New contract demands made by the United Auto Workers union would add more than $80 billion to each of the biggest US automakers’ labor costs, according to people familiar with the companies’ estimates.
That large an increase to labor costs over the contract’s four-year term could wipe out profits and threaten the carmakers’ futures, according to the people, who asked not to be named because the analysis has not been made public.
It would increase hourly labor costs to more than $150 per hour at Ford Motor Co. and General Motors Co., including wages and benefits, up from the $64 an hour GM, Ford and Stellantis NV workers make currently, the people said.
The calculation is based on the UAW’s request for a 46% wage increase, restoration of traditional pensions, cost-of-living increases, reducing the work week to 32 hours from 40 and increasing retiree benefits, according to the people.
A UAW spokesperson declined to comment on the cost estimates but referred to Fain’s previous statement that “record profits mean record contracts.”
The biggest US automakers are mired in tense contract negotiations with their largest union. UAW President Shawn Fain has declared “war” on the corporations and warned the union’s demands would be “the most audacious list of proposals they have seen in decades.” The union’s current contract with all of the Detroit legacy automakers expires Sept. 14.
Fain contends the roughly 150,000 UAW-represented workers at GM, Ford and Stellantis are due a payback for helping the companies recover from the Great Recession a decade ago, which set them up for record profits. The carmakers have pushed back on many of the demands.
The current $64 per hour labor costs at Ford, GM and Stellantis are already higher than the $55 per hour cost at non-union US assembly plants of Asian and European automakers, an estimated labor cost gap of about $900 million, according to people familiar with Ford’s costs. Labor costs at EV leader Tesla Inc. are even lower, at $45 an hour to $50 an hour, the people said.
Ford Chief Executive Officer Jim Farley last month noted that the company has added thousands of union jobs and is spending $1 billion to upgrade working conditions at plants. He argued that spending some amount more on labor would pay off in the market place.
“For us, this is not simply a number crunching exercise,” Farley told analysts during the automaker’s second quarter earnings call. “We believe over time customers will appreciate and reward our approach and our workforce will be more committed.”
Stellantis hasn’t yet finished calculating the cost of the union’s demands, a spokeswoman said. A GM spokesman declined to comment.
‘A Slap in the Face’
The negotiations come as US automakers are pouring tens of billions into designing and building EVs, while trying boost profits on conventional gas-fuel vehicles to pay for it. Fain has accused them of engaging in a “race to the bottom” in the transition to electric vehicles, with factories that will employ fewer workers making lower wages.
On Tuesday, Fain lashed out against Stellantis for its starting proposal in labor negotiations, calling it a “slap in the face” during a livestream on Facebook and accusing the owner of the Jeep and Ram brands of lying to its workers about how aggressive its asks are.
The Amsterdam-based automaker is proposing to cut existing medical coverage, create additional wage tiers, eliminate caps on the use of lower-paid temporary workers and change the profit-sharing formula, Fain alleged. He also claimed Stellantis has not offered to build any new product at its assembly plant in Belvidere, Illinois, which has been idled since February, laying off about 1,350 workers.
A copy of the proposal viewed by Bloomberg News confirmed many of Fain’s claims. The document said Stellantis expects health care costs to rise by $613 million to $1.1 billion over the next four years. It also said worker absenteeism cost the company almost 17,000 units of production in 2021 and 2022.
To lower costs, Stellantis proposed cost-saving measures that the union has long resisted, such as higher care co-payments and premiums, limiting access or reducing coverage of certain drugs like erectile dysfunction medication and replacing some Blue Cross Blue Shield plans.
The automaker also proposed making elected union officials do full-time work, and making raises, profit sharing and vacation time aligned with absentee rates for workers.
Stellantis didn’t immediately respond to questions about Fain’s speech or the leaked proposal.
The company has said it isn’t pursuing concessions, but “I want to tell you, UAW family, that just isn’t true,” Fain said during the Facebook Live stream.
“Stellantis’ proposals are a slap in the face,” Fain said. “They’re an insult to our members’ work over the past four years.” He then threw the proposal from Stellantis into a trash bin.
--With assistance from Ian Kullgren.
(Updates with Stellantis’ proposals from the fourteenth paragraph)
Author: Keith Naughton, David Welch and Gabrielle Coppola