What Detroit automakers have to give the UAW to get a deal, according to experts

The United Auto Workers and the Detroit Three carmakers could get closer to an agreement sooner than it appears if both sides focus on a few key job provisions, according to some industry observers and insiders.

One issue the union will likely have to accept that it will not win is a 32-hour workweek for 40 hours of pay, according to the people interviewed for this story. But there are other demands the UAW needs to win (a cost-of-living adjustment, for one) if the carmakers want a quick end to the strike and ratification of a tentative agreement, said one person familiar with ongoing contract talks and the union's goals.

"It has to have COLA. The union will not accept any agreement without COLA," said this person, who asked to not be named because of the sensitivity of the bargaining talks. "You will not get an agreement without COLA.”

This person also said, "The 32-hour workweek is not real. It won't happen."

As to COLA, GM has offered a version of it that it dubs "inflation protection" for its highest-paid workers. General Motors has not released the details of the offer, but the Detroit Free Press has learned the basics of it. It would offer a pay increase to match inflation if inflation hit a set percentage. Stellantis has also offered a version of inflation protection and Ford Motor Co. offered a form of COLA several days ago, according to the source. Ford declined to comment, but according to a UAW report the union had "reasonably productive conversations with Ford" on Saturday.

Also, the automakers have offered to reduce the time it takes for employees to progress to the top wage from eight years to four years. But there are no offers yet to end wage tiers, which the UAW wants.

Those are just a few of the issues the union and Detroit automakers must solve in short order to end a strike before it escalates to a level of severe financial damage to the companies and communities.

"If the unions are clever ... with the right mindset, they can win," said Balbinder Singh Gill, assistant professor of finance and labor expert at Stevens Institute of Technology in Hoboken, New Jersey. "I think carmakers are pressing to find a deal. It depends on the union and what is the line that they cannot go below and it depends on what the companies cannot give them. Then you find the right balance for structuring the deal."

The strike fallout so far

At 11:59 p.m. Thursday nearly 13,000 UAW workers across the three Detroit automakers went on strike at the first wave of plants that the union said it would shut down until a new labor agreement is reached.

Those plants are Ford Michigan Assembly Plant (Final Assembly and Paint only) in Wayne, Stellantis Toledo Assembly Complex in Ohio and GM Wentzville Assembly in Missouri.

There was fallout the next day. Ford temporarily laid off 600 employees at the Michigan Assembly Plant and GM plans to lay off some 2,000 employees at its Fairfax Assembly plant in Kansas City, Kansas, this coming week. Fairfax relies on stamped parts from Wentzville to build the Cadillac XT4 SUV and the Chevrolet Malibu sedan and with Wentzville down, GM said it expects to run out of parts by early this week and will have to halt production.

UAW President Shawn Fain revealed the list of "members" demands on Aug. 1 and they included:

• Eliminating wage tiers.
• A 40% wage increase over the life of the contract. The 40% mirrors the increase to CEO salaries, the union said but CEO Mary Barra said Friday on NBC, "I don’t know where the 40% came from. I will tell you from an executive compensation package, 92% of my compensation is based on performance so when we look at where we are from a GM perspective, when GM does well, employees do well.” Barra's 2022 compensation was $29 million. Ford CEO Jim Farley received $21 million and Stellantis CEO Carlos Tavares received $24.8 million.
• Restoring the cost-of-living allowance adjustments to counteract inflation. The union lost COLA in the 2007 contract.
• Defined benefit pension for all workers.
• The right to strike over plant closures.
• Limiting the use of temporary workers.
• Increased benefits to current retirees.
• A reduced workweek and more paid time off.

The idea behind the 32-hour workweek comes from a plan proposed in the 1970s where workers gradually accrue “Paid Personal Holidays” over a period of time as part of a bargained formula. The company then groups together workers who have earned, say, 26 such days and gives them every other Monday off for half the year.

A total package to sell the deal

Gill said the union should stay on strike as long as possible so that the workforce gets close to the 40% increase in hourly wages across the life of the contract that the UAW demands because, "if they don't get the wage increase they want, they lose their strength."

He said a reasonable ask is to come down to 30%, expecting the carmakers to then offer 25%. A recent offer by Ford and GM was 20% and Stellantis was 21%. Gill said the union could take 25% then if the automakers offered other benefits such as increased profit-sharing formulas or a more flexible working scheme. But the 32-hour week is a no-go, in his opinion.

"If you allow people to work less, they are happy so they do things quicker and better," Gill said, citing research on the topic. But, he added, "nobody will ever agree to pay them for 40 hours. They have to be a little bit realistic. You work less, but keep the same wage? no."

But COLA is a yes, Gill said, if the deal is to get ratified.

"Inflation is high, so if inflation is increasing by 2% then they can say your wage increases by 2% and that would be reasonable," Gill said. "The carmakers are making billions in profits and if you take 2% of that to pay for COLA, workers will be very happy and they'll stay longer. You don't want a worker who is stressed because they can't get food because it's too expensive."

Gill said the automakers have to offer a "total package" of COLA, greater incentives to buy cars at cheaper prices, extra training to secure jobs and a wage increase between 25% to 30% — to name a few — for the union to "sell the deal" to the workforce.

"It all comes down to if the workers are happy," Gill said. "If you have a good union, they try to find the balance between the workers' interest and the companies' interest. They understand the companies have to make a profit, too."

The magic number of 30%

Labor expert Erik Gordon agreed that the 32-hour workweek is a demand the union will have to leave on the table along with: the defined contribution plan demands, the ability to strike if a plant is closed, and automatic unionization of battery joint venture plants.

"Automakers can afford in the short run to agree to them, but the long run effect will be that they have lower market shares," said Gordon, a business professor at the University of Michigan Ross School of Business. "The companies could buy labor peace today in return for future declines in sales, and they might do that because those future declines are likely to be on the watch of a new CEO."

Gordon believes the companies will move to a 30% hourly wage increase, "but with some engineering to back-load it or count one-time payments so the ongoing base wage is 30% higher. They also will transition out of tiered workers."

Wayne State University business professor Marick Masters believes the carmakers will need to offer "something north of a 30%" increase in general wages.

"To make a tentative agreement that can be ratified, the UAW wants an offer that goes further on such critical issues as wages, in-progression and the use of temps," Masters said.

Besides the wage raise, the UAW will need a less than three-year progression to the top tier and restrictions on the use of temporary employees as steps toward a settlement, he said. 

'Angry and inspired' could leave Tesla the winner

But the truth is we are in uncharted waters in these talks.

It's the first time in recent history that the union did not pick a target company to negotiate a master contract with to use as a template for the other two carmakers. It is also the first time the UAW has struck all three automakers at the same time, employing a strategy it calls a Stand Up Strike of targeting only certain plants and then expanding out to more plants in waves, if necessary.

"It’s unclear what it will take to get a deal done just yet," said Harley Shaiken, labor expert and professor emeritus at the University of California-Berkeley. "All this will clearly be affected by the increasing economic pain on both sides. It will clearly take more money on the table."

He believes the Detroit automakers can afford wage increases given they earned $42 billion in the year ending in June and are receiving new subsidies to transition to electric vehicles.

Joe Biden defends UAW strike:President tells industry they must share record profits

"At this point in more traditional negotiations, the union might narrow its demands down to three or four core issues and in informal top level negotiations let the company know its leading priorities and what it will need to get the agreement ratified, which as we know is not automatic," Shaiken said.

But Shaiken said the UAW's Fain still has a long list of demands and "a membership that is both angry and at this moment inspired on the picket line. As the strike wears on, the calculus on both sides will change."

Also a new wrinkle in these talks is the timing. The Detroit automakers, especially Ford and GM, are moving rapidly this year to launch new electric vehicles to stay on pace with a transition to all EV lineups in the future. They have invested billions of dollars in the transition.

If the strike continues until all three Detroit automakers are effectively closed, consumers may be forced to buy Tesla, Toyota and other brands. They may not return to Detroit products anytime soon, which would slam the initial EV ambitions.

"Should this happen, it will be damaging to the rollout of all the impressive new Detroit EVs," Shaiken said.

Wall Street analyst Dan Ives of Wedbush Securities agreed, writing in a research note Thursday that if the strike lasts longer than four weeks, the big winner in the Detroit Three talks with the UAW is Tesla. The nonunion electric car leader's biggest potential EV competitors now face “mounting costs/complexities in the years ahead depending on how this ultimately plays out," Ives wrote.

Staff writer Phoebe Wall Howard contributed to this report. Contact Jamie L. LaReau: [email protected]. Follow her on Twitter @jlareauan.