The auto strike at Detroit’s Big 3 could be a catalyst for what every American worker fears

The United Auto Workers union is targeting all three major automakers in Detroit – General Motors (GM), Chrysler owner Stellantis (STLA) and club name Ford (F) – for the first time in its history. But the strike by fewer than 13,000 UAW members at three plants, one at each company, was much milder than many feared. Shares of all three major automakers were actually higher during the session on Friday despite a broader market sell-off. Before the UAW strike took effect, Ford and General Motors proposed a 20% raise, and Stellantis proposed a 17.5% raise. Unfortunately, this was not enough to avoid a strike. The two sides have been meeting an 11:59 Thursday night deadline to reach a new collective bargaining agreement. That’s when the old one expires. The union action and its knock-on effects have resulted in the suspension of 15% of total U.S. auto production. Regardless of which side “wins,” the path forward will have greater implications than the power dynamics within the automotive industry. While the Big Three’s partial strike may be seen as a good-faith attempt to mitigate the damage and ultimately reach a labor deal, it certainly makes strategic sense for the UAW. With strike funds limited, these targeted work stoppages help prolong the union’s ability to maintain pressure on the automakers while paying members wages. Based on comments from Ford CEO Jim Farley, we don’t think the union will get everything it demands — not because workers don’t deserve more money, and not because management only cares about shareholders. This is because as far as we know, this is not economically feasible. Farley quantified the union’s demands in an interview with CNBC on Thursday night, saying four-day workers would receive $300,000 a year. Farley said if this pay structure had been in place for the past 10 years, Ford would have “lost $15 billion and gone bankrupt.” President Joe Biden expressed support for the United Auto Workers union on Friday, saying union workers don’t get a fair share of the profits made by automakers. Biden said “record corporate profits” should be shared with workers, adding that he hoped both sides could return to the negotiating table and reach what he called a win-win deal. With an election year approaching, the president needs the economy to stay afloat, and the auto industry accounts for about 3% of U.S. gross domestic product. Meanwhile, Biden continues to tout himself as the “most pro-union president” ever. He may have felt pressure after signing a bill in December 2022 to stop a nationwide rail strike because he was worried about what it would mean for the U.S. economy. It remains to be seen whether this approach will be effective, or expand to factories where it will have a greater impact on the company’s bottom line. However, the strike is illustrative of a larger trend we’ve seen in recent years as union efforts have intensified—in part, no doubt, due to decades of high inflation and declining affordability. Now, everyone from the car factory floor to the C-suite, and across industries, is watching the situation closely to see who will be declared the winner. If the union is seen as a victory, it will encourage others to initiate or advance unionization efforts. If it proves futile or ends up hurting more workers than it helps, it could lead union organizers to err on the side of caution and shift power back to employers. Either way, we think ongoing negotiations could help boost automation efforts as company leaders seek to mitigate the potential for additional disruption caused by future workers. Additionally, the more companies pay for labor, the greater the incentive to invest in automation efforts, since robots and automated factories require only upfront investment and ongoing maintenance costs. There are no vacation days, health benefits or sick days required, and they run virtually 24 hours a day, 7 days a week, 365 days a year. This is the fear of every American worker: machines taking away jobs. That’s why UAW members are now working hard to get as much money as possible. This is a double-edged sword that plays out in real time: ensuring higher wages, but also understanding that this may mean shorter time for automation, which is already coming anyway. We’re not saying this is right, and we’re not saying we’re happy about the possible future, but with the advancements in AI over the last year and the various use cases companies across industries are testing in generative AI, it’s a Motivation that continues to exist. (Jim Cramer’s Charitable Trust is Long F. 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Members of the United Auto Workers (UAW) union stand on the picket line outside the Ford Motor Company’s Michigan Assembly Plant on Friday, September 15, 2023, in Wayne, Michigan, USA.

Emily Erkonen | Bloomberg | Getty Images

UAW takes aim at all three Detroit automakers — General Motors (General Motors), owner of Chrysler star (STLA) and club name Ford (F) — Strike for the first time in history. But the strike by fewer than 13,000 UAW members at three plants, one at each company, was much milder than many feared.

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