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Sunday, December 10, 2023

How US carmakers misread the Union ahead of historic strike

Detroit car companies survived a pandemic and semiconductor shortage.

They were embracing a historic transition to the electric-vehicle era, underwritten by billions in subsidies from the Biden administration. Profits were rolling in. Then came Hurricane Fain.

The walkout led by United Auto Workers President Shawn Fain at three General Motors, Ford and Stellantis factories is no ordinary labour-vs-industry clash. The 54-year-old former Chrysler electrician is pushing for a dramatic reset of the wage scales and working conditions that would meaningfully change the economics of car manufacturing.

He’s taken aback executives with eye-watering demands for 40% pay increases over the next four years and a 32-hour work week – unheard of in American manufacturing.

Just as jarring has been Fain’s unconventional negotiating style. Instead of following decades of precedent and targeting one company at a time, Fain has taken on all three companies employing 146,000 union members at once.

Two days before the strike deadline, Fain even stood up auto industry royalty, failing to show up for a bargaining session with Bill Ford, the great-grandson of Henry. “We’ve never seen anything like this,” said Ford Chief Executive Officer Jim Farley.

The UAW’s aggressiveness in many ways reflects the more assertive mood of the American worker, who’s anxious about job security in the age of artificial intelligence and angry about an ever-growing wealth gap.

Fain’s combative stance is risky. If workers sacrifice for months, throwing their lives and others’ into disarray, only to end up having to accept something much closer to what the companies have been offering, they could serve as just the sort of cautionary tale managers use to try to dissuade workers from unionising in the first place.

Leverage has been in short supply on the labour side of Detroit bargaining tables for decades. The once-dominant GM, Ford and Chrysler faced one crisis after another, starting with the 1970s oil price shock and emergence of more fuel-efficient compact cars from Germany and Japan.

United Auto Workers President Shawn Fain. File picture: Rebecca Cook / Reuters.

Fain joined the union at a casting plant in Kokomo, Indiana, in 1994. In the decade that followed, US auto worker wages stagnated, then began to steadily decline.

Plant closures and concessions by the UAW – which included setting up a union fund for retiree health care and the creation of lower-tier wages for new workers – weren’t enough to keep GM and Chrysler out of bankruptcy in 2009. But those givebacks and the $80 billion (R1.5 trillion) the Obama administration disbursed in another bailout cleared a path for the companies to exit Chapter 11 and quickly recover.

The union failed to capitalise on the carmaker’s improving fortunes to the satisfaction of many workers. Labour agreements often took place behind closed doors and generally led to steady, single-digit pay raises, but also kept in place lower wages for new hires.

Months after his swearing-in this March, Fain bucked convention by not holding handshake ceremonies usually attended by the three companies’ CEOs and union leadership to kick off contract negotiations.

Attempts by management to get a read on their counterpart privately didn’t go well. While Paris-based Stellantis CEO Carlos Tavares has largely deputised contract negotiations to his chief operating officer for North America, he did meet with Fain once before bargaining began.

According to Fain’s telling, Tavares complained about what he called the “brutality” of emissions regulations that leave the company with no choice but to slash costs to afford the EV transition.

“He used the word brutality probably 40 times in our conversation,” Fain later said in an interview with Bloomberg. “Our workers have had a brutality imposed upon them for the last 40 years – closed plants and having to uproot their lives.”

When Stellantis and UAW leadership gathered for the second time last month, Mark Stewart, the COO for North America, wasn’t physically present – he joined via video conference from Acapulco, Mexico, where he has a second home.

This was taken as an affront by some of the same workers called back to factory floors early in the pandemic to help get production lines back up and running, while salaried employees worked from home. Union representatives were coming to negotiate in a half-empty complex at the company’s sprawling North American headquarters in Auburn Hills, Michigan, a reminder of the flexible return-to-office policy for white-collar employees.

The UAW’s deft new communications team – which includes veterans of Senator Bernie Sanders’ runs for the Democratic nomination for president – seized on the faux pas. Pro-union social media accounts later spread footage and photos of a sunglasses-wearing Stewart smiling by the beach. He made it to the next meeting.

All the while, Fain has made gospel of criticising the companies’ CEO pay packages and multibillion-dollar share buybacks.

While Fain has blamed the companies for dragging their feet, he and his team have in turn been accused of taking their time to respond to offers.

“I don’t know what Shawn Fain is doing, but he’s not negotiating this contract with us as it expires,” Ford’s CEO Farley said before the strike began.

GM’s ever-composed CEO Mary Barra was, in her words, “extremely disappointed and frustrated” by the strike, which she said didn’t need to happen. A lifer at the company who started as an 18-year-old co-op student, Barra, now 61, told Bloomberg Television last week that her father – a union die maker – would have voted yes on GM’s latest offer.

Ford called in Executive Chair Bill Ford as time was running out on the company’s contract with workers to personally present what management considered the most generous proposal it’d ever offered: a 20% raise, restoration of cost-of-living-adjustment payments and a significant expansion of paid time off.

When Bill Ford, Farley and about a dozen executives arrived at the conference room on the second floor of Ford’s headquarters in Dearborn, Mich., they were greeted at the door by UAW Vice President Chuck Browning, who explained Fain wasn’t coming.

“Why not?” Bill Ford asked. Browning was vague on Fain’s whereabouts, according to people who were there, but discouraged the executives from reading anything into it.

Inside the room, more than 70 union bargaining officials sat three deep in chairs along the perimeter. Ford eased tensions by fielding questions about the big win the week before by the Detroit Lions, the football team his family owns. He and Farley walked through their offer for about 20 minutes, and Ford closed with: “I can look all of you in the eye and say I believe this is a fair offer.”

The union turned it down.

Farley was still hot about Fain’s snub a day later. “Bill Ford, the chairman of the company, like only the fourth person to lead the company since Henry Ford founded our industry, he was there,” Farley said. “And Shawn didn’t come.”

The next day, the morning before contracts were set to expire at 11:59 pm, Barra made the trip to Solidarity House along with GM President Mark Reuss, manufacturing chief Gerald Johnson and others with an offer in hand.

Just as had happened the day before at Ford, Fain stood them up. Barra and her team left, regrouped in the evening and brought the offer back when Fain would give them an audience. The proposal was similar to Ford’s, with a 20% raise, and it too was rejected.

The union lowered its raise request to 36% earlier in the week and wasn’t willing to budge further, according to a person present for the Ford meeting, who spoke on the condition of anonymity. The UAW negotiators have been willing to back off from their ask for a four-day workweek, but only in exchange for more paid time off.

Ford calculated that the UAW’s first counterproposal would still more than double its labour costs and rejected it, calling the terms unsustainable. The company didn’t see the offer as serious, but rather a tactic by the union to appear to have given the companies an opportunity to avoid a strike.

Biden, who repeatedly played down the likelihood of a strike, has at times spoken glowingly of Big Three executives. His praise of GM’s Barra for what he described as leadership with respect to EVs irked Tesla’s Elon Musk to a great degree.

After the walkout, however, Biden spoke at the White House about the “extraordinary skill and sacrifices of UAW workers” and the amount of money the companies have raked in the past few years.

“Those record profits have not been shared fairly, in my view, with those workers,” Biden said. He touted a just-released Treasury Department report on how unions benefit the economy, by increasing incomes, homeownership, retirement savings and benefits including sick leave and child care.

Of course, support for the union’s cause may be tested by repercussions Fain didn’t see coming. GM and Ford have announced layoffs of non-striking workers, citing what they’ve described as spillover effects of the three-factory walkouts. The UAW said those members won’t go without income.

Marc S. Robinson, a principal at game-theory consultancy MSR Strategy, said that while the UAW striking was foreseeable, a way out is much more difficult to predict.

“There’s just nothing to suggest the strike is going to end any time sooner than Halloween,” he said. “That’s when the membership starts getting antsy about being out of work.”

Fain will need to deliver agreements he can leverage into a more compelling case for workers at carmakers and battery companies the union hasn’t organised. Otherwise, Detroit risks starting the EV age in a position similar to the one they were in when the oil crisis hit half a century ago: stuck with labour costs that put Motor City companies at an untenable disadvantage.

“Breathing down the neck of the Big Three are the so-called foreign transplants and Tesla, which are eating up a bigger part of the market and remain unorganised,” said William Gould, a chair of the National Labor Relations Board under President Bill Clinton and professor emeritus at Stanford Law School. “That’s the Achilles’ heel of organised labour.”



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