Tag: Auto Industry Bail Out

The Auto Strike

The Daily Escape:

Trail Ridge Road, Rocky Mountain NP, CO – September 2023 photo by Rick Priebe

On Friday, The UAW union expanded its strike against GM and Stellantis, two of the Big Three automakers, ramping up pressure on the companies to reach deals on new contracts. The union walked off the job at parts distribution centers of both manufacturers but spared Ford, saying the company had done more to meet its demands. From the NYT:

“Our pressure on Ford is starting to pay off,”

But there was no indication a deal with Ford was imminent. More:

“Stellantis workers walked out at 20 of the company’s parts distribution centers Friday, while G.M. workers went on strike at 18 centers.”

Ford Canada reached a deal last week with the union that represents its Canadian workers. It may offer a clue to the US outcome: The deal provides for pay increases worth up to 25% over three years, as well as bonuses, improved retirement benefits and measures to protect employees as Ford retools factories for electric vehicles. The union, Unifor, is negotiating separately with GM and Stellantis in Canada.

The UAW is asking for a 37% wage increase over four years, improved retiree benefits and shorter work hours. They also want an end to a tiered wage system that starts new hires at much lower wages than the top UAW pay of $32 an hour. Importantly, more than 18,000 UAW members are now on strike.

Some context: UAW workers made significant sacrifices to help keep the big three afloat, amidst the financial crisis in 2009. They made those sacrifices based in part on the promise that the Big Three would eventually renew their compensation and benefits, which the Big Three never did. There were no cost of living adjustments, despite the Big Three going from losing money to record profitability (and tens of $ billions in stock buybacks).

And this week, Biden will join the strike in an extraordinary move of support. From CNN:

“Biden will travel to Michigan on Tuesday and walk the picket line with members of the United Auto Workers union, he announced Friday…”

Biden said in a post on Xitter:

“Tuesday, I’ll go to Michigan to join the picket line and stand in solidarity with the men and women of UAW as they fight for a fair share of the value they helped create. It’s time for a win-win agreement that keeps American auto manufacturing thriving with well-paid UAW jobs,”,

This presidential appearance on a picket line is a historic first. It is also an opportunity to score political points, since it comes one day before Trump is scheduled to deliver a speech to an audience of current and former union members in Detroit. In July, Trump asked the UAW to endorse him, so both politicians are working hard to gain traction with the union.

The UAW was angered by Biden’s pumping tax money into nonunion electric vehicle suppliers, and has withheld its endorsement, even as most other labor unions have rushed to back Mr. Biden’s re-election.

Back to some context for the UAW strike: The WSJ reports that:

“The Detroit companies’ labor costs, including wages and benefits, are estimated at an average of $66 an hour…”

That compares with $45 at Tesla, which isn’t unionized.

Hopefully, the UAW strike will yield fair results for the workers, given the enormous profits the companies are making, the generous salaries the industry’s execs are reaping, and the sacrifices labor made to keep the lights on when the industry was on life support in 2008.

This may well be the union’s last big strike when you consider that nearly half of all the cars built in the US are manufactured in 31 foreign-owned plants. None of these facilities are unionized, and their workers are generally paid less than those at union plants.

The move to EVs will be also be a sea-change reality for auto labor. There is likely to be a 40% reduction in the labor required to build the new engineless cars. Electric motors are much simpler than internal combustion engines. It is estimated that in less than 10 years, two-thirds of all new cars will be electric.

While the impact on labor throughout the supply chain will be dramatic, plenty of internal combustion engines will remain in use, even if not in production. That will provide stability for auto maintenance and repair workers for decades to come.

Nonetheless, the writing is on the wall. Workers with computer skills and AI capability will replace many traditional lunch-pail workers at plants assembling automobiles.

Time to wake up America! Not so long ago, the thought of a UAW strike was traumatizing because of the enormous workforce the union represented. A half-century ago, the UAW represented 1.5 million auto workers (1.5%) out of a total American workforce of just under 100 million workers. Today, UAW membership at GM, Ford, and Stellantis is about 150,000 employees (less than one percent) out of a total American workforce of 160 million workers.

Imagine if today’s number is reduced by 40%, or 60,000 workers! This means that the UAW loses its ability to represent its workers effectively by 2033!

To help you wake up, watch and listen to Green Day perform their hit “Wake Me Up When September Ends” from their 2004 album “American Idiot” at England’s Reading Festival in 2013. Frontman Billie Joe Armstrong wrote the song about the death of his father when he was 10 years old. But it has come to express loss of all kinds. Gotta love those English crowds:

You realize that the country is growing older, that Biden is growing older, the song is growing older, Green Day is growing older, and the union movement in the US is growing older too.

Regardless of how much time has passed, this song hits just as hard as it did when it was introduced 19 years ago.

Sample lyric:

Summer has come and passed
The innocent can never last
Wake me up when September ends

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Saturday Soother – October 5, 2019

The Daily Escape:

Fall colors, Adirondacks, NY – October, 2019 photo by nikhilnagane

You can be forgiven for not focusing this week on the UAW’s strike against GM, which is now in its 19th day. Shares of GM have plunged by double digits since the strike began, mostly because the automobile sector has reported weak sales figures. Wolf Richter reports that:

“New-vehicle deliveries in the US…were…flat, at 4.32 million vehicles in the third quarter. For the nine months, deliveries were down 1.6%. This puts new vehicle sales on track for about 17 million…in 2019, the worst level since 2014, and below 2000….”

So, automobile unit sales are at the same level that they were 20 years ago in 1999-2000. With the strike, GM vehicle production has ceased at nearly all of its North American plants. This hasn’t really hurt GM yet, because they had around 90 days’ sales worth of vehicles in inventory as the strike started. They typically have more like 60 days on hand. So shutting the plants helps work down their inventory bulge.

Back to the strike: Julianne Malveaux reports in the WaPo about how GM betrayed the UAW after the union made sacrifices when GM nearly folded in 2008:  

“General Motors was on its knees in 2008. Amid a global financial crisis, the company was so financially challenged that it had no choice but to accept a federal government bailout. In 2009, the United Auto Workers joined the feds in saving GM, making concessions on wages and benefits to rescue the beleaguered company.”

The partnership paid off for GM. The company has earned $35 billion in profits in the last three years, partly as a result of the concessions the workers made over a decade ago.

But, does GM owe the UAW anything in return? The protracted strike shows that GM feels it doesn’t owe them much. Darrell Kennedy, a UAW striking worker said in a video:

“We gave up a cost-of-living increase, a dollar-an-hour wage increase we were due, tuition assistance and more…”

The union wants to include non-union workers who are part of GM’s three-tiered wage system. Those hired before 2007 (the union members) are Tier One workers who earn roughly $31 per hour, plus guaranteed pensions. Those hired after 2007 are Tier Two workers, earning about $17 an hour and have the opportunity for 401 (k) participation. The third tier are temporary workers who earn less than Tier Two workers and have no benefits.

The union wants better pay for Tier Two workers, and a path to job security for Tier Three employees. But since GM plans to move toward electric vehicles which use less labor that gas-powered cars, they are uninterested in commitments that reduce their flexibility in the future.

In business, Wrongo learned the hard way that making concessions, and expecting it to create good will that helps a future negotiating position, is usually a bad idea.

But, in this case, it’s difficult to work up enthusiasm for either side.

For example, GM spent $10.6 billion since 2015 buying back its own shares, some of which went to the UAW, who originally owned about 17.5% of GM after the bailout. The UAW has now sold over half its GM stock. Since the 1960s, GM has consistently demonstrated poor management. Their share of the automobile market has decreased from about 50% to about 17%. If it wasn’t for the government bailout, GM wouldn’t be here.

The UAW is rightly trying to grow its membership by advocating for GM’s Tier Two and Three employees. OTOH, in 2009, the union didn’t agree to cooperate with GM out of any sense of benevolence. They were saving their jobs. Finally, since the bailout, GM’s UAW workers have a profit-sharing deal. In 2018, the 46,500 UAW hourly employees earned up to $10,750 each.

Wrongo is very pro-labor, and often pro-union. In this case, it’s difficult to get behind the UAW’s strike.

Time to move past which State Dept. official in the Ukraine texted what about the Bidens, or how much more blatant Trump’s overtures to foreign governments will get. Let’s enjoy a Saturday Soother!

Start by thinking about the leaves piling up outside. Friday night brought frost to Mansion of Wrong, so our fall clean-up is in full swing. If it’s warmer where you live, enjoy the last of the warm weather.

No coffee today, get outside and do something physical. But before you go out, let’s remember the great Jessye Norman who died last Monday. She was a gifted singer with one of the greatest and most beautiful voices ever. She had all the qualities to make a performance both convincing, and memorable. Here she is singing “Ave Maria” by Schubert:

Those who read the Wrongologist in email can view the video here.

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Saturday Soother – September 21, 2019

The Daily Escape:

Badlands Storm, South Dakota – September 2019 photo by Bill Frazier

It’s officially the end of summer. We now move towards shorter days, sweater weather, and at least in the Northeast, raking leaves. But, in politics, few things change with the seasons.

Consider this factoid from Bloomberg about what the Trump administration has done to support farmers hurt by his China trade war:

“At $28 billion so far, the farm rescue is more than twice as expensive as the 2009 bailout of Detroit’s Big Three automakers, which cost taxpayers $12 billion.”

Remember the auto bailout? Republicans were largely against it. The government shouldn’t pick winners and losers, let Mr. Market do it. While the auto industry was bleeding jobs, the bailout saved GM and Chrysler. It also helped restore jobs. Marketplace reports that in the Great Recession, auto-manufacturing lost 334,000 jobs, and membership in the United Autoworkers Union (UAW) fell by 150,000.

Since then, as vehicle sales rebounded, those job losses were gradually reversed. In July 2016, US auto-manufacturing employment surpassed its December 2007 pre-recession level of 957,000 jobs. The UAW however, remains more than 50,000 members short of its pre-recession high.

Back to the farmers. Because of the tariff war with China, farmers will receive $19.5 billion in direct government bailout money in 2019, the most since 2005. That doesn’t include an extra $10.5 billion in federally subsidized crop insurance payments, the main vehicle of the farm subsidy program.

This is a move to protect Trump’s political advantage with his Midwest base for the coming election in 2020. But, who is benefiting? It’s mostly the corporate farms, and the largest individually-owned farms. From Modern Farmer:

“The idea is fairly clear: the larger a farm is, the more it has to lose, and thus the more money it takes to make whole.”

The Environmental Working Group (EWG) analyzed USDA data and found that 82 farmers collected over $500,000 each in 2018-2019. In comparison, the EWG found that the bottom 80% of farmers received less than $5,000 each.

This latest tranche of government money comes after the USDA changed the rules regarding who qualified. Previously, each farmer applying for assistance had to have an average adjusted gross income of less than $900,000 per year. Now, there’s no limit on the size of an applicant’s income, as long as 75% “is derived from farming, ranching, or forestry related activities.”

That opens the trough to the biggest corporate farms, to super-rich investors, and the biggest family farms. Not surprisingly, since the Trump administration’s efforts are aimed at protecting those who are among his large donors, rather than the most vulnerable farmers, there are no cries that this is “socialism” by the GOP.

Apparently, this is capitalism at its best, but what we did to save the auto industry was socialism.

On to our Saturday Soother, that interlude in the week when we try to forget what Trump may have promised to a foreign leader, or what Cory Lewandowsky did to Jerry Nadler. We focus instead on what excuses we can use to avoid the coming fall clean-up. Here, on the fields of Wrong, we are taking in our bluebird houses, the fledglings left a week ago. A few hummingbirds are still around, but will certainly be gone next week. The apple trees have lost most of their leaves, and the deer are eating the fruit that falls to the ground. We’re trying to wait until early October to turn the heat on, but the last two nights have been in the high-30s.

Let’s warm up today by brewing up a hot, steaming cup of Ethiopia Sidamo Gora Kone ($19/12 oz.) from Sacramento, CA’s Temple Coffee Roasters. The roaster says it has a sweet-savory structure with a crisp, lightly satiny mouthfeel. You be the judge.

Now settle back and listen to a musical selection for the change of season. Here is “Autumn” a petit adagio from Alexander Glazunov’s “The Seasons”. The music was written as an allegorical ballet, but we’re going to listen to a symphonic treatment. It was composed in 1899, and first performed as a ballet by the Imperial Ballet in 1900 in St. Petersburg, Russia. Here, it is played by the Czech Radio Symphony Orchestra of Bratislava conducted by Ondrej Lenard:

Those who read the Wrongologist in email can view the video here.

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