The United Auto Workers’ strike against the industry’s Big Three is not your everyday confrontation between labor and capital.
“It’s one of the watershed moments in the history of the auto industry and the UAW,” says Julian Dalzell, a Senior Lecturer in the Management department at the Darla Moore School of Business. And that makes it a watershed moment for traditional heavy manufacturing in America.
To put it in Wagnerian terms, it could be the Götterdämmerung, or Twilight of the Gods, moment for the industry. Both sides are facing existential threats.
The Big Three – General Motors, Ford and Stellantis (or as most Americans think of it, Chrysler) – are up against global forces ranging from technological advance to concerns about global warming – and their ability to compete with competitors on those fronts is severely limited, particularly with the burdens of traditional labor expectations.
The organized workers have been through more than a generation of declining membership and loss of the kinds of benefits that used to attract workers to unions – not just upper-middle-class pay, but job security and generous benefits for life. While workers in service industries – baristas and Amazon warehouse workers – have been striding boldly forward in a time of low unemployment, the folks who build cars have seen their glory days fade away.
How will it end? “I’m not foolish enough to predict what’s going to happen,” says Dalzell. He points to some hard numbers that stand in the way of either side fully getting what it wants.
For instance, there seems to be general agreement that the industry’s future lies in electric vehicles. The Big Three, and their foreign competitors, have been investing heavily in turning in that direction, and will do so far more extensively going forward.
But what name comes to mind in this country when that subject comes up? Tesla. And Dalzell notes that Elon Musk’s company has a huge advantage that’s pretty easy to understand: “A, his factories are nonunion, and B, they set the standard for cost.”
Tesla’s cost to build electric cars is about $45 an hour in wages and benefits, says Dalzell, adding that for the Big Three, it’s more like $66. “UAW’s demands would take that to $136. That’s an awful lot.”
Part of the problem for the traditional companies is that they’re funding benefits for armies of people who no longer make cars, and for senior current workers who retire in the future. A significant percentage of their labor cost is in pensions. It has been recently estimated that each retiree costs Ford $126,018 per year.
But the UAW president, Shawn Fain, has chosen his moment well for seeking a return to defined benefits, in political terms. “It is the optics of it,” says Dalzell.
Taxpayers of the United States bailed out both GM and Chrysler as the Great Recession came crashing down. Since that ended in 2014, the industry has enjoyed profits reminiscent of the old days, back before Toyota was a force. And with third-generation union man Fain leading one side, the first figure most people see on the other is Mary Barra, chair and CEO of General Motors – who was paid close to $29 million in 2022.
Of course, you split her compensation package among the union’s 400,000 active members and 580,000 retirees, and they get less than $30 apiece, which is a drop in the bucket compared to the cost of the 32-hour work week the UAW wants.
But the optics aren’t great for the companies. And according to Dalzell, Fain is a “very talented strategist.” For instance, what’s the hardest thing about waging a long-term strike? It’s the ability of your membership to go very long without pay. Fain has met that challenge by starting with targeted walkouts, which kept most workers on the job, but prevented the companies from completing vehicles by breaking up the supply chain.
“Optics” count because “This is being conducted at least partially through the media” rather than on the picket lines, says Dalzell, which makes it unsurprising that by the end of last week, the union had already “made progress with Ford.”
He suspects that “At some point, one of these three companies will decide to settle.” But Dalzell, a veteran of labor negotiations as a longtime executive of Shell USA, is not laying odds on the outcome.
“Many things could happen.”