Nearly 13,000 auto workers walked off their jobs at key factories and went on picket lines Friday after union leaders failed to agree on a contract with Detroit’s three major automakers.

United Auto Workers leaders are calling for a 32-hour work week for full-time employment, the restoration of traditional pensions, medical benefits for retirees and more. But perhaps most importantly, they are seeking a significant pay increase for their members. Union leaders initially sought a 46% wage increase, but have since reduced this to 36%.

The demands — which even the UAW president has called “daring” — have drawn criticism from automakers. Ford CEO Jim Farley, who received nearly $21 million in total compensation last year, told CNBC on Thursday before the strike that there was no way his company would be “sustainable” if they accepted the UAW’s pay demands , while making it clear that he is still hoping for a “historic deal.”

The gap between automakers and the union remains wide when it comes to salaries: GM and Ford are each offering a 20% raise, while Stellantis, formerly Fiat Chrysler, has offered just 17.5%.

However, according to Harry Wilson, CEO of corporate restructuring advisory firm MAEVA Group, the UAW’s latest mid-30% raise offer – to be phased in over four years – is not far from what will be “fair” after the 2000s Inflation.

“If you just look at the rise in inflation from 2019, when the last agreement came into force, to today – and even assuming that inflation normalizes in the future, which I think is more likely – it is on Ending 30% above today’s levels,” he said CNBC Friday about UAW worker salaries.

Wilson, who served as a senior member of President Obama’s auto task force that handled the bailouts of GM and Chrysler in the wake of the global financial crisis in 2009, argued that a 30% increase merely “allows workers to keep up with inflation.” hold”. In his opinion, automakers should come to the table and offer a larger raise to end the UAW strike, but forego demands that have “bankrupted” their companies in the past, including the 32-hour work week and medical benefits for pensioners. These problems, Wilson said, will weigh heavily on automakers’ long-term profits by reducing worker productivity and threatening “the long-term success and profitability of automakers.”

Can car manufacturers afford this?

When it comes to Farley’s claim that his company can’t afford the UAW’s proposed raise, analysts have pushed back.

According to a recent note from Morgan Stanley auto analyst Adam Jonas, Ford can afford the raises, but it would be a challenge. Jonas explained that a 40% salary increase would mean $2.6 billion in additional labor costs for the company. But given that Ford’s projected 2023 revenue is $168 billion, that would just be a shift from the company’s current expected “UAW labor bill” of 3.8% of sales to a new labor bill of $5 .3% of sales.

Jonas noted that while the increase in labor costs is “significant,” Ford should be able to offset some of its labor costs through higher vehicle prices and cost reductions in other areas such as research and development or capital spending.

“Are the headwinds significant? Yes. However, we believe that labor inflation is well known and accurately assessed. We believe the compensation payments are likely underestimated,” he wrote, arguing that the UAW strike and contract negotiations would ultimately lead to better “capital discipline” at Ford and GM.

Still, Wedbush tech analyst Dan Ives, who covers the auto industry as it transitions to electric vehicles and autonomous driving, believes the strike and the UAW’s demands represent a “nightmare scenario” for automakers.

“At this crucial time of electric vehicle adoption, model launches, sales and marketing, and increasing competition for electric vehicles, the timing couldn’t be worse,” he wrote in a statement Friday. “We spent time in Detroit a few weeks ago and sense a ‘very nervous time’ across the automotive industry as a lot is riding on these negotiations.”

Source :

Leave a Reply

Your email address will not be published. Required fields are marked *