When Jim Farley goes to bed at night, he thinks about his grandfather. And what advice would he give him in these difficult times? Farley is the CEO of Ford. His grandfather was a factory worker at Ford, the 389th employee hired by the automaker in the early 20th century. His grandfather had some advice for him, the grandson suspected in a television interview on Friday: “Jim, make sure that everyone is well looked after. But also make sure that everyone has a future.”
Ford and the other two major US automakers from Detroit, General Motors and Stellantis, are stuck in negotiations with the powerful UAW union. Stellantis is the name of the new corporate entity, formerly Chrysler, which includes the Jeep brand, among other things. The previous framework agreement between the corporations and the UAW expired in the final minutes of September 14th. Now the union is on strike at three plants in Ohio, Michigan and Missouri. There are likely to be more factories, many more. Because it’s a lot of money. And about the future of car companies and their employees in the era of electromobility.
The union is demanding a 40 percent wage increase over four years, but employers have only offered about half that. The remuneration of corporate CEOs also increased by around 40 percent during the period, argues the controversial new UAW President Shawn Fain. “40 percent will push us into bankruptcy,” replies Ford boss Farley. He would then no longer have any money for investments, especially no money for the expensive switch to electromobility, with which Ford is currently losing a lot of money.
This time the situation is special
The current strikes are unusual because for the first time all three major car manufacturers from the US car factory metropolis of Detroit are affected at the same time. Every four years, the UAW negotiates a new framework agreement on behalf of nearly 150,000 union members who work at General Motors, Ford and Stellantis. In the past, the UAW always negotiated with one of the three companies first, and the others then joined in with similar collective bargaining agreements.
But this time the situation is special, especially from the UAW’s perspective. The four years before the negotiations were characterized by record profits at GM and Stellantis and good profits at Ford – and at the same time a phase of major changes in the entire auto industry.
The background to the strikes is not only inflation and the union members’ belief that they are entitled to a larger share of the profits, but also the conversion to the production of electric cars. Because they require fewer parts to make than gasoline-powered vehicles, fewer people are needed to assemble them. There is a risk of closures of factories that produce engine parts for gasoline engines. This doesn’t just affect the USA, Ford has already cut 2,300 jobs in Cologne and Aachen. According to industry experts, tens of thousands of jobs are at risk of being lost with the end of the combustion engine in Germany. However, many new ones are also emerging. Whether the number of employees in the industry rises or falls depends on the success of manufacturers in the transformation.
Car manufacturers are currently investing their money in expensive battery factories. In the USA, they are often in the southern states, where the workforce is usually not unionized. A profitable deal for the UAW would be good encouragement for workers in the new factories to join the union.
The three manufacturers Detroit Three mentioned, point out that their wage costs, at $64 per hour, are already much higher than their competitors. When you add up wages and benefits, the non-union factories of manufacturers like Toyota earn $55 an hour and Tesla earn $45 to $50, Bloomberg has learned.
Strikes are an expensive thing. When the UAW shut down GM for 40 days in 2019, it cost the automaker about $3.6 billion in earnings before interest and taxes, according to analyst estimates. A strike by all UAW workers at GM, Ford and Stellantis would follow a Study by the consulting firm Anderson Economic cause a loss of more than five billion dollars after just ten days. The UAW’s plan is to strike more and more factories in order to gain more influence at the negotiating table.