In bargaining. We've repeatedly told the companies from day one, September fourteenth is a deadline, not a reference point. We will not allow the Big three to continue dragging out negotiations for months. They've made a quarter of a trillion
dollars in North American profits over the last decade. They nickel and dime our members every day, price gougs the American consumer, and they squeeze the US taxpayer for every die and they can get the Big three can afford to immediately give us our fair share.
On Friday, US auto workers started an unprecedented strike against all three of the legacy Detroit carmakers, Ford, General Motors, and Stilantis, which makes Chrysler and Jeep vehicles. If the standoff isn't resolved quickly, it could ripple through the US economy. What are the union workers demanding and will the companies give them what they want? I'm west Ksova today on the Big Take Bloomberg's Detroit bureau chief David Welch. It's
here with answers, David. This auto strike is a little bit different from earlier ones because the autoworkers are walking out on all three of the big old Detroit US automakers at the same time.
That's right. We haven't had a national strike like this in history, at least not in anything we'd consider modern times. It really kind of shows the I think, the angst to a great degree that union workers have and labor in general in the country. There's a lot of labor unrest when it comes to income disparity and inflation, and you know what the union has been calling corporate greed and billionaires. You know, there's a class issue in the US.
And you know, so when it's at all three companies, it tells you that this is a widespread thing as opposed to management of one automaker or the other that the union thinks is mistreated them. This is the whole industry to them.
And they also chose only particular plants at each of the companies that make popular vehicles. Why did they choose that strategy?
Yeah, So, look, the union's got a few things going on. One is they have a strike fund that pays seven hundred and fifty dollars a week, which includes their healthcare coverage for every worker, and with one hundred and fifty thousand workers at all three companies, that fund would be broken about seven weeks if they struck every plant. So what Sean Fain, the union president, is trying to do.
He's trying to inflict some pain, and so he's shutting down the Ford, Bronco Jeep Wrangler, and Chevrolet Colorado pickup plant. That's the GM mid sized pickup, which that's an important distinction I can get to in a minute. But these are three popular vehicles that make pretty good money. They're not the most popular vehicles, and they don't make the most money. So this is sort of an opening salvo that says, hey, we're going to hurt your earnings, but
we're not going to kill them. But if you don't give us a deal, we could and we've got other levers we could pull down the road. And so think about it. If they could strike all three companies, every single plant in the last seven weeks, they do a piece me like this, they could drag this on for months.
So it also sends the automaticers a signal that, Okay, the earnings hit right now from these shutdowns may not be huge, but the union can and intends to potentially do this for a very long time, which is a lot of headaches for everybody. And then of course once they strike this plant, they could start to threaten others that can do more damage. A full sized pickup truck plant that makes a fort f one fifty or Chevy Silverado or Ram pickup. That's a lot of profit loss
right there. They could shut down parts plants they make replacement parts, which means dealers have a headache trying to repair cars and you have angry customers on your hands. That one, I think it would be risky even for the union, but that is a thing they could do. Or they could shut down plants like that make engines or body parts. That would shut down multiple assembly plants.
So you see that they can. They can sort of ramp this up, and every time they do it with some of these other strategies inflict more pain and aggravation on management to apply more pressure.
So the companies have said they've given the auto workers a pretty good deal and met a lot of what they thought were their demands. What did the companies offer so.
Right now they're all at roughly twenty percent pay increase over four years, so average of five percent a year. In the last contract they got two three percent increases and two lumps on checks worth four percent, and that was just the raw pay increase, so this is, you know, significantly bigger than that. They did offer cost of living allowance, which basically helps protect workers against inflation, and that's something that workers had from nineteen forty eight until two thousand
and nine. They lost it during the financial crisis, and they've wanted it back ever since. And the companies were sort of whistling by the great if you're not giving it back to them in each agreement, and now there's you know, with the inflation we've had in twenty twenty one and twenty twenty two, the workers think they went backwards and pay during the last agreements and now they want this. The companies have actually offered that. They didn't
tell us what the calculus was. The union crewer didn't light the calculus, but they've offered that as well. They sweetened the pensions for those who actually have pensions. The big sticking point, the one thing that they didn't offer and I believe they never will, is giving pensions back to workers hired after two thousand and seven. That's another benefit that was lost in the you know, years leading
up to the financial crisis. In two thousand and nine, when GM and Chrysler went bankrupt, guaranteed pensions for workers went away, as did retiree healthcare. Anyone hired before seven has it, everybody else does not. Union wants it back to the newer hires. Companies will never do it because it results in tens of billions of dollars in liabilities
that they have to fund. So if that becomes the sinquan no of this round of negotiations, it could be a very long and ugly fight because the companies just will not get into that situation where they have this massive, growing liability. Look, I think Sean Fain probably could have taken these current offers to his membership and gotten it ratified, but he wants to try to get some of these
other things back. So for me, the sixty four billion dollar question is what is he willing to take to the membership, And if he insists on this pension and retiree stuff, buckle in because it'll be along and ugly ride.
If, as you say, the companies did offer the union a lot of what it wanted except for these big questions over pensions, why do the membership go along? Is it a good deal? For the workers.
Look, I think it is they may need to sweepen the four to one k to kind of make the members feel like they are getting something more for their retirement than they had before. I think it's a five percent match, which I don't think is all that great, and I think they would want more than that. I think with this other stuff. You know that there's they get very good profit sharing checks. These agreements comes with a ratification bonus, which is a check just for voting
in favor of it and signing the deal. That's usually about ten thousand dollars. And think about that. You know, a worker not getting over time making the top wage of thirty two dollars an hour, that's about sixty seven thousand a year. So a ratification check of ten thousand dollars and a bonus check of about ten thousand dollars, that's about a thirty three percent bonus right there, before we even get to the pay increase or the cost of living allowance.
So why is the union willing to go to the wall over this?
There is some politics here. The past two UAW presidents stole from the union itself, you know, that's what they were indicted and convicted of so Sean Fain in some ways had to go on strike, and he has to show his the office he's getting in the office he's giving publicly to have transparency, show them members what's going on, and by going on strike, show that he's fighting the good fight for labor. For day one, we've.
Told these companies, yeah, you know, we don't have to back them to delay and rag things out, and that's what they chose to do. We didn't want to be here. We want a fair agreement. We want fair economic and social justice for our members. That's what this is all about.
Because they have no faith in leadership. And he was elected in a runoff by a very narrow margin. So he's got to prove he's the real deal. And you know, what better way to do it than to strike. And you know, have a rhetoric that accuses the CEOs of being greedy because of their raises and their big salaries and share buybacks that you know, feed billionaires more money all,
you know, all the kind of rhetoric you here. Now, Look, I think he sincerely does want to get a better deal and get as much as he can, there's no question about that. But he's also building a persona. So if he wants to be re elected as UAW president and get his deals ratified, he's got to build himself up as you know, a true great union leader.
And do we have an indication about whether this strategy has wide support among the union membership.
No one's doing a pull on it. But if you know, just judging by the social media you see when he gives speech and that sort of thing, the majority are pretty supportive of this. And look, why not. He's already he's turned down offers that were better than the last couple of agreements they got. So the workers think, okay, even if he just gets a little more here, he's done better than the past two three four presidents have.
Most of those presidents either got mild pay raisers or actually had to give concessions because we are deep recession and so forth. But yeah, he's done better than those
other presidents have already. So if you're a worker and you know you're going to get twenty percent plus all these signing bonuses cost a living allowance and all that sort of thing, and you go out for two or three weeks and maybe get a little more that, that's you know that much more on top of what you were you got from the prior regimes.
After the break, what do auto company executives say about the union workers' demands? The company CEOs have come out and kind of expressed frustration, saying, we thought we gave these workers a pretty good deal. What more are we supposed to do?
They have, And look, they knew going into this set of negotiations that they would have to offer a pretty good pay package because the last agreement wasn't all that lucrative for workers and the companies put up record profits or near record profits for the past four years. They knew it. They probably thought the current deal their offering would have been ratified six times over, and instead they have a strike. So they are very frustrated, and look,
think about this. Negotiations in past years are always done behind closed doors. Now it's out in the public. CEOs hate that they have a union president who's extracting very good offers out of them, which they're probably not in love with. And that same person who's extracting these offers routinely calls them greedy CEOs with ridiculous salaries who do share buybacks and pay dividends to discussing Wall Street billionaires. So there's there's some insult and injury going on here
that I'm sure is not lost on the well. General Motors CEO Mary bara Is I wrote a book on her. She's one of the most composed executives I've ever interviewed. You know, Mary Borrow went on Bloomberg TV on Friday to voice her frustration over there.
Yeah, I'm extremely disappointed and frustrated that we're even on a strike. We didn't need to get here. General Motors has an exceptionally strong offer on the table. It's historic. So when you look at the strength of the agreement we have on the on the table, you know, we really don't need to be here, And to me.
That says a lot.
David, I thought it was interesting that given the stakes here, that markets largely shrugged it off, and in fact, on Friday the automaker stocks went up a bit.
Now, I think that the anticipation was a big national strike that was going to shut the companies down and lead to billions and losses. You know, very quickly you're talking about three plants, and those are profitable vehicles, but you know, we've seen important plants go down for two or three weeks because they didn't have semiconductors or even something as simple as a steering column. This is something
that companies can absorb for a while. So if you know, if this goes on and the union adds more plants, then you'll see the stocks take a hit. I do think to a certain degree. You know, you've seen the stocks go down for the past month because of fear over a strike. So there's also a certain discount that's
already built in, there's no question about that. But I think there might have been a sigh of relief that you know, we're kind of punting down the road the you know, the strike armor gedding that people were really worried about.
How long until consumers would start to feel the effect of this strike.
We look, if you if you want a Ford Bronco, it's a hot selling vehicle, those dealer lots for that vehicle are going to start getting leaned pretty quickly here probably you know, a few weeks. Same goes for the other vehicles. So they'll start to see scarcity and start to see prices rise for select vehicles. I'd say within three weeks for the most part. And if he hits a parts plant. You know, you could really have dealers hurting because they don't keep a lot of parts inventory.
That could cause problems within a week or two.
And because of just how big this industry is. If you look in the past, autoworkers strikes didn't only affect the companies and the customers to buy cars, but all these suppliers up and down the chain. How costly could this strike be if it keeps going up.
One estimate we have is five point six billion dollars hits the economy if all three companies were struck at all plans for ten days. That's actually not that big if you think about the size of the US economy. It's more, you know, ripple effect for layoffs in certain regions and certain industries. When there was a strike at General Motors in September of twenty nineteen, the economy had
a brief recession in Michigan. The company lost three point six billion dollars, and we saw nineteen percent dropping steel prices that quarter and then despite the following quarter because a bunch of mills had gone down and it takes a while to bring them back up. So the ripple effect here can be pretty wide. In ways that you don't necessarily see in GDP numbers.
When we come back, the strike comes at an unwelcome time for Joe Biden.
It's my hope that the parties can return to the negotiation table to forge a win win agreement to continue our active engagement. I'm just I'm to plumb dispatching two members of my team to Detroit, Acting Labor Secretary Julie Schue and White House Senior Advisor Gene Sperling. Both of them been involved up to that to offer their full support for the parties and reaching a contract. The bottom line
is that auto workers help create America's middle class. They deserve a contract that sustains them in the middle class.
So if the markets didn't immediately respond, that's certainly not true of the White House, where Joe Biden is looking at a possible economic hit at the worst possible time for him.
Biden's and he's walking a real tightrope here because he's built himself as labour's friend, so he needs to side with them. But he can't have them out for a long time because it not only would have hurt the economy, it especially hurt the economy in the upper Midwest. There was a briefer session in Michigan when the UAW went on strike at General Motors for forty days in twenty nineteen. That's a swing state. It's a very important one and one where Trump does have a decent base. I'm assuming
he'll be the nominee. Know that that's something Biden doesn't need. And look, also, a big part of his agenda is ushering electric vehicles and clean transportation into existence. And you know, the union's union support TVs, but they want to make sure they have good paying jobs with all of this, and that's that's also a part of this fight. So uh, you know, Biden's got to play some politics here and he's kind of getting buffeted from all sides.
David, you mentioned at the very top of our conversation about how this strike is taking place in the context of a lot of labor unrest, and the strike is the latest in a string of other walkouts and other industries that we've seen, and the workers were able to squeeze concessions out of some of those companies. Did the UAW sort of take their cue from the success of other union workers.
I think to a degree they did. They'd probably never admitted, but I think Sean Fain I think he wanted a strike coming in. I mean, he says he doesn't, but I don't think there were many ways he couldn't have unless the companies just came out and offer him an insanely rich deal to begin with. And they're never going to do it either like that, that's what bargaining is all about. But I think to a degree they did.
I think the UAW was also reading polls that suggest now more than seventy percent of Americans view labor unions favorably, which is about double where it was I think five years ago. And you were seeing organizing drives win at places like Starbucks, and you organizing efforts at Amazon. Seeing the writer's strike seems to have public sympathy. You know, in Los Angeles ups didn't have a strike, but the
teamsters want a really nice contract there. So labor's having a moment clearly in the US, and I think Sean Fain not only wants to be part of it, I think he wants to ride that wave and maybe maybe make that wave a little bigger. He's he's going to hang ten on the wave of American labor.
So David, what do you think happens next? Do you think the companies will sweeten their offer for the unions or will this strike wind up spreading to those their plants.
I think there will be another round of strikes almost no matter what, you'll you know, you'll see Fain will escalate this to some degree. Maybe it's three more plants and the companies will sweepen their offers. You know, again, that big question is whether or not Faine himself is willing to take a deal to his members that doesn't have this nineteen nineties era return to guaranteed pensions and
retiree healthcare. If he's willing to just take great raises and worry about that stuff in a future round of bargaining, then you know, after maybe one more round of plant strikes, you know, we get a deal and I think that I think it would get ratified.
So if you were to venture a guess how long before this is over?
I mean, look, it's it's probably at least a couple more weeks, and it could vary at each company too, because he is he's got issues with GM over the one union battery plant. They haven't all island. Whether or not that should be in this master agreement or have a cheaper separate agreement. He doesn't like that. He's really angry at Stoantis over the threatened closure of a plant
in Illinois. So there's some separate, some separate issues that aren't just pay and benefits at those companies that could make him stay out longer with each one.
David, thanks so much for coming on the show. No problem, Thanks guys, Thanks for listening to us here at the Big Take. It's a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen, and we'd love to hear from you. Email us questions or comments to Big Take at Bloomberg dot net. This episode was produced and engineered by our supervising producer, Vicky Burgalina. Our original music was composed by
Leo Sidrin. I'm West Kasova. We'll be back tomorrow with another Big Take.
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