Understanding the Potential Autoworkers Strike

On Friday, the United Auto Workers (U.A.W.) union, representing approximately 150,000 workers at U.S. car plants, may go on strike against three major automakers if new contracts cannot be reached. General Motors, Ford Motor, and Stellantis (owner of Chrysler, Jeep, and Ram) could face production slowdowns or stoppages if an agreement isn’t reached by midnight on Thursday. U.A.W. President Shawn Fain has emphasized that Thursday is a strict deadline, not negotiable.

Typically, the union has targeted one automaker at a time in the past. However, this time, Fain and the union members are considering striking against all three simultaneously.

What Is the Key Issue in the Labor Dispute?

The primary focus of the negotiations is compensation.

U.A.W. is asking for a 40 percent wage increase over the course of four years, citing the significant salary increases for the companies’ chief executives in the past four years.

As of last week, the union and the companies were far apart in their proposals. The automakers were offering pay raises of 14 to 16 percent over four years, which Fain considered insulting. The union is still insisting on a 40 percent pay increase.

How Does the Transition to Electric Cars Impact the Negotiations?

The auto industry is currently undergoing a significant shift towards electric vehicles (EVs). General Motors, Ford, and Stellantis are investing billions of dollars in developing new EV models and building factories. These investments make it difficult for the automakers to meet the demands of substantially higher wages for workers. Additionally, unionized automakers like General Motors, Ford, and Stellantis argue that they are at a competitive disadvantage compared to nonunion automakers like Tesla, which dominates the electric vehicle market.

The U.A.W. is concerned that the automakers may take advantage of the transition to electric cars to reduce jobs or hire more nonunion workers. The union is pushing for the inclusion of workers in battery factories under the U.A.W. national contracts. Currently, these workers either have no union representation or negotiate separate contracts, but the automakers argue that they cannot legally fulfill this demand due to the joint venture structure of these plants.

What Happened During the Previous U.A.W. Strike?

The most recent U.A.W. strike occurred in 2019 against General Motors, with nearly 50,000 workers walking out for 40 days. The strike cost General Motors $3.6 billion.

Ultimately, a contract was reached that ended the two-tier wage structure, in which newer employees received significantly lower pay than veteran workers. General Motors also agreed to higher wages for workers.

What Would Be the Economic Impact of a Strike Against the Three Automakers?

A prolonged halt in car production would have far-reaching effects on the U.S. economy.

According to an estimate by Anderson Economic Group, a 10-day strike could cost the economy $5 billion. A longer strike could lead to depleted car inventories at dealerships and drive up vehicle prices.

Compared to the last strike in 2019, the auto industry is currently more vulnerable due to decreased vehicle supply caused by the pandemic. Domestic car inventories are currently about a quarter of their 2019 levels.

Could a Strike Have Political Consequences?

Certainly.

President Biden has positioned himself as a pro-labor union president and has sought to strengthen his ties with labor unions in preparation for his re-election campaign. However, the U.A.W., which traditionally endorses Democratic candidates, has refrained from endorsing Biden for the 2024 race.

The union worries that Biden’s support for electric vehicles may further erode union membership in the auto industry. Fain has criticized the administration for providing substantial federal incentives and loans for new factories without the requirement of employing union workers.

Former President Donald J. Trump, who is expected to secure the Republican nomination, has been actively trying to win the support of U.A.W. members. He has criticized Biden’s auto and climate policies, claiming they are detrimental to workers and consumers.