Trillionaire Beats Swedish Union

Stocks A to Z
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alternative post title:“With money everything is possible.”

Sweden’s largest industrial union, IF Metall, is calling off its strike against Tesla after 1,021 days, the longest labor conflict in modern Swedish history. The union says it’s stopping because Tesla bought out every one of its striking members, leaving the walkout with nothing left to withhold.

The dispute started in October 2023 over a single demand: that Tesla sign a Swedish collective bargaining agreement for its mechanics. Nearly three years later, Tesla still hasn’t signed one. And now the union is standing down.

IF Metall announced today that it’s ending all conflict measures against Tesla effective 00:01 on August 19. In its statement, the union was blunt about why. Tesla “bought out” its members at the company, so the strike “no longer has any effect.”

The fight began on October 27, 2023, when Tesla’s roughly 120 mechanics across seven Swedish workshops walked off the job after Tesla refused to sign a kollektivavtal, the collective agreement that covers the vast majority of Swedish workplaces.

It snowballed fast as other unions started supporting Tesla workers. Dockworkers refused to unload Teslas at Swedish ports. Denmark, Norway, and Finland joined the port blockade. PostNord stopped delivering Tesla’s license plates. Electricians wouldn’t service Tesla’s chargers, and cleaners stopped cleaning its showrooms. We covered each escalation as it happened, from the ports closing to the fight reaching the Superchargers.

Tesla routed around all of it. It imported cars through Germany and trucked them up to Trelleborg, and it went to court to get plates directly rather than through the post. Elon Musk called the Swedish model “insane.” The company never budged.

Here’s the part the union’s opponents will point to: the strike never actually hurt Tesla’s business in Sweden.

The Model Y was Sweden’s single best-selling car, of any kind, in both 2023 and 2024, straight through the blockade.

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Another title could be. “We’re not ever agreeing to collective bargaining, as simply a matter of policy”

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So many questions.

  1. How did Tesla “buy out” these 120 workers? I read 85% of the story and could not find that detail.
  2. The article claims it had no impact or “did not hurt Tesla” but that cannot be proven. Sales could have been higher if not for the strike and clearly Tesla suffered expenses from the strike with the cost of redirecting the shipment of their vehicles through Germany and trucking them to Sweden instead of off loading them at port. It is entirely possible that the methods Tesla used to avoid the contract ended up costing Tesla more than the cost of the contract.
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I was wondering the same thing myself.

Also, if all of the workers were “bought out” with deals that were satisfactory to them then the workers’ welfare increased. The union is sore because it didn’t get the power it wanted.

DB2

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Yeah, it’s hard to see how the union “lost” here. Tesla was forced to do something it would not have done otherwise, namely to provide buy-out payments to these workers. Cash in pocket vs. a contract - Tesla got to choose their poison, but still had to drink it.

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“The members” may have come out OK, but clearly “the union” lost, because they don’t have those members as part of their overall organization.

Unions don’t just win on having their own people negotiate (although sometimes that’s how it plays out), they also win by having other unions honor their strike. So when the Hollywood writers strike, that’s one thing. When the Directors Union members refuse to cross the picket lines, that’s another. When the SAG (actors) members also stay out, the whole thing shuts down.

There are places where the individual has a lot of bargaining power now (baseball, pilots, etc) but where they had almost none before the unions came together to equalize the game between management and labor.

Happened in the steel mills, radio and television industry, car manufacturing, and lots more. Sometimes it goes too far, like Broadway today, having to deal with 13 unions to stage a play, but the number “zero” is often not a desirable number either.

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Does capital organize itself and negotiate?

I believe it does.

I don’t see why labor organizing and negotiating is some terrible thing per se - it’s just individuals exercising their freedom as people, like corporations as people.

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Good point that this wasn’t the outcome the union wanted. But did the workers leave the union? I couldn’t tell from the article. It sounded like they were bought off to end the strike, but it wasn’t clear whether they just came back to work, left the union, left the company, or what…

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It would be more interesting to know how much it actually cost Tesla. The buyouts, the various costs to bypass all the legal hurdles, the lawyers fees, and bribes? My guess is they lost money, but it was the principle for Musk!

JimA

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Yes!

Warren Buffett learned this lesson early in his career.

Warren Buffett has called the namesake Berkshire Hathaway textile company the “dumbest stock” he ever bought, estimating that an emotional decision to take it over cost him roughly $200 billion in missed insurance investments.

The Berkshire Hathaway Blunder

  • The original plan: In 1962, Buffett bought shares in the failing New England textile maker simply to make a quick arbitrage profit when the company closed mills.
  • The lowball offer: The CEO verbally agreed to buy back Buffett’s shares at $11.50, but the official tender offer arrived at $11.375—a petty difference of 13 cents per share.
  • The emotional reaction: Angered by the perceived betrayal, Buffett spitefully bought enough stock to seize majority control of the company and fired the CEO.
  • The long-term cost: Instead of liquidating the cash to buy insurance firms right away, he trapped himself in a dying textile business for 20 years, sacrificing massive potential compounding growth. (Buffett estimates the compounded loss at $200 Billion today – and counting.)

intercst

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The big picture is more interesting.

How the union “lost” here: All the unions got the message, “Don’t mess with Tesla.”

Great question! Less than most think. A bit of history:

  • In my lifetime the good guys decided the bad guys made too much money and they put a tax on executive pay beyond a number, maybe a million a year.
  • The bad guys fought back, instead of cash they paid in stock options. The executives got even better returns in most cases but since there was no salary, corporations paid no tax.
  • Paying in stock options improved free cash flow making it a welcome corporate tool.
  • Where did the money come from? From the stock market, from investors.

Buying out the scabs was paid for by the stock market!

Paying in stock options made Musk insanely rich. Nice outcome Good guys, good intentions!

The Captain

o o o o o o o o o o o o o o o o o o o o o

A chat with AI:

In my lifetime the good guys decided the bad guys made too much money and they put a tax on executive pay beyond a number, maybe a million a year.

Yes, you are remembering a major event in corporate tax history called Section 162(m) of the Internal Revenue Code. [1]

In 1993, President Bill Clinton fulfilled a campaign promise to tackle growing income inequality by signing a law that placed a $1 million cap on the amount of executive compensation a public corporation could deduct from its taxes. [1]

However, instead of stopping corporate greed, the plan famously backfired because of a massive loophole.[1]

:collision: How the Million-Dollar Cap Backfired

The law did not actually ban executives from making more than $1 million. It just said that if a company paid them more than that, the company had to pay taxes on the extra amount rather than counting it as a normal business expense. [1, 2, 3]

To get around this, the original 1993 law included a giant exception: “performance-based pay” was completely exempt from the $1 million limit. [1, 2]

[Base Salary: Capped at $1 Million] 
       + 
[Stock Options & Performance Bonuses: UNLIMITED TAX DEDUCTIONS] 
       = 
🚀 The Explosion of Modern CEO Pay

Instead of lowering executive pay, companies completely changed how they paid their bosses: [1, 2]

  • Stock Options Exploded: Companies shifted away from cash salaries and started handing out massive amounts of stock choices. [1, 2]
  • Pay Went “Kaboom”: Because the stock market boomed in the 1990s, these stock options made executives vastly wealthier than traditional salaries ever would have. [1]
  • A New Normal: Instead of shaming companies into keeping pay under $1 million, it turned $1 million into the baseline “minimum” salary for corporate leaders. [1, 2]

:counterclockwise_arrows_button: Closing the Loophole Later On

Over the years, the government realized the rule wasn’t working and began tightening the screws:

  • The 2017 Tax Overhaul: Congress completely eliminated the “performance-based” loophole. From that point on, a public company could no longer deduct any executive compensation over $1 million, whether it was stock, bonuses, or salary. [1, 2]
  • Expanding Who is Covered: The original law only applied to the CEO and the next few highest-paid executives. Subsequent laws, including the American Rescue Plan Act and the 2025 One Big Beautiful Bill Act (OBBBA), expanded this cap to apply to more employees—stretching down to the top 10 highest-paid workers at public corporations. [1, 2, 3, 4]
  • Nonprofit Rules: A similar 21% penalty tax was placed on large nonprofit organizations (like massive hospital networks or universities) that pay any employee over $1 million a year. [1, 2]

:balance_scale: The Current Reality

Today, the federal $1 million deduction limit is still very active and stricter than ever. However, big corporations simply accept the tax penalty as a cost of doing business, and CEO pay packages continue to hit record heights. [1, 2, 3]

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One way to buy out opposition is to offer them management positions. Ie supervisor.

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Not very realistic or economically viable when we are talking about 120 union members, don’t ya think?

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Na. It’s mostly a change in title. Maybe without a contract. And often loss of overtime.

It is one of the tools. There may well be others. As noted if you are willing to spend to fight unionization.

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So your theory is that after nearly two years on strike, these union members settled for just a change in title and likely less compensation?

::chuckle::

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I suspect they got a nice raise. Company was willing to spend the money. Did they read the fine print abt overtime? (Of course this is all speculation. Who knows the details.)

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Agree.

No need to spend money, give them stock options.

The Captain