The United Auto Workers’ contract demands of the Detroit Three automakers could surge per-person labor costs to more than $100 per hour in wages and benefits, according to three sources familiar with the situation, potentially outstripping North American profits over the life of a new contract.
All-in labor costs for General Motors Co., Ford Motor Co. and Jeep maker Stellantis NV now hover around $65 per hour, according to industry estimates, compared to $55 an hour for foreign-owned automakers operating in the United States and $45 an hour for electric-vehicle rival Tesla Inc.
The “members’ demands” consisting of dozens of proposals call for a 32-workweek with 40 hours of pay, pensions extended to all workers and the revival of health care coverage for retirees. Also included: a 46% increase in wages over the life of the contract, which would expire on May 1, 2028 — International Workers’ Day, according to two of the sources.
“That number seems astronomical for manufacturing jobs that are already relatively well paid,” said Sam Fiorani, vice president of global forecasting for AutoForecast Solutions LLC. “In order to get anywhere near those (wage increase) numbers, other things will have to come off the table, including profit sharing, other benefits, any number of things in order to just get this one thing. If this is not done, you’re absolutely going to see employment reductions from the Detroit Three.”
The total calculation would be nearly double the estimates of what foreign automakers operating in the United States pay their workers in wages and benefits. The gap would be even wider for employees at electric vehicle maker Tesla Inc. The result could challenge the automakers’ competitiveness and valuation, risk UAW jobs and potentially send work to other countries, experts say.
In a Facebook livestream this week, UAW President Shawn Fain called the demands “audacious and ambitious” because the working class has been left behind by the profits achieved by the automakers for more than a decade. This is the workers’ chance, he said, to gain back what was lost amid the Great Recession and automotive bankruptcies.
“Overall, the starting pay for a Big Three worker today is almost $21,000 less than it was in 2007 when adjusted for inflation,” Fain told The Detroit News in a statement Friday, reprising his criticism of the automakers’ profitability and CEO pay. “UAW members made enormous sacrifices to save the automakers during the Great Recession, but we’ve never been made whole. These massively profitable companies can afford our demands. Our message is clear: record profits mean a record contract.”
The demands go beyond what the UAW has achieved before. The union’s written proposal calls for eight-hour work days Monday through Friday, and each worker would have “one fixed day per workweek (Monday-Friday) for a Personal Day Off” and also would “be compensated for eight hours of pay on their Personal Day Off,” according to a copy of the demands reviewed by The News. Including vacation, holidays, summer shutdowns and other paid time off, the request would represent around 100 paid days off a year.
The demands also include the elimination of grow-in periods to the top wage, rolling over all current temporary workers to full-time positions, a 20% wage increase upon ratification and a 5% raise every year of the agreement for four years.
Jeremy Ladd, 47, a 28-year GM hourly worker at the Fort Wayne Assembly Plant employee in Indiana, recalls the years when GM went through the global financial meltdown and bankruptcy, and he and his colleagues didn’t receive wage increases.
Seeing the profits GM is bringing in now, he said: “Can they afford it? Absolutely. When they say that it’s not feasible, they’re not being forthcoming. They can absolutely do it. What they’re doing is trying to protect their bottom line and beyond without compensating us what we actually should have been entitled to since the 2007 agreement.”
GM, in a statement this week, argued the proposal would “threaten” unionized auto manufacturing in the United States and reminded that it and its two crosstown rivals compete against nonunion automakers from inside and outside the country.
“Regardless of what other opinions might be, business profits enable future investments, which support long-term job security and opportunities for all,” said Gerald Johnson, GM’s executive vice president, global manufacturing and sustainability, in a video message posted Friday on the company’s negotiations website. “And, oh, by the way, we all participate in profit sharing when our business is successful.”
In a statement, Stellantis spokeswoman Jodi Tinson said the automaker intends to reward fairly represented employees for their contribution to the union’s success and negotiate a contract that balances competitiveness and a secure future for workers.
“However,” Tinson said, “it will be critical to find common ground that doesn’t jeopardize our ability to continue investing in the affordable products, services and technology that our customers want and that would allow us to continue providing good jobs here at home.”
In 2022, GM, Stellantis and Ford reported adjusted operating income in North America, respectively, of $13 billion, $15.2 billion and $9.2 billion. Stellantis’ profit-sharing checks were the highest at $14,760, followed by GM at $12,750 and Ford’s at $9,176. Temporary and supplemental workers, however, are not eligible for the bonuses. The UAW wants that benefit extended to all represented employees.
Uncompetitive wages could force the companies to take jobs outside the United States where labor costs are less expensive, Fiorani said: “Investment right now in the industry is focused on North America for (EV) incentive reasons. I can’t imagine it going offshore, but it could go to Canada or Mexico.”
The United States offers consumers a tax credit of up to $7,500 on plug-in vehicle purchases that are built and whose batteries are made in North America, because battery materials make EVs more expensive to produce. The subsidy, though, is available without geographic limitations when the vehicle is leased. Automakers also can receive manufacturing subsidies for making batteries in the United States.
Unifor, the union representing Canadian autoworkers, kicks off its contract talks with the Detroit Three this week. The current UAW contracts expire Sept. 14. Unifor’s expire Sept. 18.
David Whiston, a senior analyst for Morningstar Inc., expects that the automakers would be able to afford the requested wage increases: “It’s not a small number, but it’s not an insurmountable number either.”
Other demands, however, would lead to “absolutely massive” expenses, he said, “like reopening the pensions and reopening retiree health care, that will cost them billions and probably even tens of billions of dollars at even one company. It’s such a massive amount of money … I can’t see them agreeing to that.”
Fain “basically wants to bring things back to how they were in the 20th century, and that’s a very noble thing to do,” he continued. “And I understand why he wants to do that, but I’m just not sure it’s very realistic anymore. At the start of this century, GM had 29% of the U.S. market. They have a little over 17% now. It’s a very different world. The competition is so much more numerous and so much more fierce.”
Wall Street has started responding to the breadth of separation in expectations between the UAW and the automakers. CFRA Research downgraded GM shares to “strong sell” from “hold,” cutting its 12-month target 30% to $28. GM’s shares closed down less than 1% on Friday at $36.57. Ford closed down 1.6% at $12.89, and Stellantis’ shares were down 0.7% at $19.43 on the New York Stock Exchange.
“Newly elected UAW President Shawn Fain appears to be aggressive and eager to make his mark with the Detroit Three,” CFRA analyst Garrett Nelson said in a statement. “GM has a much greater earnings risk in the event of a strike than either Ford or Stellantis, noting the 40-day strike (in 2019), which negatively impacts GM’s earnings by $1.89/share in 2019. We are also cautious on the near-term earnings drag from GM’s EV transition as well as ultimate demand for its new models at a time of growing EV market oversaturation.”
The UAW’s demands would put the Detroit Three at a disadvantage compared to nonunion competitors, especially amid the EV transition, said Dan Ives, analyst at Wedbush Securities Inc.: “This UAW issue is happening at exactly the worst time.
“There’s major focus on costs from Wall Street. The UAW is being hardball. They’re not pulling any punches. It’s obviously a negotiation,” Ives continued, “so there is going to be some eye-popping number proposed. This is something that is a nonstarter to begin with, if they don’t want to make money on electric vehicles until 2030.”
Yet the demands by the UAW are in similar territory to wins being achieved by unions in other sectors. United Airlines Inc. last month agreed to give its pilots wage increases of up to 40% over four years, and the International Brotherhood of Teamsters recently obtained a tentative agreement for 48% in wage increases for part-time employees at United Parcel Service Inc.
Within the UAW, workers at John Deere in 2021, following a nearly five-week strike, obtained a 20% increase in wages over six years and reclaimed a cost-of-living adjustment. The UAW also is seeking the return of COLA for Detroit Three production workers.
“The UAW has always tried to be the benchmark,” said Art Wheaton, an automotive industry specialist at Cornell University’s Industrial and Labor Relations School. He noted the expansion of manufacturing in the United States by automakers like Hyundai Motor Co., Kia Corp. and Nissan Motor Co. Ltd., though the UAW failed to organize them.
“They’re hoping with these negotiations that by asking a lot, it should spur more union organizing, whether it’s just in the OEMs or also in the supply chain,” Wheaton continued. “The best way to have a higher market share for unions is having very big wins.”
In sharing some of its key demands publicly, however, the UAW also risks setting high expectations. Traditionally, officials at the table have kept demands close to the vest. But like the Teamsters, the UAW has provided more details to members on what it is seeking from employers than it has in the past.
“The question is whether that creates expectations that are harder to meet when you have to compromise on the final contract,” said Brian Rothenberg, a strategist with Triumph Communications and a former UAW spokesperson, “or whether it creates disagreement among some of the rank-and-file, who may agree with parts of it, or don’t agree with parts of it. Ultimately, it’s up to the rank-and-file members.”
Matt Horner, a GM hourly worker for 24 years, said in a message to The News that “stagnant wages are the root of many present-day problems. Wages need to be aligned.” But Horner, 46, who works at GM’s light-duty truck plant in Fort Wayne, Indiana, added that the “46% (wage increase) is a reach. … However, this is how to negotiate. Settle somewhere in the middle.”
Scott Houldieson, a Ford electrician and co-chair of the Unite All Workers for Democracy Caucus that endorsed Fain for president, said the communication for leaders is a “mind-blowing sea change” that gives workers confidence their union is fighting for them.
“We aim for extraterrestrial Mars,” said Houldieson, who isn’t involved in the negotiations, “and if we fall short, at least we made it to the moon.”