ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Tuesday, September 19, 2023

Strike!

Theodor_Kittelsen_Streik_1879
"Stike," by Theodor Kittelsen

Remember the days when Henry Ford stiffed his investors so that he could reduce the price of his cars and pay his workers a living wage (and also deprive the Dodge brothers of capital they could use to  start a rival company)?  A very different ethos inspires the managerial class at the Big Three automakers these days. 

According to Adam S. Hersh, writing for the Economic Policy Institute, profits at the Big Three have increased 92% over the past decade and are expected to be over $30 billion in 2023.  CEO pay is up 40% over the same period, and the companies have paid out $66 billion in dividends and stock buy-backs.  Worker pay, by contrast, adjusted for inflation, has decreased over 19% over the same period.  Unions made concessions to save the industry during the 2008 crisis.  The government bailed out the companies and their shareholders, but workers were expected to believe that keeping their jobs was benefit enough.

However, as Jack Ewing reports in The New York Times, unions sometimes bump up against structural economic changes, including new groups, such as immigrants, people of color, and women, joining the labor force, mechanization, and in this case, the shift to electric vehicles (EVs).  EVs have much simpler engines, which require fewer workers to build.  Moreover, Tesla, a leading EV manufacturer, has fiercely resisted unionization and has labor costs far below those of the Big Three.  Management is trying to frame the issue as pitting the unions against the drive to develop cars that contribute less to global climate change.  The reality is more complicated.  The Biden Administration is providing economic incentives for the shift to EVs, so the money that the Big Three spends on those efforts is partly provided through government subsidies.  

The unions are concerned about the shutdown of plants in the Midwest dedicated to the production of components for internal combustion engines.  Workers could shift to battery manufacturing plants, but those tend to be located in so-called "right-to-work" states where union organizing is much more difficult.  

The timing of the strike seems very well-chosen.  Despite their profits, the Big Three cannot afford a prolonged shutdown.  They run the risk of losing market share to other manufacturers of EVs.  Tesla continues to grow, as do new boutique start-ups that specialize in electric pick-up trucks and SUVs.  And then there are the foreign manufactures that have long located their factories in the U.S. South, where unions are scarce.  

As Michael D. Shear reports in The New York Times, President Biden has backed the union, but he is caught between his gut support for workers' rights and his environmental policies.  The White House has sent mediators hoping to avert a prolonged strike.  There is a lot at stake here, not only for workers and the automobile industry.  Mr. Biden must be aware that his re-election chances are linked to the state of the economy, and a significant strike at the Big Three could have national economic ramifications.

Yesterday, we blogged about Taylor Swift's impact on the fortunes of movie theaters.  Let us hope that a new contract for the autoworkers' unions will provide similar benefits for the rest of the economy.

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