AAH #669 – Who Caved First, Ford or the UAW?

I'll online after hours. It's brought to you by bridge Stone Tires, Solutions

for Your Journey and by Borg Warner Garry John, how are you? Oh?

What a crazy week? Man, What a crazy week? You know.

I keep wondering, you know, should we do another show on the UAW. And we absolutely should do another show on the UAW. All right,

But before we do another show in the UAW, today is a special anniversary for something. And I know you're going to know a lot about this,

but I tell you what it is. It's the sixty ninth anniversary of

the Chevy Small Block engine. Oh yeah, I debuted on this day in

nineteen fifty four. Wow. And what I find to be interesting about that

is, you know, as you well know, in January, General Motors announced that they're going to be spending nine hundred and eighteen million dollars to get the wherewithal to produce the sixth gen Small Block V eight. I mean,

what a wonderful engine family this has been. Yeah, it really shows that

the guys who did the original were genius at it, because obviously the engines evolved tremendously. But I want to say the bor centers and you know,

some of the other key dimensions have not changed since way back then. Yeah,

it's been and Ed Cole worked on that engine, as I recall.

Absolutely. I don't know if Ed worked on it directly, but you know

he was I think he was chief engineer of Chevrolet at the time, so he would have overseen that. And of course they were rushing to get that

engine done, to get it into fifty five Chevy. And according to David

Cole, his son, who I happened to be, I mean, it is complete coincidence. I did not This was not connected in any way.

He you know, he made the point to me that they got that engine in the fifty five. It was twenty three months after the start of development

that that engine was put into the vehicles. Yeah, so extraordinary, man.

They did things quickly back then, didn't they very quickly back then?

And you know, they didn't have cad cam, they didn't have you know, robots, they didn't have I mean, they did it with slide rules and big drafting tables, which is amazing and smart guys. Yeah right,

that's right. Well, look, let's talk about today's show. We've got

a couple of great guests. We've got Merrick master from Wayne State University who's

been on several times with us and we love having them back. We're trying

to get David Welch on from Bloomberg too, We're having some issues and he'll probably show up soon and once we get going with this discussion. But Merrick,

thanks so much for coming back on how it's a pleasure to be here.

Thank you for having me. Well, big developments this week. I

mean at first it's you know, the union took down the most profitable plants in the industry with GM Ford and Stillantis, and then bang bang yesterday, things suddenly came together really quick. What's your read of the situation. Well,

it almost seems like Sean Faine planned it out to the very minute, but no matter how you look at it, things sort of fell into place from his perspective and moved along the lines that he could have the best he could have hoped for. I think, frankly, in terms of the amount

of concessions that he's gotten across all three companies and with Ford in particular, that his strategy of striking them incrementally, waiting for them to make concessions and then going back and asking for more concessions and then using the media to emphasize his perspective and garner public support. All those things I think did the trick

in terms of moving the companies further then probably what they would have wanted to at the beginning, and maybe some would say probably more than they should have.

And nonetheless, we're at this point and he's got a tentative agreement with one and as applying additional pressure on the other two to come forward, And I know he's going to insist on a pattern and the other two will have some hard bargaining ahead of them. But I think that if they're not to

exceed to more or less of a pattern, they're going to invite more difficulty than they probably would hope for. So, So, Mark, what I'm

wondering about is, Okay, Kentucky truck. The Ford plant was taken down

first, and then Sterling Heights was taken down, and then Arlington General Motors Arlington plant. So is there any coincidence that Ford is the first to settle

because they've been enduring the pain of having their major plant down the longest.

Well, I think that that is more than coincidence. I think it was

time to some extent that way, And what you want to do is take the party that you're closest to a deal with and apply the most pressure on them so that you can get them to move the needle a little bit forward.

And as Sean Fain said, he always felt that they had a little bit more than they could give and that this would be something to induce them to do that. So what I thought was very interesting was that he struck

the plan on October the eleventh and then gave a presentation I think on that Friday or sometime not too long after that, maybe it was the following Friday, and said when he went after Ford and kind of gave the impression that he was going to strike forward again. And that was a nice diversion because

he had to know that they were making some progress at Ford and he just wanted to keep the heat up on them, but also not the others think that he was going to strike them in rapid succession in order to apply more pressure on them. So he's got to deal now with Ford that he's hoped

will be provide a basis for incentivizing the other two to come to terms with them. America, I'd love to get through read of the situation, because

as soon as the ramplants and the Arlington SEV plant were struck one right after the other a day following, I thought, oh, I think this is going to be the beginning of the end. That Sean has now struck the

most profitable plants at each one of the companies. And so I read that,

and I'm reading the tea leaves right. I'm trying to figure out what's

going on. I don't have any inside information on this. Now. Sean

could go back to his members and say, look, I took him to the mat because he did not strike the most profitable plants, because Base would have said all along, hey, you could have gotten more out of them.

Well, I think that's what he was really signaling when he gave his presentation on Friday and said that we're going to pressure them to the maximum.

We're not going to settle into it. We are absolutely convinced that we've gotten

the most out of them, every last nickel and penny that we can get out of them, then will settle. And I think he wants to be

in a position when he presents the members the tenet of agreement to say, look, you may not like everything about it. We didn't get everything.

Nobody can expect to get everything, but if we continued to strike, we're not likely to improve upon this offer very much and you're going to be worse off for it. So therefore it's something that's in your best interest to ratify.

And let's hope that they do ratify it, because this is, I think, from their perspective, a very good contract, right, very good contract. I mean, I wish I'd had Sean Pain negotiating for me during

my career. I think that he he handled it with a plumb and you

know, he rubbed the feathers of people that he wanted to rub and did I think that that's deliberate on his part to aggravate them to the point of no return and to hope they get mad. And I think that doesn't bother

him in the least. But I got to give it to the company and

the Bill Ford and his team that they didn't let that get in their way.

They put that aside and realized that they had a bigger issue to resolve here and worked hard to get it done. And even though always one can

armchair and second guess what they did, they're the ones sitting at the table have to deal with reality, and one always doesn't get to make the sausage the way they'd like to. Hey, we got David Welch from Bloomberg with

us. David, how you doing good? How's it going good? So

obviously we're talking about the latest developments in the UAW strike. You've got the

General Motors beat now Ford has settled. What are they talking about at GM

or have you have you gotten anything about what they're talking about? Yeah,

so the union's I think Merrik's right, they're just gonna pattern this and bring it together two companies. There are always little tweaks and things that they'll do

differently based on some individual circumstances in particular plants or class of workers at a company, but it'll be pretty close. You know, GM's held out for

quite am I back, Yeah, you're back. So you're starting to say

GM what GM's had some You know, they've held out on a few things throughout this right they haven't quite First they didn't want to give cola, and then they offered a Cola formula that was lesser than Fords. Same with the

four to one K formula at GM, and I think they had a longer grow in for temp workers to become full time workers, which makes sense because GM has a lot more attempts than for that, for it has I think three thousand, and GM has at any one time between I think six and ten thousand, something like that. So it's a lot more workers they've suddenly

paying more money to. So those now, those are the issues that they've

been you know, where there's been a big difference. It's not insurmountable,

but it's already a pretty rich contract and I think it the companies are pretty well to the end of their rope here. I think Sean Fain has extracted

every dour out of them that he could. So I think for our viewers

who aren't in Detroit and covering this so closely as we are, we should give them a sense of what we're talking about here. So what has been

reported by BAW is that there'll be a eleven percent salary increase for the first year and increases that will totally twenty five percent raise over four point five years, which is a length of the contract. The top wage rate will go

up thirty percent to forty dollars an hour. The starting wage rate will increase

sixty eight percent to over twenty eight dollars an hour. As as David just

mentioned, they're going to reinstate cola adjustments in three year wage progression. They're

going to end the tiers, improve the benefits for current retirees and workers with pensions in those with four one ks, and they'll be doing five dollars per year of service on pensions, So twenty five year employees would be making like extra money every year. Two weeks of parental leave, five weeks of vacation,

and Juketeenth as a holiday. So it's a pretty comprehensive package for the

employees, it is. So Mark, what's your sense do you think Ford

caved or the ua W caved? And you know, I'm just astonished at

how quickly everything just started moving this week alone. And you know, there's

been reports in the local media of stripe fatigue. I'm sure you've seen it

some people. We've seen postings claiming that they're UAW workers saying come on,

Shane, let's bring it up for a vote. We're ready to go on

this. It looks like a good contract. Do you think Sean was under

any pressure to get this done with now? Oh? I think he's under

extreme pressure to get it done. I think he realized that he's gotten He's

had thirteen thousand workers that have been out for six weeks, and they're getting antsy about the kind of progress or lack thereof. They don't want to stay

out another four weeks to get a marginally better contract. And I think he

had to realize at some point that if he stood out for a longer period of time, he just wasn't going to get that much more to make it worthwhile. And you've got to fold your cards at some point in time and

take a risk and put it up for ratification. And what he wanted to

do, I think, as you mentioned earlier, as he wanted to convince the workers that he really went to the ultimate for them, and he tried to balance the costs of the strike for both the companies. I noticed that

he struck them very symmetrically. About thirty to thirty four percent of the production

was affected across the companies, and that he also only took forty five at the ultimate point a thousand workers out on strike, which is the equivalent of a little bit more Evans to Lantis workforce. So he minimized the damage,

but also inflicted enough pain to bring the parties to an agreement. And I

really have to look at this is that the sides come to a point of reality in these negotiations where they realize that there are just sometimes things they have to do that they don't really want to do. But otherwise they can just

fight this out interminably and inflict pain on themselves to the point that they can't recover. Yeah, I mean, I mean, I mean he's under pressure

from a subset of the union, but for a lot of people who never went out, so he could conceivably drag this out longer. But I think

Merrik's right. I don't think he's going to get much more money. I

mean, you know the companies have you know, they really opened it up here. I mean, this was a record deal about four offers ago.

Yeah, I mean, I didn't expect them to be as forthcoming as this.

I thought that they would have resisted more. But you know, what

the dynamics were behind the closed doors. One never knows. But you've got

some experienced bargainers on at least at Ford and Chuck Browning who have a history with the company and know the way of the land. Pretty well, and

that I think had the place unroll and they're coming to an agreement first and and being able to disregard all the harsh words that were said on the side.

M hm, so Mark. During during Sean Faine's Facebook live presentation last

Friday, he he reiterated the point that every time they said this is the final offer and the ow pushed back, they came back with more money or more better, you know. And you know when when he said that,

it occurred to me that he's absolutely right. They just kept saying, you

know, no, but yes, no, but yes. At what point

do you think it was that Sean realized that this was it? Well?

In negotiations, one of the things I teach my students is don't ever bargain against yourself, and I think to some extent that's what the companies did.

But I think you have to have an instinctive knowledge that you've gotten the most and all kinds of discussions go on behind the closed doors about what the real resistance points are, and you have historical knowledge based on prior negotiations about what those are, and you look at the competition the lay of the land, and I think it becomes clear that I read today in the Wall Street Journal that the labor costs afford are going to go up from sixty five dollars an

hour to eighty eight dollars an hour at this end of this contract. They've

got a lot of work to do to remain competitive with that kind of a hit, and so their business acumen, their business strategy is going to have to be pretty keen. Yeah, that was going to be one of my

questions to you, Marek, can Forward motor company afford this? I mean,

of course they've got the money, but from a competitive standpoint in the marketplace, they're going to have to eat these costs because, as you know, you can't pass these costs onto the customer. Maybe you can with super

duty pickup trucks and things where there's really no international competition. It's only the

crosstown rivals who compete there. But in every other segment, it's the market

that's going to determine what the price of those vehicles can be. And it

looks to me like Ford and soon GM and Stalantis are just going to have to eat those costs. Well. I mean they're encumbered in the extent to

which they can pass along price increases because of market conditions, they're encumbered along the extent to which they can absorb the costs in terms of profitability by the capital investment requirements that they have for electrical vehicles. So they're going to have

to find some other way. Either they come up with cost savings or they

come up with new efficiencies, new technologies to make the production process more efficient, and I think that would have to be where their focuses. And I

noticed that you know, they're focusing on the lithium battery and reducing their dependence on scarce raw materials has been a trend in the industry, and I think that anything that they can do along those lines to shave costs any place in the supply chain is something they're going to be looking at. Look the couple

of things here. First of all, because union workers are locked into a

contract and so at the companies, they got pretty small raises over the past four years. That wasn't necessarily true in the rest of the labor market,

where there was inflation and wage increases and the labor market's been tight, so people in other sectors have gotten pretty good raises just because of competition for people out there. So in some ways these raises that everyone in Detroit is wringing

their hands over and saying, oh my god, the end is nigh.

They're catching up to what other sectors already had to pay. Right So that

number one, Number two Mary Barr told me this herself, but labors five percent of their costs. So if you raise that by say, let's call

it thirty percent here, thirty percent of one percent or I'm sorry, a five percent is like a little over one percent. So while we were sitting

here, one of the viewers chimed in with a comment, the Big three are going bankrupt. I'll be polite to this guy. He could take his

sandwich sign off. They're not going bankrupt over a one percent increase in costs.

It does hurt their profits, no question. So where are they going

to find the money. We know we're going to find the money, John,

We've been watching it for the past year. The average price of the

vehicles fifty one thousand dollars, and it got his highest fifty three thousand GM and out in the market it used to be fifty thousand, and how it's like, you know, forty nine to three or something like that. They're

not going to make cheap, stripped down models for anybody anymore. They haven't

been. They're just going to keep selling expensive cars because it's not offitable to

make smaller cheap cars. That's where it's going to come from. Yeah,

they'll cut the cost, you'll find efficiencies, but the end of the day, it's going to be pricing, because that's what they've been doing before.

The question was can they hold this semiconductor era pricing high pricing, and everyone said no, they're going to get greedy and lay out the incentives. No

they're not. They can't. It says that they can't. Now their cost

just went up by one percent, which is a lot of money and actual dollars. It's not going to make a bankrupt, but you know, if

you want to go out there and get, you know, a twenty one or nineteen thousand dollars vehicle or a stripped down version of something that starts at thirty two, you won't find it. Yeah. I think if you calculate

out the cost increase in an average vehicle sale, if you just average it out across them, it'd be in the case affords, something like eight hundred dollars in North American sales that they'd have to increase your average car, and that's doable, and they can. You know, they're going to have revenues

close to two hundred billion dollars a year, and therefore this is a marginal increase for them. But everything at the margin is sort of how you operate

and what you can cut back and where you can be competitive. And they

obviously want to hold their labor costs down as well as their other costs.

So he's right that they're catching up, and I think that was his case.

I think workers in general are trying to catch up. They've seen their

wages stagnating for decades, and they've seen the upper one percent get higher wages, the concentration of wealth increase, and they're looking for some rebalance in terms of the position of labor and capital. And with the diminished labor movement,

you don't have the kind of situation in which people were getting regular pay increases built into contracts anymore. You only have six center the workforce covered by labor

unions, and the rest are at the mercy of the market, which in recent years has been relatively good to labor compared to what it has been in the past. But still workers haven't caught up. Most of their wage gains

have been eaten up by inflation over the past couple of years, and they're going to be continually looking for a way to get ahead. And I think

this contract gave them a chance to feel that maybe not only they caught up, but maybe they just got a little bit ahead as well. Eric,

do you think that there's a possibility of a domino effect that will take place such that, you know, it just isn't the direct cost of vaw worker for General Motors or Stilantis or Ford, but their suppliers are going to be facing the need to pay their people more, and the suppliers to the suppliers and so on, that that would cause a rise in the cost of a vehicle. Well, I certainly think that you can have that kind of repercussion

because even if your non union, one of the strategies you use to avoid a union is substituting what the unions pay, and that the companies that are non union will realize that they may have to raise their wages in order to stay non union. So you have that kind of residual effect of these contracts,

and you also have workers in General thinking that there's more out there to be had and people asking for more, and they're going to feel that if the particularly if the job market continues to perform as it has and the economy grows at the pace that it has recently, that you're going to continue to see and upward pressure on wages. And I think the Federal Reserve is concerned

about that, and that's one of the reasons why it hasn't lose all its efforts to control inflation. Paul Is as you see the questions popped up there,

how are suppliers do and they're doing terrible. I can tell you that,

you know, volumes down, they can't get the price raises that they want because raw material prices have gone up. The economics, as they call

it. Suppliers are you know, the tier ones that supply to all the

major automakers. They're feeling the pain, but they'll get through. It's the

smaller, family owned tier twos and threes that are we'll see if they get through this. You've got thousands of those small suppliers out there that are employed

very few people, and those that are dependent on the auto industry are going to be the hardest hit and if you're a supplier that has a broader base, then you're going to be a little bit more immunized. But it's a

challenging time for them to begin with. I mean, I've seen studies from

Deloitte and elsewhere that indicate that they're the financial situation of many of them is less than desirable, and so anything like this has direct implications for them.

Yeah, you know, I still think this is going to make it much more difficult for the Detroit three to compete this contract mark you say it could raise the price of a car by eight hundred dollars. You know, back

when they were still making passenger cars in the last decade, you know, GM and Ford Stalantis, they were making about twelve hundred dollars profit on a vehicle. And that's one reason why they don't build passenger cars in the United

States anymore. With a few exception, there's Cadillac and there's Mustang, but

they're out of the pass car business because they can't make any money on it.

You know, the only affordable cars that are sold in this market today come from Mexico or South Korea. They're not made in the United States,

and I think that's an issue. I personally believe they're opening the door for

the for the Chinese to come in at at some point. And you know,

David, look to get your viewpoint on this GM stock. I think

today was trading at twenty seven dollars a share. It's trading at a lower

price than it was ten to fifteen years ago. GM's market cap is like

thirty seven billion dollars. Doesn't that open the door for potential, you know,

corporate raider to come in and buy GM. I mean, thirty seven

billion is a big number in my book, but in the auto industry, it's not that much. It's not I mean, look, that's still a

very big check for You would need a consortium of private equity funds together, and those deals haven't been done in a long time, you know. So

the question is who's going to buy it? And then the question is why

would they want it? Right? And I look, and I say that

because investors just hate car companies. I was a should talking to a Wall

Street analyst about this today. If GM goes out and has an awesome quarter,

and I've said this on Bloomberg TV to but we've seen it the analysts, there's a selloff in the stock and the analysts say, uh, sell downhill from here because they have a great quarter. And then the next quarter

they have a not so great quarter. They don't say, oh, there's

clearly upside. They say, yeah, we told you, and they sell

off again. And then you know, for a while, you know,

they love GM's EV strategy, but then when it didn't turn out, you know, hundreds of thousands of EV's sold a year, they hated it.

Then you know, for a while they started saying, well, you know, GM's pushing in evs, but they don't make any money and demand is uncertain, so they started punishing GM stock whenever GM gave an update. That

was the investors don't like auto stocks. They don't Tesla. They view as

a different animal. So yeah, I don't know who would want this thing,

but you look good. Another thing, I have to look at what

GM's share price. Go back to Tuesday. They remove their guidance on earnings

because of this strike. The union went on strike at Arlington, their most

profitable plant. They remove their guidance on EV sales because you know, they're

throttling back that the orient Electric truck plant, and they lost their permit to operate autonomous peoples in San Francisco with crews, and that all happened before noon, and the stock just got hammered, and there's no reason for it to come back up. I think once the strike settles, it'll come back up

again because there's the near term earnings risk has gone, but investors will still hate the fact that their costs are higher. These are capital intensive companies with

low margins compared to tech companies and everything else out there. Investors just don't

really love them. You know, it's going to be a couple of years

before we see Ford and GM with what anyone considers meaningful numbers of EV sales, and that could get investors interested, and they're gonna have to show profit doing it, so that's a few years away. I think these guys are

just gonna have to gut it out for a few years before before the stocks of interesting. But so Meeric. One of the things that I didn't see

related to the proposed agreement goes through the battery plants. Are you familiar with

any agreement that may have been reached there. No, I don't believe that

there has been anything reported about that, And that is a question that a lot of folks are asking, particularly in light of GM, and it's still unclear what GM negotiated with the UAW, and I don't even know if that's been finalized at this point in time. It's a thorny legal issue. I

know that a group of US senators Democratic senators have called upon the companies to incorporate those jvs into the national agreements, and that in response to that letter, one of the leaders of Altium Cells sent a letter to Senator Brown.

I believe it was addressed saying that that really wasn't in the realm of possibility at this time. But then you have the concession that apparently has been made

that at least one of the plants will be recognized under the National Master Agreement, but it's unclear what that means and if it have the same contract.

So I think this is going to be something that's just going to have to be sorted out. I think the union is deliberately quiet about it because it's

a permissive item of negotiation and they're not absolutely certain what they're going to get and don't want to tout it too much. And I also think it's very

noteworthy if you look at their list of demands that they made publicly and what they talk about. They don't mention this. They didn't mention it during the

presentation when GM made this concession and that he exempted GM from a strike action that week. But they're relatively quiet about this. So discussions have been going

on behind the scenes, and I'm like everybody else awaiting the details. Have

you learned anything about that or GM and the battery workers. Look, a

lot of proposals have been kicked around about this, and they are, by the way, like they're negotiating a deal for the ult plant down in Wordstown because it was organized separately. It's just not part of this national agreement.

You know, the unions floated a bunch of ideas. One was that all

the workers would be part of the national agreement and GM would lease them to the joint ventures. GM had no interest in that because that means, you

know, the union negotiates great wages and then GM has to go and negotiate reimbursement from the joint venture, which they don't totally control because you've got a Korean battery partner there, so it's you know, an open ended cost for them. Look, I think what will end up happening is you do have

these other workers parts, distribution plan workers and such. They're in the national

agreement, but with sort of a supplement agreement or side letters and things like that. So I think that's what we'll end up seeing. And also I

think the companies will promise to basically use a card check or you know, neutrality agreements during organizing drives. But look, you can't legally bargain on behalf

of people and plants that don't exist. They haven't been hired yet, and

you know, this has always been a thorny issue. When we interviewed Sean

Fain before talks started us a few months back, he admitted that he said, look, you know, there are some legal issues here and the companies have to be willing to do this stuff. Not very forceful at all about

it. And you know, Merrik points out, you know, absence of

discussion about this in a lot of Sean Fain's demands. And there are other

things he hasn't talked about much lately that didn't show up in the Ford Agreement, like the thirty two hour work week. Sewn hasn't really talked about that

in a long time. On his Facebook live events, and he's talked less

about pensions, and the Ford deal did not have defined benefit pensions. It

had four one k you know, Richard, four one K matches and in contributions. So you know, you have to look at what Sean doesn't talk

about. And so I think I think they're working on something that will sort

of pave the way for the unions to get into those plans and a way to compensate them once they are. But I you know, you can't.

I think permissive items that which is what this is called. Assuming it is

a permissive item, and I think there's some legal opinion that it is, but you can't bargain them to an impass. If he were to bargain them

to an impass, he'd have risk and unfair labor practice, and I'm certain that he doesn't want to be saddled with that at the present time and would rather just try and sort that out. But Ultim is further along than some

of the other joint ventures in terms of hiring and status, and they've had a union representation election in one and the company's position initially was that the union was going to have to go to each one of the jvs talk to the management there and then negotiate a agreement on whether they're going to be easily recognized or they're going to have to go through the conventional approach to do it, and then they're going to have to negotiate their own contract, which will be

separate from the national Master agreement. The union would argue that these joint ventures

are really creatures of the two owners and that they can do what they want, and that they should recognize the union and put them under the national Master agreement. Who knows what that might happen. I think the National Labor Relations

Board, with some of its recent decisions, would be favorably impressed with voluntary res cognitions of the union as long as you could show a majority interest.

And I think at some point in time they're going to have to show that a majority of workers in those facilities want the union before they're going to give them recognition. And that's the way it should be under the law. But

there are lots of different ways they can give them recognition, And what Therb has said most recently is that if a union claims recognition of a majority and the company doesn't granted, then there could be liabilities to the company for that that's created really a big stir in the field. But this is an issue,

you know, I think, as Peter Drucker once said, you pay more attention to what people don't say sometimes than what they do say. And

I particularly pay attention that they didn't say anything about defined benefit plans. As

David pointed out, they didn't say anything about retire health care. They didn't

say anything about the thirty two hour work. Always kind of wondered whether that

was a real demand or just something they just kind of threw out there to discuss. But clearly they loaded up their package with lots of things, and

we're able to settle on use the whole rubric of retirement security to embellish their defined contribution plans, which may have been the purpose to begin with. Hey,

look, we've got to take a quick commercial break right now, we'll come back. I'm going to know about next steps. Where does this leave

the transplants and Tesla and all that. But first a shout out to our

sponsors. How do you breach then tire stock shorter on what roads is their

hydro track technology? But you don't have to know how the science works,

just where the brain is what really matters is they're bridged out. Thank you

Bridgestone, thank you Borg Warner Merrick. Where do you think this leaves the

transplants in Tesla. I mean, you're saying this is probably going to get

forward up to eighty dollars an hour all in benefits everything. That's by most

estimates, almost twice the labor cost at Tesla. It's probably close to some

of the twice the labor costs at Hyundaikia plants in the US. I'm talking

about, not in South Korea. In the light. Doesn't the Union have

to go out and organize these plants now? Well, it does, and

it's hoping this contract will provide ammunition for it to do so. I have

real questions in my mind about how successful the UAW will be. Its track

history in this area is not particularly impressive. And I don't think that's just

because it's got a blemished image. I think it's because the way it conducts

organizing campaigns. I think one of the reasons Sean Fain is in the presidency

now of the Union is because the International has always had a reputation for being very heavy handed, not listening to rank and file, not listening to locals and going in and conducting organizing campaigns that really didn't pay attention to what people wanted. And so there's a lot of blame that I think the union owns

in terms of why it hasn't been successful. And I think it'll be an

uphill climb no matter what. Anytime the UAW shows up any place, you

can rest assured groups are going to mobilize against it, and they're going to have lots of ammunition that they can use. And one of the things they

will use frequently is that these things this union prices companies out of business and the forces layoffs, and if you look at what's happened in the industry.

I remember I was working with a group of steel executives when I was at the University of Pittsburgh, and I talked about what do you think about the steel workers and they said, well, you know, what they said is unprintable on that I'm certainly not going to say this even though they had them unionized, but they said, you know, look, we have no use for them, and they make it more difficult for us to operate their job classification restrictions and all down the line. Cumber US and we would prefer not

to have unionized facilities. And I think that's absolutely the case. And many

of the Japanese automakers when they came here, you know, they they went to unionized companies in the US and asked them how do they stay away from you? And they got the advice. And so I think they got a

steep climb ahead of them. And if they don't, they're going to be

in a shrinking position. And I wouldn't be surprised to see that, even

you know, it's a you know, not a large part of their overall costs. Companies will love to say money where they can, and I think

substudent capital for labor will be one of the things that they'll emphasize even more going ahead. Yeah, I think it'd almost be better if a different union

tried to organize transplants in the Tesla plants, you know, maybe Teamsters.

I think they do a very good job of listening to people. This is

probably the best chance in seventy years that the union has to have success in organizing, because you've seen organizing drives at Amazon distribution centers. You've seen it,

I think it's Starbucks and in other places. So you know, there's

a comeback for unions, and surveys show that Americans have a more favorable view of unions. And I think part of that is because of something Merit touched

on early on, which is, you know a lot of Americans, even those who don't work in auto plants or any kind of plant, they feel poor these days because on social media they can see how much the top one and two percent are making and what they drive and what they have. And

then you look at and look, the average price of a new car is almost fifty thousand dollars, even though it's come down a bit, The average American salary can't reasonably afford that for the most part, unless they're paying putting too much into the monthly payment college education, even worse healthcare costs. I

mean, there are core things that it's not just people are annoyed, like when they go and pay more for eggs. They can't touch it. And

and so some people are looking for unions to be a solutionist. They've got

it. The EAW has a shot. But yeah, there are a lot

of things that companies can say. Bankrupt GM, bankrupt Chrysler. You know,

past two UAW presidents did time. You know, there's a lot of

stuff you can put in an anti union campaign when the UAW comes knocking.

That's why I think Sean Faine was so adamant that they get a really good deal. And you know, one thing we reported is he wanted to say

all in, they got thirty percent including Cola, so that that would be the banner. They can waive an organizing drives. We can get you a

thirty percent raise. So this deal will help them. But the UAW is

just so bad at organizing, you know, maybe maybe another union. Yeah,

I think David hit on something that's really important, that the fight that they have, I think institutionally unions and if you looked at them as a business and their market share had declined as much, you'd say that really some of them ought to go out of business. But yet they stay in business.

And the Teamsters, while they are good at doing certain things, they also come with a lot of baggage. They were under government control for more

than thirty years. And just to show you a difference between the Teamsters and

the UAW, whenever you're under one of those consent decrees, they listed the people that you are barred from associating with in the union, and there were several people, and Gary Jones, the former president, would be one, and Dennis Williams would be another. High profile cases. In the case of

the UAW, the number of people listed was about fifteen to twenty. In

the case of the Teamsters, it was over seven hundred. And the magnitude

of the Teamsters scandal, because it was mob infested, was so much greater.

You had really some personal breed scandals that ran awry, and people took advantage of the joint training centers, which I think were a bad idea, though not in principle, but the way they were financed and managed by the company and the union led to the These kinds of problems are at least facilitating them happening. But I'm not certain what the solution is to unions. I've

given this a lot of attention as a researcher and as somebody who you know pays attention to the labor movement. And you might say, I'm pro union.

I believe in collective bargaining the right to unionize, but I'm not certain how labor gets its way out of it, and it hasn't shown it may be the best chance in seventy years, but I would say it's still not a very good chance. Yeah. I mean, look, one of the

problems they have is, yeah, I think you look at Toilet and Honda plants. I think those workers are pretty happy, and the companies do a

good job of managing people, and they do pay them pretty well. Tesla

is a different situation. I think Elon Musk would do everything he could and

probably dance on the line of what's allowed to keep the union out, and he is pretty good at scaring people. And also, by the way,

I think one thing I'll say is, you know, stock opp from stock grants go away, and even though those grants haven't done well the past two years, per workers hope springs eternal, and you know, having stock in Tesla's you know that appeals to a lot of people, and I you know, just threatening to take that away is going to make an organizing drive really, really difficult. I would think if the union has a chance anywhere,

it would be the Korean plans. They don't pay as well. They've been

cited by OSHA for severe violations over the past decade. They had a bunch

of a lot of injuries. We you know business. We did a report

on that a few years ago, so I think they've cleaned that up.

But you know, we're pay as lower and there's a bad safety record for the union to campaign on. That's where they have a shot. But getting

into Toyota and Honda, I mean, John, I don't know. You

and I have probably talked about that on your show these unsuccessful drives, who knows how many times over the past twenty years. That's right, No,

I mean, I I dating myself. I remember talking to Doug Fraser,

and Doug Fraser telling me in the very early nineteen eighties after Honda came in, he said, just you wait, because I was saying, you guys can't organize there. He says, not now, but you just wait.

They're going to crank up that line speed and the workers are going to get dissatisfied and that's going to be our end. Well that was forty years ago,

and it's never happened. You know why, because Honda never cranked up

the line speed. Mark. Do you find that right to work legislation has

an effect on whether there's unionization or not. What we know about right to

work is the effect of that legislation is not so much on reducing membership within existing bargaining units, because a lot of unions, like the UAW have gotten pretty sophisticated about dealing with situations in right to work state and being able to bolster their membership within those existing bargaining units. But what happens is it makes

it more difficult to organize within the state itself because it's really reflective environment that is less hospitable, and so unions invest less in organizing, and when they do try to organize, they face more of an uphill battle. They've got

suspicious workers out there who take a good hard look not only at the companies.

It's not that they just they necessarily trust the companies, but they don't trust the union. And so they think that union bosses, our unions get

them into trouble, and they don't want to take that. They've got pretty

good, decent existence and they don't want to risk it. And companies can

you know, he talks, David talks about dancing on the line. You

know, what are the consequences that are crossing the line. I'm not going

to say some companies cross the line, but I do know some that do.

And the consequences are minimum and for their point of view from a cost benefit analysis, if you keep a union out, I mean, if I wanted to keep a union out, I'd basically tell all my managers that if you if you let a union in here, well, I guess there's another employer that would like you. But it's interesting, you know, if you

look at the states that do have right to work on the books, many of these states are states which have Korean manufacturers and Japanese manufacturers. And so

to your point that that also makes it more difficult for those plants, I mean it sort of it's a cause and effect thing, and they're so entangled that you know, it's the political, social economic climate in those settings as well as the legal climate that you face and trying to organize it. And

although there are polls and there are surveys that academics do and they find, you know, roughly forty some percent of the workers that were polled said it's give them the chance they vote for a union in a certification election. That's

a generic question. If you ask at your particular work site, with this

union trying to represent you at a given point in time, with the employer doing this or that would you vote accordingly. That's really the question that you

have to ask, and people will look and realize that there are risks to doing that. And although you watch might want to cross the line of the

law, you can be as a management very heavy handed in terms of how you deal with a union organizing effort. Do you think Sean Thing's rhetoric during

this strike, which was really nasty about the companies and ceo showies and that sort of thing corporate creed, would that appeal to workers in plants that unorganized so we're be scared of them thinking that, you know, they'd like a union to represent them. But this one's pretty hardcore and it can bring some

bad consequences. I think it's going to have a group of people that it's

going to appeal to, those that are more leftists and nature that are more hostile to companies. But people know where their bread is buttered, and if

you're in a state or a setting where there are relatively few employment opportunities that are that good, I think you're going to be reluctant to want to risk it. And I also think that there's a generational difference. I don't think

most people like the harsh language that's being used. It's reminiscent of me to

the language that John Lewis and other labor leaders of the past us in which they were very coarse, very harsh, very insulting, and they did it as a way of antagonizing the other side and rallying the troops. I think

Sean Fain has a group of people around him which are are very much of a similar mind and have very strong views about the role of labor in society and the role of business in society, and they don't all accord with something that synchronize as well with a purely capitalistic society. There's another issue with what

I mean. I understand blue collar anger, working class anger over inflation,

lack of lack of wage increases for the last twenty thirty years completely in some ways, the auto industry kind of the three companies here are paying for what's happened in America, and they're not all that guilty. Their workers actually get

paid relative to others pretty well. I mean, if you want to look

at where there's disparity in CEO pay and stock races that reward shareholders. You

know, a company like Apple that has workers in uh Taiwan making iPhones at less than U a W workers would make here, while you know their CEO makes a lot of money Morton Mary Barrow does, and their shareholders have gotten extremely rich. Amazon similar thing. They don't pay people a lot of money

in these warehouses, and you know their owners and their CEO, and their CEO is fabulously wealthy. You know Mary Barr makes a lot of money,

and so it is Jim Farley. But the disparity is not near what it

is with some of these tech oriented companies. And that's kind of where the

andeer is focused these days. But but you know, the U a W

kind of thought that fight where they can, which is with the car companies.

So they're paying a very rich contract on that same theme. But the

pay wasn't you know the pay that the pay that they get isn't that bad compared to other unskilled labor. I think that's very good point. And I'll

probably get myself fired at the university for saying I'm a capitalist. But I

am a capitalist, and I'm not against people getting wealthy and believe that there's a lot to be said for people that have those ambitions and aspirations and entrepreneurs that want to do that. But at the same time, you know,

I think a lot of workers that don't have the healthcare that the auto workers have, where they only pay a fraction of their costs compared to what your typical worker pays at Ford, they pay three percent of their costs of health care. Your typical manufacturing worker pays thirty percent. They're talking about increasing the

pay wages workers in general motors to eighty four thousand dollars, probably higher than that at board in the ninety thousand dollars, and a lot of people look at that and say that, you know, these are really good conditions.

And when the UAW asked for define benefit plans and retiree healthcare, most workers look at it as something they don't have. I remember I was an advisor

to a company one time that negotiated a VIVA with a union, and this was before the UAW did it, and we did a study on the extent to which employers provided retiree healthcare and found out, you know, just very few of them did. And this was many years ago, and now it's

even fewer. And as a result of that, a lot of workers are

going to say, how can you ask for a thirty two hour work week, retiree healthcare, and define benefit plans on top of all the other things you're asking for, and they're going to think that that's something a little bit maybe out of the payo of reason, but nonetheless from their perspective, these are things that they had that they gave up, are suspended in their mind, and they want to reclaim to raise the standard of living for the working class. And it goes into what you define as is a rightful share of

profits if you will. Hey, we're going to get close to the end

of the show here, but I wanted to get your guys opinion. What's

going to happen next year. David, Let's start with you GM Stlantis.

Do they follow suit with Ford very quickly? Does it drag out longer?

What's your crystal ball? I mean, I think they'll do it fairly quickly.

You know. The one one thing I didn't think Stilantis would want to

give in on was the right to strike over plan closings, because I thought, Okay, Carlos Tavaris, you know, having followed him at a couple different companies, now he'd say, fine, we'll give you this rich contract, and he'd just start closing plants and moving things to Mexico, not in the mass, but I think I thought he would. But now the union

can strike over that. Devil's in the detail. We'll have to read how

that actually comes out in the contract and how much how much they have in terms of rights. But look, I think they pretty quickly come to a

deal here, and then then it's going to be interesting because Sean Fain does have a vision of organizing and using this deal to do that, and now he's got to live up to his side of the bargain and make the competitors of these three companies have somewhat competitive contracts. And I think his heart's in

the right place on that. I don't think he can get it done.

America. How do you think the rest of this strikes the playoff? I

think that assessment is about right on target. I think that they will probably

have some difficult issues to sort out, but they should be able to do that within a few days unless there's something really thorny in there that they can't get done. And I would just put that probably in the category of the

joint ventures that I just don't know much about. Maybe behind the closed doors.

But assuming that it's just the economic matters or the gaps enough to get it done, and then I think that he's got a contract that he can sell to the membership. I think the membership is going to be anxious that

they're not on strike anymore, and those that weren't on strike are going to be glad that they weren't called out and they didn't lose pay for four to six weeks, and they'll move on to the challenges that face them. The

companies will have the structural challenge of electrication in the union have the challenge of organizing in the industry. So neither set of those parties has an easy task

ahead of it. Garry, any thoughts how you think this is going to

play out. I can nearly guarantee that next week's show will not be about

to strike, So yeah, I know. I felt that it would probably

take another week or two for the others to come in. I love hearing

what you were saying, Merrick, that it might be a few days.

The sooner this gets over with and the industry gets back, the Detroit based industry gets back to building cars, the better off everyone's going to be.

And then they can wait for somebody. As David said, who really wants

to buy a car company that changed. That would change the world, wouldn't

it. That would well real good you guys. We're going to wrap this

up, but thanks so much for coming back on the show. Appreciate it,

Thank you for having I'd love to stay afterwards in chat, but I've got to run to another event. And pleasure being both with all of you

and nice to meet you. David enjoyed your comments very much. Yeah on

Online After Hours is brought to you by bridge Stone Tires, Solutions for Your Journey and by Borg Warner. If you like this program, I would like

to learn more about the automotive industry. Check out our website at Autoline dot

tv, or look for us on YouTube on the Autoline channel.

AAH #669 – Who Caved First, Ford or the UAW?

Ford Mustang

About this episode

Original notes