Upcoming Labor Contract Negotiations between the UAW Union and the Big Three Create Auto Industry Uncertainty

22 May 2023 Dashboard Insights Blog
Author(s): Mark J. Neuberger

The United Auto Workers (UAW) Union and the Big Three automotive companies — General Motors (GM), Ford, and Stellantis — stand on the brink of a pivotal moment as they prepare to engage in labor contract negotiations. The current collective bargaining agreement expires on September 14, and a strike could have disastrous consequences for not only the Big Three but supplies and vendors down the supply chain. In 2019, UAW workers at General Motors went on strike for 40 days before a new contract was ratified, costing the automaker billions of dollars in lost revenue. Historically, the UAW focuses its bargaining on one of the Big Three companies and then uses that deal to create a pattern for the other two automakers.

These negotiations come at a time of significant challenges and opportunities facing the automotive industry. Both labor and management face strategic issues which will significantly raise the stakes in the collective bargaining process.

Challenges Faced by the UAW Union

Job Security: The UAW likely will seek to enhance job security, aiming to protect workers from layoffs and plant closures. However, due to shifting consumer preferences, a transition to electric vehicles (EVs), and global market uncertainties, job preservation becomes increasingly complex. Generally, EVs require fewer people on the assembly line because they have far fewer parts than gasoline-powered vehicles.

Workforce Demands: One of the main challenges faced by the UAW Union is addressing the evolving demands of its members. With advancements in technology and automation, traditional manufacturing jobs are being replaced by more specialized positions requiring new skills. The union will likely negotiate for training programs and re-skilling initiatives to ensure its members can adapt to these changing job requirements.

Wages: In the end, most labor contract negotiations come down to money. While inflationary pressures seem to be easing, the UAW will, of course, be pushing for more.  Last year, the UAW negotiated 10% wage increases in the first year of a six-year agreement with farm equipment maker John Deere. That settlement was reached after a six-week strike.

Another area of concern for the UAW Union is wage disparities among its members. Negotiations will likely seek to address wage gaps between veteran and entry-level employees. The union must advocate for equitable wages that reflect the contributions and skills of its diverse workforce.

Challenges Faced by the Big Three Automotive Companies

Electric Vehicle Transition: As the automotive industry accelerates its transition to electric vehicles, the Big Three companies face the challenge of restructuring their manufacturing operations and retraining their workforce accordingly. Negotiations will likely involve discussions on investment in EV production facilities, battery technology, and support for workers during the transition.

Cost Pressures and Supply Chain Issues: The automotive industry faces significant cost pressures due to various factors, including inflation, raw material price fluctuations, rising commodity costs, and increased competition from international manufacturers. The Big Three companies will aim to negotiate labor contracts that help manage these costs without compromising profitability.

Global Market Dynamics: The Big Three automotive companies operate in a highly competitive global market, necessitating negotiations that consider the ever-changing dynamics of international trade and protectionist measures. Addressing market challenges while ensuring fair trade practices will be a key concern for the companies during labor contract negotiations.

The recent election of a new UAW President, Shawn Fain, injects further uncertainty into the negotiations. Fain was elected after a series of scandals sent several former UAW officials to prison. In statements to the media, Fain has taken an aggressive posture regarding the upcoming negotiations. Fain said workers at the Detroit Three automakers are "fed up with the status quo" and prepared to fight in contract talks this fall.

The upcoming negotiation bears close watching by anyone involved in the industry. Even the threat of a strike could cause economic dislocation, much like we saw with recent labor negotiations in the railroad industry which had to be resolved through federal government intervention. The outcome of bargaining will carry significant implications for the future of every business up and down the supply chain. 

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