Auto Industry Shaken as UAW Strike Ends, Unveils Hefty Pay Raises
October 31, 2023
Resolution to the Automotive Industry Strike
After a long and difficult six weeks, it seems like the strike that was endangering the American auto industry is ending. General Motors (GM), one of Detroit’s Big Three automakers, is the latest to reach a tentative agreement with United Auto Workers union.
The Union planned to continue the strike at GM’s engine plant in Tennessee. This plant is their biggest facility in North America. Around 50,000 workers went on strike from September 15, resulting in huge financial losses for GM, Ford (F), Stellantis (STLA), and their suppliers.
The Perspective of the Union
UAW President Shawn Fain proclaimed: “We are confident that our strike squeezed every penny out of General Motors. They underestimated us and undervalued you. We have demonstrated to companies across the country, indeed around the globe, that working-class battle is far from over. It’s only just begun.”
Union members will get sizeable double-digit wage increases, possibly costing GM about $7B over the next four-and-a-half years. Higher labor costs will affect Ford’s profits. The company recently announced that its agreement with UAW will increase costs by $850 – $900 per vehicle.
Other agreements include limiting the use of temporary workers who are cheaper. The agreements also involve having a say in decisions about plant operations. These agreements specifically relate to the shift to electric vehicles.
The Investors’ Viewpoint on GM
JR Research from Investing Group asserted, “GM has embarked upon a moderate-term downturn trend—investors have decisively surrendered their crucial $30 support zone.” They added that “In spite of management’s hopefulness, there is reason for investors to question whether General Motors’ 2030 business strategy remains viable.”
Potential Repercussions for Automakers and Likely UAW Targets
The newly minted UAW contracts will considerably inflate costs for auto manufacturers. Companies may try to pass on added costs to customers, improve production efficiency, or focus on the most profitable models.
Electric vehicle market frontrunner Tesla (TSLA) and non-union international brands such as Toyota (TM) could potentially find themselves in UAW’s crosshairs. This might encourage employees from other sectors to negotiate improved pay and working conditions.
Recent strike actions by CVS (CVS) and Walgreens (WBA) staff, termed “Pharmageddon” illustrate this trend. According to the Anderson Economic Group, this is not solely about car production. Instead, it demonstrates the ability of a unionized workforce to request and receive higher wages.