DETROIT: The United Auto Workers union launched simultaneous strikes at three Detroit Three factories early on Friday, kicking off the most ambitious US industrial labor action in decades.
The walkouts will halt production of the Ford Bronco, Jeep Wrangler and Chevrolet Colorado pickup truck, along with other popular models. UAW President Shawn Fain said the union will hold off for now on a broad, general strike, but said all options are open if new contracts are not agreed.
Fain laid out plans for the unprecedented, simultaneous walkouts at General Motors, Ford and Chrysler parent Stellantis’ US operations in a Facebook Live address less than two hours before the expiration of the old contract.
“For the first time in our history we will strike all three of the Big Three,” Fain said.
The strikes involving a combined 12,700 workers will take place at assembly plants operated by Ford in Wayne, Michigan, GM in Wentzville, Missouri and Stellantis’ Jeep brand in Toledo, Ohio. They are critical to the production of some of the Detroit Three’s most profitable vehicles.
Fain’s decision to go with targeted walkouts could limit the cost to the union of strike pay. The UAW has a strike fund of US$825 million, which pales in comparisons to billions in liquidity the automakers have built up thanks to robust profits from the trucks and SUVs UAW members build.
A limited strike could also reduce the potential economic damage economists and politicians fear would result from a widespread, lengthy shutdown of Detroit Three operations.
Stellantis has more than 90 days worth of Jeeps in stock, and has been building SUVs and trucks on overtime, according to Cox Automotive data.
But a week-long shutdown at Stellantis’ Jeep plant in Toledo could cut revenue by more than US$380 million, based on data from the company’s financial reports.
“If the negotiations don’t go in a direction that Fain thinks is positive, we can fully expect a larger strike coming in a week or two,” said Sam Fiorani, a production forecaster at Auto Forecast Solutions.
He estimated the limited action would stop production of about 24,000 vehicles a week. And while it targets some key brands, like the Bronco, buyers would be willing to wait, for now.
Companies fear cost hikes
The union has said it wants a 40% raise. The companies have offered up to 20%, but without key benefits demanded by the union. None of the Detroit Three has proposed eliminating tiered wage systems that require new hires to stay on the job for eight years to earn the same as veteran workers — a central UAW demand.
Ford said in a statement the UAW’s latest proposals would double its US labour costs, and make it uncompetitive against Tesla and other non-union rivals. A walkout could mean that UAW profit-sharing checks for this year will be “decimated”, the company said. GM and Stellantis declined to comment ahead of the midnight strike deadline.
Ahead of Fain’s address, GM’s top manufacturing executive Gerald Johnson said in a video that the UAW’s wage and benefits proposals would cost the automaker US$100 billion, “more than twice the value of all of General Motors and absolutely impossible to absorb”. He did not detail how the union proposals would result in that cost, or over what time frame.
Ford CEO Jim Farley said before the address that the future of the industry was at stake. “Let’s do everything we can to avert a disastrous outcome,” he said.
Fain has rejected the automakers’ assertions that union demands would cost too much, saying the companies have spent billions on share buybacks and executive salaries.
Suppliers and other industries that depend on automakers and their workers could see demand and cash dry up if the UAW shut down Detroit Three’s US manufacturing operations. The standoff has become a political issue with President Joe Biden, facing re-election next year, prominently calling for a deal.
Biden is pouring billions in federal subsidies into expanding sales of electric vehicles. But the shift to EVs could threaten UAW combustion powertrain jobs. The union has not endorsed Biden’s re-election.
“I think the Biden administration just continues to watch this slow-moving car crash as its EV strategy collides head on with unions,” Wedbush analyst Dan Ives said.
UAW President Fain has taken an unorthodox approach to the negotiations, bargaining with all three Detroit automakers simultaneously. Past UAW leaders chose one company to set a contract pattern for the other two. Fain has played the companies against each other, seeking to drive up their offers.
While a deal with one or more of the automakers could come at any time, the disruption is an opportunity for non-union automakers in the United States, including Tesla, Toyota, Honda and Mercedes.
Those non-union factories, plus imported vehicles, account for more than half of the vehicles sold in the US market. But the Detroit automakers build some of the US market’s best-selling vehicles, such as the Ford F-150 and Chevrolet Silverado pickup trucks and Jeep SUVs.
A full strike would hit earnings by about $400 million to $500 million at each affected automaker per week of lost production, Deutsche Bank has estimated. Some of those losses could be recouped by boosting production schedules after a strike, but that possibility fades as a strike extends to weeks or months.