But the automakers claim that they need those gains to finance the transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs). That also seems reasonable. Several years ago, automakers voiced concerns about the large investment needed to transition from the ICE age.
CEO pay. High CEO pay long has been a rub in labor disputes. Cited as a case in point: GM’s CEO Mary Barra, whose annual compensation is estimated between $29 and $40 million—at least a 34-percent increase over the last 4 yr.
Cost-of-living (COL) increases. The union wants COL adjustments in addition to a large pay hike. GM’s offer: If the inflation rate exceeds the wage increase, it will match it. Seems fair, but the union doesn’t agree.
Detroit Three vs. nonunion automakers. Consider that only GM, Ford and Stellantis plants are unionized. It stands to reason that nonunion automakers Tesla, Toyota, Honda, Hyundai and others have an advantage.
Job security with EVs, autonomous transition. One UAW demand concerns retaining the ability to strike over closing plants. This may be the most important point, because automakers have begun to build new EV and battery plants largely in nonunion states rather than repurposing existing engine plants.
Labor component. Tesla CEO Elon Musk predicts that union demands would bankrupt the Detroit Three. According to Fortune, Ford’s UAW labor costs represent 3.8 percent of revenue, and a 36-percent pay hike would increase that labor burden to 5.3 percent. That does not seem to be the bankruptcy trigger that Musk predicts.
Looking down the road, what can be done to stymie these hugely disruptive battles?
Wage mechanism. Could some mechanism maintain a close relationship between corporate profit and workers’ pay? Profit-sharing seems like an excellent way to incentivize and reward workers for contributing to the company’s success, but it doesn’t seem to track with workers. Why? Maybe it’s because many profit-sharing plans are part of retirement plans that don’t pose a real-time reward. Perhaps profit-sharing programs can be redesigned to benefit employees more promptly.
CEO pay index. I admire Barra and believe that she should be well-rewarded for her stellar management and the company’s success. Still, her salary this year equates to $13,942/hr.—more than 400 times the average $29/hr. UAW wage.
Is there a reasonable ratio or index that can be maintained between the highest-paid company executive and the lowest-paid worker so that an hourly worker’s pay would rise with the CEO’s pay? What should the multiplier be? In 1965, the multiplier was 20; today it’s closer to 300.
Transparency in profits, investments. Automakers could draw a clearer connection between profits, the investments for which they’re using them and how those investments will help workers.
Reasonable asks. The UAW began by seeking a whopping 40-percent wage increase by the end of the 4-yr. contract, which it said mirrored the rate of the automakers’ profitability. That in addition to COL increases, a four-day 32-hr. work week and a return to pensions of a bygone era. Reactions to those demands were unsympathetic.
Cautionary Notes
A note of caution to unions: Don’t overfish the pond, lest you eliminate the fish population. And, don’t push OEMs into a corner. One automaker CEO says, “We have contingency plans for various scenarios and are prepared to do what is best for our business, our customers and our dealers.”
Read: “We can relocate to non-union states, move our operations outside of the United States and buy robots to replace you.”
A note of caution to automakers: Your union workers buy your vehicles, boost the vehicle-buying economy, and are skilled and primed to work. Don’t bite the hand that needs you.
The best contract is one that is mutually beneficial. MF
Contributing Editor Kate Bachman can be reached at kbachman@pma.org.
Technologies: Management
Kate Bachman