Looming Auto Workers Strike Hints at Stormy Future for Auto Industry

Everyone wants fair pay, as we see from strikes in Hollywood and the impending autoworkers strike in Detroit. But people have vastly different ideas of fair pay in this age.

It seems like what's requested is pretty simple. After all, the auto industry rakes in billions of dollars – shouldn't that be enough to pay their laborers what they're asking for?

When breaking down what the auto workers are demanding against the needs of a rapidly changing industry, it's readily apparent the answer isn't simple.

Who Wants What?

The United Auto Workers (UAW), which represents approximately 150,000 workers, and Detroit's three major automakers, Ford, General Motors, and Stellantis (the one formerly known as Fiat Chrysler), have been unable to agree on a new labor agreement.

The current agreement expires at midnight on September 14th.

Looking at the demands from each side – they could not be more opposed to each other.

The UAW wants a 35 percent raise for its workers to keep up with the rising cost of living expenses. They also demand better benefits packages for current workers, new hires to receive full pay, and a shortened work week.

Conversely, the Big Three auto companies want stricter attendance policies for union workers, the ability to move laborers around to meet changing production needs, and reduced health care coverage.

Current labor costs for The Detroit Three add up to an average of $65 an hour to cover pay, benefits, pensions, and premiums. For perspective, that's $10 more per hour than overseas automakers pay – and around $20 more than Tesla pays per hour.

Ford, GM, and Stellantis would see their labor costs skyrocket to an average of $145 an hour if they meet UAW's demands. For 150,000 union workers, that's well over $21 million an hour in labor costs.

The cost of dealing with the UAW is not all the Detroit Three needs to consider. A separate labor agreement with a Canadian union representing approximately 18,000 workers expires on the 18th.

Given the potentially astronomical rise in labor costs – these major auto companies do not have faith that they will be able to compete against non-unionized automakers in the marketplace.

The cost of labor amounts to only about 10 percent of total costs for automakers, so those fears are not unfounded.

What's Complicating These Negotiations?

Complicating matters is political pressure. The Biden administration has pressed the auto industry to invest almost exclusively in an all-electric vehicle (EV) future – but EVs have yet to prove profitable.

Bolstering UAW fears are that electric vehicles and their batteries require less labor to produce, meaning auto plants will need fewer workers, and those workers are likely to be paid less.

The principal players at the negotiating table are also refusing to budge.

Rallying the troops for the UAW is their President, Shawn Fain – a fiery man who may take bold, unprecedented action to see his union's demands met – having workers at all three companies strike at once.

Playing hardball for The Detroit Three is Stellantis CEO Carlos Tavares, a staunch businessman if there ever was one, who does appear to be giving an inch in negotiations.

How Will This Affect Everyone Else?

Cars will become more expensive.

In the short term, there are fears of price hikes and gouging if a strike occurs. In the long term, the UAW receiving expensive contracts could prohibit car companies from producing more affordable vehicles.

However, there are other ways a strike will impact consumers.

While the output of UAW laborers accounts for under 50 percent of the vehicles made in the U.S. – automakers throughout the globe use the same suppliers – and a strike will hinder those suppliers.

The Anderson Economic Group has estimated that ten days of striking will cause losses of at least $5 billion. A car-producing state like Michigan could easily fall into a recession if this comes to pass.

Making matters worse is how this could affect corporate decision-making, prompting production to be moved to less expensive countries, resulting in job losses for car-making communities in North America. The ripple effect of such revenue loss will likely affect small and local businesses nationwide. Even local coffee shops could face cutbacks.

Virtually no one will be unscathed.