This is 8 Minutes a podcast helping you understand the Energy and Climate Challenge . In just a few minutes , I'm your host , paul Schuster . At the stroke of midnight on September 15th , the United Auto Workers contracts with the big three auto companies expired . The result the first UAW strike against all three auto companies at the same time .
How does this relate to energy and climate ? Well , one of the big concerns of auto workers is the transition of the industry towards electric vehicles , a process that requires fewer hands and sometimes a lower pay rating . Today , we'll look at the EV transition through the lens of the workers on the front lines . What are they demanding ?
Are their fears real and what does this mean for the future of electric vehicles ? 8 Minutes it's how long it takes the sun's race hitter , or about how long it takes to bake up a batch of chocolate chip cookies . Add another minute on to eat them and let's get it on .
Jim Farley , the CEO of Ford , made something of a splash in November of last year when he stated that EVs required 40% less labor than that of an internal combustion engine car . Oh boy , you can imagine how that was received by the 145,000 strong membership of the UAW .
As recently as 2019 , uaw members walked off the lines at GM , partially due to their fears that the transition to electric vehicles would need them losing their jobs . The UAW and the automakers managed to negotiate their way through that crisis , but the intervening years have seen a lot of change .
Back in 2019 , evs made up less than 2% of the US market , whereas today that percentage is up over 7% . Tesla and their non-unionized EV shop now dominates every aspect of the automotive landscape , and the Biden administration has shoved billions of dollars into encouraging automakers and consumers to accelerate their transition to electric vehicles .
To auto workers , this move is scary . If Ford's expectations are right , there are a lot of jobs that are going to be lost during this transition , and so , as of Thursday of last week , the UAW organized their first ever coordinated strike against all three big auto manufacturers .
Usually , the union challenges one or two companies at a time , but we now find ourselves with all three being affected . Oh sure , pay is a big part of this .
Sean Fain , the UAW president , points to the fact that carmaker profits are up over 65% over the past four years , but auto worker rates have only increased by 6% , and the disparity between CEO and line worker pay has grown over that time as well , with Farley's salary jumping 21% over that time frame , while the CEO of GM , mary Barra's salary is now 362 times
that of the median GM employee . The UAW has offered up a position to raise wages by 40% , and naturally the auto companies have countered with a range of more of 15% to 20% . Those issues need to be worked out , but the EV issue looms right beside it . What good is a 40% pay raise if the job disappears at the end of the day ?
Let's take it one step further , because the types of jobs that EVs require are different as well . Evs don't require all of the moving parts that an ICE car does no transmission or exhaust systems , for example . However , the EV does require battery pack assembly and installation . The challenge for auto workers .
The current ICE jobs pay out an average rate of $28 to $35 per hour . According to the Bureau of Labor Statistics , a Carnegie Mellon study found that a new Ford battery plant in Kentucky is hiring workers at somewhere around $25 per hour , and a GM battery plant in Ohio is hiring workers at a rate as low as $1650 per hour .
Even if transmission workers shift and skill up to work on batteries , they could see a real wage decrease of 10% to 40% , and those battery factory jobs are non-unionized , which is something of a threat to UAW leadership . But the news isn't all bad for workers . For one thing , the notion that EVs will require less labor than ICE cars may be overstated .
Monroe and Associates , which specialize in tearing apart and benchmarking cars , notes that the number of parts between an EV and an ICE car , once the battery pack is included , are roughly the same , and that Carnegie-Mellon study that I referenced earlier found that EVs actually require more labor hours once the battery assembly is included .
This is one of the reasons why the major automakers are trying to pull some of that labor further in-house . By more vertically integrating , the auto companies hope to not only retain control over their fragile , evolving electric supply chains but ensure that the jobs that are created are Ford or GM or Stellantis jobs .
The challenge for the UAW is in finding ways to unionize those positions and getting their wages up to what union members are used to , and that evolution may take time , as currently EV production is a huge money sink for most automakers .
With the exception of Tesla , which is built a supply chain and a process to turn out profitable , affordable-ish EVs , the other automakers are kind of lurching forward from a standing start . Ford is investing $50 billion into their EV production lines by 2026 . Gm investing another $35 billion between 2020 and 2025 , with Stellantis following around the same numbers .
These are big dollars , big bets , and bets that won't pay off for a bit . Ford CFO John Lawler reported that each EV that it sold in the second quarter of this year cost them $32,000 . That compares to a profit of a little over $3,000 for each ICE vehicle . That loss , though , is almost all in capital retrofitting .
Once those investments have been made , lawler expects that EVs will be even more profitable than ICE cars , yielding an 8% return per vehicle .
In the meantime , though , automakers need to navigate that capital investment a complete restructuring of their supply chain , a need to turn out electric vehicles that their customers want to buy , all while keeping investors from panicking at the thought of a loss of $30,000 per car . And now the line workers want a 40% pay raise too .
That's the push and pull of the current strike . How can union members ensure that they will not only have jobs at the end of the day , but good , well-paying jobs that meet their needs , and how can auto companies meet those expectations , all while doing everything they can to soften the near-term impact of this massive transition to electric vehicles .
Getting this right is critical , because getting it wrong couldn't mean big price increases on EVs right at a time when the US market needs more affordable EVs , not more pricing ones . I'm Paul Schuster and this has been your 8 Minutes .