Union begins strike at three carmakers in Detroit

Detroit — The United Auto Workers union launched simultaneous strikes at three factories owned by General Motors, Ford and Chrysler parent Stellantis early on Friday, kicking off the most ambitious US industrial labour action in decades.

The walkouts at the “Detroit Three” 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 more costly companywide strikes, but said all options are open if new contracts are not agreed.

Fain laid out plans for the unprecedented, simultaneous walkouts in a Facebook Live address less than two hours before the expiration of the old contract.

The walkouts capped weeks of clashes between Fain and Detroit Three executives over union demands for a bigger share of profits generated by combustion trucks, and stronger job security as automakers shift to electric vehicles.

“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 $825m, 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.

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 weeklong shutdown at Stellantis’ Jeep plant in Toledo could cut revenue by more than $380m, based on data from the company’s financial reports.

“This is more of a symbolic strike than an actual damaging one,” said Sam Fiorani, a production forecaster at Auto Forecast Solutions, who added that he had expected more in the first wave of the strike.

“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,” he said.

Fiorani estimated the limited action would stop production of about 24,000 vehicles a week. And while it targets some key brands, such as the Bronco, buyers would be willing to wait, for now.

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 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 would be “decimated,” the company said.

Stellantis responded to the union walkout by saying it had immediately put the company in “contingency mode” and would take all of the appropriate structural decisions to protect the company and its North American operations, without elaborating.

Fain said earlier this week that Stellantis had proposed shutting as many as 18 US facilities.

GM said it was disappointed by the walkout, and would continue to “bargain in good faith.”

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 $100bn, “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.

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 power-train 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.

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 US, 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.

A full strike would hit earnings by about $400m-$500m 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.

Reuters