United Auto Workers want a bigger slice of a shrinking pie

If the United Auto Workers go on strike this week – and as I write this it appears as though they will – it will be largely because the union needs the headlines. For its own survival, it has to hold up the impression that it is a major player in the US auto industry and not a corrupt and increasingly irrelevant relic of the past. Grinding the three biggest domestic-owned manufacturers to a brief halt is the best counter-argument the union can offer.

The pressure will not be as strong on the automakers to settle as it was for UPS. That potential Teamsters strike threatened to freeze the nation’s supply lines, which would have had immediate repercussions throughout the economy by disrupting the supply chains that put groceries on shelves and deliver raw materials for manufacturers.

A freeze by automakers on the other hand wouldn’t be felt by the broader public for a while. Auto dealers, who operate independently from the manufacturers, might even appreciate the opportunity to clear out their lots. Note that UAW President Shawn Fain’s strike plan is to target only certain auto factories to stretch out its strike fund. The union’s hand is weaker than it may appear.

GM, Ford, and Jeep-maker Stellantis are the three corporations currently negotiating with UAW. These three, mostly located in the northern states, combined account for just under 40 percent of the domestic car market. Non-unionized foreign-brand plants, mainly located in the southern states, account for the rest. A prolonged UAW strike will simply give the non-union plants a chance to further grow their market share.

The Biden administration’s pressure on the industry to switch to electronic vehicles will accelerate this trend. Never mind that the environmental benefits of doing this are weaker than advertised. EV car plants will require 30 percent fewer workers, according to the Wall Street Journal.

The batteries will likely be built at separate factories, most of which haven’t been unionized. The UAW has made various bids to organize the new factories in the south and elsewhere but despite a lot of noise has had little success. Even if they were to organize the plants, many are in right-to-work states, meaning that individual workers would have the right to reject making financial contributions to the union if they felt it wasn’t benefitting them.

The Biden administration has recently announced $12 billion in subsidies for the auto makers to help them transition, but it is not clear exactly how much that will benefit the unions. Hence the UAW’s demands, which not just more pay, more paid time off, and the return of cost-of-living adjustments but also more “stability”: i.e., demands that the companies don’t move jobs to other nonunionized factories as part of the EV changeover.

How important is this stability to UAW? Earlier this week the union dropped its demands for 40 percent wage hikes, saying workers would settle for something to the mid-30 percent range. This telegraphed the message that the union will bend on pay first.

An added problem for the union is its leadership’s credibility with its own members. UAW President Shawn Fain’s two predecessors both lost their positions in corruption scandals. Fain got elected in large part because the UAW was forced, as part of a Justice Department settlement, to adopt more small “d” democratic election procedures. His election win was narrow, and this negotiation is Fain’s first big moment in the spotlight. He needs to look tough. Leading a walkout is one way to do that. It’s pretty much the only tool the union leader has at the moment.