The ongoing labor dispute between the United Auto Workers (UAW) and the Big Three U.S. automakers involves familiar issues like salary increases, sick days, and pay grades. However, there’s a significant underlying factor at play—the transition to electric vehicles (EVs) and the shift away from internal combustion engine (ICE) vehicles, which has major implications for the industry and its workforce.
In 2022, U.S. automakers sold nearly 14 million new cars and trucks, with hybrid and all-electric vehicle sales surpassing 1 million for the first time. This marks a significant milestone, but it also underscores that the EV transition is still in its early stages.
While current concerns such as worker compensation are at the forefront of negotiations, the UAW’s contract with the Big Three expires soon, and a strike threat looms if agreement on a new contract isn’t reached.
Notably, during the tenure of the expiring contract, annual gross profits have surged by 34% at Ford, 50% at General Motors, and 19% at Stellantis. The UAW seeks a contract that reflects this growth and addresses the effects of inflation.
As Jeff Schuster, global head of automotive for GlobalData, suggests, there’s widespread acknowledgment that the union and its members should share in the automakers’ healthy profits. However, the automakers face a complex situation, even with their substantial earnings. As EVs become dominant, they must invest in new manufacturing facilities, research and development, workforce training, and sourcing raw materials, all while continuing to develop new vehicle models. Building auto plants is costly, and challenges are expected along the way.
Adding to the complexity, Tesla, a newer player in the industry, has excelled in EV development and manufacturing, putting pressure on the Big Three to catch up.
Erin McLaughlin, a senior economist specializing in transportation and infrastructure for The Conference Board, notes that many Big Three automakers are establishing EV plants in less union-friendly states, potentially weakening the union’s influence as a cost-saving strategy.
While union members naturally desire substantial wage increases, they face competition from non-unionized companies where workers often earn less. Tesla, the only major U.S. automaker without a union, exemplifies this trend.
If automakers feel labor costs are too high, they might shift more jobs overseas, which could negatively impact U.S. workers. These concerns erode the union’s membership and bargaining power, particularly in a climate of declining union membership nationwide.
Additionally, the negotiations are complicated by rising vehicle costs in recent years. The average transaction price of a new vehicle was $48,334 in July, and EVs tend to be pricier due to expensive batteries.
Balancing the development and expansion of EVs and the necessary infrastructure with consumer affordability poses a challenge for automakers.
The industrywide shift to EVs remains a prominent issue for UAW members and automakers, and the long-term implications of these challenges are uncertain.