US Auto Workers Have Reached Braking Point

US Auto Workers Have Reached Braking Point
Theodora Lee Joseph, CFA

6 months ago2 mins

What’s going on here?

An upcoming strike by the United Auto Workers (UAW) union could wreak havoc on the US economy.

What does this mean?

About 146,000 auto workers are gearing up for a potential strike this week if General Motors, Ford, and Stellantis don’t give in to their demands. And it seems they’ve set their sights pretty high: we’re talking a whopping 46% pay hike over four years, plus some sweeter retirement benefits, and a shorter workweek to boot. But the companies themselves are less than enthusiastic about this shopping list of goodies. After all, they’ll need to shell out big time on the EV revolution in the coming years, and giving in to these demands could further jack up their car prices – making European and Asian competitors look all the more tempting.

Why should I care?

For you personally: Put the pedal to the metal.

If you’ve been daydreaming about cruising in a new American-made car, prepare for a potential hit to your savings. As of the end of August, America's Big Three automakers boasted a 70-day car inventory – but once that dwindles, prices might surge. And considering the pandemic’s lingering effects, which have already made new cars rarer than they were in 2019, you just might want to act fast to bag a ride at a decent price.

The bigger picture: Running on empty.

Should the UAW’s demands get the green light, labor costs could rocket from $66 to an eye-watering $136 per hour. And the broader economic landscape could take a hit too: even a brief ten-day strike could bleed the three titans of $5 billion, potentially pushing Michigan’s economy to the brink of a recession. After all, the 40-day UAW strike in 2019 cost General Motors alone a whopping $3.6 billion. And that’s not to mention the potential fallout for suppliers and their workforces, as well as the price drops that commodities like steel could face.

UAW strike losses
Source: Bloomberg
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