Welcome to another edition of The Future of Automotive, with Steve Greenfield, Founder and CEO of Automotive Ventures, where I put recent automotive and mobility news items into context in terms of the broader thematic areas that will potentially impact the industry.
This week, let’s take a deep dive into the United Auto Workers (UAW) strike at the big three domestic automakers and speculate a bit on how this might play out.
On Sept. 15, UAW-represented workers walked out of the General Motors assembly plant in Wentzville, Missouri, the Stellantis plant in Toledo, Ohio, and the Ford factory in Wayne, Michigan, after the three automakers failed to reach a deal on a new contract with the union.
So far, the gap between the two sides doesn’t seem like it’s going to be resolved anytime soon.
The union has demanded a 36% increase in wages, a four-day workweek, and all temp workers converted to full-time status immediately. However, the most contentious issue is returning all workers to full, defined-benefit pensions.
I think we could all agree that rank-and-file autoworkers are absolutely overdue for a big pay hike, given how profitable the automaker has been the past few years and the fact that inflation continues to track much higher than pre-COVID levels.
But the demands the union is making go far beyond that. In fact, labor and political leaders are doing workers no favors by setting expectations so sky-high that, if they actually get everything they want, they might end up putting their employers out of business — especially since those employers might already be in a more precarious position than recent profit levels suggest, especially given the shift from internal combustion drivetrains to EVs.
Just look at the friction that Tesla has created this year with multiple waves of retail price cuts. The Tesla price cuts illustrate how the automaker can take advantage of a lower cost structure to engage in price wars with rivals around the world to juice sales.
To put things in perspective, the Detroit companies’ labor costs, including wages and benefits, are currently estimated at an average of $66 an hour. That compares with $45 at Tesla, which isn’t unionized and was founded just 20 years ago.
Foreign automakers operating in the United States, such as Toyota and Hyundai, pay their workers about $55 per hour all in.
Meeting the UAW’s initial demands would boost average hourly labor costs to $136 for the Detroit companies.
And we need to put all of this in perspective of how the legacy automakers are navigating the very expensive transition from internal combustion to Electric drivetrains.
Ford said in July that its electric vehicle business would lose $4.5 billion this year. If the UAW got all the increases in pay, pensions, and other benefits it is seeking, the company said, its workers’ total compensation would be up to three times as much as Tesla’s employees.
Ford CEO Jim Farley said this week that union demands would force Ford to scrap its investments in electric vehicles.
Steven Rattner, who negotiated concessions with the UAW to help keep GM and Chrysler afloat in 2009, says UAW workers deserve significant raises but can’t make the automakers uncompetitive.
Rattner said that the union has to be careful that they don’t kill the goose that lays the golden egg, so to speak, by asking for too much.
And let’s talk about comparable productivity.
For the UAW, it makes perfect sense to demand more pay and better work-life balance from Detroit’s three automakers.
But what makes sense to striking factory workers makes no sense for manufacturing as a whole. Pay is ultimately tied to productivity: the quantity and quality of products a company’s workforce churns out. And here, American manufacturing companies and workers seem to be in trouble.
Since 2009, manufacturing output per hour in the U.S. has grown just 0.2% a year, well below the economy as a whole and peer economies in Europe and Asia, except Japan.
In motor vehicle manufacturing, the picture is especially bad: From 2012 through last year, productivity per hour plummeted 32%, though some of this was no doubt due to pandemic disruptions.
If you remember back to ancient history class, a Pyrrhic victory is defined as a victory that inflicts such a devastating toll on the victor that it is effectively equivalent to a defeat. Such a victory negates any true sense of achievement or damages long-term progress.
The phrase originates from a historical figure, Pyrrhus of Epirus, whose triumph against the Romans in 279 BC destroyed much of his forces, forcing the end of his campaign.
Commenting on Pyrrhus’ victory, Greek philosopher and historian Plutarch noted: “If we are victorious in one more battle with the Romans, we shall be utterly ruined.”
Let’s hope that the UAW strike doesn’t end up cutting off the proverbial nose to spite its face.
Companies to Watch
Every week, we highlight interesting companies in the automotive technology space to keep an eye on. If you read my weekly Intel Report, delivered to your email inbox at 7 a.m. on Mondays, I showcase a couple of companies to watch, and we take the opportunity here on this segment to share those companies with you.
Today, we have one new company to watch: ARX Landsysteme
ARX Landsysteme is a defense technology manufacturer specializing in developing autonomous unmanned systems for dual-use applications.
ARX builds and operates autonomous Single-to-Multi-Use robots for various applications.
The goal is to help soldiers and civilian first responders make better decisions and take more effective action in life-threatening situations.
For the armed forces, ARX robots serve as robust, cost-effective, and consumable solutions that can help train and protect troops, gather intelligence, and withstand the challenges of missions.
For civilian emergency services, they are designed to provide years of reliable support for relief purposes.
If you’re interested in learning more, you can check out ARX at www.arx-landsysteme.de.
If you’re an AutoTech entrepreneur working on a solution that helps car dealerships, we want to hear from you. We are actively investing out of our new DealerFund.
If you’re a dealer who wants to invest in early-stage AutoTech companies that benefit your business, let me know. We are still accepting new investors into the DealerFund.
If you’re interested in joining our Investment Club to make direct investments into AutoTech and Mobility startups with small checks, join the Club. There is no obligation to start seeing our deal flow.
And don’t forget to check out my book, The Future of Automotive Retail, on Amazon.com. And keep an eye out for my new book, The Future of Mobility, which will be out at the end of the year.
Thanks as always for your ongoing support, and we look forward to working closely together with you to create the future of this industry.
Thank you for tuning into CBT News for this week’s Future of Automotive segment, and we’ll see you next week!
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