In an unprecedented strategic move, General Motors and Stellantis, the progenitor of Jeep, are convening with the United Auto Workers negotiators this Thursday. The meeting’s objective is to ascertain the feasibility of a contract comprehension that is parallel to the recently instated agreement with their competitor Ford.
This initiative follows the ceasefire of approximately 17,000 Ford employees who had been striking, as Wednesday carried the promise of an impending agreement. The employees are slated to resume their duties imminently. However, the potential accord needs ratification by around 57,000 Ford workers.
Unless GM and Stellantis adhere to the blueprint established by Ford, there’s a palpable risk of UAW President Shawn Fain instigating further partial strikes in addition to those initiated on September 15, shared Art Wheaton, a distinguished labor studies director at Cornell University. Wheaton affirms Fain as a key figure unlikely to cave into constraints by the two auto manufacturers to deviate from the practised model.
Supplemental strikes would inflict significant damage on the companies, GM being particularly vulnerable due to their profitable pickup truck plants centred in Fort Wayne, Indiana, and Flint, Michigan, which stand at risk of closure owing to the disruptive power of the union, Wheaton conveyed.
The escalatory strikes translate to losses for GM and Stellantis, and the companies earnestly seek to bring a resolution to the discord even though the endorsement of the Ford worker contract remains uncertain. Moreover, GM publically acknowledged a weekly loss nearing $200 million as a result of the strikes, a revelation that was particularly significant when the highly lucrative factory in Arlington, Texas experienced the strike crisis first hand this week.
The Ford contract promises to benefit assembly plant workers with a 25% raise in their salary over the contract’s duration. This, coupled with the cost of living hikes, implies an overall 30% surge in wages topping $40 per hour by April 30, 2028. Temporary workers were also beneficiaries of the contract as it promised accelerated progress to full-time positions, the abolition of certain wage tiers, pension enhancement, and escalated 401(k) contributions.
GM’s prospects of becoming the next company to settle the dispute largely hinge upon its commitment to integrating new electric vehicle battery factories into the UAW’s national contracts, thereby leading to their unionization. The UAW envisions these plants as the future employment hubs in the auto industry as it strategically shifts from internal combustion engines to battery power.
It, however, remains ambiguous as to what Ford’s stance on battery factories is. Ford had previously divulged plans for erecting two battery factories in Kentucky, one in Tennessee, and another in Michigan. Although, the proposed Michigan plant seems to be in limbo for the moment.
In parallel, Ford, GM, and Stellantis stand united against the probability of absorbing substantial labour costs that may lead to enforced price increases posing a threat to their vehicles’ market appeal.
Capping these developments, John Lawler, Ford Chief Financial Officer, acknowledged during Thursday’s third-quarter earnings conference call, that the strikes had undercut the company’s pretax earnings by $100 million during the quarter.
The UAW agreement is projected to add labour costs ranging from $850 to $900 per vehicle, Lawler said. Contingent upon successful implementation of cost-cutting and efficiency measures, it’s uncertain what percentage of this added cost will be passed on to consumers.
Until the union votes on the agreement, Ford has resorted to withdrawing its previous forecast for 2023, indicating the strikes’ disruptive impact on component suppliers and the production ramp-up at affected Ford factories.
Wheaton concludes that despite the hefty labour costs, estimated at 6-8% of a vehicle’s cost, the companies have the capacity to bear them due to their consistently high profitability in billions.
