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The Detroit Three automakers and the United Auto Workers union are negotiating a new contract just hours before the current contract expires, raising the possibility of a strike.

Unions threatened strike action against Ford, Stellantis and General Motors after their four-year contracts expired at 11.59pm on Thursday. This is the first time in the UAW’s 88-year history that a strike has affected Detroit’s three major auto companies simultaneously.

UAW President Shawn Fain said union members will strike at select locations starting Friday rather than at all of the company’s plants. Depending on developments at the bargaining table, more and more locations are set to go on strike.

The union is planning a so-called “stand up strike” — a reference to the historic sit-down strikes of the 1930s that helped form the UAW — as a way to keep companies guessing.

“One of the questions people are asking is why don’t we strike at every facility in the Big Three?” Brian Shepherd, the UAW’s chief organizer, said Thursday. “But the option is still on the table. Stand up and strike is really about giving state negotiators maximum flexibility.”

Negotiations between the Detroit Three and the United Auto Workers have been unusually contentious compared to other four-year cycles. Fein came to power this year amid a union corruption scandal. He took a confrontational approach, noting that “over the past decade, automakers have made billions in profits while workers have seen most of the concessions.”

Another point of tension is the automotive industry’s transition to electric vehicles. Automakers will need billions of dollars to invest in new factories and tools to build battery-powered cars and trucks.

At the same time, they are forming electric vehicle battery joint ventures with non-union companies where workers are paid less than their union counterparts. As the auto industry electrifies, the United Auto Workers is looking to ensure auto industry jobs continue to pay better and be unionized.

The UAW lowered its demand for raises to 36 percent over four years, while the automakers raised their initial offers to 20 percent. The UAW also wants to end the two-tier wage system in which new employees take four years to make the same wage as permanent employees, but automakers disagree.

Ford CEO Jim Farley told CNBC on Thursday that if his company had agreed to the UAW’s demands, “we would have lost $15 billion and gone bankrupt right now.”

The strike could weigh on the U.S. economy and test President Joe Biden’s pro-union bona fides, especially in the battleground state of Michigan.

Oxford Economics estimates that if the nearly 150,000 unionized workers at the three companies end up going on strike, the move could shut down about a third of U.S. auto production, putting pressure on the labor market and pushing up prices for new cars, etc. The prices of certain products.

The consulting firm said this would directly lead to a reduction in U.S. gross domestic product of as much as 0.3% on an annualized basis. Including indirect effects, the hit to GDP will be greater, at 0.7%, as long as the impasse persists.

Michael Pearce, chief U.S. economist at Oxford Economics, predicted an overall drop in industrial production of up to 40% based on past strikes, but said of the wider economic impact: “Once the dispute is over, any blow will should be fully lifted, so the impact on full-quarter GDP is likely to be negligible.”

Anderson Economic Group, a Michigan consulting firm, estimates that workers, including all UAW workers at the three companies, will lose $859 million in wages during the 10-day strike, while the companies will lose $989 million.

Both sides are ready. The UAW has an $825 million strike fund and can pay workers $500 a week. Fitch Ratings analyst Stephen Brown said the companies’ liquidity – cash and marketable securities, plus revolving credit lines – was “quite strong” at $39 billion for General Motors, $51 billion for Ford and Europe’s Stellantis is €66 billion.

Fain said on Wednesday that the focus on widespread economic damage from automakers and the “corporate media” is misplaced as pay for CEOs at the three major automakers has risen 40% in the past four years and funding for stock buybacks has climbed. Wages for UAW workers increased by 1,500% and 6%.

“They pretend that if we get our fair share, the sky will fall,” he said. “When they say we’re going to destroy the economy, we’re not destroying the economy, we’re destroying their economy. The billionaire economy. That’s what they’re worried about. . . . They want to scare the American people into thinking that auto workers are the problem. .”


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