After ongoing labor contract renewal talks failed to reach an agreement by midnight, the United Auto Workers (UAW) labor union has now initiated targeted walkouts among select production facilities of Ford Motor, General Motors and Stellantis.

The UAW has elected a strategy that avoids a massive strike action, and instead focus on rolling work stoppages targeted at individual automakers most popular and profitable car models. Initially, 12,700 workers have walked off their shifts at a Ford Motor vehicle assembly plant that produces the popular Bronco SUV. Walkouts have also occurred at a Missouri assembly plant producing popular GM pick-up trucks, and an assembly plant producing the branded Jeep Wrangler SUV.

The labor union has hinted that there will be additional targeted walkouts involving critical components of popular and profitable models such as engine, transmission or other production facilities, a strategy that targets the most impactful points in the supply network.

The obvious fears for the industry as a whole are the ripple disruptive effects among global based supply networks including parts suppliers, dealer networks, auto parts distributors and repair facilities. With an industry predicated on just-in-time inventory practices, it will not take that long for multi-tier disruption to occur.

CEO’s among the three impacted U.S. automakers have publicly voiced their frustration over the aggressive stance of the labor union which has now resulted in a disruptive labor strike action.

Strategies At-Play

As The Wall Street Journal has noted in its reporting, the action represents the first time in the 88-year history of the UAW that all three U.S. automakers are being targeting for work stoppages simultaneously. The labor union has reportedly accumulated a $825 million strike fund to compensate striking workers, and this select targeting action is a means to not have the entirety of union workers off the job and collecting strike benefits at the same time, thus prolonging the ability to support a lengthy action.

The head of the UAW is being described as a firebrand reformist leader who won membership wide election by a narrow margin. This organization has additionally been beset with corruption practices among two prior leaders who have been convicted on federal charges and jail sentences.

Some contrast is made to 2019, when the UAW specifically target GM that resulted in a 40-day disruption that reportedly cost the automaker upwards of $3.6 billion. This current action involving three automakers has the potential for a more expensive overall cost to respective automakers.

In its specific reporting Bloomberg indicated that in initially not targeting factories that produce cash cows such as the Ford F-150, Chevrolet Silverado and Dodge Ram pickup models, it provides union leaders added options to make more damaging moves as the strike wears on.

From our lens, the counter question is whether the three automakers collectively elect to lockout all UAW employees simultaneously if negotiations are not showing progress.

As we pen this posting, indications are that talks are ongoing and that proposals are going back and forth. However, automakers such as Ford are clearly delineating what is unacceptable, in Ford’s case being an abbreviated 32 hour work week. The UAW agenda seems to be one of taking back major concessions agreed to during the global financial crisis amid economic fears and the actual bankruptcy filing of the then Chrysler and General Motors. During that period, the UAW was praised for its practical stance related to the industry’s business and economic challenges at-hand.


Broader Industry Wide Implications

As noted in our prior update, what makes these talks significant and possibly groundbreaking is the backdrop of an industry that has embarked on a rather expensive and risk laden transformation in regard to development and production of more electric or hybrid powered vehicles that include batteries and electronic components vs. complex engines and transmissions.

At the same time, these past four years have provided significant learning relative to the need for more resilient automotive and advanced technology supply chains. The result is government policies and subsidies that now favor domestic auto manufacturing and semiconductor supply networks geared toward specific domestic markets such as the United States, Europe, Asia and other regionalization.

Today, Chinese EV automakers and suppliers have notable cost advantages in materials sourcing, production and labor costs. Thus, some U.S. automakers were forced to formulate production or component alliances with Asia based suppliers in order to support U.S. production needs and capabilities. For the most part, labor unions are not a fabric of Asia based suppliers and technology providers.

Specifically for the U.S. automotive market, the further backdrop is the unique nature of existing auto assembly and supplier production sites where foreign based auto manufacturers have elected to primarily locate production, that being within U.S. southern states where right to work and non-union labor laws are practiced. Industry data points to a $10 to $15 per hour difference on average in total direct labor costs among non-union vs. unionized production in the predominate U.S. Midwest auto sector. According to reporting from Bloomberg, direct labor costs for Tesla’s U.S. facilities average $45 to $50 per hour on a fully loaded basis.

Reportedly, full-time UAW workers have an entry-level wage rate of $18 per hour rising to a maximum rate of $32 per hour. The union is seeking an overall 40 percent increased over the life of a new four year contract, along with provisions related to a cost-of-living allowance pegged to inflation levels along with less use of temporary workers that automakers current practice.

The UAW future resides in its ability to demonstrate to automakers that unionized workers can be more skilled, agile and productive while also supporting the needs, effects and ongoing realities of the industry-wide transformation. The Biden Administration’s policies related to the retro fit of existing auto plants includes a provision that labor unions are given special consideration in the acceptance of such direct subsidies. That is the political backdrop of these ongoing industry dynamics.

The threat or reality of a loss of jobs looms large, and any labor union seeks to protect such jobs, either by obstacle or by acceptance of a transitionary state where workers are supported in reskilling needs while pension and health care benefits will be protected over a longer term transitionary period.

Added Perspectives

Supply Chain Matters  views these ongoing labor contract talks, along with the confluence of the various stakeholder interests will be pivotal to U.S. based production and supply network strategies in the coming years. The stakes are high and include a lot of political, labor and changed industry thinking. Hopefully, the rhetoric and forces of activism are challenged into constructive approaches for future relationships with labor groups and workers.

For these reasons we fear that this industry disruption will prolong itself. Hopefully, we may be off the mark, but there is a lot at stake for automakers, workers and industry supply networks depending on the actual end result of this negotiation process.


Bob Ferrari

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