auto Workers members walk in the Labor Day parade a few years back.(AP Photo/Paul Sancya, File)

Morningstar automotive analyst David Whiston echoed those concerns, particularly for GM and Ford, which are more tied to the UAW compared to Stellantis, which has a bigger international labor presence.

"GM and Ford may be in the penalty box for a while. Wall Street hates uncertainty," Whiston said. "This is not a normal negotiation, both in style and the demands they are asking."

"This is a different time," longtime Detroit Free Press automotive writer Eric Lawrence told Yahoo Finance.

"The union is talking in terms that they probably haven't talked in a long time. They've kind of come out swinging. They've kind of put the automakers on notice, and they've told the workers that they expect to fight for a lot of this contract."

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.