AAH #668 - Why Does Shawn Fain Want to Damage the Detroit Automakers?

I'll online After hours is brought to you by Bridge Done Tires Solutions for your journey, Gary, John, how are you. I'm doing okay. I

feel like I'm back in the saddle. You know, I missed last week's

show. I was out of town. So it's good to be here and

we're glad to have you back. We're gonna talk about some serious stuff today,

but I I've got to talk about something slightly more whimsical to begin the show with good So I would argue that one of the most famous cars in the world is the DeLorean DMC twelve. Anybody knows, you know, the

back to the Future car, and and you know, you could you could talk to housewives, you could talk to to retired anybody would know what that that vehicle is. So it just so happens that forty one years ago today,

John DeLorean was arrested in a sting by the FBI for a twenty four million dollar cocaine deal. Right, that's completely mind bottling to me. That's

how bad it got, Right, how desperate he was he resorted to selling coke to try to save the company. I mean, that's just so crazy

to think about that. You know, there was a guy in the industry.

He'd worked at you know, General Motors for Pontiac for many, many, many many years, and then started his own company, came up with this car and you know again a legendary looking car that was designed by a guy by the name of Bill Collins. I knew Bill Collins, who died

this last March. And so remember a complete story. Delriidon was acquitted,

right. Yeah, his lawyers were successfully able to argue that it was entrapment,

that the FBI actually trapped him into selling cocaine. Right, But he

was very willing to do it, and Trappman or not, he was a willing to participant. So that's our Martin McFly moment for the day. So

let's go, okay with the show. Let's get out with the show.

Let's bring everybody in. We've got Bob Schravelli from Strategic Labor and Human Resources

teeth not and from Bloomberg and Paul Eisenstein from Headlight News. Great having y'all

here. And Bob, we want to talk about the strike. You are

the true labor expert. I mean, we all follow this, right,

but I mean you've been in the thick of this. Your entire career.

What do you make of where we're at right now? I mean, and

let me set the stage this way. They got a hell of a contract

negotiated already. I mean, they got just about every damn thing that Sean

Fain wanted, and yet this thing's dragging on. So what do you make

of what's going on? Well, you know, you and I have talked,

and there was a real inflection point that started all of this down the path, and that's when the monitor over the UAW, Neil Broski, signed, with just a stroke of the pen, a change to how they elected their leadership from what used to be called the Ruther caucus basically a delegate form of elections, to a one member, one vote, and whenever you give all the members a vote, crazy things can happen. Anyways, they threw

out the old leadership and they brought in the new leadership. And that is

truly the inflection point in my estimation of what we're seeing today and what we're seeing today. Back when this first started with that vote, I knew it

was going to be chaotic. Matter of fact, at the time, I

was doing some speaking with Mima and I actually labeled the presentation chaos and labor relations. Who wouldn't have known that it would have been this chaotic. Yeah,

and just to establish your quota fide for the audience here, the Justice Department brought you in to help them oversee all what was going on there.

Yeah, so most of your viewers know that there was a big scandal between what we used to be called FCA and the UAW, which involved embezzlement of a lot of funds. And as the UAW and FCA pled guilty to the

criminal charges, part of the plea remit required that they engaged monitors to oversee their labor relations. And I was engaged by the Department of Justice with two

friends to account to oversee Stilantis. And then Neil Barrowski was appointed by the

Department of Justice to oversee the UAW. Yeah, Keith, you're following this,

I mean, especially from the Ford side, right, I mean, and what do you I mean last week? Was it last week or this

week? I mean, things are going so fast I can't even keep turning.

This week Bill Ford came out and I mean the guy was practically down on his knees begging the union stop the strike. Yeah. Ford has offered

a twenty three percent raise, which you know, just stopped for a second and think that of the last time you received a twenty three percent raise, like never and so. And then if you fold in Cola, which Ford

has agreed to restore, as has GM, as has U Stolantis, then you actually get up to around a thirty percent raise, which was kind of the new bogie we were told by our sources that Sean Faine had. So

as soon as Ford got to that bogie, then things changed. Then it

was wait, we need the battery plants. You know, as part of

the deal, we want the battery plants to be in the master Agreement, and GM has agreed to do so. So then you know, suddenly Ford

was not the didn't have the favored nation status that it seemed to have, And then the UAW kind of turned on them and took down Kentucky truck eighty seven hundred workers. Ford now has more sixteen thousand workers on strike out of

a total of thirty four thousand, so way more than GM and Stillantis have on strike. So Ford went from the penthouse to the doghouse. So Keith,

I want to ask you, So you know John mentioned that that Bill Ford came out made a presentation, and you know, he said, I've been silent. I haven't said anything, but you know when Kentucky Truck went

down, now he had to speak. And to quote part of his presentation,

he said, I have been part of every negotiation since nineteen eighty two and have worked with every UAW leader from Doug Frasier to Ron Gettlefinger and Bob King. I have also been the most pro union leader in our industry.

On my watch, Ford is the only automaker to have added UAW jobs over the past fifteen years. We employ more UAW workers than any other automaker,

and then went on to say, I call on my great UAW colleagues, some of whom I've known for decades. Many are close personal friends. We

need to come together to bring an end to this acrimonious round of talks.

I sort of got the feeling from that he was setting himself up saying, Hey, I'm a friend of the UAW UAW friends that I've known going back to nineteen eighty two, which presumably would not include Sean Fain. Hey,

let's come together on this. Did you get that sense at all? Yeah?

Absolutely, and no They didn't really know Sean Fain. He came up

through the Chrysler system, so it's not somebody Ford has dealt with. But

they sure know Chuck Browning, who is the vice president for the Ford department, who's negotiated several contracts and they have great relationships with him. Bill Ford

plays hockey with UAW guys. He does have friendships with UAW folks, regular

rank and file folks, high ranking UAW folks, and Ford has always had the best relations John can tell you that has always had the best relations with the UAW of the three companies, and they feel like, you know, no good deed goes unpunished here. They currently have the best economic offer on

the table, and you know, they're at a twenty three percent raise.

GM and Stilantis are around twenty percent. They were the first to offer Kola

back. They have really made a pretty extraordinary economic offer. But where they

haven't moved as much is on the battery plants, and that's where at least Sean Fain says, GM really doesn't talk about it. But Sean Faine says

GM has agreed to have the battery plants as part of the UW's master agreement, which is extraordinary because we talk about these battery plants. They for the

most part, with the exception of one, you know GM ultim plant in Ohio, all of the battery plants we're talking about are under construction. They

have no workers yet, they have not been organized by the UAW, and yet you know GM, according to Sean Fain, has agreed to put them under the UAW Master Agreement. Before. There are workers who have voted to

join the uaw's which some people which some people say they can't really legally do.

There's an argument to be made that workers actually have to vote. I

see Bob shaking his head in agreement. I don't mean to cut you off,

Keith, but one of the things I'm wondering if any of you folks agree. I actually thought that Sean Fain wanted to strike, and I still

think he may have wanted to strike, and I still think he may want the strike to continue. I think Fain really believes he can squeeze incredible amounts

out of these folks. But there's more. I also see Faine as somebody

who has almost this grand vision. First of the UAW again resuming its position

as the exclusive union in the US labor industry, and secondly himself being elevated to some sort of demigod, the guy who is going to reinvigorate American labor after what forty years or more of the labor movement just continuing to decline, certainly since Reagan fired the air traffic controllers. And if you look at what

the UAW Fane's response was to Bill Ford's comments during that speech, very brief speech he made at the Rouge plant, it was quite interesting because he basically said, don't talk to us about Ford and the UAW it's workers against the auto industry. Auto industries greed basically talking about the world of labor coming together,

solidarity forever. And one of the fantasies of that quote was, we're

going to represent the workers at Honda and Nissan and Toyota and VW and Tesla, and there's a chance Tesla could get a union because they're so screwed up.

But the other automakers have basically the workers that the other automakers have either said go away or they voted down unionization drives. Yeah, But what Sean

Fane is betting on, Paul is that the terms of this deal are going to be so rich that the workers at those factories who previously have turned away the UAW are now going to say, I want to sign up for that.

I'll take a thirty percent raise. Sure, come on in, yeah,

Bob, But I want to get Bob's input on that. What do

you think, Bob? Do you want to be able to organize the transplants

and the startups? Well, John, in the first three minutes of your

show, there is so much swirling around in my head. I feel like

a mosquito on a news stamp. I know I want to see I want

to start. I mean, this is such a rich conversation. First off,

I've been in this business a very long time as an advisor and a labor lawyer, and I deal with twenty different international unions, generally all along the way from the top to the bottom, and nobody I know knows fane, very few of them. A few of my colleagues know the leadership that

was elected. And if you go around all the regions, almost to a

tee, all the old regional directors, not all of them, but almost all of them have been replaced. And the one thing I heard I agree

with one hundred percent this is an area for ideologues. I think somebody also

said a demagogue. And I was telling John the other day that I read

a quote it said, the labor movement is industrial conflict with declining capitalism number two, a move from a move to distinguish workers from capitalists, a move from capitalism to socialism, and a liberal use of strikes to pull out economic and political power. And I think I may have surprised you, John,

when I said that quote came from nineteen twenty and in the early part of the nineteen hundreds, the labor movement was controlled by a lot of ideologues, and there was many, many more strikes, and many of them were violent.

And that's the cloth from which fan is cut. And when you look

at the major name brand unions in the automotive industry, including Unifor, the ibwiue CWA steel Workers Teamsters, almost every single one of their international leaders are I'm recently elected and with IVT O'Brien said the same thing. Fine said,

it's not I don't care what's going to happen with the industry. I care

about what's happening to working people. And if I have to bleed a little

now, for that ideology of the working class. I will do it.

But who knows. This is not a industry that is cemented in America.

It's not a railroad or a hospital or a institution that can't move. We

will see just precisely who's going to be the winner of this two, three, four years from now. And you know, I was looking back at

some records when the UAW struck General Motors last time. They still the striking

workers from what they lost in wages during that strike, they still have not recouped it four years later. That's a pretty impressive statistic that whatever they did

to gain something, they still have not regained it. Bob, when you're

saying that that it's not a hospital, it's not a railroad, are you suggesting that some of the OEMs might decide to move plants elsewhere. I would

say, because our industry is an extended enterprise, the dollar will find its best use among the OEMs and among the suppliers. And we went through restructuring

in such a big way over the years where we moved everything the low cost countries that it is within the realm of possibility, and I would fully expect location decisions to put places that will not have to suffer this risk, either in non union settings, in different geographical settings within the United States, or following the dollar to its best use in low cost countries. Absolutely, can

I jump in for a second. There's a critical thing we have to remember.

The Biden administration has creatively done something that at least gives a little support to the UAW and a heck of a lot of support to the American auto industry. And by that I talk about any and everyone producing vehicles in the

United States or if you prefer in North America because of NAFTA two and that is the IRA. So it does put a whole bunch of restrictions on moving

out of the US. Yes, you can move to Mexico and Canada to

varying degrees, but all the incentive guidelines they restrict where you can build them, where you can assemble the vehicles, where the batteries come from, where the raw materials come from. So, in a sense, that does potentially

help the UAW, but really not, because it doesn't really matter if it's Tasla, if it's Toyota. As long as they meet the same standards producing

them here, that's fine. They're going to do great and something something to

keep in mind, which sort of fits in this. But Keith, you

were talking about before, it's all well and good to say to workers down in Kentucky or Texas or wherever any of the transplants are that look at how much money we made. Well, we know exactly what's gonna happen, because

it has happened since the first Honda plant opened here for forty years ago.

The transplants are just simply going to raise their rates, their benefits to very close but not quite as high as whatever the UAW wins. They always do.

They save maybe one thousand dollars a vehicle overall, they get a little more productivity out of their offers to their workers, and they keep the union out. They keep the workers happy because they say to them, look,

just like you mentioned, Bob, how much did they lose striking, how much did it disrupt it took market share, risked your jobs. Don't strike.

Don't we do very good job taking carry you? We're the benevolent company.

And what's going to happen now? I think, though, you have

to recognize that things have changed. This is labour's moment. Three quarters of

the company support the UAW in this strike, and we have union victories all over the place. Look what the teamsters did with UPS. The top rate

for drivers at UPS now is forty seven dollars an hour. That's very attractive.

Yeah, I don't, and I don't makes a good point here.

You know, package delivery cannot be outsourced to China, it can't be moved down to Mexico. They have a captive market here and UPS can easily pass

the cost on to the customer. In the auto industry, that's not the

case. The market determines what the price of any vehicle is going to be.

As an automaker, you can subtract out what profit you want to make at that price point, and what's leftover is your cost. And if you

can't meet that cost, you're screwed. You lose money, maybe you even

go out of business in the long run. And that's the real difference here

is and this is why I question whether Sean Fain and his new cadre of leaders see the big picture. This industry is going through a massive transformation.

It's not just EVS, it's the move to software defined vehicles. It's trying

to drag legacy suppliers along into this new centralized zonal computing architecture. There is

a big hurdle to be overcome the massive strain in the industry without the UAW issues. Now add in huge increases in labor costs on top of everything that's

going on, and a strike that is absolutely crippling smaller suppliers. If this

goes on another two weeks, we're gonna see irreparable damage being done. In

my opinion, See, I don't think the union sees this. I think

we've heard irreparable damage many a time before, and I've been The first strike I covered was back in seventy eight, So I mean we've heard that every time. We hear the same arguments on both sides, and Keith your point,

I think there was irreparable damage. In nineteen seventy eight, there were

one point five million UAW members, Detroit three had what eighty percent of the market. Today they've got forty percent. There was irreparable damage back then.

We just don't see it immediately. It takes years for that to play out.

I would argue that the vast majority of that was bad management. I

mean I came into the business, you and I know management, plus crippling pension costs, crippling healthcare costs, and a jobs bank where each of the Detroit three were paying a billion dollars a year to people for not to work.

I mean, so it was boneheaded management decision to agree to those things.

Well, yeah, but how much just just if you look at GM's market share, how much of that was from a cars that you couldn't like.

Agreed, great, another car that the pain peeled off and they wouldn't help it work. No, No, hey, look, I'm not going

to exonerate management at all. I mean, you know, Dumming said it.

You know, managements were at least eighty percent of the problem, and he said, and as long as I'm thinking about it, maybe it's ninety percent. And I also have to remember when the UAW and all the other

unions were at their highest level of membership, it was pre Reagan, and an inflection point back then was what the air traffic Controllers strike, where they started to use permanent replacements. Before that, we all thought permanent replacements was

a strange phrase, never use, sort of theoretical concept. And back prior

to nineteen eighty there were many, many more strikes, even than there are now, and so they made the decision, that is, the management negotiating team made the decision, let's do what we need to do to put the industry back to work. But it makes me think that when Bill Ford went

on and made a plea, he made some of the plea was let's get back to the business of building cars, but also let's avoid this irreparable damage to the industry. And it might not happen in a year. I think

we're going to have to look at this historically to see precisely where everything goes.

But you know what is when I talked to my colleagues, all of which don't want to be named, there are people in the UAW that are trying to influence this shift away from this type of strike activity, and even within the companies they're scratching their head on this stuff. Does Spain actually have

a number in his head that, once it's reached he said, okay, everybody go back to work, Because it almost sounds to me until the autos say this is my last offer, my last best and final offer, he won't make that decision. They are going to have to at some point say

enough is enough, play your next hand. Uaw all right. So that

was the headline of a story I just posted on the Headlight News just a little while ago. Gerald Johnson, the head of manufacturing at GM, just

issued a five and a half minute video in which he essentially said enough is enough. He didn't use those words, but it was exactly what he said.

We have given you. Thirty nine dollars and twenty four cents an hour

is your average. The average war work will make eighty thousand dollars in pay,

and when you add in bonus and profit sharing and overtime, many quote unquote many of you will take home one hundred thousand dollars a year or more.

When you add in all of the benefits, you get the number he quoted, one hundred and fifty thousand dollars per worker. And he wrapped up

by saying, you are in the top thirty percent of all American workers, not manufacturing, not just blue collar. You are in the top thirty percent

of all American workers. Now, doesn't it seem that longer it takes the

more money they get. So if you're a worker, you basically say,

hey, I'm in no hurry because Sean is doing a hell of a job.

For me, because it just goes up, up, up and up.

The only pattern we're creating here is not in the terms and conditions of the agreements. We're creating a pattern in terms of the direct actions of the

u WAW and other unions to use a strike to get the companies to go beyond their last offer. And we've done that a number of times in the

industry by going to multiple ratification votes and sweep me in the pack. We

have trained these folks to do this. But you have to say, if

Fain could get a fraction of a percent more or one percent more, somebody has to be doing a cost benefit analysis on the hurt is causing to his membership to be out just to get that little increase on the margin to satisfy his desire to be the president that got the big package. Somebody has to

be doing that. I think saying his goals go way beyond the auto contracts

here, I do he sees this as the modern inflection point. It's the

air traffic controllers strike was the inflection point the line of unionism in America.

This is the inflection point for its rise. And you know all these new

labor leaders that we've been talking about, are having all this success organizing Starbucks, organizing all these new companies, and he sees an opportunity finally to reverse that slide. It wasn't one and a half million John in nineteen seventy eight,

it's four hundred thousand right now. He sees an opportunity to organize Tesla.

This is not pie in the sky. This is what he truly sees

as an opportunity and the calling card. The best way to do that is

to get a very rich, historic generous contract. So this is way beyond

just what he gets out of four GM and stillantis. This is about the

future of the UAW and the labor movement in the United States. They feel

like they have the wind at their back right now, coming out of the pandemic. The American public is more supportive of unions than they have been at

any time since the nineteen fifties. They don't trust employers, they aren't happy

about how they were treated during the pandemic. They need protection. So unions

have their moment and that's what he's trying to seize. Right Totally agreed Keith.

In fact, I would argue that Sean Fain has a moral obligation to his membership to organize the transplants and the startups, because if he gets this big pay gap and they are able to maintain the labor cost advantage that they have right now, it's a threat to his union membership. I mean,

you know, he complains that when he hears about the need to be competitive, he hears a race to the bottom. When I hear an argument about

not being competitive, that's a race to going out of business. If you're

not competitive, you know you're going to get bulldozed out of the way.

In this industry, Well, the unions are winning more and more in RV elections, more than seventy five percent margin of victory in terms of the petitions that are filed. And when I'm advising our clients to do is obviously get

the best you can on market rates, but protect operational agility and efficiency and flexibility. The market to a certain extent is going to determine what the wage

and benefit settlements will be. Even in the non union they can't avoid the

market impact. And with FAIN getting much bigger, actually the OEMs providing much

larger wage and benefit increases, that'll have a whips effect on everybody. It

will move the market. And you know, you have to think about our

industry with a lot of it in the Michigan, Illinois, Wisconsin, Indiana, Ohio area as a trading block, and that trading block will go up and down together and that'll make everything more expensive. It also make the settlements

larger. So agility, operational flexibility, protecting managerial provid prerogatives as best as

they can. That is still quite doable. And also so you're talking about

the factory floor here to me, just so our viewers can get an understanding what you're talking about in terms of agility and flexibility. So first off,

if you are in a unionized facility, let's say you want to put somebody into an open position, you might have to move three or four or five people to get the one person in that position. That is absolutely the outcome

of a seniority system that's negotiated. So being able to move people quickly and

flexibly to the places where they're best used very important to set up and bring to a conclusion certain lines of business very important. There cannot be any impediments

to that, and of course, in this industry, anything that damages our ability to keep production flowing a major problem. So it's really important for any

employer to understand what their organizational imperatives are cash, profitability, flexibility, and make sure in all the relationships with the workforce, whether union or non union, that they are able to fortify those organizational imperatives. You know, I

want to get back to something, Keith said. Keith, You're absolutely right.

All the studies show that people are very dissatisfied with employers in general, and union support has gotten to a level that we haven't seen in a long time. There was a great there was a great chart on the front page

of the New York Times, I think it was late last year or early this year, which showed wages, income for different classes of Americans. And

what it showed was CEO pay and the billionaire class. Everything was skyrocketing.

It looked like it looked like a missile takeing off where the average American at best it was like this, and in many cases it went down for many of the sectors of the economy. Now you add the fact that first we

have inflation. We've seen prices on vehicles a great example, prices on a

new vehicle average now about forty eight thousand dollars. Once you talk about average

transaction prices, what costs to take the vehicle home, that's over a third more than it was as recently as twenty sixteen, well above the rate of inflation. The reality is, with rare exceptions, there aren't many young people.

There aren't many people who are getting into the market who can afford a new vehicle, and people are getting very frustrated. They can't afford that,

they can't afford to buy the food that they like, they can't afford to go to concerts anymore, they can't afford to buy homes. This is setting

off a chain reaction. A lot of the political dissatisfaction that we see is

in various interpretations all about this frustration. And it's weird because it echoes in

different ways on left and right at the spectrum, but it comes from the same sort of area. So that's why I think the union strikes that we've

seen and the strong demands are actually echoing. Well, you don't hear people

saying all those greedy auto workers. They're agreeing more and more those greedy bosses.

Yeah, great point. Hey, thanks for that, Paul, But

we've got to take a quick commercial break. Right now, we've got stuff

to come back, and when we come back, I want to ask about the impact of all this labor stuff on the electric vehicle segment, and Keith, think about that because I want to come to you on that. But

first a shout out to our sponsor, Bridgestock. How do you breach the

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So, Keith, as you know, Ford was going to build this plant battery plant in Michigan with COTL, biggest battery manufacturer in the world from China.

They've paused that directly because of the labor negotiations. Now we see General

Motors delaying its electric pickup by a year. There's issues, you know,

maybe the take rate isn't going as strong as they thought it would be.

But now there's this, and Bob alluded to this earlier, this deepening concern of how do we deploy our capital. We got to be very very careful

about where and when we put it. So I'd just like to get your

reaction. You know, what do you think these labor negotiations are doing to

the EV segment? And then where does that leave the Biden administration. You

know, Joe Biden's most pro union president ever, he says, and he's also trying to push electric vehicles. I see a head on collision with administration

policies here. Absolutely, I'm picking up on what Paul just said. There

is an affordability crisis in the industry in general electric vehicles. If regular vehicles

are forty eight thousand average transaction price, electric vehicles are sixty thousand. None

of what's happening right now is going to make electric vehicles more affordable. And

yes, there is a demand problem now with electric vehicles. You could see

it in Tesla's earnings yesterday. Their margins keep shrinking and shrinking, and they

are not getting the volume. They had a decline in sales in the third

quarter for the first time in several quarters. They're not getting the volume you

would expect from all the price cuts that they are doing. Because we are

getting to this next level of electric vehicle buyers, the main stream, the early adopters have already got their electric vehicle or two, So now you're getting to regular people and they're saying, wait a minute, I can't afford a sixty thousand dollars vehicle that I don't know if I'm going to be able to find enough chargers to get from point A to point B for So there's a big pause on electric vehicles and that plant in Marshall, Michigan, the battery plant. Ford is pausing it for three reasons. One is labor costs,

for sure. They don't know what they're going to be yet, so they

can't commit to this three and a half billion dollar plant until they know that.

But the other is ev demand. And the third element is what's going

to be in the IRA How much of a government subsidy am I going to get for making batteries here in the United States. That's not clear yet.

That still needs to be worked out. It does leave Biden really walking a

tightrope. How can you be the most labor friendly president and then have this

very aggressive green agenda. He wants half of the cars sold in America by

twenty thirty to be electric, and increasingly no industry expert is predicting that's going to happen. The auto companies think it'll be made a third and that might

be aggressive. So when I heard Chane announce that he had pulled in the

joint venture battery of program to the master agreement at General Motors, it shocked me because, Paul, you hit it right on the head. Our law

does not allow something like that to happen where you have two employers, and where you have a joint venture, you have two joint employers. I am

not quite ready to say that was an accurate statement on Fame's part. I

want to see what General Motors has to say about it, because I'm not so sure that they pulled the whole thing under the UAW master contract. If

they did, that was a massive win for the UAW and a massive loss for General Motors. And GMA said nothing. It's been crickets. They've said

nothing. So are we going to just believe what Fain said. I'm not

quite that naive to say that's the full story. I don't think you guys

are either. No. No, So. Our our friend Joe White,

who was on the show two weeks ago, three weeks ago, had a piece in Reuters Today which I own a quote from because it goes to your point, John about the Biden administration and Paul to your point about the IRA, so quoting Joe in effect famous demanding that workers get a greater share of the thirty five dollars per kilowatt hour in US government battery cell manufacturing subsidies the plants helped to recap from the US President Joe Biden's Inflation Reduction Act. The

flow of cash flow from the IRA could be substantial. For example, thirteen

hundred workers at GM's ultimate Aultium battery plant Northeast Ohio could someday produce thirty five gigawatt hours of batteries annually, or thirteen kilowatt hours for each hour in a worker's forty hour week. At full capacity, the plant could generate an average

of four hundred and fifty four dollars in subsidies per worker per hour in return for wages starting at twenty one dollars per hour based on figures disclosed by Altium.

So there it is that Sean Fain looks at that number and says, you know what, that's not fair to the workers. Absolutely, it feels

like the workers are getting left behind at these battery plants. And you know,

let's face it, they were paying Altium initially was paying wages at that plant that were the equivalent of working at McDonald's. So they've raised them since,

but there's still a lower pay rate. They're twenty to twenty four dollars

an hour. The top rate at UAW know Master Agreement is thirty two dollars

an hour currently heading for forty. So they need to close that gap somehow,

or all those workers who are in internal combustion engine powertrain plants right now who might find work at a battery plant are going to take a huge bay cut. Yeah, but here's the problem, here's the challenge, is that

the only cost problem with electric cars is the battery. That's it. Everything

else is cheaper. And if the Detroit eight three are locked into significantly higher

labor rates, and I'm not saying that the workers don't deserve it or shouldn't get it. I'm just saying, if you're the Detroit three and you have

the highest labor costs on the highest cost item in an electric car that's going to make or break the whole EV industry, You're screwed. I mean,

And this is why I come back to the moral imperative that Sean Fain has to organize the transplants and the startups, because as good as it will be for those workers, it could lead to the long term demise of the Detroit three, especially in the EV segment. Is the only way to get the

price really down is to get volume, and you can't get volume at sixty thousand dollars a car. So they got to find a way to increase volume.

And right now it's not going in that direction. But you know,

one of the questions I'm going to be looking at when when all this is done, we hear about we hear about time off, we hear about retirement and medical and so on, what else is there that is going to be aimed at improving productivity? I mean, that's been an issue for what thirty

years now in all the contracts, and we've seen good contracts as we saw before the Great Recession, there were some good jumps in what the worker's got, but the UAW also granted significant improvements in productivity if I'm correct, And John, you or Gary may be the most likely to remember this, maybe Bob you haven't. If if I'm correct, the percentage of the cost of

today's vehicle that is attributable to labor has actually gone down quite a bit over the last thirty years. So, yeah, wages and all that stuff has

gone up, and yet at the same time, you're buyer spending less when you buy a car to pay workers. Yeah, but you know, part

of that has just got to do with the price of the vehicles. So

let's say in an assembly plant, a good assembly plant is probably twenty five labor hours per vehicle. If that vehicle costs thirty thousand dollars, your labor

cost is a much more significant chunk of that than if you're making one hundred and ten thousand dollars, you know, escalades or Grand wagoneers. So one

of the reasons that it's shrunk is simply because the price of cars has gone up so bloody high. Yeah, but then the amount of hours. I

remember when when it was pretty good, if Detroit got down below forty hours.

No, no, no, I mean you know in the day when we saw the Harbor report, and we haven't seen that in years now, over a decade. I mean, Ford Atlanta making fusions was an eighteen hour

car they you know, and now with more content, you know, undoubtedly that number's gone up. But you know, look at what Asla's doing with

this unboxed assembly process and with its gigacastings. It's taking uh labor out,

labor hours, cost out simply through design. And I come back to is

knock knock, knock, Hello, Hello, is anybody home at the UAW don't they see what's going on here? And Toyota is one in particular who

is talking very aggressively about about giga casting, So we know that other automakers are there. I know that Hyundai's been looking at it. I've gotten the

hint that GM is looking at in several different areas. GM's got demand.

What's the b for a hundred thousand the Clatke's got giga castings. Yeah,

but that's a three hundred thousand dollars car. So I get back to it

gets back to my point. It'll be very interesting to see if buried in

the details of this contract whatever it is, or these contracts, whatever they are, if there will be effort, there will be some concessions to the manufacturers that do let them help recover recoup some of the cost by taking advantage of the lower manufacturing costs that evs are going to have. FIB What do

you think labor costs is a percent of sales for the OEMs is significantly different than labor costs is a percent of sales for the suppliers. If you look

at Ford, General Motors and Stilantis on average, the labor cost of total revenues is somewhere around five percent, but if you go into the suppliers, it can be anywhere from twenty five to thirty five percent. And when they

negotiate a rich contract of the OEMs, there's a whipsaw effect that goes through the entire supply chain of the auto supply industry. That's going to make all

those other wage adjustments union or non union higher. That's going to make the

component prices higher, which will be the component price that the OEM has to increase their spend on, and the cost of the car is going to go even higher than that. You know, I was talking to the one guy.

He said, you know, we talk about labor costs as a percent of sales with the OEMs around five percent, but when you put it all together, it's probably closer to ten or eleven because this is a highly interdependent industry and all these costs end up going into the bucket of labor. I

think it's going to be just a much more expensive. The other thing is

history tells us this, both in the UAW and in other places. When

you raise the cost of labor, employment goes down. John L. Lewis,

for the mine workers, negotiated a massive wage increase in the forties, even though it led to twenty five percent of the miners being laid off.

I can't help but believe there'll be massive productivity increases and many, many fewer auto workers will be used, many fewer. Hey, hey, Bob All,

you're right the pas thorugh that will go to suppliers. What about the

white collar workers. I mean, they're going to be looking at all this.

There's engineers. Now, we're going to be going, hey, wait

a minute, I'm not making as much money as the guys on the line.

And I went to school for four to six years to be able to get this job. Well a couple things. For decades now, the salary

workforce has been rooting behind the scenes for every negotiations because they want to do the same thing the autoworkers did. But when you talk to them about their

sentiments about the company and what workers deserve, I can't remember who said it a little earlier, but there's a general support for the worker and against management, even among the salary folks. Now, I haven't done a survey,

but you talk to enough of them and you hear it, you have to believe, Well, maybe there's a growing sentiment that, you know, life in the autos is just too difficult and something has to happen. Keith,

did Ford say that they're protecting all of the jobs in that you know, as they move just as I say that, Gary. Yeah, they have

said they will not be cutting any jobs during the life of this contract, and the union is looking for a four year, eight month contract and all the companies are fine with that, and in fact, Ford has said they expect to be hiring workers during the life of this contract. You know,

they're making this this big transition. They still need their internal combustion engine business

to crank out all the profits to pay for the electric vehicle business, so they'll be running basically two companies simultaneously, and it will take a lot of people. But to Bob's point, you know, it takes forty percent less

labor to assemble the powertrain for an electric vehicle than it does to assemble the powertrain for an internal combustion engine vehicle. That math will play out at some

point, which gets to the point. You know, John, you were

talking about, you know, Tesla doing these manufacturing improvements in designing costs out of all of their products, you know, and including their batteries, including their motors, including everything they make. And so it seemed to me that

it would be exceedingly difficult for Ford, say, to compete with Tesla if Tesla is able to even further reduce the direct labor hours per vehicle, while Ford has to perhaps artificially keep you know, X number of workers working even though they may not need them. Yeah, and this is one of the

problems that gets into having the UAW on board. Bob, you talked about

this earlier. Lines of demarcation, work rules. You guys all know it.

You know, if a piece of machinery has got to be plugged in, oh the line worker, you've got to get an electrician to do that.

A piece of wood is on the floor, just on the floor.

You need a carpenter to go pick that up. A mill, right's got

to do this, an electric electrician's got to I mean, there's so many work rules that you do not see at the transplants. Takes almost four years

to get your journeyman's card to be a skilled trades person at any of the Detroit Three automakers Honda, they don't call them skilled trades, they call them maintenance workers. Takes two years, and they're trained in everything everything. You're

not an electrician, you're not a mill right, You're not a dye setter, you're not you're all of that. You're trained in all of those things.

And if you look at Honda's uptime, it's awfully damn good. So

it's not a problem, you know, in the way that it's doing it.

And these are some of the hidden costs, you know, the hidden costs of having UAW people, local people that are essentially on the company pay raw but they're not building vehicles, they're not building anything. They're doing union

work. So when we talk about the cost per hour of the line worker,

I'm telling you it goes way beyond that. And that's the saddled costs

that the Detroit Three face against their non union competitors, and the other competitors have younger workforces without legacy benefits. Can I throw one question out, Bob,

you may have the best view on us. I'm not sure which of

the automakers, the transplants, and Tesla do you see is most likely that the UAW would be most likely to succeed in organizing None of them? I

mean, workers are angry as hell. Yeah, but you have to remember

a year ago Musk invited the union to come in and do an election, not to go through the lengthy campaigning period, and the union demurred on it.

You know, with unions, they have to do two things. They

have to organize and they have to negotiate and administer contracts. Some unions are

great at organizing. Some unions are great at the contract administration negotiations. The

UAW is not a great organizing union. It's a great negotiating union, and

it's a great administration union. You know, you don't have to look back

more than a handful of years to see how much money they've spent on the transplants and have not hardly converted a single one of them. They haven't.

They haven't been great at organizing autoworkers, for sure, I think they're winless.

But organizing grad students and casino workers, they've been wildly successful and public sector. They have also been very very good at the public sector. Yeah,

but you know we're not talking about those industries, right, you know, so a look, I mean the Detroit three employ about one hundred and forty eight thousand Americans, you know that are UAW workers. The transplants plus

the startups employ one hundred and twenty eight thousand, So they're really closing the gap fast. And they there is what you know, over a dozen turned

manufacturers and startups in the United States. They have massive manufacturing facilities. They

make millions of vehicles in the US every year. They employ one hundred and

twenty eight thousand line workers, all of whom are none union. And you

know they have gone into rural areas to set up their plants, so you can't get a better job within one hundred mile radius. You just can't do

it. They pay the best wages and when people start talking about the union,

they go, really, where are you going to get a better job than what you got right now? Look at all those guys in the union

that went to jail. They say they're clean now, but are they really?

And you know you got a problem, you come talk to us.

We bring a union in you talk to the union, and the union comes to us, and look at all those people out on strike right now, they're making five hundred dollars a week. Are you sure you really want to

go through with all of that? And so that's why I agree with Bob.

I don't think they stand a chance of organizing the transplants, even though I maintain Sean's got a moral obligation to get it done. So the last

transplant that had any level of union organization was in the mid to late seventies and it was called BW in Pennsylvania. We's Moreland there you go. And

if but to really give you a little more of an insight, Toyota and Nissan, maybe Mercedes US they have all done a very very good job of addressing their employees' concerns. If I had to stratify it, maybe the Koreans

are more vulnerable. But you know, the UHW just has had a really

bad record of organizing them, and I don't see that changing anytime. So

right here, they lost, they lost John the lost VW vote. VW

in Kentucky seemed a Tennessee, I mean, seemed absolutely ready to have the union start negotiating yeah, and there was the workers who blocked them, not not management. Yep. It's a It's amazing, isn't it. Here's a

good strategy has been very successful in keeping unions out of the newest DOTO plants for the new ones. Right, but you know here, here's a good

statu you know that talks to I think, uh, the sentiment of the non union workers at the transplants and Bob, you know. This stalance is

presented in its first proposal a bunch of stats, one of which was what their average absenteeism is like twenty one percent. It's crazy absenteeism at Toyota and

Hades three percent. And that scheduled absenteeism. I got to go to the

doctor, I got to take my kid to a special school project. So

scheduled absenteeism is just that what I call a wall, and the industry calls unscheduled absenteeism. It's not out of control at all UAW plants. Some of

them are actually quite good. It varies by region, but in some places

it's out of control. And this is not a new issue. The Big

Three have been complaining about that since the eighties. Well, we measure pay

for time not worked, and in the unionized facilities it's much higher than it is in the non union facilities. Now, granted, most absenteeism is not

paid for, but if it's not scheduled, it has a negative impact on the operations. You know, to pay workers to do nothing, that is,

to not be at work is a big drag on the business. You

know, some of it's legally required, but some of it isn't. You

know, it's just what happens in union settings. Keith, I've got a

question for you, and then I want to ask Bob a question, and so so Keith. The question I have is after Bill Ford made that presentation,

and the response was, you know, this is Paul mentioned before, you know, the tweet Sean Fain basically saying if Ford wants to be the all American auto company, they can pay all American wages and benefits. Were

the people at Ford surprised at that reaction. I mean, when you when

you talk to your sources there, I mean, what was their response.

The big surprise was within Sean Fein's statement, you might have the whole statement in front of you, Garry. Yeah, he makes a reference to Bill

Ford threatening to close the rouge. Well, I was there. I did

not hear him threatening to close the rouge. So and actually, if you

keep reading in the feign statement, he threatens to close the rouge. But

I guess Bill made because because then you know, the UW had to had to come back and explain why they accused him of that. And Bill Ford

made a kind of a reference to if you know, we don't come up with a good agreement, it'll cost jobs or cost plants. He didn't ever

say it'll cost There was a picture of the rouge behind him when he was speaking. Somebody, well, and we were at the roots, that's where

we're at. But but so I think they're a little bewildered by that.

You know, one of the things Bill Ford said before he gave that speech to the reporters who were there is that, you know, the rhetoric is super heated, and these talks more heated maybe than any of us have seen.

But you can't he's counseling his executives. You can't take that personally,

because when this thing is over, we all have to work together. We

all have to come together again. So if you hold grudges over all of

the you know, insults and bricks that have been thrown. That's just going

to be counterproductive in the long run. It's just it is a It is

a very we've never seen. I haven't anyway, and I've been covering talks

since the nineteen ninety contract with Ellen Bieber. We've just not seen this level

of not just rhetoric, but sort of openness. They are openly negotiating in

the in the public. That was, you know, completely contrary to the

way it used to be done. But every new offer, you know,

they either do a press release on it or the numbers leak immediately. Yeah,

they is that. You know, this acrimony that seems to exist in

this period right now, I mean, how does that get resolves? You

know, I know I know Bill Ford enough to realize it. He takes

that seriously. I think Bill Ford has a way of getting past the rhetoric.

It goes with the fact that he plays. He can he can take

it out on some of those guys from the Union by buying him into the wall a link. But I think I think Bill is a type that knows

how the game is played. There's sort of a patrician element to that.

One of the questions. Well, hold on, Pop, because I know

Bob's got a hard stop at the top of the hour, and I want to give him the last word. I know, Gary, you were going

to ask me, give me, give me two seconds because he's got an absolute hard stop. But anyway, go ahead, Bob. Final thoughts,

final thoughts. This will all be over at one point, will all be

rushing like crazy to get it back on track. Each one of the companies

is going to is already training in supervisors how to welcome them everybody back, and as long as this thing doesn't go too long, they will be back on track, enjoying the best wage and benefit package that they've ever had.

I have a lot of faith in the industry and the smart people in it, and I just hope the damage isn't going to be irretrievable. Yeah,

good, Bob, thanks for that. You may go now. I gotta

get some final thoughts from everyone else. But I know you had a very

hard stop that you had to get to you. Thank you, Thanks,

John. Yeah, okay, thanks, we have you back. Closing thoughts.

Yeah, just what I was going to say. The thing I hope

is that Sean Fain can get past his own rhetoric. This is a guy

that almost immediately after being elected in a very very testy runoff ballot, declared the automakers the enemy. And what I'm not sure yet because nobody knows him

well enough. Is this pure rhetoric and he knows how to get beyond it

or is that really revealing Sean Fain. And if if Sean Faine is a

guy that truly thinks these guys are the enemy and have to be treated like the enemy even after a good contract, the industry is going to have problems.

Yeah, Keith, final thoughts. Yeah, my thoughts are you know,

how close to the end really are we? Because you know, even

though it seems like they're very close on the economics, it still feels like there's a big chasm on the battery plans. And I kind of took as

a bad sign this week that GM postponed its investor day that was scheduled for next month. They're moving it to I think March, And that Chrysler said

it's pulling out of CEES the Consumer Electronics Show because of the strike that CES is in January. How long do these companies think this strike is going to

last? So I feel like we are not really that close to the finish

line. Well, I think one thing, Keith, if I may real

quickly, don't be surprised if the automakers are loading a lot of stuff on the strike that they might otherwise have to explain differently, like pulling out a cees and maybe a case of just doesn't do any benefit to us. Let's

blame this, Yeah, maybe Gary. Final thoughts, I think that both

Paul and Keith did a very excellent job at describing, you know, the social context in which we are existing in terms of labor versus the wealthy class.

And I think that you know, this UAW strike is is is a concentration of those those concerns, and I'm just afraid that if the rhetoric rises, then there could be you know, further disruptions within all kinds of industries.

You know, Keith mentioned the uh, you know, grad students and workers at Starbucks and so on. I mean, it could spread like wildfire.

And I just don't know who has a good handle on that. Yeah,

you know, I guess my final thought is that, you know, if Sean Fain wanted to declare victory this afternoon, as Bob just pointed out all his workers would get an unbelievable contract. But that's not what this strike

is about. And I think you alluded to this earlier. To Paul,

they tipped their hand. We saw the memo that got leaked. They want

to do damage to these companies for months. We're only one month into it.

That memo said that they wanted to do it for months. And I

support all these workers getting a much better deal than that what they've had, a much better deal. But now you're starting to damage the industry and that's

where my support for it stops. Aren't we a happy anyway? Hey,

this was a great discussion. Guys, really appreciate Paul, love your input,

Keith, you two and Gary. I mean, that's what the show

is about, bringing, you know, really good informed discussion to our audience.

Indeed, Okay, see, Y'll take care. O't online after Ours

is brought to you by Bridgestone Tires Solutions for your Journey. If you like

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AAH #668 - Why Does Shawn Fain Want to Damage the Detroit Automakers?

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