Who Actually ‘Won’ the UAW Strike? Are Union Pay Bumps Sustainable?


who actually won the uaw strike are union pay bumps sustainable

Despite rampant talk about how the United Auto Workers’ stand-up strike and its resulting deals would bankrupt the automotive sector, the union strategy appears to have ended up costing the industry less than the labor strike GM endured all by its lonesome in 2019.

Companies have started reporting how much picketing set them back. Ford said union complications cost it roughly $1.3 billion while General Motors had estimated closer to $800 million right before the UAW ramped up the pressure. Stellantis threw out a multi-billion dollar setback in overall revenue. But it also stated that it probably only ended up losing about $800 million in profits — presumably meaning it lost even less dough than GM ultimately would in the end.

Earlier data shows General Motors losing $3.6 billion following the 40-day strike the UAW launched in 2019. This seems to suggest that the UAW’s new strategy of picketing all three Detroit automakers simultaneously while selecting increasingly important plants as the days rolled on was not only more effective in getting auto workers one of the best deals they’ve seen in decades but also ended up costing the industry less money overall.

But there are two lingering questions left to answer. How necessary was it for the UAW to demand wage and benefit increases and will the resulting changes in worker compensation make it impossible for the industry to do business?

The first issue is largely a matter of opinion, hinging largely on how much value you place on the labor force. UAW leadership immediately targeted pay increases that mimicked what had been witnessed by top-level executives in recent years by demanding a 40-percent pay bump over just four years. The demands were unrealistic, albeit a representation of its grievances. It also served as a reminder to American workers that executive pay has outpaced standard wages for decades.

Based on data from the Economic Policy Institute, CEO pay averaged 344 times as much as the average American’s income in 2020. This has actually been the status quo for quite some time, with the number pivoting between roughly 200 and 400 times what typical workers are paid since the early 2000s. However, if we go back in time, CEOs were only making 21 times as much in 1965 and 60 times as much in 1990.

That’s already a noteworthy increase while average wages were struggling to even match inflation and the figure absolutely skyrocketed following the implementation of the North American Free Trade Agreement (NAFTA) in 1994.

We can speculate as to why but it certainly sounds like the offshoring of American jobs under NAFTA was a relevant factor. The above wasn’t simply a problem for any singular industry either. These are trends that have been impacting just about every quadrant of the U.S. economy.

As for automotive jobs specifically, American auto workers were actually paid less than Japanese and German counterparts. The Bureau of Labor Statistics said the average UAW member makes about $28 per hour on the line at the start of 2023. Meanwhile, the typical German auto worker was netting $35 per hour. Japanese employees are a little harder to suss out due to a larger percentage of their overall compensation being tied to productivity bonuses. But most estimates have them somewhere between $32 and $40 per hour — depending on who they work for and how well they’re doing.

Those numbers do not include calculations for benefits, as the relevant details are difficult to find beyond the borders of North America. But UAW members have made major concessions in terms of benefits and pay bumps to help the industry thrive since the late 1990s.

The worst example has to be 2009, following government bailouts that only managed to exclude Ford Motor Company. Workers had endured mass layoffs and agreed to sacrifice retirement benefits, medical benefits, and cost-of-living adjustments in the hopes that it would end in automakers retaining more domestic jobs. This was also an era where many union officials who would later be busted for bribery and embezzlement schemes at the expense of their workers rose to prominence.

The deals reached between the UAW and Detroit automakers in 2023 have effectively brought union wages up to a level that’s comparable to what we’ve seen elsewhere, if not a little higher. But is this tenable in a society where there are plenty of countries that will build your cars for less?

Hopefully. It would be insane for any of the companies to have agreed to terms they couldn’t possibly comply with. However, it might be wise not to assume anything right away.

As of now, Ford has said the deal it reached with the UAW will ultimately add up to $900 in manufacturing costs on every vehicle it builds. That’s apparently in addition to lopping off sizable per-vehicle margins. Though leadership has suggested it’ll find ways to recoup those losses via manufacturing synergies and some clever cost-cutting.

While General Motors and Stellantis haven’t chimed in on the matter yet, it’s likely they’ll follow a similar trajectory while using the deal to help rationalize rising MSRPs. But they were all already doing this. In fact, American automakers spent most of the 2010s killing off affordable models for larger, pricier vehicles boasting far higher margins (e.g. pickup trucks and SUVs) and ways of circumventing stringent emission laws.

Your author has often wondered how this strategy would play out when affordability became a problem during a period of economic downturn. It doesn’t appear to have injured the automakers all that badly in the short term. In fact, we’ve seen record-setting profits being reported over the last few years despite years of production shortfalls and the industry dumping billions of dollars into money-losing investments pertaining to electric vehicles and autonomous driving systems.

Some of this was undoubtedly due to consumer willingness to take on debt via increasingly lengthy loan agreements as vehicle pricing started breaking records. But we’re now in a situation where the average American household can no longer afford to spend the kind of money required to purchase new vehicles. Something tells me that bumping up the price of cars another grand won’t work as wealth is further consolidated in society’s upper rungs.

But executives are few in number and line workers are many. Won’t having to pay nearly 150,000 employees an extra 25 percent over the next few years bankrupt automakers?

Not necessarily. While the deals all result in sizable ratification bonuses that will need to be paid immediately, deals with the UAW forego some of the really big asks regarding retirement benefits in exchange for juicer 401(k) savings plans. The way in which the union selected its targets — opting for precision strikes against increasingly important facilities owned by all three companies, rather than selecting one manufacturer that would have all of its factories stalled — likewise helped save everyone money. Automakers got to share the financial burden while production was allowed to continue at most plants and the UAW managed to stretch out its own strike budget.

In truth, the biggest hit automakers seem to have endured from this is a loss in confidence from investors. While Stellantis has held relatively strong, General Motors and Ford have both seen sizable declines in market valuation since contract negotiations began over the summer. We’re talking tens of billions of dollars.

But investors are a fickle lot and none too bright. Modern market valuations seem to hinge on the perception of success rather than anything tangible — something that’s underscored by the insane number of EV startups we’ve seen receiving record-breaking valuations before they’ve built a single car, only to dissolve years later after the founders pull out their own investments.

That has continued. We’re already seeing reports speculating how the strike will impact the advancement of electric vehicles and future investments. But only about half of those focus on how EV sales look to have already plateaued going into the summer months earlier this year. That’s not to suggest the industry’s multi-billion-dollar investment into electrification isn’t relevant. But it hardly seems like it should be anybody’s core focus after so much failure and the industry probably shouldn’t attempt to pin any of that on its recent battle with the UAW.

Listen, I’m not an economist or the biggest fan of the UAW. I’m just a guy who has spent his entire adult life researching the automotive industry and reading about American history. I cannot tell you the best path for each individual company to take that will result in happy workers and exceptionally high profit margins. But I can tell you that a lot of what’s been tried in the past hasn’t worked for everyone and probably contributed to economic disparities that the past would suggest are untenable in the long term.

When Henry Ford increased wages for his employees over 100 years ago, he effectively made it possible for them to buy the automobiles they were producing. Whether or not it was the man’s intention, a middle class blossomed and the United States became the envy of the world.

That’s not the situation we’ve enjoyed since the early 2000s, perhaps not even since the 1970s. Wages have stagnated, the middle class is shrinking fast, and it’s now becoming difficult for employees to purchase the very products they’re manufacturing. Blame can be placed on a lot of doorsteps. Government regulations, sustained inflation, wage stagnation, an obsession with appeasing the stock market, the outsourcing of labor, and a myriad of other factors have all played a role.

who actually won the uaw strike are union pay bumps sustainable

It may be in the automotive industry’s best interests to try and undo some of the harms it’s responsible for. When Ford was the first company to reach a deal with the UAW, I argued that this made the company look good. Perhaps not to big-money investors, but probably to regular people that are worried about whether there will be good-paying jobs left in the United States for regular people.

That said, union members likewise need to remember that their recent victory will be for nothing if they don’t help keep these companies competitive. I may believe that America’s workforce has been due for a pay bump for years. But receiving increases in wages and benefits obligate employees to put in the effort required to rationalize the expenditures made on their behalf. A deal made in bad faith serves no one and I think we’ve all had our fill of that.

I cannot tell you the perfect way to think about all of this. I’ve even struggled myself. But I would recommend trying to avoid getting sucked into any black holes regarding which political actors want to take credit for what’s happening between the UAW and the automotive sector. Try as they might, politicians had very little to do with what took place over these last couple of months. Union members seem to be shying away from the UAW’s former political ties and even leadership told any politicians hoping to get involved to mind their business. Though Joe Biden still managed to make an appearance for the obligatory photo opportunity while other presidential hopefuls chimed in on the situation.

Still, it’s just noise for the most part — totally separate from the realities of the people most affected by the relevant contract negotiations. Politicians failed to help the UAW for decades and effectively issued policies that weakened the U.S. labor market. Love or hate the automotive union, it’s the group that actually got line workers paid. While it would have been nice to have gotten there without striking, automakers should also be praised for offering the kind of deal that seems sure to be ratified by the people populating assembly lines. Even if those decisions were made under some duress.

It’s certainly not a perfect solution and miserly investors may dump some stock under the assumption that margins are about to get a little leaner. But if the industry is serious about investing in the domestic workforce, domestic investors would be utter fools not to take that into account.

[Images: UAW]

Become a TTAC insider. Get the latest news, features, TTAC takes, and everything else that gets to the truth about cars first by  subscribing to our newsletter.

Source link