General Motors and Stellantis, creators of Jeep, are holding negotiations with the United Auto Workers (UAW) in an effort to agree upon a contract that mirrors the successful deal recently established with their crosstown competitor, Ford. The aforementioned agreement catalyzed the return of nearly 17,000 striking Ford workers back to the assembly lines, with the remaining 57,000 employees still due to deliberate on the tentative pact.
It appears paramount for both GM and Stellantis to heed the precedent set by Ford, given the likely course of action UAW President Shawn Fain is to take, according to Art Wheaton, director of labor studies at Cornell University. Wheaton suggests that not aligning with Ford’s recent contract may lead to a surge in partial strikes, particularly impacting GM due to the profitable pickup truck plants located in Fort Wayne, Indiana, and Flint, Michigan.
Ongoing strikes impose significant financial strain on GM and Stellantis, with hopes of their swift conclusion running high, despite uncertainty surrounding the Ford workers’ decision on contract ratification. GM’s weekly loss due to the labor unrest reaches approximately $200 million, further exacerbated with the recent hit to the thriving factory in Arlington, Texas, responsible for producing heavy-duty SUVs such as the Chevrolet Tahoe.
With local union leaders’ approval, Ford’s deal promises promising benefits, including a 25% wage increase for top-level assembly plant workers over the lifetime of the contract. This figure may rise by over 30% considering the cost-of-living adjustments, amounting to an hourly wage of over $40 by contract’s end on April 30, 2028. The deal further includes salary increases for temporary workers and facilitates a faster transition to full-time posts.
GM, perceived to be the next in line to resolve labor disputes, has shown willingness to incorporate new electric vehicle battery factories within UAW’s national contract. This impressive move essentially expands union representation within the plants seen as the automotive industry’s future job creators, against the backdrop of the global shift from internal combustion engines to battery power.
The companies remain mindful of the potential elevated labor costs that may inflate vehicle prices, thereby jeopardizing their competitiveness against nonunion companies such as Tesla and Toyota. In its recent earnings call, Ford stated the strike dented its pretax earnings by $100 million in the last quarter, with disruption of 80,000 vehicles’ production set to reduce full-year pretax earnings by $1.3 billion. The UAW agreement is expected to lift labor costs per vehicle by $850 to $900.
A recent Moody’s Investor Service study anticipates the contract’s potential increase in annual labor costs by $1.1 billion for Stellantis, $1.2 billion for GM, and $1.4 billion for Ford by the contract’s closure, assuming a 20% rise in hourly labor costs. Wheaton maintains that these prosperous companies can shoulder the increased labor costs, estimated to constitute between 6% and 8% of a vehicle’s cost. Despite such anticipated rises, the companies continue to strategize moves for cost-cutting and efficiency to mitigate consumer pricing impact.
