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Musk Warns Biden-Backed 40% UAW Pay-Hike Risks Big 3 Bankruptcy

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.”

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.

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.

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?

  • Rick says:

    The unions have always been there to create good paying middle class jobs. Although there in China and Mexico.

  • Art LaPella says:

    First, in a free economy, when a union contract runs out the management would be free to fire all the union members and start over. As long as that is often considered an unfair labor practice, business commandeered by a union is more like the government than like a real business. Management interested in getting things done has long since been replaced by leaders more like politicians than like businessmen, who don’t mind kissing up to labor practice regulators. Nothing much gets done.

    Next, granting the union’s demands won’t cause as much inflation as you think it will. Raising the price will drive car buyers to buy foreign cars instead. But it will cause bankruptcy. I’m not sure either the union bosses, the union workers, or management care about bankruptcy. The workers won’t think that far ahead. The union bosses need to look relevant. And all of them are likely expecting Biden to bail them out at taxpayer expense. So they’re really striking against you, not just management.

    What’s the difference between a labor union and the Mafia? The Mafia doesn’t have enough power to get its robberies legalized.

  • Patrick Borush says:

    EV’s are a niche vehicle for the rich to run around town in and feel some way about it and virtue signal, thats it! They are a death knell to the US auto industry and there was NEVER any hope of “on shoring” main production of these environmental disasters from china where labor and resources are dirt cheap due to communism and rampant corruption. The 30-40% pay increase ask is a hard sell and a non negotiating point for auto makers here also, esp as they lose billions on these shit EV’s no wants or can afford!

  • Southeast Missouri says:

    In the foreseeable future, America turns into Cuba, with vintage automobiles everywhere. Now the labor market shifts from new production, to the maintenance of the older vehicles.

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