Upcoming Automotive Labor Negotiations: Are You Prepared?

Jun 30

This is article is part of a series of monthly articles produced by Harbour Results for PMA’s MetalForming Business Edge e-newsletter. Click here to view the full collection of articles.

The upcoming labor negotiations between Infor and the UAW and the Detroit Three automakers – GM, Ford and Stellantis - are expected to be contentious. The UAW/Unifor is fighting for increased wages and benefits and job security, while the automakers want to keep costs down to fund the transition to electric vehicles. With contracts expiring in September, negotiations will begin in July. However, the UAW has already outlined its demands:

Eliminate the tiered wage system;
Stronger job protections against plant closures; and,
Reinstate cost-of-living increases.

And, the new UAW leadership has expressed they are prepared to strike. Specifically, they have mentioned focusing on feeder facilities – transmission or engine plants - for high-demand ICE vehicles. A strike could be disastrous not only for the OEMs but the entire supply chain. Remember, in 2019, the UAW workers at GM went on strike for 40 days costing the automaker and its supply chain billions in lost revenue.

This year’s negotiations come at a critical time in the automotive industry, and both the UAW and OEMs face opportunities and challenges that raise the stake in the collective bargaining process.

Challenges Faced by the Unions

Job Security: The UAW likely will seek to enhance job security, aiming to protect workers from layoffs and plant closures. However, the transition to EVs, increased cost of doing business and global market uncertainties makes this difficult. In general, EVs require significantly fewer people to produce because they have far fewer parts and trim levels than ICE vehicles. Over the past several weeks, we have seen both Ford and GM make announcements about investments in ICE production facilities as well as salaried employee layoffs and buyouts. These are all in an effort to reassure employees and the unions.

Wages: In the end, most labor contract negotiations come down to money. With the OEMs announcing record profits, the UAW/Unifor will want hourly employees to benefit from those earnings and push for more salary. Another area of concern for the UAW Union is wage disparities among its members. Negotiations will likely seek to address wage gaps between veteran and entry-level employees. The union must advocate for equitable wages that reflect the contributions and skills of its diverse workforce.

Challenges Faced by the Detroit Three

Electric Vehicle Transition: As the automotive industry accelerates its transition to electric vehicles, the Detroit Three face the challenge of restructuring its manufacturing operations, building new vehicles and retraining its workforce accordingly. They need the profits they have been earning through COVID to fund this transition – the capital expenditures to support all the new battery electric vehicles being launched in the next 7 years is huge. Negotiations will likely involve discussions on investment in EV production facilities, new vehicle launches, battery technology, and support for workers during the transition.

Cost Pressures and Supply Chain Issues: The automotive industry faces significant cost pressures due to various factors, including inflation, raw material price fluctuations, rising commodity costs, and increased competition from international manufacturers. GM, Ford and Stellantis will aim to negotiate labor contracts that help manage these costs without compromising profitability.

Increased Competition: Today’s automotive industry is seeing a great deal of more competition, specifically in the EV marketplace, with new OEMs domestic and abroad targeting vehicle sales in North America. The Detroit Three are facing increased competition for their product without a unionized workforce, which makes it even more difficult for them to make the transition successfully.

If you are in the automotive supply chain, the upcoming negotiation should be on your radar, and you should be closely monitoring the situation. You need to do scenario planning and be prepared for a prolonged strike. Are you communicating with your customers? Do you need to adjust inventory spend? How are you going to manage your workforce if you need to shut down? What levers can you pull?

We are all hoping for an amicable agreement, but as business leaders we cannot rely on hope.