Why Detroit's Big Three are fighting to dominate the next generation of the car industry

Marley Jay
Thu, September 14, 2023 

Many of the core issues in the labor dispute between the United Auto Workers and the Big Three U.S. automakers are familiar: salary increases, sick days and pay grades.

While much of the attention has gone to those key issues, a major undercurrent of the dispute is the transition to electric vehicles and away from cars and trucks with internal combustion engines — those that run on gasoline and motor oil. The change, which might be the biggest in the history of the auto industry, has major implications for the business and for its workers.

U.S. automakers say they sold almost 14 million new cars and trucks in 2022. For the first time, hybrid and all-electric vehicle sales topped 1 million that year, according to the Bureau of Transportation Statistics.

That's a milestone, but it also shows that the shift to EVs is still in its early stages.

Present-day issues like pay for workers are obviously paramount in the negotiations. The current contract between the UAW and the Big Three expired at 11:59 p.m. Thursday, and the UAW union officially went on strike. Around 13,000 UAW members walked out at three manufacturing facilities: one Ford plant, one General Motors plant, and one Stellantis plant.

It’s the first time the 88-year-old UAW has gone on strike against all three companies at the same time, and it says more workers may walk off the job if a deal isn’t reached soon.

Since the last contract went into effect in 2019, annual gross profits have risen by 34% at Ford and 50% at General Motors. Stellantis, which formed when Fiat Chrysler merged with the French automaker Peugeot in 2021, reported that its annual gross profit rose by 19% from 2021 to 2022.

The UAW wants the new contract to reflect that growth — and, by extension, the growth in executive pay. The new contract, according to UAW president Shawn Fain, should also address the effects of inflation in the U.S.

"I don’t think anyone would disagree that the union and the members should participate in the healthy environment of greater profits for the automakers," said Jeff Schuster, global head of automotive for GlobalData. Schuster added that the auto industry has seen "massive earnings because prices were up" during the height of the pandemic.

That kind of profit growth can cure a lot of ills, and the Big Three have agreed to raise their employees' pay. But Schuster says the companies are in a tricky position, despite their outsize earnings.

An uncertain future for Detroit's Big Three

As EVs come to predominate, GM, Ford and Stellantis will have to build and revamp manufacturing plants, do more research and development, train new workers and source new raw materials, even as they continue to work on new car and truck models.

It's very expensive to build an auto plant, and there are bound to be some bumps and mistakes in that process.

Meanwhile, the Big Three have a newer rival that is already doing a pretty good job at all of that.

"I think everyone is trying to play a bit of catch-up with Tesla," Schuster said.

Erin McLaughlin, senior economist specializing in transportation and infrastructure for The Conference Board, said the UAW is trying to understand what that will look like for present and future union members.

“A lot of the Big Three are opening EV plants in the Sun Belt, which are less pro-union states and where foreign companies have put their plants,” McLaughlin said. That can weaken the union, so it serves as a cost-saving strategy.

Ford, GM and Stellantis all partnered with South Korean companies to build plants that manufacture EV batteries. Jobs at those facilities are non-union and lower-paid. The UAW says that needs to be addressed in the next contract, not least because in the coming years, more people will work at those plants — and fewer will probably be needed to build cars and trucks.

While union members likely want the largest wage increases they can get, Schuster said that the Big Three are mostly competing against non-unionized companies, where workers generally earn less. Tesla is the only U.S. car company whose workers don't have a union.

If the automakers decide they're paying too much for labor, they could move more jobs overseas, putting U.S. employees out of work.

Both of those factors are concerns for the union, because it could erode its membership or bargaining power over time. McLaughlin links that to a national trend of reduced union membership.

“One of the reasons we’re seeing these labor discussions now is a shrinking employee labor base, and we’re seeing an increase in manufacturing at the same time we’re seeing low unemployment,” she said.

Schuster said the negotiations are that much more complicated because new cars and trucks have grown more expensive in recent years. Kelly Blue noted the average transaction price of a new vehicle was $48,334 in July. EVs cost more as well, generally because the large batteries that power them are expensive.

The development and buildout of electric vehicles and the factories and infrastructure needed to ramp up production cuts into the automakers' profits, but passing the cost on to consumer might be tricky when prices have already risen in recent years.

"It really comes down to how much more can you add to the price of a vehicle where consumers are already struggling with vehicle pricing," he said.

This industrywide shift is certainly front-of-mind for many UAW members and the carmakers. How these challenges play out in the long term is unclear.

This article was originally published on NBCNews.com

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UAW strike exposes tensions between Biden's goals of tackling climate change and supporting unions

CHRIS MEGERIAN

Updated Sat, September 16, 2023 at 8:05 AM MDT·5 min read

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Biden Auto Workers Strike

President Joe Biden speaks about the auto workers strike from the Roosevelt Room of the White House in Washington, Friday, Sept. 15, 2023. (AP Photo/Susan Walsh)

ASSOCIATED PRESS

WASHINGTON (AP) — Two of President Joe Biden 's top goals — fighting climate change and expanding the middle class by supporting unions — are colliding in the key battleground state of Michigan as the United Auto Workers go on strike against the country's biggest car companies.

The strike involves 13,000 workers so far, less than one-tenth of the union's total membership, but it's a sharp test of Biden's ability to hold together an expansive and discordant political coalition while running for reelection.

Biden is trying to turbocharge the market for electric vehicles to reduce greenhouse gas emissions and prevent China from solidifying its grip on a growing industry. His signature legislation, known as the Inflation Reduction Act, includes billions of dollars in incentives to get more clean cars on the roads.

Some in the UAW fear the transition will cost jobs because electric vehicles require fewer people to assemble. Although there will be new opportunities in the production of high-capacity batteries, there's no guarantee that those factories will be unionized and they're often being planned in states more hostile to organized labor.

“The president is in a really tough position,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “What he needs to be the most pro-labor president ever and the greenest president ever is a magic wand.”

The union is demanding steep raises and better benefits, and it's escalating the pressure with its targeted strike. Brittany Eason, who has worked for 11 years at the Ford Assembly Plant in Wayne, Michigan, said workers are worried that they'll “be pushed out by computers and electric vehicles.”

“How do you expect people to work with ease if they’re in fear of losing their jobs?” said Eason, who planned to walk the picket line this weekend. Electric vehicles may be inevitable, she said, but changes need to be made “so everybody can feel secure about their jobs, their homes and everything else.”

Biden on Friday acknowledged the tension in remarks from the White House, saying the transition to clean energy "should be fair and a win-win for autoworkers and auto companies.”

He dispatched top aides to Detroit to help push negotiations along, and he prodded management to make more generous offers to the union, saying “they should go further to ensure record corporate profits mean record contracts.”

As part of its demands, the UAW wants to represent employees at battery plants, which would send ripple effects through an industry that has seen supply chains upended by technological changes.

“Batteries are the power trains of the future,” said Dave Green, a regional director for the union in Ohio and Indiana. "Our workers in engine and transmission areas need to be able to move into the new generation.”

Executives, however, are keen to keep a lid on labor costs as their companies prepare to compete in a global market. China is the dominant manufacturer of electric vehicles and batteries.

“The UAW strike and indeed the ‘summer of strikes’ is the natural result of the Biden administration’s ‘whole of government’ approach to promoting unionization at all costs,” said Suzanne Clark, CEO of the U.S. Chamber of Commerce.

Some environmental groups, conscious of how labor remains crucial to securing support for climate programs, have expressed support for the strike.

“We’re at a really pivotal moment in the history of the auto industry,” said Sam Gilchrist, deputy national outreach director at the Natural Resources Defense Council.

Presidential politics have increased the stakes for the strike, which could damage the economy going into an election year, depending on how long it lasts and whether it spreads. It's also centered in Michigan, a key part of Biden's 2020 victory and critical to his chances at a second term.

Former President Donald Trump, the front-runner for the Republican nomination, sees an opportunity to drive a wedge between Biden and workers. He issued a statement saying Biden “will murder the U.S. auto industry and kill countless union autoworker jobs forever, especially in Michigan and the Midwest. There is no such thing as a ‘fair transition’ to the destruction of these workers’ livelihoods and the obliteration of this cherished American industry.”

In an interview with NBC's “Meet the Press,” Trump said that “electric cars are going to be made in China,” not the United States, and he said “the autoworkers are being sold down the river by their leadership.”

Trump's comments have not earned him any support from Shawn Fain, president of the UAW.

“That’s not someone that represents working-class people,” he told MSNBC earlier this month. “He’s part of the billionaire class. We need to not forget that. And that’s what our members need to think about when they go to vote.”

Ammar Moussa, a spokesman for Biden's campaign, said Trump “will say literally anything to distract from his long record of breaking promises and failing America's workers.” He noted that Trump would have let auto companies go bankrupt during the financial crisis rather than bail them out as President Barack Obama did at the time.

But there are also disagreements between Biden and workers.

When the Energy Department announced a $9.2 billion loan for battery plants in Tennessee and Kentucky, part of a joint venture by Ford and a South Korean company, Fain said the federal government was "actively funding the race to the bottom with billions in public money.”

Madeline Janis, co-executive director of Jobs to Move America, which works on environmental and worker issues, said the White House needs to do more to alleviate labor challenges.

“We don’t have enough career pathways for people to see themselves in this future and let go of the jobs in industries that are causing our world to be in crisis," she said.

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Associated Press writer Joey Cappelletti in Lansing, Michigan, contributed to this report.