The conclusion of the UAW-Big 3 strike has brought the automotive world a mix of challenges and opportunities. The most significant impact is the resumption of production at the Big 3 automakers. The return to production signaled full demand for parts and components, leading to an almost immediate surge in orders. For suppliers, this meant rapidly ramping up their production, with some even resorting to overtime to keep up.
However, the strike wasn’t without its financial toll. The extended halt meant a drastic reduction in orders, putting a dent in the financial health of the suppliers. Even though the strike’s end hints at a potential economic recovery, the aftershocks might be visible in the subsequent quarterly financial statements.
But it’s not just about finance and production; the supply chain felt the tremors, too. The end of the strike meant a sudden upswing in demand, testing the agility and robustness of the supply chain. Ensuring adequate inventory while maintaining quality standards is now a pivotal concern for suppliers.
What’s Next for the UAW? Setting Sights on the Electric Future
With the conclusion of their latest strike with the Big 3 automakers, many are left wondering: what’s next on the horizon for the UAW?
Careful analysis of the industry dynamics suggests that the UAW is primed to focus on the burgeoning electric vehicle (EV) battery sector. Precisely, the union is positioning itself to engage with three significant players in this arena: LG Energy Solution, SK Innovations, and Samsung SDI. Why? The answer lies in the ambitious investment these companies, in partnership with the Big 3 – General Motors, Ford, and Stellantis, are planning.
These firms are jointly planning on a whopping $28 billion investment to build EV battery production facilities on US soil. Such a massive investment indicates not only the direction in which the automobile market is headed but also the potential job opportunities it would create. And this is precisely where the UAW’s interests lie.
The promise of nearly 20,000 new jobs in these joint ventures presents the UAW with a golden opportunity. Organizing these workers under the union’s banner would not only bolster the UAW’s membership but also ensure a growing relevance of the UAW at the center of the industry transformation. As major automakers shift gears from fossil fuels to electric power, the production of EV batteries becomes as central to this new era as the production of internal combustion engines was to the previous one. By focusing on these battery production ventures, the UAW strategically positions itself at the heart of this transformation, ensuring its relevance and influence in the next chapter of automotive history.
The wage structure, negotiated by the UAW with the Big 3, reflects the union’s focus on ensuring its members are compensated adequately for their labor. For many workers in the EV battery production facilities, the prospect of joining the UAW becomes more appealing when they consider the potential for a significant wage boost akin to what UAW members will enjoy under this new contract. The union’s historic contract will act as a beacon and could draw these workers towards collective bargaining and the promise of a better deal.
Let’s look at the agreement with GM, whose Ultium Cells plant in Warren, Ohio, is already UAW. It will allow the joint-venture workforce to vote on unionizing future plants and decide whether they want their contract or to be part of the master contract. However, considering the terms of the new agreement, like employees at GM’s other facilities, those employed at the Ultium Cells plant in Warren, Ohio, will automatically get an 11% increase in the first year of the contract, putting their pay at $35 an hour. By the end of the contract, GM workers will be close to $42 an hour. It is important to note that this joint venture cell plant provided in late August a significant wage hike for workers at the Warren, Ohio plant by an average of 25% after paying workers as little as $16 an hour. This new wage scale is a sign of things to come for these other battery facilities.
GM is building two more Ultium Cell plants: One in Spring Hill, Tennessee, and the other in Lansing, both expected to start operations within the next two years. GM will begin building a fourth battery plant in northern Indiana with South Korean-based Samsung SDI next year, and it will open in 2026. This agreement with GM has far-reaching implications for all these battery JVs, including the other Big 3 members, Ford and Stellantis.
Unlike GM, Ford and Stellantis have a different challenge. Their JVs with SK Innovations and Samsung SDI, respectively, introduce a layer of complexity as these collaborations stand outside the purview of the automakers’ primary agreements with the UAW.
While these battery production JVs aren’t directly tied to the Ford and Stellantis agreements, the UAW has secured favorable terms indicating that the automakers won’t stand in the way of unionization efforts at these facilities. This is a significant win for the UAW, as it creates an open door for the union to approach workers at these plants, advocating substantial pay increases.
The Ripple Effect on Automotive Suppliers
The labor movement within the major automakers, particularly around the significant wage hikes at plants like GM’s Ultium Cells facility, has not gone unnoticed by the broader industry. Such decisions have set benchmarks that workers in other parts of the automotive ecosystem, especially within major automotive suppliers, are bound to take note of. Given that suppliers often operate with thinner profit margins compared to the giant automakers, they have traditionally been more conservative with wage increments. However, with key industry players pushing the boundaries on worker compensation, a wave of expectations could be set in motion.
Many employees at supplier firms may now expect similar wage considerations. The precedent set by GM could act as a catalyst, sparking discussions, negotiations, and even unionization movements within these supplier firms. If major suppliers face increased pressure from their workforce to match the wage hikes seen at the automakers, they could find themselves in a challenging position. On the one hand, they’d need to maintain competitive pricing for the automakers; on the other, they’d be pressed to ensure fair compensation to retain and attract talent in an industry rapidly transitioning to electric and autonomous technologies. This tension could lead to various outcomes – from renegotiating contracts with automakers to increased automation to offset labor costs. In any case, the automotive industry could stand at the cusp of a significant labor recalibration, and the moves made by the Big 3 could have cascading effects throughout the supply chain, reshaping the landscape of automotive employment in the coming years.
Looking ahead, the strike served as a poignant reminder of the industry’s unpredictability. For automotive suppliers, it emphasized the need for better preparedness against such disruptions. The strike’s impact drives a need to modify contingency plans and strategies considering this and future disruptions. It might cause them to diversify their customers further or even enter new wage scales and terms with their workforce.
