How Auto Executives Misread The UAW Ahead Of Historic Strike

(Bloomberg) -- Detroit automakers survived a pandemic and semiconductor shortage. They were embracing a historic transition to the electric-vehicle era, underwritten by billions in subsidies from the Biden administration. Profits were rolling in.

Then came Hurricane Fain.

The walkout led by United Auto Workers President Shawn Fain at three General Motors Co., Ford Motor Co. and Stellantis NV factories is no ordinary labor-versus-industry clash. The 54-year-old former Chrysler electrician is pushing for a dramatic reset of the wage scales and working conditions that would meaningfully change the economics of car manufacturing. He’s taken aback executives with eye-watering demands for 40% pay increases over the next four years and a 32-hour work week — unheard of in American manufacturing.

Just as jarring has been Fain’s unconventional negotiating style. Instead of following decades of precedent and targeting one company at a time, Fain has taken on all three companies employing 146,000 union members at once. He’s inflicting significant damage by disrupting truck and sport utility vehicle output, while taking pains not to burn through too much of the UAW’s strike fund. He’s left himself the option to bring down even more lucrative pickup plants, if need be.

Two days before the strike deadline, Fain even stood up auto industry royalty, failing to show up for a bargaining session with Bill Ford, the great-grandson of Henry. “We’ve never seen anything like this,” said Ford Chief Executive Officer Jim Farley.

The UAW’s aggressiveness in many ways reflects the more assertive mood of the American worker, who’s anxious about job security in the age of artificial intelligence and angry about an ever-growing wealth gap. In this summer of strikes that’s seen Hollywood writers and actors walk off their jobs, and workers at companies as varied as Starbucks, Amazon, Apple and Microsoft all vote to unionize in the last two years, the UAW drama has taken on broader significance.

Fain’s combative stance is risky. If workers sacrifice for months, throwing their lives and others’ into disarray, only to end up having to accept something much closer to what the companies have been offering, they could serve as just the sort of cautionary tale managers use to try to dissuade workers from unionizing in the first place.

The UAW strike also is perilous for President Joe Biden, who’s made building an EV and battery manufacturing industry a pillar of his economic agenda. Can he live up to his own billing as the most pro-union president in history, without compromising the competitiveness of the US auto industry against lower-cost rivals, led by China?

“If the union has taken a more militant turn and is punished for it successfully, that will intimidate workers across the board,” said University of Chicago historian Gabriel Winant. “If they win, it will augment the message that is already circulating with greater frequency: that now is the moment that workers have leverage.”

Leverage has been in short supply on the labor side of Detroit bargaining tables for decades. The once-dominant GM, Ford and Chrysler faced one crisis after another, starting with the 1970s oil price shock and emergence of more fuel-efficient compact cars from Germany and Japan. Chrysler needed a bailout to make it to the 1980s, when import quotas led the likes of Honda and Toyota to set up plants across the country that the UAW tried and failed to organize.

Fain joined the union at a casting plant in Kokomo, Indiana, in 1994. In the decade that followed, US auto worker wages stagnated, then began to steadily decline.

Plant closures and concessions by the UAW — which included setting up a union fund for retiree health care and the creation of lower-tier wages for new workers — weren’t enough to keep GM and Chrysler out of bankruptcy in 2009. But those givebacks and the $80 billion the Obama administration disbursed in another bailout cleared a path for the companies to exit Chapter 11 and quickly recover.

The union failed to capitalize on the carmaker’s improving fortunes to the satisfaction of many workers. Labor talks were largely opaque affairs in which UAW leaders stashed themselves at the union’s headquarters — called Solidarity House — in downtown Detroit and negotiated with management behind closed doors. They would emerge after a couple of months with tentative agreements that in recent years included steady, single-digit pay raises, but also kept in place lower wages for new hires. “We don’t bargain in the media” was a common refrain from leaders on both sides.

Enter Fain, the first UAW president to be directly elected by the membership, after two of his predecessors and their underlings did prison time for spending union funds on golf clubs, luxury lodgings and steak dinners with champagne and cigars.

Months after his swearing-in this March, Fain bucked convention by not holding handshake ceremonies usually attended by the three companies’ CEOs and union leadership to kick off contract negotiations.