US Auto Workers Union Demands Pay Raise, Will Increase Manufacturer's Costs by Over $80 Billion

According to informed sources, the new contract proposed by the United Auto Workers (UAW) in the United States is expected to increase the labor costs of major American automakers by over 80 billion dollars. The source stated that the significant increase in labor costs over the four-year contract period could erode profits and threaten the future of automakers.

The source mentioned that the hourly labor costs, including wages and benefits, for Ford (F.US), General Motors (GM.US), and Stellantis (STLA.US) would increase from the current 64 dollars per hour to over 150 dollars. This calculation is based on the UAW's proposed 46% wage increase, restoration of traditional pensions, increased cost of living, reduction of weekly working hours from 40 to 32, and increased retirement benefits.

A UAW spokesperson declined to comment on cost estimates but referred to a previous statement by UAW President Shawn Fain, stating, "Record profits mean record contracts."

It is understood that the largest American automakers are currently engaged in tense contract negotiations with their largest unions. UAW President Fain has declared war on these companies and warned that the union's demands will be the "boldest proposal list they have seen in decades." The union's current contracts with all traditional Detroit automakers are set to expire on September 14th.

Fain believes that the approximately 150,000 workers represented by the UAW at General Motors, Ford, and Stellantis should be rewarded for helping these companies recover from the Great Recession a decade ago and generating record profits. However, the automakers have rejected many of the demands.

According to insiders familiar with Ford's costs, the current hourly labor costs of Ford, General Motors, and Stellantis, at 64 dollars per hour, are already higher than the hourly labor costs of Asian and European automakers at non-union assembly plants in the United States, which stand at 55 dollars per hour. The labor cost gap between the two sides is estimated to be around 900 million dollars. Insiders say that labor costs for electric vehicle leader Tesla are even lower, ranging from 45 to 50 dollars per hour.

In response, Ford CEO Jim Farley stated last month that the company has added thousands of union jobs and invested 1 billion dollars to improve working conditions in its factories. He believes that spending a little more on labor will pay off in the market.

During Ford's second-quarter earnings conference call, Farley told analysts, "For us, this is not just a number game. We believe that over time, customers will appreciate and reward our approach, and our employees will be more loyal."

As negotiations unfold, American automakers are investing billions of dollars in designing and manufacturing electric vehicles while trying to increase profits from traditional fuel vehicles to cover the associated costs. However, on Tuesday, the UAW President turned his attention to Jeep brand automaker Stellantis, criticizing the company's demands for concessions at the negotiating table as a "slap in the face" to the automotive workers represented by the union. .

Fain said that Stellantis is proposing to reduce existing healthcare insurance, establish additional wage levels, eliminate the cap on low-wage temporary workers, and change the profit distribution formula. He also claimed that Stellantis has not proposed to produce any new products at its assembly plant in Belleville, Illinois, which has been idle since February, resulting in the layoff of approximately 1,350 people.

According to reports, a copy of the proposal also confirms many of Fain's claims. The document states that Stellantis expects healthcare costs to increase by $613 million over the next four years, reaching $1.1 billion. The company also stated that in 2021 and 2022, worker absenteeism resulted in a loss of nearly 17,000 units.

In order to reduce costs, Stellantis has proposed cost-saving measures that have long been opposed by the union, such as increasing co-pays and premiums, limiting coverage for certain medications or reducing their coverage, such as drugs for treating erectile dysfunction, and replacing some Blue Cross Blue Shield plans.

The automaker also proposed making elected union officials work full-time and increasing wages, profit sharing, and vacation time based on worker absenteeism rates.

Stellantis did not immediately respond to questions about Fain's speech or the leaked proposal.

In response, Fain said, "Stellantis' proposal is a slap in the face and an insult to our members' work over the past four years." He then threw Stellantis' proposal into the trash can.