Tesla wins as strike between Detroit automakers and UAW reaches day four

While all eyes are on the ongoing labor dispute between Detroit’s car manufacturers and their unionized United Auto Workers (UAW), one clear winner is already emerging—Elon Musk.

The UAW went on strike on Friday, September 15, 2023, after negotiations with Detroit’s three major automakers—Ford, General Motors, and Stellantis—failed to yield an agreement. The targeted strike marks the first time since 1970 that the UAW has called a strike against all three automakers concurrently.

In a recent report, the Wall Street Journal, Tesla maintains an average labor cost of around $45 per hour, a substantial contrast to GM, Stellantis, and Ford, who estimate their costs at approximately $66 per hour. If the UAW successfully secures the substantial pay raises it initially demanded, Detroit’s Big Three could potentially witness its labor costs surge to a staggering $136 per hour, as projected by Wells Fargo.

Throughout this year, Tesla has capitalized on its cost advantage to implement significant reductions in car prices, all in a bid to uphold its dominant position within the electric vehicle (EV) market. Remarkably, this strategy has proven effective, with Tesla reporting a noteworthy 20% increase in Q2 profits despite these price reductions.

UAW President Shawn Fain has consistently played down concerns that the ongoing labor action might further cement Tesla’s dominance in the EV market. In a recent interview with CNBC, Fain said, “Our concern is working-class people need their share of economic justice in this world.”

Nonetheless, a potential challenge to Tesla’s growth trajectory could emerge if the UAW strike manages to secure higher wages, potentially motivating Tesla’s workforce to pursue unionization at Elon Musk’s manufacturing facilities. It’s worth noting, however, that previous unionization efforts by the UAW in 2017 and 2018 did not yield success.

The UAW’s demands are comprehensive and include, a substantial pay increase, guaranteed job security, greater involvement in the transition to electric vehicles, restrictions on the utilization of temporary labor and forced overtime, and enhanced worker leisure time, including advocating for a four-day workweek.

In response, the automakers have tabled a proposal for a 10% pay increase over four years, which the UAW has flatly refused. In an interview with CNBC, Ford CEO  Jim Farley said that the United auto workers want $300,000 a year to work 4 days a week.

“If we sign up for UAW’s request, instead of making money and distributing $75,000 in profit sharing in the last 10 years, we would have lost $15 billion and gone bankrupt by now. The average pay would be nearly $300,000 fully fringed for a 4-day work week,” Farley told CNBC.

The repercussions of this strike are poised to reverberate throughout the auto industry, given that Ford, GM, and Stellantis collectively contribute to roughly 40% of all cars and trucks produced in the United States. This could result in production disruptions and shortages of vehicles, potentially leading to higher prices.