Elon Musk is correct. The risk of UAW’s 40% pay hike for its 150,000 members at the “Big Three” US automakers – General Motors, Ford, and Chrysler – could send them spiraling into bankruptcy once again.
Musk said while responding to our post, “They want a 40% pay raise *and* a 32-hour workweek. Sure way to drive GM, Ford, and Chrysler bankrupt in the fast lane.”
They want a 40% pay raise *and* a 32 hour workweek. Sure way to drive GM, Ford and Chrysler bankrupt in the fast lane.
— Elon Musk (@elonmusk) September 26, 2023
The last time the automotive industry was in a crisis was when Biden was vice president. During that time, automakers received a bailout from then-President Obama.
Even the corporate press has had to admit that Tesla benefits from the union chaos in Detroit.
A reporter asked Biden: “Mr. President, should the UAW get a 40% [pay] increase?”
The president responded: “Yes.”
Here is the moment when President Biden expressed agreement that the UAW’s demands for a 40% pay hike over a new four-year contract with automakers should be considered.
“Mr. President, should the UAW get a 40% [pay] increase?”
BIDEN: *confused* pic.twitter.com/Ya8LbCOimv
— RNC Research (@RNCResearch) September 26, 2023
To confirm we understood what bumbling Biden said in the video, Bloomberg also verified this.
We have noted that the auto industry workforce is set to contract in the years ahead under Biden’s Green New Deal as manufacturers pivot towards EVs that require fewer workers.
Also, Morgan Stanley’s auto strategist, Adam Jonas, recently warned clients that a surge in labor inflation among automakers could complicate the math for onshoring production in the US.
But beyond the 1-time losses, Jonas says he is much more concerned about the potential for 30 to 40% labor inflation over the life of the next 4-year contract and how the domestic auto companies may recalibrate their ROIC and payback math for EV onshoring. The MS strategist thinks the outcome will be greater austerity and focus on the ICE run-off (that, however, would make many more workers redundant as EVs require far less mechanical intervention than ICEs).
One River CIO, Eric Peters, said if UAW Boss Shawn Fain’s demands are met, the average hourly wage for union members would be north of $136.
Detroit automaker unionized labor costs, including wages and benefits, are estimated at an average of $66/hour. That compares with $45 at Tesla, which isn’t unionized, and $55 for Asian automakers.
Meeting all of Fain’s initial demands would boost average hourly labor costs to an estimated $136/hour.
Fein claims to be matching the roughly 40% compensation gains automaker CEOs have realized in the past decade. Ford’s CEO made $22mm last year. Stellantis’s $24.8mm. GM’s nearly $29mm.
… and another problem: the consumer will have to pay even higher prices after automakers pass-through all the wage increases.
Automakers will immediately pass through all wage increases to car prices. https://t.co/COl9DOTVgq
— zerohedge (@zerohedge) September 26, 2023
It’s unprecedented for the president to walk the picket line. Presidents historically avoid strikes and usually act as mediators.
Does the White House even understand how inflation is created?