The United Auto Workers union and Detroit’s Big Three could both end up losing after the current strike because government-driven electric vehicle manufacturing is quickly eating away at the industry’s big profits, the Mackinac Center for Public Policy informed national media recently.
UAW’s strike against Ford, General Motors and Stellantis – the union’s first action against all three major U.S. automakers – is entering its fourth week, and news organizations have been reaching out to the Mackinac Center for insights.
The three companies still see strong demand for their traditional vehicles, and the union is seeking a greater share of recent profits. But the accelerating changeover to EV manufacturing – which is motivated by government pressure and incentives rather than by market demand – means U.S. manufacturers and their employees will soon be stuck with an inventory of cars that buyers do not want. This looming threat to the auto industry’s business model has received little attention in the press, but Mackinac Center experts say it will last long after the strike’s short-term economic effects are forgotten.
USA Today cited Steve Delie, the Mackinac Center’s director of labor policy, days before the strike began:
“It would be extremely economically significant,” says Steve Delie, director of labor policy at the Michigan-based Mackinac Center for Public Policy. “It could be potentially more devastating than strikes in the past.”
Such significant increases in salaries and benefits would put the Big Three in an extremely uncompetitive position with foreign competitors and Tesla.
The UAW is seeking a four-day work week, a 46% wage increase and a share of company profits, among other things.
The UAW is demanding enormous concessions that are only possible with a mid-20th-century economic boom. If the UAW gets anything close to what it’s demanding, it may drive the Big Three off a cliff — taking the UAW’s 150,000 members with it.
While workers understandably want wage hikes, especially after years of devastating inflation, these demands don’t reflect the realities facing the Big Three. Domestic automakers have been profitable over the past decade — making $164 billion, including $20 billion in 2023 — but the rapid transition to electric-vehicle production has automakers spending huge sums while preparing for substantial red ink.
Is this the future of the Big Three? Making cars people don’t want at prices they can’t afford, while paying workers more to work less, mostly on the taxpayer’s dime? If so, it’s an unsustainable business model that will benefit neither consumers nor taxpayers.
Delie also appeared on CNN, explaining why the UAW’s demands are not sustainable:
The union is trying to get the best deal for their membership that they can, and that's perfectly understandable. But when you look at the market and how EVs have gone so far in this transition, with the incentives and the mandates that various states are issuing, the money coming in from the federal government that’s propping this industry up — despite all of that, Ford still lost 4.5 billion dollars on EVs this year, and that’s in a year with record profits.
Michigan Capitol Confidential editor James David Dickson has appeared on the Fox 2 Detroit TV show “Let it Rip” several times to discuss the strike.
Guests on the Sept. 8 show discussed electric vehicles, their role in the strike, and the effects they have on the Big Three’s profits.
“Gretchen Whitmer wants there to be two million EVs on the road by 2030,” Dickson said. “Right now, there are 37,000. The only path there is with a lot of taxpayer money allocated to EV subsidies.”
There is not enough demand for electric vehicles to accomplish Whitmer’s goal, Dickson noted, so government mandates to produce EVs could harm the profits of automakers.
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