United Auto Workers members are currently on strike outside General Motors’ Detroit-Hamtramck Assembly plant in Detroit. This comes as Warren Buffett’s Berkshire Hathaway announced a significant reduction in its stake in General Motors during the second quarter. The decision may be related to the challenging contract negotiations between the United Auto Workers union and GM, Ford Motor, and Stellantis. These negotiations, which impact around 150,000 autoworkers, could result in billions of dollars in additional labor costs and potential work stoppages.
The UAW leadership has emphasized the importance of these talks and is prepared to take strong measures to secure their demands. However, these aggressive efforts are primarily beneficial for the UAW itself rather than the companies or their shareholders. The UAW’s contract proposals, which include a wage increase of 46%, restoration of traditional pensions, cost-of-living increases, reduced workweek hours, and increased retiree benefits, could add over $80 billion in labor costs for each automaker over the contract period.
If these demands are met without any changes to other benefits, the hourly labor cost for automakers would more than double. This represents a significant increase compared to the previous four-year agreements. The potential work stoppage by 150,000 UAW workers at GM, Ford, and Stellantis could result in an economic loss of over $5 billion after 10 days. Strikes can take various forms, including a national strike or targeted work stoppages, and each automaker could suffer earnings losses in the range of $400 million to $500 million per week of production.
The UAW has an strike fund amounting to more than $825 million, which is used to provide strike pay to eligible members. Strike pay is $500 per week and is available after the eighth day of a work stoppage. The UAW is also scheduled to hold a strike authorization vote next week. If a strike were to occur against all three automakers, production losses could quickly mount up, potentially leading to the loss of approximately 1.5 million units.
Experts suggest that a strike now could have a more significant impact on the operations and bottom lines of the automakers compared to four years ago. This is due to the ongoing recovery of the U.S. auto industry from supply chain disruptions caused by the COVID-19 pandemic, as well as lower vehicle inventory levels. These factors make it crucial for the negotiators to reach a satisfactory agreement to avoid substantial financial losses for all parties involved.
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