DETROIT – With contract talks said to be moving “slowly” between Detroit’s Big Three automakers and the United Auto Workers union, a strike is becoming more of a possibility this fall. But things have certainly and significantly changed since the UAW last struck in 2019.
Auto workers represented by the UAW are preparing for a potential strike if the union can’t make a deal with General Motors, Ford Motor Company and Stellantis by the Sept. 14 deadline. So far, the quadrennial negotiations have been moving slowly this year, according to new UAW President Shawn Fain, who last week filed unfair labor practices against GM and Stellantis.
Fain claims GM and Stellantis have failed to respond to the union’s list of demands, which were reportedly provided several weeks ago, in an effort to delay the talks. The union has heard back from Ford, but is explicitly dissatisfied with their counter offer.
The apparent conflict, partly driven by Fain’s unwavering position on union demands -- which include an end to wage tiers, a notable wage increase, cost of living adjustments, and pension restoration -- makes it seem unlikely that both sides will come to an agreement within the few days they have left. And the UAW is viewing the deadline as a hard stop, and doesn’t intend to extend the current contracts.
Tens of thousands of auto workers represented by the UAW have voted in favor of authorizing a strike, should leaders decide to call one.
Unlike in previous years, the UAW hasn’t declared a target company among the Big Three, from which workers might strike until a new contract is drawn up, and then use that contract to establish similar agreements at the other two companies. That process is called pattern bargaining, and often happens in succession rather than all at once.
This year, Fain has decided to push for bargaining with all three automakers at the same time, and has declined to name a target. That means it’s unclear where workers may strike at this fall, or perhaps where they may strike first. It is possible, though some say unlikely, that workers will strike at all three companies at the same time.
The last time the UAW went on strike was in 2019, and it was only GM workers who struck. Since then, the automotive industry has experienced significant changes related to the pandemic, the economy, and its investment in electric vehicles.
UAW’s 2019 strike
Leading up to the 2019 strike, the UAW selected GM as its target for negotiations and the subsequent strike, and chose to extend its contracts with Ford and then-Chrysler (which has since merged with the parent company of the Peugeot brand to create Stellantis).
On the night of Sept. 14, 2019, when the UAW’s contract with GM expired, hundreds of employees across Michigan and Ohio had already walked off the job. The national strike officially began on Sept. 15, 2019, the first auto strike in more than a decade.
For six weeks, 48,000 GM auto workers were on strike in what became the longest UAW strike since 1970. The strike caused 34 plants to idle across several states.
Analysts estimated that GM lost about $2 billion in vehicle production over two fiscal quarters due to the strike, though GM’s estimate was higher. The company reported a net income of $2.3B in their third quarter of 2019, which was down 9% from a $2.5B net income in the same quarter in 2018.
The final agreement between the UAW and GM included an $11,000 signing bonus for each member, performance bonuses, two 3% annual raises, two 4% lump sum payments, and holding the line on health care costs. GM estimated that wage increases from that deal would cost the company an additional $100 million per year.
The new contract also allowed GM to permanently shut down three plants that were designated for closure, including one in Warren.
The UAW’s contract with GM was used to establish new terms with Ford and then-Chrysler.
What came after the strike
Over the last four years, the Big Three automakers and the UAW have dealt with their own turmoil brought on by the pandemic and corruption.
For automakers, the pandemic created unprecedented circumstances and challenges, which were eventually turned into positives.
At the end of 2019, automakers expected sales to decline, and were working with losses resulting from the six-week strike. Sales did decline through the beginning of 2020, when the COVID pandemic abruptly shut down much of the country. The decline in sales only lasted so long, however.
When lockdowns were lifted, the demand for cars soared -- and, unfortunately for consumers, so did car prices.
At the beginning of 2020, manufacturers were facing a range of circumstances they couldn’t prepare for, including global shipping issues, a semiconductor shortage, and factory shutdowns all related to the pandemic. The shortage of microchips led automakers to prioritize them for higher-priced vehicles like SUVs and trucks, which would result in higher profits amid fewer sales.
These factors led to fewer vehicles being produced, especially more affordable models, preventing the manufacturers from being able to keep up with a demand that grew as people were able to move about freely after lockdowns.
After some time, supply chain issues had become more regulated, and the Federal Reserve’s interest rate hikes were meant to help fight inflation and deter people from buying so many cars. Still, the demand for new and used vehicles remains high in comparison with available supply.
Despite improved conditions and more vehicles being made than two years ago, automakers have continued to prioritize the production of more expensive and luxury vehicles that offer better profits compared to smaller vehicles that are more affordable, but offer smaller profit margins. Dealerships are also reportedly responsible for jacking up car prices, keeping prices high for American consumers.
Prior to the pandemic, automakers would produce more vehicles than were needed, and would offer incentives to help clear inventory. Now, automakers are continuing to work with a new model initially set unintentionally due to the pandemic: Lower inventory means bigger profits.
It’s those profits that new UAW President Shawn Fain has drawn attention to since taking office in March. The UAW calculates that the Big Three made a combined total of $21 billion in profit in the first half of 2023, and made a combined $250 billion in American profits in the last 10 years.
Fain argues that those profits have not translated to sufficient benefits or pay for auto workers in the same way they have for company executives. He also says UAW labor costs only account for 10%-15% of a vehicle’s price.
Since being voted into office this year in the UAW’s first-ever direct leadership election, Fain has taken a more aggressive and transparent approach to negotiations with the Big Three. The new president set the stage early for what was expected to be an unusual bargaining season, and has since held a strong stance for better pay and benefits for UAW members.
Fain’s election came after a series of corruption issues among UAW leadership.
Even before the 2019 GM strike, several officials were accused of embezzling money. Then-UAW president Gary Jones resigned in November 2019 and was convicted on fraud charges, pushing Rory Gamble into the role of acting president -- until he retired in 2021. Then, Ray Curry served as the union’s leader until he was ousted in March in the race against Fain.
The new president has since pushed for a series of demands that he says were created with input from UAW members. The demands go beyond pay and benefit bumps, and seek to help workers establish a better work-life balance with fewer working hours, more paid time off, a job bank, and benefits for new and existing retirees.
The UAW is also focused on establishing some sort of job security at a time when automakers are investing heavily in a shift toward EVs. Workers are particularly concerned about what EV production means for their futures, since the vehicles require less people to make them -- though those workers require more thorough training.
On the other end, the Big Three say they are facing billions of dollars in developmental costs as they shift to prioritizing electric vehicles, which has been encouraged by the federal and state governments who are focused on improving environmental conditions.
A look at a potential 2023 strike
There are just under 150,000 auto workers represented by the UAW today.
The union has about $825 million in its strike fund, so those on the picket line would get about $500 per week during a strike. This weekly pay would be a pay cut for most employees, though it’s a larger amount than what was provided during the 2019 GM strike.
However, experts say those funds could run out quickly depending on how many workers are striking at one time. The UAW could choose to strike at one, two, or all three of the Detroit automakers at once -- though some industry experts believe it’s unlikely that workers will strike at all three.
When crunching the numbers for a potential strike in 2023, Anderson Economic Group found that if workers strike for 10 days at Ford only, for example, that company would lose $325 million in earnings. About $341 million in direct wages would be lost.
Note: Both GM and Ford are clients of the consultancy firm.
If members strike at all three automakers at once, the firm estimates a combined total loss of $989 million in earnings for the companies in a 10-day period. An estimated $856 million in direct wages would be lost.
Those numbers may sound high, but that’s the point of a strike: for it to be costly for the employers.
In addition to impacting the Big Three, experts argue a strike would have a ripple effect throughout the supply chain.
Jeff Rightmer, who teaches global supply chain management at Wayne State University, told Local 4 that if the strike lasts six weeks like the one in 2019, then the lower levels of the supply chain will likely be affected. While the bigger, stronger tier one suppliers would be able to “hold on longer,” he predicts that tier two and tier three suppliers, some of which are small businesses, would have to close their doors if the strike lasts a while.
Businesses like bars and restaurants that are near striking workplaces could also be affected, Rightmer said.
Auto dealers may also take a hit from a halt in production amid a strike. Already low dealership inventories could drop even lower, meaning dealers could run out of product.