Labor and industry experts say the United Auto Workers’ tentative contract agreement with Detroit’s Big Three automakers has major implications for the auto industry’s shift to electric vehicles and the nation’s effort to cut greenhouse gases.
EVs have been at the center of negotiations during the UAW’s six-week strike against Ford, GM and Stellantis, the company that makes the Jeep, Ram and Chrysler brands. The three automakers each reached tentative settlements within a few days of each other, ending with GM’s agreement on Monday. UAW members will now vote on whether to ratify the agreements.
At several points during the negotiations, industry executives claimed that they couldn’t produce EVs at large scale and remain competitive while paying higher wages. That was when EV proponent and labor supporter Jason Walsh said he started to worry. Walsh is executive director of the BlueGreen Alliance, a coalition of environmental groups and labor organizations, including the UAW, which argues that we shouldn’t have to choose between good jobs and a clean environment.
“The tentative agreements between the UAW and the Big Three, I think, conclusively show that’s a false choice,” Walsh told Newsweek.
Wage increases and other benefits the UAW won will add to the costs of making EVs. But the automakers also win by gaining certainty in business planning and resolving some long-simmering points of conflict with labor, according to Cornell University professor and labor expert Harry Katz.
“I think it’s helped, rather than hindered, the growth of electric vehicles,” Katz told Newsweek.
In addition to discontent over stagnant wages, the union was concerned that some workers would be left behind as automakers pivot to cleaner cars.
EVs generally require fewer parts and thus less labor compared to the manufacture of internal combustion vehicles. Further, federal loans and other government incentives had sparked a wave of new investment in EV battery manufacturing. Some of those new facilities are being built by battery companies that are not represented by the union and some are jointly owned by battery companies and the Detroit automakers.
“They wanted to make sure through this agreement to have at least the battery plants that are jointly owned by the Big Three have UAW representation,” Katz said. Katz studies collective bargaining at Cornell’s School of Industrial and Labor Relations, and he said UAW President Shawn Fain made the most of his bargaining power in an agreement that “did very well” for his members.
The UAW won wage increases of between 25 and 30 percent, greater retirement security and a mechanism for newer workers to advance more quickly to higher pay tiers. Katz said the union also won an agreement that makes it easier to organize workers at the battery plants that the Big Three automakers jointly own.
That will become more important as the automakers build more battery facilities, according to Sam Abuelsamid, an auto industry analyst at market research company Guidehouse Insights. Abuelsamid rattled off ten planned battery facilities the Big Three will have a stake in, each bringing big job potential.
“There will be lost jobs at other plants, but there will be new ones created,” Abuelsamid told Newsweek. “So it will be more of a shift, not a huge change in the number of employees.”
Abuelsamid said the additional costs in this agreement do not look like a major barrier.
“Of the challenges the EV revolution has, this labor agreement is probably the least of them,” he said, listing material shortages and the lack of a reliable national charging system as bigger hurdles for the industry. High interest rates aren’t helping either, he said, as the lack of attractive financing suppresses consumer demand.
Former auto industry executive John Casesa is less dismissive of the costs associated with the UAW agreement.
“I think it’s fair to say it’s a more expensive contract than anybody in the industry expected,” he told Newsweek. Casesa was once a group vice president at Ford where he was head of strategy for three years. He’s now a senior managing director at the investment bank Guggenheim Securities. Casesa said any additional cost makes it harder for companies with one foot still in the gas-powered market to shift to the electric one.
“The incumbent auto companies have to remain competitive in their core business and have enough capital to build the new EV business,” Casesa said. “To the extent that the labor agreement makes it more expensive to operate the existing business, there’s less money to invest.”
Battery Belt Growth
The Big Three automakers are only part of the growing EV and battery sector, and Katz said that points to another challenge for the union.
“I call it the Achilles’ heel of their success,” Katz said of the UAW, “the growing share of cars and trucks sold in the U.S. that are not made by UAW workers.” That is especially true of EV makers such as Tesla, he said. UAW President Fain has made it clear in recent comments that the union will step up its efforts to organize nonunion EV and battery makers.
“He hopes that by all these gains in their contracts with the Big Three, that will lead the workers in the nonunion workplaces to be more interested in unionization,” Katz said. Fain will have a difficult task organizing facilities in the emerging battery belt of southeastern states, Katz said, where cultural and political forces are less labor-friendly than in the Upper Midwest.
Many of the states with the biggest recent EV and battery developments, such as Kentucky, Georgia, South Carolina and Tennessee, have “right to work” laws which make union organizing more difficult. But difficult does not mean impossible, Walsh at the BlueGreen Alliance said.
“If anyone is under the illusion that unions can’t organize in right-to-work states, they should look to the workers at Blue Bird in Georgia,” Walsh said. Workers making electric school buses at the Blue Bird Corporation’s facility in Fort Valley, Georgia, voted in May to join the United Steel Workers.
Driving Down Emissions
Casesa said it is difficult to grasp the enormous change the auto industry is undergoing with the move to EVs.
“There’s nothing comparable in the history of the auto industry,” he said, pointing to major change coming to every aspect of the business, from the supply chain to the product and the way the companies reach customers. “With the changes rippling through the system, essentially you’re going to have a new kind of industry,” he said.
The Biden administration has set an ambitious goal for a range of electrified vehicles to make up half of total U.S. auto sales by the end of the decade, including battery-electric, plug-in hybrid and fuel cell technology. Legislation passed last year includes billions to boost the manufacture of EVs and batteries and to build a better charging infrastructure.
Car buyers can get a tax credit and other incentives for qualifying electric vehicles, battery companies are vying for $17 billion in loans from the Department of Energy, and the Bipartisan Infrastructure Law included $7 billion in funding for a national charging network.
All of that is part of the administration’s larger strategy on climate action, which calls for a 50 percent reduction in U.S. greenhouse gas emissions from 2005 levels by 2030. The transportation sector is the country’s largest source of those emissions.
“Shifting to electric vehicles is absolutely central to meeting our emissions reduction goals,” Walsh said in a reminder of just how much is riding on the EV transition. “You can’t get there unless you significantly reduce greenhouse gas emissions in the transportation sector.”