Over the past year, the Biden administration has faced labor strife in multiple sectors, from railroad workers to actors and writers, although the strike of the United Auto Workers (UAW) is possibly the most significant labor crisis so far.
President Joe Biden has long advocated for labor unions and positioned himself as the most pro-union president in American history. However, his handling of the nation’s economy has already been a source of concern for blue-collar workers, and he now faces a strike that could have far-reaching effects on the economy.
A prolonged strike will not only harm the American workers directly employed by the “Big Three,” but also its suppliers and dealers across the country. It will reduce the availability of new vehicles, resulting in higher car prices for all Americans. And this will be a significant setback for President Biden’s economic agenda, called “Bidenomics.”
Speaking from the White House on Sept. 15, President Biden encouraged both sides to return to the negotiating table while noting that record corporate profits should also mean record contracts for workers.
“Auto companies have seen record profits, including the last few years, because of the extraordinary skill and sacrifices of the UAW workers,” President Biden said. “Those record profits have not been shared fairly, in my view, with the workers.”
The president said that he would send Acting Labor Secretary Julie Su and White House senior advisor Gene Sperling to Detroit to assist both sides in negotiating an agreement.
Despite most large labor unions endorsing President Biden’s 2024 reelection campaign, the UAW has so far sat on the sidelines. It cited concerns over his policies that encourage a transition to electric vehicles, which could cause traditional auto workers to lose their jobs.
A Historic Strike
For the first time in its 88-year history, thousands of U.S. auto workers simultaneously walked off the job at Ford, General Motors, and Stellantis—the maker of Chrysler and Jeep—after their four-year contracts expired at 11:59 p.m. Washington time on Sept. 14. Roughly 13,000 UAW-represented workers began picketing at a Ford Ranger factory in Wayne, Michigan, a General Motors assembly plant for its Chevy Colorado pickup in Wentzville, Missouri, and a Stellantis Jeep facility in Toledo, Ohio.
Rather than engage in a nationwide strike, the UAW is participating in a so-called stand-up strike.
That will give the UAW maximum leverage and flexibility to secure “a fair contract.” But the option to strike at all facilities across the Big Three is still on the table, according to the union.
UAW leadership is demanding a four-year contract that includes a 40 percent pay raise, a 32-hour work week with 40 hours of pay, and the restoration of traditional pensions.
The contract disputes between the union and the Big Three could result in “far-reaching negative consequences for our economy,” said Suzanne Clark, president and CEO of the U.S. Chamber of Commerce.
The chamber criticized the Biden administration for “promoting unionization at all costs” and emboldening labor unions.
“For the 94% of American private sector workers not in a union, the costs are starting to stack up,” Ms. Clark warned, urging the UAW to end the protests and return to the negotiating table.
Former President Donald Trump, who has been courting auto workers in recent weeks, also issued a warning on his Truth Social platform that the drive for electric vehicles will eliminate UAW and other U.S. auto workers.
Consequences for the Economy
As inflation remains elevated and the U.S. economy shows signs of slowing, the UAW strike “will make matters worse,” Business Roundtable CEO Joshua Bolten said.“Business Roundtable is deeply concerned about the widespread impact of the UAW strike on the U.S. economy. The repercussions will be felt by workers, businesses, and communities beyond the auto industry and will continue to get worse each day that passes,” Mr. Bolten said. “We urge a speedy resolution before the consequences cause broader economic harm.”
If the UAW strike lasts for a month, it would only have a 0.2 percent drag on the U.S. economy during the third quarter, according to RSM’s chief economist Joe Brusuelas.
However, he noted that the impact of this strike would be felt throughout the broader manufacturing ecosystem that supports domestic auto production. That includes industries such as petrochemicals, steel, and glass, as well as a diverse group of suppliers that manufacture parts, electronics, and software.
Brian Sponheimer, a portfolio manager at Gabelli Funds, warns that consumers could expect to see higher prices due to potential “supply constraints on key products.”
Reactions From CEOs
Hours before the targeted strikes began, General Motors CEO Mary Barra defended her company’s counterproposal, calling it “compelling and unprecedented” in a public letter.In an interview with CNBC on Sept. 15, Ms. Barra said she was “extremely frustrated and disappointed” at autoworkers’ rejection of the proposal.
The UAW took exception to Ms. Barra’s media rounds, writing on X that “she ‘earned’ more money than any autoworker makes in a full work day” during her eight-plus minutes on CNN.
Meanwhile, Ford says it “remains absolutely committed to reaching an agreement” to reward employees and protect the company’s efforts to invest in the future.
“The last offer Ford submitted was historically generous, with large wage increases, cost of living adjustments, more paid time off, additional retirement contributions, and more,” the automaker said in a statement. “Unfortunately, the UAW’s counterproposal tonight showed little movement from the union’s initial demands submitted Aug. 3. If implemented, the proposal would more than double Ford’s current UAW-related labor costs, which are already significantly higher than the labor costs of Tesla, Toyota, and other foreign-owned automakers in the United States that utilize non-union-represented labor.”
Jim Farley, the Ford CEO, told CNBC on Sept. 14 that the UAW proposal could force the auto giant into “bankruptcy.”
“If we signed up for the UAW’s request, instead of making money and distributing $75,000 in profit sharing in the last 10 years, we would have lost $15 billion and gone bankrupt by now,” said Mr. Farley. “You want us to choose bankruptcy over supporting our workers?”
Stellantis, which was formed in a merger between French automaker Peugeot and Fiat Chrysler Automobiles, might be prepared to wait it out.
“We are extremely disappointed by the UAW leadership’s refusal to engage in a responsible manner to reach a fair agreement in the best interest of our employees, their families, and our customers,” the company said in a statement after the union launched its targeted strikes. “We immediately put the Company in contingency mode and will take all the appropriate structural decisions to protect our North American operations and the Company.”
