Various estimates indicate national healthcare costs continuing to balloon well past this current decade, interest payments on government bond issuances becoming a substantive drain on government revenues from taxation et al, increasing burdens on government contribution to benefits as a result of this, and the ominous implications on the creation of conditions for «thriving» among America’s youth entering the workforce. In essence, the American middle class is under enormous pressure. By no means can blame be laid squarely on any one side of the current political divide: as the data indicates, little of consequence has been done to address these issues in the past four decades wherein both sides of the political divide held sway over the highest seats of power for extended periods of time.

It’s increasingly harder to enter the middle class or stay in the middle class. This has grim consequences on long-term consumption trends of American goods by Americans. Rising costs could be considered to be the root cause behind both a decline in overall new car sales as well as rising clamour among the workers’ unions for higher wages and benefits.

Advantage: EV Makers?

Ford estimates that the average hourly labour costs, including benefits, among the «Big Three» amounts to around $65 per worker, compared to about $55 for foreign non-union automakers in the U.S. like Toyota and Nissan. However, to control costs, it brought about a tiered system has since been in place that effectively pays younger/newer workers less than older workers, along with a cap of workers’ wages at around $32 an hour. UAW demands that this be done away with. The union further demands from the «Big Three» a mid-30% wage increase over the lifespan of the new contract, down from the initial demand for a 40% pay hike, but still far from what auto manufacturers have offered, at 20% at most. Ford has stated that UAW’s demands would double its labour costs, which are already significantly higher than that of carmakers that utilize workers unrepresented by unions.

It has been estimated that Tesla’s labour costs, borne from non-unionized labour, are at around $45-$50 per worker per hour. Both Ford and Volkswagen have estimated that 30% less labour is required to build a BEV, given they don’t require complex parts needed to build engines and transmissions. The «Big Three» have committed to investing over $100 billion in EV manufacturing over the next few years via joint ownership of plants with companies such as South Korea-based LG Energy Solution and Samsung predominantly located in a growing “Battery Belt,” centred on Georgia, Kentucky, and Tennessee. Most of these developments are in states with “right to work” laws that curtail collective bargaining.

However, UAW seeks to extend union-driven benefits to workers in EV plants, with Tesla already being a long-sought target. A California plant worker allegedly fired by the company for union organizing has been ordered to be reinstated by federal authorities, which is currently under appeal. The authorities also made it clear that there can be no withholding of stock grants to any unionized workers.

In Germany, Tesla’s Berlin plant also employs workers who are represented by a management-dominated Works Council (Betriebsrat) instead of the likes of a union such as IG Metall. As early as 2017, it was reported that Tesla’s German workers are paid 20-35% below that of unionized workers in other car companies. Earlier this year, IG Metall has called for an investigation over complaints that workers were made to work longer hours and are being forced to sign non-disclosure agreements, thus making them fearful of retribution if they were to discuss working conditions.

In Conclusion

Former Ford CEO Mark Fields already warns that UAW’s demands not related to wages – such as the reinstatement of pensions and healthcare for retirees among others – could simply make it more rational for U.S. carmakers to move production to foreign shores such as Mexico. Tesla and BMW both are working on building plants in Mexico, along with a host of EV-relevant Chinese companies.

Much of the current bickering between worker and management is severely limited to what the former can squeeze from the latter and how little can the latter get away with conceding to the former. What neither union nor management acknowledges is why the conflict exists: rapidly (perhaps even exponentially) rising costs of living, over which neither have substantive control. Decades of laxities in government planning have led to this with, as per current trends, at least a decade more of long-term rising costs expected. Given that, it’s inevitable that this conflict would recur in very short order.

Deutsche Bank estimated a full strike could cost each affected automaker about $400 million to $500 million per week if all production was lost. Anderson Economic Group predicts a full 10-day strike could result in a total economic loss of more than $5 billion. While costs increase and conflicts arise, more and more vehicle production (both conventional and EV) will shift to foreign countries. This conflict will become the epitome of a «death spiral»: fewer jobs, more conflicts, even fewer jobs, even more conflicts. It’s all too evident that macroeconomic conditions are the root cause of such a spiral. But little by way of the byzantine corridors of power in Washington seems to address it.