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The UAW strike at Ford, GM, and Stellantis could change the entire automotive industry forever

Nora Naughton,Alexa St. John   

The UAW strike at Ford, GM, and Stellantis could change the entire automotive industry forever
  • The UAW is looking to regain its influence in the automotive industry.
  • A more expensive labor deal will change the manufacturing equation for Detroit.

On the picket line at Ford's Bronco and Ranger factory in suburban Detroit, one striking United Auto Workers member is thinking about more than just his job.

"I'm fighting for future generations to come," Matt Wegener, who has been at Ford's Michigan Assembly for more than 20 years, said. "Just look at the amount corporations and CEOs are making compared to the working person – not just the Detroit 3, but everywhere. It's crazy."

For the first time in its 88-year history, the UAW is on strike at all three of the Detroit companies at once. The UAW's unique whack-a-mole targeted strategy gives the union more longevity in this historic work stoppage, putting pressure on Ford, GM, and Stellantis to deliver hefty wage increases and a reversal of some concessions workers made during the 2009 recession.

"We have a bigger point to make," Wegener said, noting the strike sends a larger message about inequality across the industry. "It's not just one company not sharing the profits, it's all three."

That larger point is certainly being made, manufacturing and labor experts told Insider this week. In fact, the United Auto Workers-led strike at the Detroit 3 is shaping up to have an outsized effect on the entire automotive industry.

"If the UAW does dig their heels in and does well here, it's highly likely that they will get other auto workers who are not UAW auto workers to be very interested," Ambrose Conroy, CEO of consultancy Seraph, said. "And that gives them even more power."

A lot is on the line for the UAW

The UAW has been rattled by declining membership and a yearslong criminal probe that sent several of its prominent leaders to prison. The union has also lost a lot of influence in the industry, failing over the last several years to organize outside of the Detroit 3, with one of its more bitter losses being Tesla.

Despite those challenges, one of America's oldest and most well-known unions is fighting to reignite its relevance in the labor movement.

Fain and a team of advisors and labor lawyers have built the UAW's fight around a broader confrontation between the working class and the ultra-wealthy that has burgeoned since the pandemic and resulted in major deals for Teamsters, United Airlines pilots, and more.

"Billionaires, in my opinion, don't have a right to exist," Fain said on a livestream earlier in September. He went on to talk about how the labor movement once fought to deliver the 40-hour work week. "Sadly, it feels like we've gone so far backwards, that we have to fight just to have the 40-hour workweek back. Why is that? So another asshole can make enough money to shoot himself to the moon."

Rhetoric like this is a return to the union's roots as an early leader in the 1930s labor movement. Even the branding of the strike, which Fain has called the "Stand Up" strike, is a play on the UAW's highly influential 1937 sit-down strike at GM.

The hope of union leaders and workers on the picket line like Wegener is that the UAW can once again set the standard for work in automotive manufacturing.

"There's a war for the auto job happening here," Jason Miller, a professor of supply chain management at Michigan State University, said.

Changing the equation

On the other side of the bargaining table, Ford, GM, and Stellantis are reluctant to be made an example of, especially so soon after the 2009 financial crisis threatened their very existence.

Each of the Detroit 3 are spending billions of dollars to electrify their vehicle offerings and must weigh costly R&D expenses in the future with these increased labor costs.

"It's at such a crossroads," Melissa Atkins, a labor and employment partner at Obermayer, said. "There's the change to electric vehicles, which would essentially take less employees, and they're more expensive to build and they're trying to find cheaper ways to do this. So they have to invest in innovation and different ways and different models. That costs money."

Executives have pleaded with the union in public to consider the broader implications of their demands.

"There's no way we could be sustainable as a company," Ford CEO Jim Farley told CNBC on the eve of the strike deadline last week. "You want us to choose bankruptcy over supporting our workers."

The Detroit automakers always go into quadrennial contract negotiations with the UAW with the goal of remaining "competitive." The idea is to toe the line between meeting union demands while not adding to the gap between Detroit's labor cost and the rest of the industry.

Tesla looms large over this year's labor talks

Something top of mind for everyone watching this develop is what it means for Tesla.

Elon Musk's electric car company is estimated to spend about $45 an hour in wages and benefits on its non-union labor, compared to about $66 an hour spent by Ford, GM, and Stellantis. The UAW's current demands would balloon that figure to about $136 an hour, according to estimates from Wells Fargo.

At this point in the contentious labor talks, a higher labor cost per hour is a given, requiring Detroit executives to rethink the equation on manufacturing, Miller said.

"They will have to find a way to make labor costs a less important overall cost," Miller said.

The companies can try to do that by integrating more automation, shifting production to more productive facilities, and relying more on overseas manufacturing, he said — a fine line to walk as these automakers electrify given the Inflation Reduction Act's requirements for domestic carmaking in order to receive crucial tax credits, thus keeping the competitiveness going.

Tesla has already done that cost-cutting. Part of Tesla's advantage also lies in the profit sharing returns that, for the most part, have kept its employees happy — or at least, not eager to unionize — over the years.

"It's a very challenging moment for the UAW," Conroy said. "They've drawn the line and they've gone to war, and the question is: are they going to be able to win or not? And I don't know."

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