US auto union strike: Tesla's Elon Musk reacts on how it will hit the Big Three

Tesla Inc. Chief Executive Officer Elon Musk blasted the United Auto Workers Tuesday, saying the union’s demands would “drive GM, Ford and Chrysler bankrupt in the fast lane."

UAW strike Ford Motor
Members of the United Auto Workers (UAW) picket outside Ford Motor's plant in Michigan. (AFP)
UAW strike Ford Motor
Members of the United Auto Workers (UAW) picket outside Ford Motor's plant in Michigan.

President Joe Biden endorsed the UAW’s demand for a major wage increase during a visit to a picket line at a General Motors Co. plant in suburban Detroit earlier Tuesday. The union is striking against General Motors Co., Ford Motor Co. and Stellantis NV, maker of the Jeep, Chrysler and Dodge brands. The union, which has taken the rare step of striking against Detroit’s Big Three automakers simultaneously, has reduced its demands for pay raises in negotiations from 40% to 36%.

Tesla and other pure electric vehicle companies like Lucid Group Inc. and Rivian Automotive Inc. are not unionized. They typically use restricted stock units and employee stock purchase plans for a big part of overall compensation. The UAW worries that EVs, which typically require fewer moving parts and fewer workers to make, will cost them jobs and reduce wages.

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Musk is not alone in saying that a big win for the UAW could mean trouble for Detroit’s automakers.

“If the UAW gets everything they are asking for, it will very clearly damage the competitiveness of the Big Three companies materially," Patrick Kaser, portfolio manager for Brandywine Global, said in an interview last week.

In 2017, the UAW began work to organize workers at Tesla’s plant in Fremont, California, as the company was struggling to ramp up the Model 3 sedan. In 2018, Musk tweeted “Nothing stopping Tesla team at our car plant from voting union. Could do so tmrw if they wanted. But why pay union dues & give up stock options for nothing?"

The union’s effort at the Fremont plant never gained enough traction to get to a vote. A bipartisan group of US labor board members ruled in 2021 that Tesla repeatedly violated federal law in Fremont, including by “coercively interrogating" union supporters and firing one because of his activism. Tesla has denied wrongdoing and is appealing that ruling.

In February, the union Workers United accused Tesla of terminating dozens of workers in response to a union campaign at the company’s plant in Buffalo, New York.

Despite the headwinds, significant gains for UAW workers at Detroit’s legacy carmakers, combined with high public support for unions, could once again inspire Tesla workers to organize, said Catherine Fisk, a labor law professor at UC Berkeley.

“Unionizing is extremely difficult under US law," Fisk said. “That said, workers successfully unionized against even stiffer odds in the 1930s. It happened before, it can happen again — it’s just a torturous process."

Tesla has industry leading profit margins, and Musk has vowed to chase volume over profits. The EV manufacturer has lowered the price of its vehicles this year, even as Detroit automakers are making the costly shift from making internal combustion engines to EVs.

“If you are the Detroit Three, you are running two operating systems," said K. Venkatesh Prasad, senior vice president of research and chief innovation officer for the Center for Automotive Research in Ann Arbor, Michigan, in a phone interview. “The profits you make on ICE vehicles is what is funding the transformation to EVs, which are not going to be profitable for a while."

“The biggest competitive advantage Tesla has it they are not managing two systems," he added. “They only have one."

First Published Date: 27 Sep 2023, 09:05 AM IST
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