United Auto Workers President Shawn Fain is taking a tough stance in contract negotiations with Detroit automakers, General Motors, Ford Motor, and Stellantis. Fain has made it clear that he is not afraid to initiate a strike if necessary, even if it means pulling approximately 150,000 auto workers out of factories. To emphasize their determination, Fain and the union recently filed unfair labor practice charges against GM and Stellantis, accusing the companies of not bargaining in good faith. Fain’s approach is different from previous union leaders, as he is negotiating with all three automakers simultaneously, without selecting a “target” company. He has also been more confrontational, occasionally launching personal attacks on executives.
The Potential Need for Strikes
Some industry analysts and experts believe that strikes may be necessary to convince UAW members that their leaders fought hard to meet their demands. Labor professor Art Wheaton from Cornell University expects there to be a strike, possibly starting with Stellantis, which could be used as a warning to GM and Ford to improve their offers. Strikes could take different forms, including a national strike involving all workers covered by the contract or targeted work stoppages at specific plants over local contract issues. The impact of prolonged strikes against all three automakers would be significant, affecting the automotive supply chain, the U.S. economy, and domestic production.
The Involvement of the Biden Administration
The Biden administration has shown a particular interest in the contract negotiations, appointing Democratic adviser Gene Sperling to monitor the situation for the White House. This level of attention reflects the potential consequences of a work stoppage. Similar concerns have been expressed on Wall Street, with many investors believing that a strike is extremely likely. The uncertainty surrounding the negotiations has led to cautiousness among investors.
The current combative rhetoric from Fain and other union leaders is not unprecedented. Past contract negotiations have involved work stoppages, including strikes by the UAW. The union has made ambitious demands this time around, including pay increases of 40% or more, the retention of platinum healthcare, and a reduced 32-hour workweek. These demands are typically not publicized until later in the negotiations, in order to maintain good faith bargaining and avoid setting unrealistic expectations for UAW members.
While Fain has expressed his readiness for strikes, it is not solely up to him to call for them. The decision falls to the UAW’s 14-member International Executive Board (IEB), which Fain leads as president. A work stoppage requires the approval of the IEB, with a two-thirds majority vote. The duration of a potential strike is another important consideration. Investors surveyed by Morgan Stanley expect the strike to last longer than a week, with some anticipating a strike lasting longer than a month. A previous strike against GM in 2019 lasted 40 days, resulting in significant financial losses for the automaker.
The UAW has an extensive strike fund of over $825 million, which can be used to pay eligible members who are on strike. Strike pay amounts to $500 per week per member. With approximately 150,000 UAW members covered by the contracts, the union can sustain the strike fund for about 11 weeks. However, this calculation does not include additional healthcare costs that the union would need to cover, potentially draining the fund more quickly.
In previous contract negotiations, it was generally expected that UAW members would approve the deals endorsed by union leaders. However, recent negotiations have seen members rejecting tentative agreements, leading to a return to the negotiating table. Once a tentative agreement is reached, local organization members of a specific automaker vote on whether to accept it and make it a contract. The entire ratification process can take around two weeks for each company. In 2019, negotiating and ratifying all three agreements following GM’s strike took an additional eight weeks.
The possibility of a strike against Detroit automakers looms large as contract negotiations approach their deadline. United Auto Workers President Shawn Fain’s assertive approach and the filing of unfair labor practice charges indicate a willingness to take action. Strikes may be necessary to demonstrate to UAW members that their leaders fought vigorously for their demands. The involvement of the Biden administration and the concerns of Wall Street further illustrate the significance of these negotiations. However, the decision to strike ultimately rests with the UAW’s International Executive Board, and the financial impact of strikes must also be considered. The upcoming ratification process adds another layer of uncertainty to the negotiations, as recent history has shown members rejecting tentative agreements. As the clock ticks, the automotive industry and the broader economy brace themselves for the potential consequences of a work stoppage.
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