The United Automobile Workers’ Strike Could Present Challenges for Tesla
Tesla, the electric vehicle manufacturer that has disrupted the automotive industry and stolen customers from major players like Ford, General Motors, and Stellantis, may benefit from the ongoing United Automobile Workers (U.A.W.) strike against Michigan automakers. With no activist union to contend with, Tesla can take advantage of the work stoppages to further its lead in battery technology and software. While established automakers struggle with labor costs and electric vehicle development, Tesla can potentially lower car prices and maintain higher profitability than its competitors. However, this strike also poses risks for Tesla and its CEO, Elon Musk, due to the U.A.W.’s determination to secure better treatment for its members and the current resurgence of union activism across the country.
According to Mike Miller, Director of U.A.W.’s Region 6, which includes California, Nevada, and Tesla’s manufacturing locations, there is a group of Tesla workers actively discussing the formation of a union and advocating for better conditions through collective bargaining. The U.A.W. has previously attempted to organize Tesla’s factory workers but failed. Despite Miller’s refusal to provide further details or disclose the identities of these workers, he confirms that union organizing efforts are separate from the campaign at Tesla’s Buffalo plant.
While the U.A.W. demands substantial wage increases and benefits from Detroit automakers, they are also aware of the impact any such deal would have on nonunion workers at Tesla. Rahul Kapoor, a management professor at the Wharton School, suggests that this situation could potentially push non-unionized autoworkers to join a union if they see a significant increase in wages.
Shawn Fain, President of the U.A.W., warned Tesla’s CEO on CBS News’s “Face the Nation,” emphasizing that most autoworkers struggle financially while executives like Elon Musk profit greatly.
In 2016, an organizing drive at Tesla’s assembly plant in California failed to gain enough momentum for a vote. At that time, Tesla was struggling financially, but today, the company dominates the U.S. electric vehicle market and boasts a higher value on the stock market than the three major American automakers combined. This success could position Tesla to provide better rewards for its workers than its competitors.
However, labor organizing is not an easy task. Activists need at least 30% of workers to sign union cards and initiate a vote overseen by the National Labor Relations Board. Companies often employ lawyers and consultants to discourage union participation. Even if workers vote in favor of a union, negotiations for pay increases and benefits can take years. For instance, Amazon warehouse employees in Staten Island voted to unionize in April 2022, but negotiations are yet to begin due to legal challenges from the company.
Tesla may become an attractive target for unions due to its significant profitability. In the second quarter, the company reported a $2.7 billion profit on $25 billion in sales, resulting in an 11% profit margin. This margin surpasses that of Ford and General Motors, even during their profitable periods. The recent merger of Fiat Chrysler and Peugeot created Stellantis, which reported an 11% profit margin in the first half of the year but lost U.S. market share.
With its stronger financial position, Tesla has been able to lower car prices, making it challenging for established automakers to gain traction in the electric vehicle market. For example, the lowest-priced Model 3 sedan is around $33,000 after federal tax credits, making it cheaper than equivalent gasoline vehicles.
The current climate for organized labor is more favorable than in past years, with President Biden expressing support for unions. Recent labor strikes among Hollywood writers and actors have garnered significant attention. In August, United Parcel Service employees secured substantial raises through a contract negotiated by the International Brotherhood of Teamsters.
Tesla has not responded to requests for comment, but Elon Musk acknowledged the union threat last week, claiming that his workers are better off than those employed by Ford and GM, although he acknowledged higher performance expectations. The traditional automakers dispute Musk’s claims, stating that their workers earn substantially higher salaries with an average annual income of $112,000, including benefits, compared to approximately $90,000 at Tesla.
While Ford’s figures do not include stock options, Tesla provides them to its employees. However, the distribution and reliability of these options are uncertain, and their value fluctuates with Tesla’s stock price. The stock, which peaked at over $400 in late 2021, dropped to just over $100 last year but has rebounded to $270 this year. Such uncertainty may impact workers who rely on stable income for mortgages and childcare expenses.
Despite Tesla’s reputation as a demanding workplace with long hours and tight deadlines, labor organizing efforts may face strong opposition from Elon Musk. The National Labor Relations Board previously found that Musk unlawfully threatened employees in 2018 by suggesting they would lose their stock options if they voted to unionize. Further, the labor board determined that Tesla illegally fired one of the lead organizers. Although an appeals court upheld this decision, Tesla is appealing, claiming that Musk and the company have done nothing wrong.
Undoubtedly, the U.A.W. strike poses significant risks for the Detroit automakers, who have been slow to address Tesla’s impact and may lose valuable time to catch up. Gary Black, Managing Partner of the Future Fund, an investment firm that owns Tesla stock, believes that the real winner in this strike may be the auto company that has been winning all along. However, the strike could serve as a turning point and potentially impact Tesla’s future.+
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