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Shareholders and top executives at General Motors, Ford, and Stellantis have outperformed workers in the last five years, as the US auto industry experienced a remarkable recovery after the 2008 financial crash, according to an analysis by the Financial Times.
While the United Auto Workers union strike enters its second week, the industry is thriving, giving the union more leverage in negotiations. Filings show that shareholders have received nearly $85 billion from the Detroit Three through dividends and buybacks since the crisis.
The UAW has expanded strikes, targeting GM and Stellantis more aggressively, while scaling back pressure on Ford after an increase in the pay offer.
All three car manufacturers are currently engaged in heated pay talks with the union, arguing that they need resources to invest in electric vehicles and remain competitive in a challenging global market.
However, the UAW raises concerns about stagnant wages and the potential threat to organized labor among US car manufacturers due to the shift towards EVs, which require fewer workers and involve non-unionized plants.
Philippe Houchois, a global auto analyst at Jefferies, describes the record profits of carmakers as leaving them “cornered” during negotiations. He adds that steep increases in executive pay, particularly when most workers are affected by soaring inflation, make demands for higher wages an easy narrative for the UAW to sell.
In real terms, the average worker’s wages at all three carmakers have decreased by approximately 20% in the five years leading up to 2022, primarily driven by a decline at Ford.
However, carmakers warn that the UAW’s original demand for a 40% increase, now reduced to 36%, poses a risk to their financial health.
Ford CEO Jim Farley stated that the company would have gone bankrupt if it had paid the wages demanded by the UAW.
Carmakers have not disclosed the exact cost of the UAW’s demand. Farley estimated that Ford’s $30 billion profit over the past four years would have turned into a $15 billion loss, indicating a potential $45 billion gap. Sources close to GM suggest an even higher cost impact of $80 billion to $100 billion.
PAYOUTS
Out of the $84.9 billion returned to investors since the crash, $52.7 billion has come through dividends and $32.6 billion from share buybacks.
This includes a one-off dividend of $3.5 billion from Fiat Chrysler before the merger with PSA to form Stellantis in 2020 to equalize the value of the merging companies.
A significant portion of the total amount is attributed to GM’s $26.3 billion share buyback program, which primarily took place from 2012 to 2017 following its recovery from bankruptcy.
These payments have raised questions, especially as carmakers need to invest billions in electric vehicles to compete with Tesla.
“People will say: ‘You told us EVs are going to cost, but wasted so much money on buybacks,'” notes Houchois.
PROFITS
Collectively, the three carmakers have earned $70.3 billion in profits during
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