Speaker 1: In bargaining. We've repeatedly told the companies from day one,
Speaker 1: September fourteenth is a deadline, not a reference point. We
Speaker 1: will not allow the Big three to continue dragging out
Speaker 1: negotiations for months. They've made a quarter of a trillion
Speaker 1: dollars in North American profits over the last decade. They
Speaker 1: nickel and dime our members every day, price gougs the
Speaker 1: American consumer, and they squeeze the US taxpayer for every
Speaker 1: die and they can get the Big three can afford
Speaker 1: to immediately give us our fair share.
Speaker 2: On Friday, US auto workers started an unprecedented strike against
Speaker 2: all three of the legacy Detroit carmakers, Ford, General Motors,
Speaker 2: and Stilantis, which makes Chrysler and Jeep vehicles. If the
Speaker 2: standoff isn't resolved quickly, it could ripple through the US economy.
Speaker 2: What are the union workers demanding and will the companies
Speaker 2: give them what they want? I'm west Ksova today on
Speaker 2: the Big Take Bloomberg's Detroit bureau chief David Welch. It's
Speaker 2: here with answers, David. This auto strike is a little
Speaker 2: bit different from earlier ones because the autoworkers are walking
Speaker 2: out on all three of the big old Detroit US
Speaker 2: automakers at the same time.
Speaker 3: That's right. We haven't had a national strike like this
Speaker 3: in history, at least not in anything we'd consider modern times.
Speaker 3: It really kind of shows the I think, the angst
Speaker 3: to a great degree that union workers have and labor
Speaker 3: in general in the country. There's a lot of labor
Speaker 3: unrest when it comes to income disparity and inflation, and
Speaker 3: you know what the union has been calling corporate greed
Speaker 3: and billionaires. You know, there's a class issue in the US.
Speaker 3: And you know, so when it's at all three companies,
Speaker 3: it tells you that this is a widespread thing as
Speaker 3: opposed to management of one automaker or the other that
Speaker 3: the union thinks is mistreated them. This is the whole
Speaker 3: industry to them.
Speaker 2: And they also chose only particular plants at each of
Speaker 2: the companies that make popular vehicles. Why did they choose
Speaker 2: that strategy?
Speaker 3: Yeah, So, look, the union's got a few things going on.
Speaker 3: One is they have a strike fund that pays seven
Speaker 3: hundred and fifty dollars a week, which includes their healthcare
Speaker 3: coverage for every worker, and with one hundred and fifty
Speaker 3: thousand workers at all three companies, that fund would be
Speaker 3: broken about seven weeks if they struck every plant. So
Speaker 3: what Sean Fain, the union president, is trying to do.
Speaker 3: He's trying to inflict some pain, and so he's shutting
Speaker 3: down the Ford, Bronco Jeep Wrangler, and Chevrolet Colorado pickup plant.
Speaker 3: That's the GM mid sized pickup, which that's an important
Speaker 3: distinction I can get to in a minute. But these
Speaker 3: are three popular vehicles that make pretty good money. They're
Speaker 3: not the most popular vehicles, and they don't make the
Speaker 3: most money. So this is sort of an opening salvo
Speaker 3: that says, hey, we're going to hurt your earnings, but
Speaker 3: we're not going to kill them. But if you don't
Speaker 3: give us a deal, we could and we've got other
Speaker 3: levers we could pull down the road. And so think
Speaker 3: about it. If they could strike all three companies, every
Speaker 3: single plant in the last seven weeks, they do a
Speaker 3: piece me like this, they could drag this on for months.
Speaker 3: So it also sends the automaticers a signal that, Okay,
Speaker 3: the earnings hit right now from these shutdowns may not
Speaker 3: be huge, but the union can and intends to potentially
Speaker 3: do this for a very long time, which is a
Speaker 3: lot of headaches for everybody. And then of course once
Speaker 3: they strike this plant, they could start to threaten others
Speaker 3: that can do more damage. A full sized pickup truck
Speaker 3: plant that makes a fort f one fifty or Chevy
Speaker 3: Silverado or Ram pickup. That's a lot of profit loss
Speaker 3: right there. They could shut down parts plants they make
Speaker 3: replacement parts, which means dealers have a headache trying to
Speaker 3: repair cars and you have angry customers on your hands.
Speaker 3: That one, I think it would be risky even for
Speaker 3: the union, but that is a thing they could do.
Speaker 3: Or they could shut down plants like that make engines
Speaker 3: or body parts. That would shut down multiple assembly plants.
Speaker 3: So you see that they can. They can sort of
Speaker 3: ramp this up, and every time they do it with
Speaker 3: some of these other strategies inflict more pain and aggravation
Speaker 3: on management to apply more pressure.
Speaker 2: So the companies have said they've given the auto workers
Speaker 2: a pretty good deal and met a lot of what
Speaker 2: they thought were their demands. What did the companies offer so.
Speaker 3: Right now they're all at roughly twenty percent pay increase
Speaker 3: over four years, so average of five percent a year.
Speaker 3: In the last contract they got two three percent increases
Speaker 3: and two lumps on checks worth four percent, and that
Speaker 3: was just the raw pay increase, so this is, you know,
Speaker 3: significantly bigger than that. They did offer cost of living allowance,
Speaker 3: which basically helps protect workers against inflation, and that's something
Speaker 3: that workers had from nineteen forty eight until two thousand
Speaker 3: and nine. They lost it during the financial crisis, and
Speaker 3: they've wanted it back ever since. And the companies were
Speaker 3: sort of whistling by the great if you're not giving
Speaker 3: it back to them in each agreement, and now there's
Speaker 3: you know, with the inflation we've had in twenty twenty
Speaker 3: one and twenty twenty two, the workers think they went
Speaker 3: backwards and pay during the last agreements and now they
Speaker 3: want this. The companies have actually offered that. They didn't
Speaker 3: tell us what the calculus was. The union crewer didn't
Speaker 3: light the calculus, but they've offered that as well. They
Speaker 3: sweetened the pensions for those who actually have pensions. The
Speaker 3: big sticking point, the one thing that they didn't offer
Speaker 3: and I believe they never will, is giving pensions back
Speaker 3: to workers hired after two thousand and seven. That's another
Speaker 3: benefit that was lost in the you know, years leading
Speaker 3: up to the financial crisis. In two thousand and nine,
Speaker 3: when GM and Chrysler went bankrupt, guaranteed pensions for workers
Speaker 3: went away, as did retiree healthcare. Anyone hired before seven
Speaker 3: has it, everybody else does not. Union wants it back
Speaker 3: to the newer hires. Companies will never do it because
Speaker 3: it results in tens of billions of dollars in liabilities
Speaker 3: that they have to fund. So if that becomes the
Speaker 3: sinquan no of this round of negotiations, it could be
Speaker 3: a very long and ugly fight because the companies just
Speaker 3: will not get into that situation where they have this massive,
Speaker 3: growing liability. Look, I think Sean Fain probably could have
Speaker 3: taken these current offers to his membership and gotten it ratified,
Speaker 3: but he wants to try to get some of these
Speaker 3: other things back. So for me, the sixty four billion
Speaker 3: dollar question is what is he willing to take to
Speaker 3: the membership, And if he insists on this pension and
Speaker 3: retiree stuff, buckle in because it'll be along and ugly ride.
Speaker 2: If, as you say, the companies did offer the union
Speaker 2: a lot of what it wanted except for these big
Speaker 2: questions over pensions, why do the membership go along? Is
Speaker 2: it a good deal? For the workers.
Speaker 3: Look, I think it is they may need to sweepen
Speaker 3: the four to one k to kind of make the
Speaker 3: members feel like they are getting something more for their
Speaker 3: retirement than they had before. I think it's a five
Speaker 3: percent match, which I don't think is all that great,
Speaker 3: and I think they would want more than that. I
Speaker 3: think with this other stuff. You know that there's they
Speaker 3: get very good profit sharing checks. These agreements comes with
Speaker 3: a ratification bonus, which is a check just for voting
Speaker 3: in favor of it and signing the deal. That's usually
Speaker 3: about ten thousand dollars. And think about that. You know,
Speaker 3: a worker not getting over time making the top wage
Speaker 3: of thirty two dollars an hour, that's about sixty seven
Speaker 3: thousand a year. So a ratification check of ten thousand
Speaker 3: dollars and a bonus check of about ten thousand dollars,
Speaker 3: that's about a thirty three percent bonus right there, before
Speaker 3: we even get to the pay increase or the cost
Speaker 3: of living allowance.
Speaker 2: So why is the union willing to go to the
Speaker 2: wall over this?
Speaker 3: There is some politics here. The past two UAW presidents
Speaker 3: stole from the union itself, you know, that's what they
Speaker 3: were indicted and convicted of so Sean Fain in some
Speaker 3: ways had to go on strike, and he has to
Speaker 3: show his the office he's getting in the office he's
Speaker 3: giving publicly to have transparency, show them members what's going on,
Speaker 3: and by going on strike, show that he's fighting the
Speaker 3: good fight for labor. For day one, we've.
Speaker 1: Told these companies, yeah, you know, we don't have to
Speaker 1: back them to delay and rag things out, and that's
Speaker 1: what they chose to do. We didn't want to be here.
Speaker 1: We want a fair agreement. We want fair economic and
Speaker 1: social justice for our members. That's what this is all about.
Speaker 3: Because they have no faith in leadership. And he was
Speaker 3: elected in a runoff by a very narrow margin. So
Speaker 3: he's got to prove he's the real deal. And you know,
Speaker 3: what better way to do it than to strike. And
Speaker 3: you know, have a rhetoric that accuses the CEOs of
Speaker 3: being greedy because of their raises and their big salaries
Speaker 3: and share buybacks that you know, feed billionaires more money all,
Speaker 3: you know, all the kind of rhetoric you here. Now, Look,
Speaker 3: I think he sincerely does want to get a better
Speaker 3: deal and get as much as he can, there's no
Speaker 3: question about that. But he's also building a persona. So
Speaker 3: if he wants to be re elected as UAW president
Speaker 3: and get his deals ratified, he's got to build himself
Speaker 3: up as you know, a true great union leader.
Speaker 2: And do we have an indication about whether this strategy
Speaker 2: has wide support among the union membership.
Speaker 3: No one's doing a pull on it. But if you know,
Speaker 3: just judging by the social media you see when he
Speaker 3: gives speech and that sort of thing, the majority are
Speaker 3: pretty supportive of this. And look, why not. He's already
Speaker 3: he's turned down offers that were better than the last
Speaker 3: couple of agreements they got. So the workers think, okay,
Speaker 3: even if he just gets a little more here, he's
Speaker 3: done better than the past two three four presidents have.
Speaker 3: Most of those presidents either got mild pay raisers or
Speaker 3: actually had to give concessions because we are deep recession
Speaker 3: and so forth. But yeah, he's done better than those
Speaker 3: other presidents have already. So if you're a worker and
Speaker 3: you know you're going to get twenty percent plus all
Speaker 3: these signing bonuses cost a living allowance and all that
Speaker 3: sort of thing, and you go out for two or
Speaker 3: three weeks and maybe get a little more that, that's
Speaker 3: you know that much more on top of what you
Speaker 3: were you got from the prior regimes.
Speaker 2: After the break, what do auto company executives say about
Speaker 2: the union workers' demands? The company CEOs have come out
Speaker 2: and kind of expressed frustration, saying, we thought we gave
Speaker 2: these workers a pretty good deal. What more are we
Speaker 2: supposed to do?
Speaker 3: They have, And look, they knew going into this set
Speaker 3: of negotiations that they would have to offer a pretty
Speaker 3: good pay package because the last agreement wasn't all that
Speaker 3: lucrative for workers and the companies put up record profits
Speaker 3: or near record profits for the past four years. They
Speaker 3: knew it. They probably thought the current deal their offering
Speaker 3: would have been ratified six times over, and instead they
Speaker 3: have a strike. So they are very frustrated, and look,
Speaker 3: think about this. Negotiations in past years are always done
Speaker 3: behind closed doors. Now it's out in the public. CEOs
Speaker 3: hate that they have a union president who's extracting very
Speaker 3: good offers out of them, which they're probably not in
Speaker 3: love with. And that same person who's extracting these offers
Speaker 3: routinely calls them greedy CEOs with ridiculous salaries who do
Speaker 3: share buybacks and pay dividends to discussing Wall Street billionaires.
Speaker 3: So there's there's some insult and injury going on here
Speaker 3: that I'm sure is not lost on the well. General
Speaker 3: Motors CEO Mary bara Is I wrote a book on her.
Speaker 3: She's one of the most composed executives I've ever interviewed.
Speaker 3: You know, Mary Borrow went on Bloomberg TV on Friday
Speaker 3: to voice her frustration over there.
Speaker 4: Yeah, I'm extremely disappointed and frustrated that we're even on
Speaker 4: a strike. We didn't need to get here. General Motors
Speaker 4: has an exceptionally strong offer on the table. It's historic.
Speaker 4: So when you look at the strength of the agreement
Speaker 4: we have on the on the table, you know, we
Speaker 4: really don't need to be here, And to me.
Speaker 3: That says a lot.
Speaker 2: David, I thought it was interesting that given the stakes here,
Speaker 2: that markets largely shrugged it off, and in fact, on
Speaker 2: Friday the automaker stocks went up a bit.
Speaker 3: Now, I think that the anticipation was a big national
Speaker 3: strike that was going to shut the companies down and
Speaker 3: lead to billions and losses. You know, very quickly you're
Speaker 3: talking about three plants, and those are profitable vehicles, but
Speaker 3: you know, we've seen important plants go down for two
Speaker 3: or three weeks because they didn't have semiconductors or even
Speaker 3: something as simple as a steering column. This is something
Speaker 3: that companies can absorb for a while. So if you know,
Speaker 3: if this goes on and the union adds more plants,
Speaker 3: then you'll see the stocks take a hit. I do
Speaker 3: think to a certain degree. You know, you've seen the
Speaker 3: stocks go down for the past month because of fear
Speaker 3: over a strike. So there's also a certain discount that's
Speaker 3: already built in, there's no question about that. But I
Speaker 3: think there might have been a sigh of relief that
Speaker 3: you know, we're kind of punting down the road the
Speaker 3: you know, the strike armor gedding that people were really
Speaker 3: worried about.
Speaker 2: How long until consumers would start to feel the effect
Speaker 2: of this strike.
Speaker 3: We look, if you if you want a Ford Bronco,
Speaker 3: it's a hot selling vehicle, those dealer lots for that
Speaker 3: vehicle are going to start getting leaned pretty quickly here
Speaker 3: probably you know, a few weeks. Same goes for the
Speaker 3: other vehicles. So they'll start to see scarcity and start
Speaker 3: to see prices rise for select vehicles. I'd say within
Speaker 3: three weeks for the most part. And if he hits
Speaker 3: a parts plant. You know, you could really have dealers
Speaker 3: hurting because they don't keep a lot of parts inventory.
Speaker 3: That could cause problems within a week or two.
Speaker 2: And because of just how big this industry is. If
Speaker 2: you look in the past, autoworkers strikes didn't only affect
Speaker 2: the companies and the customers to buy cars, but all
Speaker 2: these suppliers up and down the chain. How costly could
Speaker 2: this strike be if it keeps going up.
Speaker 3: One estimate we have is five point six billion dollars
Speaker 3: hits the economy if all three companies were struck at
Speaker 3: all plans for ten days. That's actually not that big
Speaker 3: if you think about the size of the US economy.
Speaker 3: It's more, you know, ripple effect for layoffs in certain
Speaker 3: regions and certain industries. When there was a strike at
Speaker 3: General Motors in September of twenty nineteen, the economy had
Speaker 3: a brief recession in Michigan. The company lost three point
Speaker 3: six billion dollars, and we saw nineteen percent dropping steel
Speaker 3: prices that quarter and then despite the following quarter because
Speaker 3: a bunch of mills had gone down and it takes
Speaker 3: a while to bring them back up. So the ripple
Speaker 3: effect here can be pretty wide. In ways that you
Speaker 3: don't necessarily see in GDP numbers.
Speaker 2: When we come back, the strike comes at an unwelcome
Speaker 2: time for Joe Biden.
Speaker 5: It's my hope that the parties can return to the negotiation
Speaker 5: table to forge a win win agreement to continue our
Speaker 5: active engagement. I'm just I'm to plumb dispatching two members
Speaker 5: of my team to Detroit, Acting Labor Secretary Julie Schue
Speaker 5: and White House Senior Advisor Gene Sperling. Both of them
Speaker 5: been involved up to that to offer their full support
Speaker 5: for the parties and reaching a contract. The bottom line
Speaker 5: is that auto workers help create America's middle class. They
Speaker 5: deserve a contract that sustains them in the middle class.
Speaker 2: So if the markets didn't immediately respond, that's certainly not
Speaker 2: true of the White House, where Joe Biden is looking
Speaker 2: at a possible economic hit at the worst possible time
Speaker 2: for him.
Speaker 3: Biden's and he's walking a real tightrope here because he's
Speaker 3: built himself as labour's friend, so he needs to side
Speaker 3: with them. But he can't have them out for a
Speaker 3: long time because it not only would have hurt the economy,
Speaker 3: it especially hurt the economy in the upper Midwest. There
Speaker 3: was a briefer session in Michigan when the UAW went
Speaker 3: on strike at General Motors for forty days in twenty nineteen.
Speaker 3: That's a swing state. It's a very important one and
Speaker 3: one where Trump does have a decent base. I'm assuming
Speaker 3: he'll be the nominee. Know that that's something Biden doesn't need.
Speaker 3: And look, also, a big part of his agenda is
Speaker 3: ushering electric vehicles and clean transportation into existence. And you know,
Speaker 3: the union's union support TVs, but they want to make
Speaker 3: sure they have good paying jobs with all of this,
Speaker 3: and that's that's also a part of this fight. So uh,
Speaker 3: you know, Biden's got to play some politics here and
Speaker 3: he's kind of getting buffeted from all sides.
Speaker 2: David, you mentioned at the very top of our conversation
Speaker 2: about how this strike is taking place in the context
Speaker 2: of a lot of labor unrest, and the strike is
Speaker 2: the latest in a string of other walkouts and other
Speaker 2: industries that we've seen, and the workers were able to
Speaker 2: squeeze concessions out of some of those companies. Did the
Speaker 2: UAW sort of take their cue from the success of
Speaker 2: other union workers.
Speaker 3: I think to a degree they did. They'd probably never admitted,
Speaker 3: but I think Sean Fain I think he wanted a
Speaker 3: strike coming in. I mean, he says he doesn't, but
Speaker 3: I don't think there were many ways he couldn't have
Speaker 3: unless the companies just came out and offer him an
Speaker 3: insanely rich deal to begin with. And they're never going
Speaker 3: to do it either like that, that's what bargaining is
Speaker 3: all about. But I think to a degree they did.
Speaker 3: I think the UAW was also reading polls that suggest
Speaker 3: now more than seventy percent of Americans view labor unions favorably,
Speaker 3: which is about double where it was I think five
Speaker 3: years ago. And you were seeing organizing drives win at
Speaker 3: places like Starbucks, and you organizing efforts at Amazon. Seeing
Speaker 3: the writer's strike seems to have public sympathy. You know,
Speaker 3: in Los Angeles ups didn't have a strike, but the
Speaker 3: teamsters want a really nice contract there. So labor's having
Speaker 3: a moment clearly in the US, and I think Sean
Speaker 3: Fain not only wants to be part of it, I
Speaker 3: think he wants to ride that wave and maybe maybe
Speaker 3: make that wave a little bigger. He's he's going to
Speaker 3: hang ten on the wave of American labor.
Speaker 2: So David, what do you think happens next? Do you
Speaker 2: think the companies will sweeten their offer for the unions
Speaker 2: or will this strike wind up spreading to those their plants.
Speaker 3: I think there will be another round of strikes almost
Speaker 3: no matter what, you'll you know, you'll see Fain will
Speaker 3: escalate this to some degree. Maybe it's three more plants
Speaker 3: and the companies will sweepen their offers. You know, again,
Speaker 3: that big question is whether or not Faine himself is
Speaker 3: willing to take a deal to his members that doesn't
Speaker 3: have this nineteen nineties era return to guaranteed pensions and
Speaker 3: retiree healthcare. If he's willing to just take great raises
Speaker 3: and worry about that stuff in a future round of bargaining,
Speaker 3: then you know, after maybe one more round of plant strikes,
Speaker 3: you know, we get a deal and I think that
Speaker 3: I think it would get ratified.
Speaker 2: So if you were to venture a guess how long
Speaker 2: before this is over?
Speaker 3: I mean, look, it's it's probably at least a couple
Speaker 3: more weeks, and it could vary at each company too,
Speaker 3: because he is he's got issues with GM over the
Speaker 3: one union battery plant. They haven't all island. Whether or
Speaker 3: not that should be in this master agreement or have
Speaker 3: a cheaper separate agreement. He doesn't like that. He's really
Speaker 3: angry at Stoantis over the threatened closure of a plant
Speaker 3: in Illinois. So there's some separate, some separate issues that
Speaker 3: aren't just pay and benefits at those companies that could
Speaker 3: make him stay out longer with each one.
Speaker 2: David, thanks so much for coming on the show. No problem,
Speaker 2: Thanks guys, Thanks for listening to us here at the
Speaker 2: Big Take. It's a daily podcast from Bloomberg and iHeartRadio.
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Speaker 2: dot net. This episode was produced and engineered by our
Speaker 2: supervising producer, Vicky Burgalina. Our original music was composed by
Speaker 2: Leo Sidrin. I'm West Kasova. We'll be back tomorrow with
Speaker 2: another Big Take.
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