The Morning ShiftAll your daily car news in one convenient place. Isn’t your time more important? Both the United Auto Workers and General Motors are preparing for the strike to go long, Ohio’s Lordstown plant workers want a car to make, Europe’s automakers continue to freak out over a no-deal Brexit and more on The Morning Shift of Monday, Sept. 23, 2019.
1st Gear: Who Backs Down First?
There’s a lot to say about the ongoing GM strike, so I’ll try and pick out some crucial bits, but the important one is this: it could take a while, and both sides are gearing up for that outcome.
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The last time GM’s workers went on strike, it was 2007 and the action lasted just two days in September. Even as a global recession loomed and GM’s bankruptcy was less than two years away, if you ask workers on the picket line right now as the strike enters its seventh day, this time is vastly more serious.
After all, GM these days is a handsomely profitable company. But it’s one that continues to close U.S. plants and ship manufacturing jobs to other countries as it gears up for a possible economic downturn in the short term, and a massively uncertain transformation of the entire auto industry in the long term. So for the striking workers, this is about securing their present as well as their future.
Health care costs are one of the central sticking points. UAW workers pay far less in individual contributions to health plans than most Americans do, and GM wants to see that go up, but the workers say the dangerous nature of their job makes their current plan a necessity. Via CNBC:
After a dozen years as an auto worker, Hall said the generous health-care benefits the companies provide for UAW employees, costing workers just 3% out of pocket, are a necessity.
“I have carpal tunnel, heel spurs and I’ve been to physical therapy for my shoulder and my knees. I’m only 41,” she said. “That’s why we need that health care to be on the company. … The repetitive wear and tear on your body is horrible.”
The UAW on Tuesday night released a video on social media detailing workers’ needs for low health-care costs that featured several members explaining why they felt their health care should remain unchanged.
“You’d be hard-pressed to find a long-term GM worker that doesn’t live on a day-to day basis with permanent injury as a result of the job,” said Denny Ramos, a striking GM worker in Lansing, Michigan, in the video.
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Meanwhile, both sides are digging in for a long fight. Most analysts say it’ll take weeks for GM to feel the sting financially, but workers are living on $250 a week strike pay while they’ve been cut off from company health care. The UAW is covering the latter now, unexpectedly, which isn’t good news from the strike fund. Via Automotive News:
Most forecasters and Wall Street analysts agree it would take weeks, if not months, to truly dent GM’s bottom line, even as the company loses an estimated $50 million to $100 million each day production is idled. Inventory levels, well above the industry average, can keep dealership lots full for the foreseeable future, but some dealers have voiced concern that parts shortages could soon cripple their service departments.
Meanwhile, some GM suppliers, including Nexteer Automotive, warned temporary layoffs were expected soon.
GM’s tactical decision to abruptly kick roughly 46,000 hourly workers off their normal health coverage, though it generated negative headlines, added pressure on the union. And while the work stoppage has given employees a release valve to air long-festering grievances on wages, health care and job security, many voiced apprehension as the realities of living on a fraction of their normal pay settled in.
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2nd Gear: This Moment Is Political Too
Michigan was crucial to President Donald Trump’s election in 2016, at least somewhat in part because Hillary Clinton blew it so hard in that state. But this time, Democrats are out in force supporting striking workers. Massachusetts
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Sen. Elizabeth Warren was at Detroit-Hamtramck this weekend, Minnesota Sen. Amy Klobuchar was there last week and Vermont Sen. Bernie Sanders is expected there this week. Additionally, former Vice President Joe Biden was at Fairfax Assembly in Kansas City to march with picketing workers.
Here’s the Detroit News’ story on Warren:
Warren joined the gathering outside the plant that straddles the border of Detroit and Hamtramck at about 12:30 p.m. She immediately exited the SUV and grabbed a sign to march with the crowd dressed in red and T-shirts saying “I am a Warren Democrat” and “Warren has a plan for that.”
Warren during her visit condemned GM for building product in countries such as Mexico with cheaper labor. She credited unions for creating the middle class and said they would rebuild it, too.
“The workers of the UAW are here to say no more,” she said. “They want contracts here that keeps these jobs in America. They want a fair wage. They want benefits. They want what it takes to be a part of America’s middle class. And they want the same for themselves and for temporary workers. Everybody deserves a living wage in this country. When unions win, all American workers win.”
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Trump, who campaigned heavily on bringing manufacturing jobs back to America, has mostly so far just expressed a desire for a speedy resolution to the strike.
He has been sharply critical of GM’s manufacturing moves over the past few years, but as the AP notes here, labor is still an overwhelmingly Democratic domain. This puts him and rest of the GOP in a weird spot:
Backing the union would undermine Trump’s message that labor does not advocate for its workers and give a powerful Democratic force a boost before an election.
Siding with GM would call into question his promises to defend workers and he would risk getting blamed for economic woes in Rust Belt states he needs to win reelection.
His task gets tougher the longer the strike goes on.
“There is a history of this issue being treacherous in Michigan,” said Michigan State University political scientist Matt Grossmann. He noted that Republican Mitt Romney’s presidential campaign suffered in 2012 when Democrats pointed repeatedly to an opinion article he wrote opposing the auto bailout. The headline: “Let Detroit Go Bankrupt.”
“It is treacherous to be against the autoworkers,” Grossmann said.
[…] Michigan-based Republican strategist John Sellek said he believes Trump is on the side of the workers but is trying to “thread the needle” and not “blow up” GM’s offer to save a plant or two.
“That fits his electoral victory path, and it fits his policy positions on trade,” he said. “He’s walking a more careful path rhetorically for now. But if he decides on any given day that it’s time to jump in with both feet, we shouldn’t be surprised that he does.”
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3rd Gear: Lordstown Workers Say Battery Plant Isn’t Enough
One of the biggest flashpoints in this strike battle is GM’s now-shuttered Lordstownfactory in Ohio. The once made the Chevrolet Cruze, but after being “unallocated” it was waiting on a deal to be sold to an electric truck startup—though that would probably mean fewer jobs and certainly not the same level of pay as before.
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Now GM’s talking about making it a battery plant instead as negotiations continue, but for auto workers on strike there, one thing is clear—the only way forward is if they’re given a car to make. Via Reuters:
As part of contract talks with the UAW, GM has suggested the Lordstown facility could be converted to an electric vehicle (EV) battery plant. Separately, it says it is also negotiating to sell the plant to a group affiliated with EV start-up Workhorse Group Inc (WKHS.O). Workhorse declined to comment.
In Washington in June, GM Chief Executive Mary Barra defended the Workhorse plan. She also told Reuters that GM had no intention of building a new vehicle in Lordstown.
Lordstown workers say that’s the only way there will be enough well-paid manufacturing jobs for the community. They – and the UAW – place the blame squarely on GM.
“You did everything GM ever asked of you and it still wasn’t enough,” UAW Local 1112 president Tim O’Hara told 100 cheering workers during a rally outside the plant on Friday. “We’re going to hold the line as long as it takes.”
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But experts say it’s not likely:
The reality is that GM needs to cut back underutilized U.S. manufacturing capacity even at current levels, said Sam Fiorani, a vice president with Auto Forecast Solutions.
“There’s no chance that GM is going to put a product back into that plant,” he said. “They have too much capacity as it is.”
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(GM posted an $8.1 billion profit in 2018.)
4th Gear: Car Companies Play ‘Wait And See’ On Emissions Rules
Bloomberg notes that in 2009 when President Obama announced tougher fuel economy rules, “he stood shoulder to shoulder in the White House Rose Garden with chief executives of the largest automakers.” Now, as his successor works to roll back those standards, they’re a lot less visible.
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From the story:
Instead of a cadre of CEOs, the automobile industry’s lone envoy was a trade association official who after the event said the group neither opposed nor supported the plan just yet.
The contrasting scenes highlight the awkward position in which carmakers have found themselves in President Donald Trump’s Washington. The industry aggressively lobbied him to ease the Obama rules, yet the plan proposed in August 2018 went beyond what most carmakers actually sought.
“This is exactly what we were trying to avoid, this uncertainty that is happening now,” Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufacturers, said on the sidelines of the event Thursday. “We’re going to have to look at whatever the final rule is and look at the entire package and decide then what our position’s going to be, and different companies may fall in different places.”
That uncertainty comes in an already volatile time for the industry. Carmakers are under pressure from investors to funnel billions into future-oriented technologies including electric and autonomous vehicles.
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And even if the fuel economy rules get rolled back to pre-Obama levels, don’t expect an immediate difference in your new cars, given long product planning cycles. Try around 2025.
If the Trump administration prevails on all fronts — weakening national standards and stripping California’s power to set its own — it won’t necessarily be a clear-cut win for the industry. Those locked-in product plans and parts contracts already have improved fuel-efficiency baked in, both for vehicles powered by gasoline and electricity.
“If the standards are weakened, then those suppliers who worked on those technologies — be they internal-combustion-engine or electric-vehicle — will find those volumes lessened, so it’s a risk for the suppliers,” said Alan Baum, an independent auto analyst in West Bloomfield, Michigan.
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5th Gear: Europe Freaks Out
More companies than just BMW’s Mini division and Jaguar Land Rover are freaking out over a potential no-deal Brexit, which looms large in October. From Reuters:
In a statement, groups including the European Automobile Manufacturers’ Association, the European Association of Automotive Suppliers and 17 national groups warned of the impact of “no-deal” on an industry which employs 13.8 million people in the European Union including Britain, or 6.1% of the workforce.
“The UK’s departure from the EU without a deal would trigger a seismic shift in trading conditions, with billions of euros of tariffs threatening to impact consumer choice and affordability on both sides of the Channel,” they wrote in Monday’s statement.
“The end of barrier-free trade could bring harmful disruption to the industry’s just-in-time operating model, with the cost of just one minute of production stoppage in the UK alone amounting to €54,700 (£50,000).”
If the two sides revert to World Trade Organisation trading rules, the likely consequence of a disorderly Brexit, the groups warned that the necessary tariffs will add 5.7 billion euros to the EU-Britain car trade bill.
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Gonna be an interesting one to watch for sure.
Reverse: Standard Oil
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Neutral: What Resolution Do You Want To See To The Strike?
The super-low health care contributions UAW workers pay is baffling to most Americans who pay much more than that, but you fully get why they’d want to protect that. And GM has indeed made a lot of money as it’s shipped jobs out of America. What’s the best way for workers to prevail here?
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