In this seventh weekly Supply Chain Matters reader update, we can now highlight that tentative labor agreements have been reached between the United Auto Workers and U.S. auto makers Ford Motor, Stellantis and now General Motors.
On Thursday of last week, we highlighted the announcement of a tentative agreement being reached with Ford Motor Company. Going into the weekend, the UAW continued with its work stoppage targeting work stoppages at other high profile car assembly plants.
On Saturday, a tentative agreement was jointly announced involving Stellantis, producers of Jeep, Chrysler and Dodge branded cars and trucks. That evening, the UAW elected to again ramp up the pressure for holdout Geneal Motors by ordering workers at a final assembly facility in Tennessee to walk off the job.
Today, The Wall Street Journal citing people familiar with ongoing talks, reported that a tentative agreement was expected to be announced by the labor union with GM (Paid subscription). While the terms of the GM agreement could not be determined at this point, reports indicate that they are expected to align with agreements reached with the two other U.S. based auto makers.
All three of these agreements must now be voted upon by the respective union membership. That may not necessarily be a feat complete given the ongoing empowerment of labor unions.
Implications
Reporting from Reuters indicates that these agreements: “mark another major victory for labor unions that have turned up the pressure on big corporations to put better deals on the table.” The report further indicates that when ratified, total pay hikes of more than 30 percent are expected when cost-of-living increases are factored and compounded.
The report points out that union workers for equipment makers CNH International, Deere and Company and Mack Trucks have each rebuffed initially negotiated deals despite significant wage gains that were negotiated. Regarding the latter Mack Trucks parent company Volvo, indicated last week that union workers increased contract demands are “unrealistic” and no new talks are being scheduled since the contract rejection.
In its reporting, The Wall Street Journal indicated today: “The United Auto Workers campaign against Detroit’s three automakers can be described as one thing for the union: a win.” This report further observes: “By the end of the contract’s term in 2028, most of the Detroit companies’ unionized workers would make in the mid-$80,000s annually, before overtime pay.”
The CFO of Ford Motor has already indicated to company investors that the new labor contract will add $850 to $900 in added labor expenses per vehicle. The Wall Street Journal cites analysts as indicating that under these new agreements, UAW workforces would average $87 to $90 per hour with new wages and benefits. That is compared with a mid-$60 per hour average currently.
Some labor relations experts anticipate that the ongoing wave of labor activism that has led to significant wage gains will spill over to other industries and to non-unionized workforces as higher wage thresholds are established in specific industries.
UAW President Shawn Fain added to this speculation in a statement over the weekend: “One of our biggest goals coming out of this historic victory is to organize like we have never organized before.” He further added: “When we return to the bargaining table in 2028, it won’t just be the Big Three, but with the Big Five or Big Six.”
The Teamsters labor union, after negotiating significant wage, cost-of-living and other benefit increases from UPS, has also vowed to increase organizing efforts within existing transportation and logistics non-unionized workforces including Amazon. As Reuters has indicated in its reporting: “when the recently negotiated UPS labor agreement expires in 2028, the average full-time U.S. based driver will be compensated upwards of $170,000 annually in pay and total benefits, significantly more than Amazon or FedEx.”
Added Thoughts
In our sixth update, Supply Chain Matters echoed the observations of Ford Executive Chair Bill Ford, specifically that the automakers and the union needed to bring an end to these acrimonious round of talks. The cost of the disruption has taken a financial toll on all three U.S. based automakers. Indeed, all three “paid up,” perhaps more than they originally anticipated. However, we speculate that the rancor, targeting and combative language of the UAW will likely linger in the minds of senior auto industry leaders.
Upon successful ratification, each of these specific automakers will have a meaningful cost disadvantage with existing competitors that are producing vehicles in U.S. based facilities and that includes Tesla, Toyota, Honda and Volkswagen, among other brands.
If the labor union is indeed serious about protecting the welfare of members, then the conversations need to turn toward constructive and collaborative efforts. They include increasing individual worker technical and collaboration skills, along with support of individual company production, productivity, overall quality and supply chain added efficiencies.
While public opinion polls in the U.S. currently favor worker rights to garner their fair share of economic gains of automakers or other companies, the proof is in whether consumers will pay more for labor union produced products that are of high quality and design.
We congratulate all parties on reaching a tentative agreement and we trust that the union membership will add their stamp of approval.
It is time to get back to the work of this industry’s transformational challenges ahead in a constructive manner.
Bob Ferrari
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