UAW strike: that 70's show?

Investment Analysis Clubs Macro Economic Trends and Risks
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I remember the strikes and inflation that plagued the 1970s. It has been a long time since “what’s good for GM is good for the nation.” But a successful UAW strike could be inflationary and also possibly prompt other unions to strike.

UAW’s Strike Strategy: Start Small and Keep ’Em Guessing

The union hit the Detroit car companies’ more profitable pickup and SUV plants in targeted action that it could ratchet up if labor negotiations stall

By Nora Eckert and Ryan Felton , The Wall Street Journal, Updated Sept. 15, 2023

The United Auto Workers union’s strike at three factories Friday represents a show of force that, while more restrained than some expected, sends a signal to the Detroit car companies that actions could escalate if talks drag out…

The strike is an unprecedented one, targeting all three Detroit automakers at once, and comes after nearly two months of bargaining failed to produce a deal at any one company…

It initially proposed a 40% pay bump for workers over four years and has sought the re-establishment cost-of-living adjustments and retiree medical benefits, both of which were lost in previous rounds of bargaining…

Economists expect the strike’s impact to be relatively modest if it is limited to a few locations and resolves quickly. A prolonged work stoppage could hold down economic growth, curtail employment and push up inflation, adding new uncertainty about the outlook for a cooling economy… [end quote]

The UAW strike could be a macroeconomic blow to the economy. The other shoe to drop is the government shutdown in a month.

Wendy

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I’m ok with that. Unions and middle class workers have been stiffed for too long now, since Reagan went on with his supply side voodoo economics. It has failed us as a nation. I’m all for bringing some power back to the worker.

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That is the narrative the corporate owned media keeps propagating “if the workers get a raise, it will make the car you want cost more”, as if workers everywhere need to BOHICA, so “you” can get what you want cheaper.

As has been pointed out before, Mexican auto workers only make about $100/week, but the retail price of the vehicles they build is not noticeably lower than the price of US built vehicles. Can’t help but wonder what happens to all that money that is not paid to the Mexicans that build those $60,000 pickups. /sarcasm

Of course, the management talking points about a strike are constantly aired too “it will hurt the economy, and put thousands and thousands of people out of work.”

Review history. There were a lot of strikes in the late 40s, because the “JCs” were leveraging booming post-war demand to jack up prices, and the resulting inflation was strangling the workers.

Steve

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It was from the Wall Street Journal. :laughing: They are NEVER going to admit that American corporate brass are, by and large, massively over-paid and that the workers are being taken advantage of. Never. But that is what is happening. And workers are finally pushing back.

This is a GOOD thing.

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Are people on fixed incomes ok with that?

What is AARP saying WRT this “potential inflation”?

I googled AARP and UAW strike, but got nothing.

:face_with_monocle:
ralph

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Define “fixed income”. My Social Security includes a COLA adjustment, like working people had, until management took it a way.

Steve

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I read an interesting article in the past two days about the entire language of this process and how it has been subtlely manipulated for decades to steer any potential labor strike in one consistent direction – in favor of corporations.

Every contract negotations starts with this narrative:

  • management is “offering” X
  • labor is “demanding” Y

“Offering” sounds very open minded, giving. “Demanding” sounds very selfish, greedy.

Management is “offering” a pay structure that simply tacks on 4% yearly increases to an existing wage structure where new workers can earn up to $17.00/hour and senior tier works can earn up to $33.00/hour. This reflects language agreed to in prior contracts where management succeeded at convincing senior workers to protect their own wages by establishing a much lower entry-tier structure for newbies that would perpetually leave them behind going forward. Imagine existing computer science engineers at the FANGs agreeing with the FANG leadership to protect their inflated $220,000 salaries by capping salaries for new college hires at $112,000 per year. That might work… for a while. Until all of the graybeards want to retire and the depressed entry level wages have driven all engineers away from the FANGs in particular or computer science in general.

Assuming workers would get paid for a minimum of two weeks vacation, 52 weeks x 40 hours/week = 2080 hours so these workers are making “up to” $35,360 or $68,640 for top tier workers. There are people working in fast food that are making $17.00/hour. Hourly wages have risen about 6% per year under current contracts which means these workers have stood still through the 3-year bout of pandemic induced inflation.

Union members are “demanding” a 40 percent increase over the next four-year contract. That’s about an 8.7% yearly hike in wages. Official inflation figures for the US were 1.4% (2020), 7.00% (2021), 6.5% (2022), 3.7% (so far 2023). With 2020 dollars as a 1.00 baseline,

1.00 (2020) = 1.00 * 1.014 * 1.07 * 1.065 * 1.037 = 1.198 (September 2023)

With 6% annaual wage increases, average union pay has grown to:

1.00 (2020) = 1.00 * 1.06 *1.06 * 1.06 * 1.06 = 1.262 (September 2023)

So wages have risen 26.2% but inflation has wiped out 19.8% of that, leaving wages only 6.4% higher after four years. During a period where auto companies increased the existing obscene pay of their execs by up to 40% and – more critically – undertook stock buybacks to funnel profits back to shareholders while claiming they were “investing for the future” with battery electric vehicles, etc.

That’s some “offer” on the part of management. And note how the labor “demand” is always summarized as a cumulative (GIANT) number instead of a per-year figure to compare against inflation?

Management may not realize it but kids who grew up in the 70s and 80s had little interest working in a car parts factory tending machines as they stamped out ball joints, brake parts, etc. or standing 8 hours a day inserting seats inside cars on an assembly line all day. Kids growing up today have even less inclination to do this labor, especially for car models they will NEVER be able to afford on $17/hour wages. Even if Tesla figures out how to cut labor by another 50% with its gigastamp based design, there is still going to be a shortage of workers willing to do this kind of work over the next decade. Suppressing already-low wages with another renewal that preservers the devil’s bargain in prior contracts that protected wages of senior workers by creating a lower wage tier ladder for new workers won’t cure that problem.

People can stand on the sideline with whatever opinion they wish to draw from their understanding of economics or management / labor dynamics but having coverage of the power struggle consistently distorted by the flawed terminology that has become boilerplate doesn’t accurately convey where the dollars are in the struggle and the fairness of the current / proposed redistributions. Management is allowed make its attempts to limit costs via wages but workers are equally justified in making their case to avoid setting patterns that will impoverish workers across a variety of industries, unionized or not.

WTH

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Has the COLA kept your SS up with inflation?
Is it “automatic”?

Are pensions COLA’d?

My pension is not automatically COLA’d.
Instead, the rumor is that we gonna get a 1-time “extra” payment sometime this Fall.

:face_with_monocle:
ralph

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The SS COLA is keyed to a measure of inflation. One of the ways proposed to “save” SS has been to change to an inflation measure that would reduce the increases.

Yes, the SS COLA adjustment is automatic.

Steve

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A lot of content in your post. I will relay a comment by one of the workers the news interviewed at Wayne Assembly today, which builds the Ford Ranger and Bronco: new hires at the plant make less than workers at McDonald’s, and no, most of them cannot afford the trucks they build.

Steve

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Here’s AARP on the SS COLA.

{ Over time, however, Social Security COLAs have kept up with inflation well, says Alicia Munnell, director of the Center for Retirement Research. The COLA lags inflation when prices are rising, as occurred in 2022, but it lags when inflation is moderating, too. That’s the case this year, with benefits up 8.7 percent but the CPI-W steadily slipping from 6.3 percent in January to 3.2 percent in June.

As a result, over the up-and-down course of an inflationary period, the COLA tracks changes in prices fairly well. In the past 20 years, the Social Security COLA has averaged a 2.1 percent annual gain while the overall CPI has risen an average of 2.2 percent. }

:face_with_monocle:
ralph no comment

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@WendyBG In the 1950s such strikes were not nearly as inflationary. In those days the executives were not pigs. If Mary Berra gave into some wage concessions for the C suite things would be better. She obviously is not earning her keep. She is the problem.

Seriously for every dollar labor has given up over the last 40 years the executive suite was not shy about picking it up. Yet we had very little inflation until 2020.

Until we as a group explain how executive pay can rage higher and higher for almost two generations with little inflation I have no reason to care if an honest person wants better pay.

If GM wants to head off inflation then GM’s management needs to become a lot more efficient. I’d suggest turning out the management.

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2x…This is rhetoric that has come up time and time again. The only impact a strike ‘should’ have is to decrease the outrageous c-suite pay and ‘maybe’ lower record profits. See, if cars get too expensive we won’t buy them. There is NO reason for a pickup truck to be over $80,000 for something that actually will tow. None. There is nothing inside a big three work pickup truck that is that valuable/costly.

Strikes will help everyone. They always have. Do not forget where the weekend and 40hr work week came from. It wasn’t gifted to Americans, it was fought for.

Another proof that this is just scare tactics, look at how other first world countries are doing. Don’t read American stories about it, but really look into their pay scales and the fact that they are still able to buy houses, cars, food, etc. And they are better off than us.

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Japanese companies have no problems with this. Thinking globally the Japanese company decides the model retail price and then builds all they can into that price considering their markup.

American companies make things cheaper. Big mistake. Then they add up the costs which are not different from what would have been better built. Then income the executives and shareholders. The entire process shrinks GM and F. How much of a bet Stellantis gives into the UAW and the other two have to give in. It could make Stellantis larger than GM and F within a generation.

The arrogance of the C suite again is sending me to Japanese cars.

Don’t wave the American flag to pork me.

Don’t build a church for a fat preacher.

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The trend across most of the industry is to escalate ATP and GP. The easy way to do that is to discontinue the lower priced models. Management responds “everyone wants a truck, no-one wants those itty, bitty, cars”.

In it’s last year, 2018, Ford sold 113,345 Focuses. In it’s last full year of production, Ford sold 166,045 Fusions. Not trivial numbers, but not the most profitable models, so, in Welchian fashion, they were dropped.

Average car prices are escalating, because auto company management is forcing them higher.

Steve

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Are people on fixed income ok with American workers continuing to be shafted by corporate America? This has gone on for too long.

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An inevitable result of capitalism.
Maximize profits. how else could it work?

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Get rid of high-overhead management that fails to perform year after year after year after year…

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I totally agree that the C suite has been overly paid at the expense of workers over that last decade(s). (It is a separate question as to whether any legacy automaker C suiter has earned much of anything over the last decade)
But I don’t think it is right to trot out the 40hr work week and weekends that were “won” about a century ago as justification for every union desire going forward.

Mike

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automatic… using a deeply flawed metric that is manipulated downward to understate inflation