With the United Auto Workers (UAW) strike against the Detroit Three automakers in its fifth week, there is a growing panic within the industry. Ford executive chairman Bill Ford says there is an urgent need for a settlement, that the future of the US-based auto industry is at stake.
Speaking (October 16) at Ford’s Rouge plant near Detroit, Ford said, “Toyota, Honda, Tesla and others are loving this strike because they know the longer it goes on the better it is for them. They will win and all of us will lose.”
The economic losses from the strike have reached almost $8 billion, and US companies are curtailing production and laying off non-striking workers.
The Detroit Three already operate at a 25% cost disadvantage to Tesla and non-unionized foreign-owned companies producing cars in the US. That cost gap is likely to grow as the Detroit Three have offered 20% plus wage increases over a four-year period.
Tesla, the non-union American startup, is producing ten times more electric vehicles than GM, Ford, and Chrysler combined and has a 60% US market share. On average, a line worker at the Detroit Three costs $66 per hour compared to $48 at Tesla.
Sandy Munro, the brash automotive engineer and consultant who grew up as a working-class kid in Windsor, Ontario, makes an impassioned plea for a settlement. Speaking (October 18) on his popular YouTube channel, Munro said the American auto industry is like a house of cards, “pull one card out and the whole thing collapses.” He believes UAW president Shawn Fain is out of touch, unaware that excessive union demands will have an enduring negative impact on an already shrinking industry.
Munro says striking workers need to be cognizant of how much the Detroit Three and the union have shrunk in recent decades. “There were 1.5 million union workers in 1979,” he emphasized, “today there are only 150,000 in the auto industry.”
Thus far, UAW president Fain is unfazed. In response to Bill Ford’s warning, Fain says the union is fighting corporate greed. “If Ford wants to be the all-American auto company,” he said, “they can pay all-American wages and benefits. Workers at Tesla, Toyota, Honda, and others are not the enemy – they’re the UAW members of the future.”
In fact, the UAW has repeatedly failed to organize workers at Tesla and the German, Korean, Japanese, and Chinese-owned companies that build cars in the US. Tesla, with large plants in Fremont, California, Nevada, and Austin, Texas, prides itself on being flexible without the rigid job classifications and procedures built into a UAW contract. UAW contracts with the Detroit Three typically are 700 to 1,800 pages long.
The companies’ Achilles heel in the negotiations is the exorbitant salaries paid to their CEOs. Mary Barra’s compensation was $24 million at General Motors in 2022. At Ford CEO Jim Farley’s compensation was $21 million, and Stellantis chairman Carlos Tavares $25 million. This hard-to-justify compensation has been a gift to the union, whose members’ wages have not kept pace with inflation.
The disparity between workers’ and CEO pay was at the root of the union’s initial demand for a 40% wage hike. Unlike Tesla, where workers receive stock as part of their compensation, the Detroit Three have profit sharing for 2022 that translated into bonuses of $12,000 at GM, $9,000 at Ford, and $14,000 at Stellantis.
For each day that the strike continues, the losses to the workers, companies, and the country increase.
Michigan native Barry D. Wood has been writing about the auto industry since the 1979 Chrysler bailout, most recently for marketwatch.com.
Learn more about Barry HERE.