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Can the UAW Unionize Tesla?

For President Joe Biden, this week’s settlement of the United Auto Workers strike against the Big Three domestic automakers was a proof of concept for his contention that American workers can thrive in the transition to a clean-energy economy. But the most important test of that proposition is still ahead.

The UAW’s tentative agreements with General Motors, Ford, and Stellantis (which sells cars under the Jeep, Chrysler, and Dodge brands) represent one of the biggest victories in decades for organized labor. After years of stagnating or declining wages for auto workers, the contracts provide union members a pay increase that could reach 30 percent by early 2028. This will provide Biden—who supported the strike almost unreservedly—a powerful example to rebut the frequent accusation from Donald Trump and other Republicans that the administration’s push for a rapid transition to electric vehicles will destroy the domestic auto industry and erase union jobs.

“To quote President Biden out of context, the settlement is ‘a big effing deal’,” Jason Walsh, the executive director of the BlueGreen Alliance, a coalition of labor unions and environmentalists, told me. “It ends a race to the bottom in the auto industry that leads to progressively lower wages and job quality for auto workers. It shows conclusively that it is a false choice to present the EV transition and union jobs as mutually incompatible.”

But the victory will prove hollow for both the UAW and Biden if the Big Three’s higher labor costs render them unable to compete against the predominantly nonunion carmakers that are dominating the nascent transition to EVs, most notably Elon Musk’s Tesla. The Big Three have already experienced challenges transitioning to EVs; a greater cost disadvantage could further impair their ability to crack that growing market—which could ultimately reduce the number of union jobs they can support.

The UAW will need to find ways to unionize and raise wages at more of the nonunion auto companies that are locating their new EV production mostly in southern states where “right-to-work” laws make labor organizing difficult. Shawn Fain, the UAW’s aggressive new president, has openly accepted this mission. “One of our biggest goals coming out of this historic contract victory is to organize like we’ve never organized before,” Fain recently told his members. “When we return to the bargaining table in 2028, it won’t just be with the Big Three, but with the Big Five or Big Six.”

Biden has a large stake in that effort too. The three major economic bills he passed in his first two years have produced a torrent of private-sector investment in the renewable-electricity, electric-vehicle, and semiconductor-manufacturing industries—more than $600 billion since he took office, according to the White House’s latest tabulation. But, as I’ve written, a disproportionate share of that spending has flowed into red states whose legal climate is hostile to unions and whose predominantly Republican senators and representatives voted against the laws encouraging the investment surge.

Breakthroughs for the UAW at nonunion companies such as Tesla, BMW, Hyundai, and Mercedes-Benz would provide Biden crucial evidence to make the case that his climate agenda can also generate meaningful numbers of good-paying union jobs. Organizing more of those nonunion auto manufacturers “is the critical next piece” in ensuring that the energy transition also produces the broadly shared economic benefits that Biden has pledged, Walsh said.

Transitioning cars and trucks from gasoline to electric power is a central pillar of Biden’s agenda to reduce U.S. carbon emissions to half of their 2005 level by 2030. To encourage the movement away from the traditional internal combustion engine, he has deployed both carrots (lucrative subsidies under the Inflation Reduction Act for auto companies to produce, and for consumers to purchase, EVs manufactured domestically) and sticks (proposed federal fuel-economy rules that will effectively require that two-thirds of all auto sales consist of EVs or other zero-emission vehicles by the early 2030s). Domestic and foreign auto companies have responded by investing more than $142 billion in clean vehicle-manufacturing facilities across the U.S. since Biden took office, according to the White House.

The EV industry has grown rapidly; sales have increased by nearly 50 percent  through the first three quarters of 2023 compared with last year. But in the past few months, the industry has hit some conspicuous bumps. Because EVs are still more expensive than gasoline-powered cars, they have been especially vulnerable to the chilling impact of high interest rates on auto sales. Growth has also been hurt by the frequent breakdowns and general unreliability of public charging networks. (Tesla has its own, more reliable network.) “People are a little bit uneasy about paying the price tag for EVs without being really confident that the network is going to be available and accessible,” Alan Amici, the president and CEO of the Center for Automotive Research, told me.

Trump and other Republicans have also attacked EVs as an example of liberal elites imposing changes that ordinary Americans don’t want. That may be depressing sales too: Gallup earlier this year found that Republican voters were far less likely than Democrats or independents to say they were seriously considering purchasing an EV.

The Big Three unionized auto companies are struggling especially hard. For several years they have pledged their commitment to an electric future, promising consumers enticing new car and truck models in flashy ads. (Remember the pulsing Sopranos-themed ad touting an electric Chevy Silverado truck that aired during the 2022 Super Bowl?) But they have so far failed to bring new EVs to market in large numbers. In a particularly egregious example, GM reported delivering just 18 EV Silverados in this year’s third quarter.

The three combined make up only about 12 percent of the total EV market share; Tesla remains the dominant brand at 56 percent, and foreign companies such as Audi, BMW, and Hyundai, as well as new entrants such as Rivian, provide the remainder. Ford and General Motors have recently backed off earlier targets to rapidly expand EV production, and both have delayed the opening of factories tied to those goals. While Tesla “has gone through cycles of learning in terms of the design of their EVs and the design and production of batteries,” the Big Three manufacturers are still clearly working out the kinks, Amici told me.

He and other industry observers say the recent headwinds signal that the transition away from gasoline- to electric-powered vehicles likely will not happen as fast as the Biden administration hopes. But, even while tempering their short-term goals, leaders of the auto companies, such as GM’s chair and CEO, Mary Barra, have publicly reaffirmed their long-term commitment to EVs. Despite the calls from Trump and other Republicans to fundamentally renounce that transition, the companies probably have no choice but to tilt more toward electrification, given that China and Europe are moving so decisively in that direction.

“The whole context of this conversation is that Donald Trump and the conservatives are offering a magical world where China doesn’t exist,” Josh Freed, the senior vice president for climate and energy at Third Way, a centrist Democratic group, told me. “Countries that don’t look ahead, anticipate that electric vehicles are going to get a larger and larger part of the market share, are going to relegate their domestic auto industries to the dust bin. It would be the same as if Donald Trump in the 1980s were saying GM, Ford, and Chrysler should go on and continue to build gas guzzlers, because we don’t need to compete with the Japanese.”

One reason for the UAW strike, as I’ve written, was the union’s fear that the domestic companies wanted to use the historic shift toward EVs to effectuate a second shift toward lower wages and nonunion production. Those fears were piqued especially because Ford and GM are designing and building their EV batteries in joint ventures with foreign partners in facilities that were not previously subject to the firms’ overall UAW contracts. Though most details have not yet been disclosed, the new agreements have ameliorated that concern by placing GM’s new EV-battery plants under its union contract and allowing the UAW to organize some (though not all) of Ford’s future EV facilities through an expedited process.

Ensuring the union a foothold in the EV transition will be a powerful shield for Biden against Trump’s repeated accusation that the shift will “kill countless union autoworker jobs forever, especially in Michigan and the Midwest.” Also countering Trump’s claims is the companies’ agreement in the deal to invest in retooling and upgrading existing unionized plants across the industrial Midwest, in many cases to build EVs. (Federal grants and loans under the Inflation Reduction Act may underwrite some of those pledged investments). Most valuable of all for Biden will be the substantial wage gain the union achieved. That reversed a 15-year period, dating back to the financial crash of 2008, in which autoworker wages fell by an average of 2 percent annually in inflation-adjusted terms, according to calculations by Ellen Hughes-Cromwick, a senior resident fellow in the climate program at Third Way. “This is a very historic agreement,” Hughes-Cromwick, a former chief economist at Ford, told me.

In an interview, Gene Sperling, the veteran Democratic economist adviser who served as the Biden administration’s principal liaison in the talks, previewed the case the president is likely to make in Michigan and other industrial states next year. The agreement, he told me, “was a complete refutation of everything” the critics of the EV transition have argued. “Wages, instead of going down, are going up dramatically,” he said. “Investment, instead of going down, is going up tens of billions of dollars. Jobs, instead of going down, are going up—and every existing UAW worker is pretty much guaranteed a secure economic future.”

Traditionally, the risk for the UAW has been that if it succeeded in negotiating higher wages, the companies could respond by shifting more production to lower-wage countries abroad. As Walsh notes, the Inflation Reduction Act has essentially neutralized that threat for EVs, because its tax incentives create an almost irrefutable business case for manufacturing and assembling them domestically. But the union still faces the threat that the agreement will inadvertently strengthen the nonunion EV producers operating mostly in the South, which already spend much less on wages and benefits for their workers.

The hopeful news here, Amici told me, is that the nonunion manufacturers are likely to raise wages proactively to discourage their workers from joining the union; Toyota has already responded to the UAW’s agreements by announcing a wage increase for its U.S. workers.

Such moves may close some of the wage gap with the unionized firms. But the pivotal question remains whether the UAW can organize more of the nonunion companies leading the EV transition, particularly Tesla.

The Biden administration has only limited tools to help, because Democratic Senator Joe Manchin of West Virginia, as part of his price for providing the decisive vote to pass the Inflation Reduction Act, demanded the removal of a provision that would have provided consumers an extra tax break for purchasing EVs constructed mostly with union labor. But the lucrative new agreements with the Big Three have provided the UAW its best calling card in decades to attract new workers. “This is really a big opportunity for the union to stop the decline in its membership,” Amici told me.

The auto industry is now the central front in the struggle over wages in the green-energy economy, but, as Walsh notes, “unions and workers will [face] the same question across multiple clean-technology sectors.” Since Biden took office, private companies have invested more than $130 billion in facilities to manufacture wind turbines, solar panels, and other low-carbon sources of electricity generation, and those industries are largely nonunion as well. Many battles must still be fought to fulfill Biden’s promise that a clean-energy future can also restore the high-paying manufacturing jobs of America’s past.

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