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Speaker 1: In bargaining. We've repeatedly told the companies from day one,

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Speaker 1: September fourteenth is a deadline, not a reference point. We

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Speaker 1: will not allow the Big three to continue dragging out

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Speaker 1: negotiations for months. They've made a quarter of a trillion

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Speaker 1: dollars in North American profits over the last decade. They

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Speaker 1: nickel and dime our members every day, price gougs the

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Speaker 1: American consumer, and they squeeze the US taxpayer for every

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Speaker 1: die and they can get the Big three can afford

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Speaker 1: to immediately give us our fair share.

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Speaker 2: On Friday, US auto workers started an unprecedented strike against

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Speaker 2: all three of the legacy Detroit carmakers, Ford, General Motors,

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Speaker 2: and Stilantis, which makes Chrysler and Jeep vehicles. If the

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Speaker 2: standoff isn't resolved quickly, it could ripple through the US economy.

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Speaker 2: What are the union workers demanding and will the companies

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Speaker 2: give them what they want? I'm west Ksova today on

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Speaker 2: the Big Take Bloomberg's Detroit bureau chief David Welch. It's

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Speaker 2: here with answers, David. This auto strike is a little

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Speaker 2: bit different from earlier ones because the autoworkers are walking

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Speaker 2: out on all three of the big old Detroit US

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Speaker 2: automakers at the same time.

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Speaker 3: That's right. We haven't had a national strike like this

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Speaker 3: in history, at least not in anything we'd consider modern times.

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Speaker 3: It really kind of shows the I think, the angst

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Speaker 3: to a great degree that union workers have and labor

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Speaker 3: in general in the country. There's a lot of labor

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Speaker 3: unrest when it comes to income disparity and inflation, and

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Speaker 3: you know what the union has been calling corporate greed

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Speaker 3: and billionaires. You know, there's a class issue in the US.

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Speaker 3: And you know, so when it's at all three companies,

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Speaker 3: it tells you that this is a widespread thing as

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Speaker 3: opposed to management of one automaker or the other that

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Speaker 3: the union thinks is mistreated them. This is the whole

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Speaker 3: industry to them.

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Speaker 2: And they also chose only particular plants at each of

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Speaker 2: the companies that make popular vehicles. Why did they choose

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Speaker 2: that strategy?

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Speaker 3: Yeah, So, look, the union's got a few things going on.

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Speaker 3: One is they have a strike fund that pays seven

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Speaker 3: hundred and fifty dollars a week, which includes their healthcare

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Speaker 3: coverage for every worker, and with one hundred and fifty

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Speaker 3: thousand workers at all three companies, that fund would be

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Speaker 3: broken about seven weeks if they struck every plant. So

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Speaker 3: what Sean Fain, the union president, is trying to do.

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Speaker 3: He's trying to inflict some pain, and so he's shutting

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Speaker 3: down the Ford, Bronco Jeep Wrangler, and Chevrolet Colorado pickup plant.

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Speaker 3: That's the GM mid sized pickup, which that's an important

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Speaker 3: distinction I can get to in a minute. But these

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Speaker 3: are three popular vehicles that make pretty good money. They're

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Speaker 3: not the most popular vehicles, and they don't make the

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Speaker 3: most money. So this is sort of an opening salvo

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Speaker 3: that says, hey, we're going to hurt your earnings, but

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Speaker 3: we're not going to kill them. But if you don't

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Speaker 3: give us a deal, we could and we've got other

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Speaker 3: levers we could pull down the road. And so think

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Speaker 3: about it. If they could strike all three companies, every

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Speaker 3: single plant in the last seven weeks, they do a

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Speaker 3: piece me like this, they could drag this on for months.

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Speaker 3: So it also sends the automaticers a signal that, Okay,

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Speaker 3: the earnings hit right now from these shutdowns may not

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Speaker 3: be huge, but the union can and intends to potentially

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Speaker 3: do this for a very long time, which is a

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Speaker 3: lot of headaches for everybody. And then of course once

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Speaker 3: they strike this plant, they could start to threaten others

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Speaker 3: that can do more damage. A full sized pickup truck

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Speaker 3: plant that makes a fort f one fifty or Chevy

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Speaker 3: Silverado or Ram pickup. That's a lot of profit loss

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Speaker 3: right there. They could shut down parts plants they make

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Speaker 3: replacement parts, which means dealers have a headache trying to

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Speaker 3: repair cars and you have angry customers on your hands.

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Speaker 3: That one, I think it would be risky even for

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Speaker 3: the union, but that is a thing they could do.

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Speaker 3: Or they could shut down plants like that make engines

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Speaker 3: or body parts. That would shut down multiple assembly plants.

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Speaker 3: So you see that they can. They can sort of

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Speaker 3: ramp this up, and every time they do it with

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Speaker 3: some of these other strategies inflict more pain and aggravation

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Speaker 3: on management to apply more pressure.

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Speaker 2: So the companies have said they've given the auto workers

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Speaker 2: a pretty good deal and met a lot of what

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Speaker 2: they thought were their demands. What did the companies offer so.

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Speaker 3: Right now they're all at roughly twenty percent pay increase

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Speaker 3: over four years, so average of five percent a year.

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Speaker 3: In the last contract they got two three percent increases

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Speaker 3: and two lumps on checks worth four percent, and that

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Speaker 3: was just the raw pay increase, so this is, you know,

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Speaker 3: significantly bigger than that. They did offer cost of living allowance,

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Speaker 3: which basically helps protect workers against inflation, and that's something

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Speaker 3: that workers had from nineteen forty eight until two thousand

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Speaker 3: and nine. They lost it during the financial crisis, and

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Speaker 3: they've wanted it back ever since. And the companies were

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Speaker 3: sort of whistling by the great if you're not giving

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Speaker 3: it back to them in each agreement, and now there's

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Speaker 3: you know, with the inflation we've had in twenty twenty

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Speaker 3: one and twenty twenty two, the workers think they went

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Speaker 3: backwards and pay during the last agreements and now they

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Speaker 3: want this. The companies have actually offered that. They didn't

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Speaker 3: tell us what the calculus was. The union crewer didn't

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Speaker 3: light the calculus, but they've offered that as well. They

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Speaker 3: sweetened the pensions for those who actually have pensions. The

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Speaker 3: big sticking point, the one thing that they didn't offer

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Speaker 3: and I believe they never will, is giving pensions back

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Speaker 3: to workers hired after two thousand and seven. That's another

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Speaker 3: benefit that was lost in the you know, years leading

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Speaker 3: up to the financial crisis. In two thousand and nine,

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Speaker 3: when GM and Chrysler went bankrupt, guaranteed pensions for workers

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Speaker 3: went away, as did retiree healthcare. Anyone hired before seven

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Speaker 3: has it, everybody else does not. Union wants it back

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Speaker 3: to the newer hires. Companies will never do it because

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Speaker 3: it results in tens of billions of dollars in liabilities

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Speaker 3: that they have to fund. So if that becomes the

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Speaker 3: sinquan no of this round of negotiations, it could be

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Speaker 3: a very long and ugly fight because the companies just

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Speaker 3: will not get into that situation where they have this massive,

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Speaker 3: growing liability. Look, I think Sean Fain probably could have

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Speaker 3: taken these current offers to his membership and gotten it ratified,

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Speaker 3: but he wants to try to get some of these

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Speaker 3: other things back. So for me, the sixty four billion

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Speaker 3: dollar question is what is he willing to take to

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Speaker 3: the membership, And if he insists on this pension and

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Speaker 3: retiree stuff, buckle in because it'll be along and ugly ride.

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Speaker 2: If, as you say, the companies did offer the union

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Speaker 2: a lot of what it wanted except for these big

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Speaker 2: questions over pensions, why do the membership go along? Is

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Speaker 2: it a good deal? For the workers.

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Speaker 3: Look, I think it is they may need to sweepen

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Speaker 3: the four to one k to kind of make the

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Speaker 3: members feel like they are getting something more for their

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Speaker 3: retirement than they had before. I think it's a five

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Speaker 3: percent match, which I don't think is all that great,

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Speaker 3: and I think they would want more than that. I

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Speaker 3: think with this other stuff. You know that there's they

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Speaker 3: get very good profit sharing checks. These agreements comes with

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Speaker 3: a ratification bonus, which is a check just for voting

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Speaker 3: in favor of it and signing the deal. That's usually

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Speaker 3: about ten thousand dollars. And think about that. You know,

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Speaker 3: a worker not getting over time making the top wage

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Speaker 3: of thirty two dollars an hour, that's about sixty seven

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Speaker 3: thousand a year. So a ratification check of ten thousand

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Speaker 3: dollars and a bonus check of about ten thousand dollars,

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Speaker 3: that's about a thirty three percent bonus right there, before

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Speaker 3: we even get to the pay increase or the cost

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Speaker 3: of living allowance.

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Speaker 2: So why is the union willing to go to the

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Speaker 2: wall over this?

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Speaker 3: There is some politics here. The past two UAW presidents

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Speaker 3: stole from the union itself, you know, that's what they

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Speaker 3: were indicted and convicted of so Sean Fain in some

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Speaker 3: ways had to go on strike, and he has to

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Speaker 3: show his the office he's getting in the office he's

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Speaker 3: giving publicly to have transparency, show them members what's going on,

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Speaker 3: and by going on strike, show that he's fighting the

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Speaker 3: good fight for labor. For day one, we've.

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Speaker 1: Told these companies, yeah, you know, we don't have to

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Speaker 1: back them to delay and rag things out, and that's

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Speaker 1: what they chose to do. We didn't want to be here.

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Speaker 1: We want a fair agreement. We want fair economic and

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Speaker 1: social justice for our members. That's what this is all about.

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Speaker 3: Because they have no faith in leadership. And he was

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Speaker 3: elected in a runoff by a very narrow margin. So

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Speaker 3: he's got to prove he's the real deal. And you know,

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Speaker 3: what better way to do it than to strike. And

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Speaker 3: you know, have a rhetoric that accuses the CEOs of

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Speaker 3: being greedy because of their raises and their big salaries

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Speaker 3: and share buybacks that you know, feed billionaires more money all,

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Speaker 3: you know, all the kind of rhetoric you here. Now, Look,

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Speaker 3: I think he sincerely does want to get a better

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Speaker 3: deal and get as much as he can, there's no

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Speaker 3: question about that. But he's also building a persona. So

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Speaker 3: if he wants to be re elected as UAW president

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Speaker 3: and get his deals ratified, he's got to build himself

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Speaker 3: up as you know, a true great union leader.

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Speaker 2: And do we have an indication about whether this strategy

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Speaker 2: has wide support among the union membership.

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Speaker 3: No one's doing a pull on it. But if you know,

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Speaker 3: just judging by the social media you see when he

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Speaker 3: gives speech and that sort of thing, the majority are

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Speaker 3: pretty supportive of this. And look, why not. He's already

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Speaker 3: he's turned down offers that were better than the last

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Speaker 3: couple of agreements they got. So the workers think, okay,

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Speaker 3: even if he just gets a little more here, he's

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Speaker 3: done better than the past two three four presidents have.

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Speaker 3: Most of those presidents either got mild pay raisers or

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Speaker 3: actually had to give concessions because we are deep recession

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Speaker 3: and so forth. But yeah, he's done better than those

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Speaker 3: other presidents have already. So if you're a worker and

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Speaker 3: you know you're going to get twenty percent plus all

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Speaker 3: these signing bonuses cost a living allowance and all that

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Speaker 3: sort of thing, and you go out for two or

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Speaker 3: three weeks and maybe get a little more that, that's

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Speaker 3: you know that much more on top of what you

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Speaker 3: were you got from the prior regimes.

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Speaker 2: After the break, what do auto company executives say about

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Speaker 2: the union workers' demands? The company CEOs have come out

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Speaker 2: and kind of expressed frustration, saying, we thought we gave

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Speaker 2: these workers a pretty good deal. What more are we

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Speaker 2: supposed to do?

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Speaker 3: They have, And look, they knew going into this set

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Speaker 3: of negotiations that they would have to offer a pretty

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Speaker 3: good pay package because the last agreement wasn't all that

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Speaker 3: lucrative for workers and the companies put up record profits

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Speaker 3: or near record profits for the past four years. They

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Speaker 3: knew it. They probably thought the current deal their offering

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Speaker 3: would have been ratified six times over, and instead they

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Speaker 3: have a strike. So they are very frustrated, and look,

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Speaker 3: think about this. Negotiations in past years are always done

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Speaker 3: behind closed doors. Now it's out in the public. CEOs

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Speaker 3: hate that they have a union president who's extracting very

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Speaker 3: good offers out of them, which they're probably not in

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Speaker 3: love with. And that same person who's extracting these offers

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Speaker 3: routinely calls them greedy CEOs with ridiculous salaries who do

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Speaker 3: share buybacks and pay dividends to discussing Wall Street billionaires.

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Speaker 3: So there's there's some insult and injury going on here

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Speaker 3: that I'm sure is not lost on the well. General

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Speaker 3: Motors CEO Mary bara Is I wrote a book on her.

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Speaker 3: She's one of the most composed executives I've ever interviewed.

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Speaker 3: You know, Mary Borrow went on Bloomberg TV on Friday

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Speaker 3: to voice her frustration over there.

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Speaker 4: Yeah, I'm extremely disappointed and frustrated that we're even on

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Speaker 4: a strike. We didn't need to get here. General Motors

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Speaker 4: has an exceptionally strong offer on the table. It's historic.

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Speaker 4: So when you look at the strength of the agreement

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Speaker 4: we have on the on the table, you know, we

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Speaker 4: really don't need to be here, And to me.

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Speaker 3: That says a lot.

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Speaker 2: David, I thought it was interesting that given the stakes here,

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Speaker 2: that markets largely shrugged it off, and in fact, on

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Speaker 2: Friday the automaker stocks went up a bit.

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Speaker 3: Now, I think that the anticipation was a big national

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Speaker 3: strike that was going to shut the companies down and

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Speaker 3: lead to billions and losses. You know, very quickly you're

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Speaker 3: talking about three plants, and those are profitable vehicles, but

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Speaker 3: you know, we've seen important plants go down for two

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Speaker 3: or three weeks because they didn't have semiconductors or even

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Speaker 3: something as simple as a steering column. This is something

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Speaker 3: that companies can absorb for a while. So if you know,

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Speaker 3: if this goes on and the union adds more plants,

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Speaker 3: then you'll see the stocks take a hit. I do

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Speaker 3: think to a certain degree. You know, you've seen the

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Speaker 3: stocks go down for the past month because of fear

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Speaker 3: over a strike. So there's also a certain discount that's

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Speaker 3: already built in, there's no question about that. But I

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Speaker 3: think there might have been a sigh of relief that

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Speaker 3: you know, we're kind of punting down the road the

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Speaker 3: you know, the strike armor gedding that people were really

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Speaker 3: worried about.

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Speaker 2: How long until consumers would start to feel the effect

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Speaker 2: of this strike.

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Speaker 3: We look, if you if you want a Ford Bronco,

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Speaker 3: it's a hot selling vehicle, those dealer lots for that

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Speaker 3: vehicle are going to start getting leaned pretty quickly here

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Speaker 3: probably you know, a few weeks. Same goes for the

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Speaker 3: other vehicles. So they'll start to see scarcity and start

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Speaker 3: to see prices rise for select vehicles. I'd say within

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Speaker 3: three weeks for the most part. And if he hits

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Speaker 3: a parts plant. You know, you could really have dealers

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Speaker 3: hurting because they don't keep a lot of parts inventory.

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Speaker 3: That could cause problems within a week or two.

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Speaker 2: And because of just how big this industry is. If

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Speaker 2: you look in the past, autoworkers strikes didn't only affect

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Speaker 2: the companies and the customers to buy cars, but all

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Speaker 2: these suppliers up and down the chain. How costly could

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Speaker 2: this strike be if it keeps going up.

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Speaker 3: One estimate we have is five point six billion dollars

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Speaker 3: hits the economy if all three companies were struck at

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Speaker 3: all plans for ten days. That's actually not that big

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Speaker 3: if you think about the size of the US economy.

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Speaker 3: It's more, you know, ripple effect for layoffs in certain

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Speaker 3: regions and certain industries. When there was a strike at

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Speaker 3: General Motors in September of twenty nineteen, the economy had

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Speaker 3: a brief recession in Michigan. The company lost three point

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Speaker 3: six billion dollars, and we saw nineteen percent dropping steel

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Speaker 3: prices that quarter and then despite the following quarter because

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Speaker 3: a bunch of mills had gone down and it takes

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Speaker 3: a while to bring them back up. So the ripple

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Speaker 3: effect here can be pretty wide. In ways that you

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Speaker 3: don't necessarily see in GDP numbers.

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Speaker 2: When we come back, the strike comes at an unwelcome

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Speaker 2: time for Joe Biden.

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Speaker 5: It's my hope that the parties can return to the negotiation

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Speaker 5: table to forge a win win agreement to continue our

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Speaker 5: active engagement. I'm just I'm to plumb dispatching two members

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Speaker 5: of my team to Detroit, Acting Labor Secretary Julie Schue

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Speaker 5: and White House Senior Advisor Gene Sperling. Both of them

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Speaker 5: been involved up to that to offer their full support

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Speaker 5: for the parties and reaching a contract. The bottom line

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Speaker 5: is that auto workers help create America's middle class. They

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Speaker 5: deserve a contract that sustains them in the middle class.

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Speaker 2: So if the markets didn't immediately respond, that's certainly not

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Speaker 2: true of the White House, where Joe Biden is looking

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Speaker 2: at a possible economic hit at the worst possible time

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Speaker 2: for him.

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Speaker 3: Biden's and he's walking a real tightrope here because he's

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Speaker 3: built himself as labour's friend, so he needs to side

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Speaker 3: with them. But he can't have them out for a

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Speaker 3: long time because it not only would have hurt the economy,

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Speaker 3: it especially hurt the economy in the upper Midwest. There

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Speaker 3: was a briefer session in Michigan when the UAW went

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Speaker 3: on strike at General Motors for forty days in twenty nineteen.

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Speaker 3: That's a swing state. It's a very important one and

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Speaker 3: one where Trump does have a decent base. I'm assuming

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Speaker 3: he'll be the nominee. Know that that's something Biden doesn't need.

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Speaker 3: And look, also, a big part of his agenda is

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Speaker 3: ushering electric vehicles and clean transportation into existence. And you know,

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Speaker 3: the union's union support TVs, but they want to make

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Speaker 3: sure they have good paying jobs with all of this,

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Speaker 3: and that's that's also a part of this fight. So uh,

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Speaker 3: you know, Biden's got to play some politics here and

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Speaker 3: he's kind of getting buffeted from all sides.

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Speaker 2: David, you mentioned at the very top of our conversation

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Speaker 2: about how this strike is taking place in the context

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Speaker 2: of a lot of labor unrest, and the strike is

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Speaker 2: the latest in a string of other walkouts and other

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Speaker 2: industries that we've seen, and the workers were able to

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Speaker 2: squeeze concessions out of some of those companies. Did the

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Speaker 2: UAW sort of take their cue from the success of

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Speaker 2: other union workers.

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Speaker 3: I think to a degree they did. They'd probably never admitted,

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Speaker 3: but I think Sean Fain I think he wanted a

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Speaker 3: strike coming in. I mean, he says he doesn't, but

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Speaker 3: I don't think there were many ways he couldn't have

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Speaker 3: unless the companies just came out and offer him an

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Speaker 3: insanely rich deal to begin with. And they're never going

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Speaker 3: to do it either like that, that's what bargaining is

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Speaker 3: all about. But I think to a degree they did.

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Speaker 3: I think the UAW was also reading polls that suggest

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Speaker 3: now more than seventy percent of Americans view labor unions favorably,

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Speaker 3: which is about double where it was I think five

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Speaker 3: years ago. And you were seeing organizing drives win at

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Speaker 3: places like Starbucks, and you organizing efforts at Amazon. Seeing

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Speaker 3: the writer's strike seems to have public sympathy. You know,

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Speaker 3: in Los Angeles ups didn't have a strike, but the

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Speaker 3: teamsters want a really nice contract there. So labor's having

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Speaker 3: a moment clearly in the US, and I think Sean

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Speaker 3: Fain not only wants to be part of it, I

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Speaker 3: think he wants to ride that wave and maybe maybe

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Speaker 3: make that wave a little bigger. He's he's going to

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Speaker 3: hang ten on the wave of American labor.

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Speaker 2: So David, what do you think happens next? Do you

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Speaker 2: think the companies will sweeten their offer for the unions

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Speaker 2: or will this strike wind up spreading to those their plants.

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Speaker 3: I think there will be another round of strikes almost

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Speaker 3: no matter what, you'll you know, you'll see Fain will

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Speaker 3: escalate this to some degree. Maybe it's three more plants

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Speaker 3: and the companies will sweepen their offers. You know, again,

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Speaker 3: that big question is whether or not Faine himself is

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Speaker 3: willing to take a deal to his members that doesn't

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Speaker 3: have this nineteen nineties era return to guaranteed pensions and

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Speaker 3: retiree healthcare. If he's willing to just take great raises

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Speaker 3: and worry about that stuff in a future round of bargaining,

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Speaker 3: then you know, after maybe one more round of plant strikes,

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Speaker 3: you know, we get a deal and I think that

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Speaker 3: I think it would get ratified.

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Speaker 2: So if you were to venture a guess how long

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Speaker 2: before this is over?

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Speaker 3: I mean, look, it's it's probably at least a couple

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Speaker 3: more weeks, and it could vary at each company too,

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Speaker 3: because he is he's got issues with GM over the

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Speaker 3: one union battery plant. They haven't all island. Whether or

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Speaker 3: not that should be in this master agreement or have

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Speaker 3: a cheaper separate agreement. He doesn't like that. He's really

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Speaker 3: angry at Stoantis over the threatened closure of a plant

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Speaker 3: in Illinois. So there's some separate, some separate issues that

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Speaker 3: aren't just pay and benefits at those companies that could

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Speaker 3: make him stay out longer with each one.

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Speaker 2: David, thanks so much for coming on the show. No problem,

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Speaker 2: Thanks guys, Thanks for listening to us here at the

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Speaker 2: Big Take. It's a daily podcast from Bloomberg and iHeartRadio.

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Speaker 2: Email us questions or comments to Big Take at Bloomberg

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Speaker 2: dot net. This episode was produced and engineered by our

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Speaker 2: supervising producer, Vicky Burgalina. Our original music was composed by

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Speaker 2: Leo Sidrin. I'm West Kasova. We'll be back tomorrow with

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Speaker 2: another Big Take.

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Speaker 4: Don't Pump Bad, Pup Pup Pup ban Bomber