Auto Workers Go on Strike

The United Auto Workers labor union says that it’s all about distributing profit. By their lights the greedy capitalists who run auto companies have been raking in massive profits and refusing to share them with workers.

Of course, the companies remember the story of a General Motors glass factory in Ohio, the one that negotiated a generous union contract, only to discover that the factory could not survive such generosity. Thus, as recounted in a movie called, American Factory, GM sold it to a Chinese enterprise, FuYao Glass. The workers made less but they had jobs.

And they voted against unionization. In fairness, the Chinese owners insisted that if the workers had unionized, they would have shut down the plant.

This is to say that the issues in labor negotiation are seriously complex. When you say that the companies have too much profit, you need also to ask how much value an individual worker can add to the company and whether or not the company is going to reinvest its profit.

In the current configuration, the background for the dispute, according to both the Wall Street Journal and the New York Times is the transition to electric vehicles. You see, they require less labor, and that means, fewer jobs. 

As the Wall Street Journal editorializes, the Biden administration, with its push toward electric vehicles paved the way for the strike:

In many ways, this strike is made in Washington because of the Biden Administration’s policy mandating a rapid transition to electric vehicles. The UAW knows that EVs require fewer workers to make and will jeopardize union jobs making gas-powered cars. But the companies already lose money on EVs and worry about making too many concessions to the UAW that will cause them to lose even more as they are forced to build more EVs.

Auto companies have been manufacturing more EVs, but they have not been selling them. Whether it is because they are too expensive or because charging stations are not readily available, or because insurance rates are too high, EVs have failed in the marketplace. Companies are losing money on EVs.

The Biden Administration, with California as its co-enforcer, is mandating that EVs make up an increasing share of auto-maker sales—two-thirds by 2032. California and other progressive states plan to ban all new gas-powered cars by 2035.

And yet, the free market is not deciding. The Biden administration has mandated the production of EVs, so companies are required to transform their manufacturing, away from gas-powered trucks and toward EVs. It’s called industrial policy. Sometimes it works; more often, it does not.

But last year EVs made up less than 3% of Detroit auto maker sales. Auto makers are increasingly steering profits from their popular gas-powered pickups and SUVs into cranking up EV production and subsidizing their sales to meet the government mandates.

The unions understand that their workers are next in line to be laid off. 

The companies have already laid off thousands of salaried workers, including engineers, to finance the EV transition. 

Assembly-line workers so far have been largely spared. But Mr. Fain knows that auto makers will ultimately have to shut down union plants that produce gas-powered vehicles, as Stellantis did a Jeep Cherokee plant last December.

Auto makers have an easy solution to the problems posed by unions. They can build their cars outside of the country or else in states where workers are not required to join a union:

Yet the strike is reinforcing the message that auto makers should build their EVs as far away from the UAW’s reach as possible, whether in right-to-work U.S. states or Mexico.

One will note, with interest, that a New York Times analysis of the background of the strikes, written by Jack Ewing, echoes the same points.

 

It does not happen every day that the Journal and the Times are on the same page, so, here goes:

The strike has come as the traditional automakers invest billions to develop electric vehicles while still making most of their money from gasoline-driven cars. The negotiations will determine the balance of power between workers and management, possibly for years to come. That makes the strike as much a struggle for the industry’s future as it is about wages, benefits and working conditions.

It takes fewer workers to make an eclectic vehicle, and the U.A.W. wants ultimately to unionize Tesla, one auto company that is doing very well indeed.

Workers are trying to defend jobs as manufacturing shifts from internal combustion engines to batteries. Because they have fewer parts, electric cars can be made with fewer workers than gasoline vehicles. A favorable outcome for the U.A.W. would also give the union a strong calling card if, as some expect, it then tries to organize employees at Tesla and other nonunion carmakers like Hyundai, which is planning to manufacture electric vehicles at a massive new factory in Georgia.

Again, the companies are suffering under the weight of a government mandate to produce more EVs. They are obliged to do so because the Biden administration believes that this will be a good way to fight climate change. As it happens, and as we have noted, many scientists do not believe that climate change is a crisis, but the true believers in the Biden administration think otherwise.

Under pressure from government officials and changing consumer demand, Ford, G.M. and Stellantis are investing billions to retool their sprawling operations to build electric vehicles, which are critical to addressing climate change. But they are making little if any profit on those vehicles while Tesla, which dominates electric car sales, is profitable and growing fast.

Ewing points out that the companies are facing the choice of giving more money to workers or continuing to invest in EVs.

Union demands would force Ford to scrap its investments in electric vehicles, Jim Farley, the company’s chief executive, said in an interview on Friday. “We want to actually have a conversation about a sustainable future,” he said, “not one that forces us to choose between going out of business and rewarding our workers.”

More EVs mean fewer jobs:

For workers, the biggest concern is that electric vehicles have far fewer parts than gasoline models and will render many jobs obsolete. Plants that make mufflers, catalytic converters, fuel injectors and other components that electric cars don’t need will have to be overhauled or shut down.

Worse yet, the new EV plants are not going to hire the workers who have been working in today’s auto plants. The new plants are in the South, where labor laws make it far more difficult to unionize. Which is why auto companies have been building there.

Many new battery and electric vehicle factories are springing up and could employ workers from the plants that have shut down. But automakers are building most aggressively in the South where labor laws are tilted against union organizers, rather than in the Midwest, where the U.A.W. has more clout. One of the union’s demands is that workers in the new factories be covered by the automakers’ national labor contracts — a demand that the automakers have said they can’t meet because those plants are owned by joint ventures. The union also wants to regain the right to strike to block plant shutdowns.

One does understand, as the authors fail to mention, that China is now leading the world in producing EVs. American automobile companies have not yet mastered the art of producing them. That means, more investment. 

A new G.M. battery factory in Ohio has been slow to produce batteries, delaying electric versions of the Chevrolet Silverado pickup and other vehicles. Ford this year had to suspend production of its electric F-150 Lightning in February after a battery caught fire in one of the pickups that was parked near the factory for a quality check. And Stellantis won’t even begin selling any fully electric vehicles in the United States until next year.

The CEO of General Motors, Mary Barra explained the reality of the situation:

Speaking to “CBS Mornings” on Friday, Ms. Barra said an excessive pay raise would undermine G.M.’s ability to continue producing vehicles with internal combustion engines while also developing electric vehicles. “This is a critical juncture where investing is very important,” she said

On the other side, since the Biden administration has produced inflation, workers find that their purchasing power has decreased.

Adjusted for inflation, wages for autoworkers in the United States have fallen 19 percent since 2008, according to the Economic Policy Institute, a left-leaning research group.

It is not about ill-will. It is not about corporate greed. It has a great deal to do with government interference in an industry.

Please subscribe to my Substack.