In mid-September, a potential strike at Ford, GM, and Stellantis, collectively known as the big three automakers, could extend the “summer of strikes” into autumn. The United Auto Workers (UAW) union, which has endorsed President Biden, plans to strike on September 14 if an agreement is not reached. The UAW’s support for Biden could further cement the administration’s pro-labor stance. The union is focused on securing the best possible contract for its members in 2023 and is calling for the federal government to actively support economic justice in the green transition. They criticize the Biden Administration for providing billions to the automakers without any strings attached, cautioning against the use of trickle-down economics. The White House has been involved in negotiations, as it has been in other labor disputes such as with railroad workers and the Teamsters.
The UAW is fighting for improved pay, working conditions, and a return to defined-benefit pension programs instead of market-pegged retirement plans. Defined-benefit pension programs could significantly impact the auto industry’s capital structure, requiring companies to prioritize cash for employee benefits over reinvestment or stock returns. This may also affect shareholder returns and executive compensation.
The UAW is mindful of the 2008 financial crisis, which resulted in significant changes to the automotive industry’s labor and compensation structure. The union is critical of the government bailout, as autoworkers experienced wage and benefit cuts while companies received taxpayer funding. The UAW is seeking to recover from these setbacks.
The pandemic recovery has led to increased auto industry profits, with Ford raising its profitability guidance for the year. However, a UAW strike could disrupt production schedules and vehicle deliveries to dealerships, prompting some dealers to stock up on inventory to mitigate the potential impact.
The Biden administration considers the auto industry crucial in the “green transition” and has provided tax credits for the production of electric vehicles. The Treasury Department recently emphasized the importance of unions in supporting the middle class and the economy.
In summary, the potential UAW strike at the big three automakers represents a continuation of the summer’s labor unrest. The UAW is advocating for better pay, working conditions, and a return to defined-benefit pensions. The strike could impact production and dealership inventories. The Biden administration’s support for unions and the green transition plays a significant role in these negotiations.
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