UAW Strike May Cost Economy Billions

Note: As of 9 AM, GM is up .58 or 1.72% to $34.24, while Ford is up .10 or .7% to $12.72. 

Sometimes I side with the unions, but mostly I don't. In this case, the UAW has asked for too much, in my opinion. Democrats talk about greedy companies all the time, but ignore greedy workers. 

Full-time assembly plant workers at Ford and GM earn $32.32 an hour, while part-timers currently make about $17 an hour. Full-time employees at Stellantis earn $31.77 an hour, and part-time workers earn close to $16 an hour.

The $32 an hour translates to approximately $67,000 annually, based on a 40-hour work week. According to the U.S. BLS, the median wage in 2022 was $54,132. So the plant workers are already making above-average pay, some 25% more.

They want that $32 an hour to go up some 40 percent over four years, or to about $45 an hour. This equates to $94,000 a year, based on a 40-hour work week.

The strike will initially target one plant at each of the Big Three automakers and will not involve all of the union’s nearly 150,000 members walking out at once.

Walkouts have started at a General Motors plant in Missouri, a Stellantis plant in Ohio and a Ford plant in Michigan.

More workers may be called on to join the strike as time goes on, UAW said.

Collectively, just under 13,000 workers are striking at the three plants.

The union is also pushing for making all temporary workers at the automakers permanent, cost-of-living adjustments, increases in pension benefits for current retirees and restoring pensions for new hires, among other benefits. But one of the main sticking points at the table was GM's decision to close four US factories, including a large assembly plant in Lordstown, Ohio. The sides eventually agreed to a deal that saw GM investing billions of dollars in a battery joint venture in Lordstown, which unionized with the UAW in late 2022. In return, GM was allowed to shutter three other factories.

Corporate leaders aren't happy with the union's demands, which at the high end call for a 40% wage hike. "There's no way we can be sustainable as a company" if those demands are met, Ford CEO Jim Farley told CNBC yesterday. Deutsche Bank analysts estimate the full demands would cut $1-2 billion from annual profit for the automakers. GM had a profit of less than $10 billion last year on $157 billion in revenue. Ford lost $2 billion.
Experts say the strike could cost the U.S. economy billions of dollars.

$5.4 billion. That’s how much Moody’s Analytics estimates each of the Big Three automakers could lose from halted production over the duration of a six-week strike, roughly the same amount it said General Motors lost during a 40-day strike in 2019. All three of the companies could offset those losses with supplies of “ample cash and borrowing capacity,” Moody’s said, though it warned a prolonged strike could hamper the automakers’ pushes toward producing electric vehicles, which all three have embraced in recent years as the EV market skyrockets.

That is according to a new analysis from the Anderson Economic Group, a Michigan-based think tank that specializes in the economic impact of labor strikes. The report estimates that economic losses from a 10-day work stoppage could cost about $5.6 billion.

If you want to know just how bright the market thinks these companies' prospects are, well, they already look pretty dim. Ford shares peaked in 1998 around $35 and currently trade at $12-and-change. GM went bankrupt during the financial crisis and has been trading in the mid-$30s for the past decade, aside from a Covid spike. Both companies are valued around $50 billion today. Chrysler was fully bought by Fiat (now Stellantis) in 2014 and only its Jeep and Ram brands may even survive.

While there are dozens of different historical reasons for the Detroit automakers' struggles, their current diminution boils down to the fact that the market is shifting to EVs, and it's unclear how big--and profitable--a role they will even play in the global auto industry going forward.

According to Kelly Evans at CNBC, "we are at...one of the biggest inflection points the auto industry has ever had; and the "big three" are looking smaller by the day."

Sources for this story: Business Insider, FoxNews, Forbes, CNBC, CNN