The Daily - A Breaking Point for the U.S. Auto Industry

Episode Date: September 12, 2023

Later this week, as many as 150,000 U.S. autoworkers may walk out in a historic strike against the three Detroit automakers, General Motors, Ford and Stellantis. The United Auto Workers union and the Big Three are still far apart in talks, and have only two days left to negotiate a new labor contract before the deadline.Neal Boudette, who covers the auto industry for The New York Times, walks us through a tangled, decades-long dynamic and explains why a walkout looks increasingly likely.Guest: Neal E. Boudette, an auto industry correspondent for The New York Times.Background reading: An auto strike is looming that threatens to shut down Detroit’s Big Three.The United Auto Workers has said it is prepared to strike at General Motors, Ford and Stellantis if a deal is not reached before current contracts end.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday.

From The New York Times, I'm Michael Barbaro. This is The Daily. Later this week, as many as 150,000 U.S. autoworkers may begin a historic strike against their employers, carmakers collectively known as the Big Three. against their employers, carmakers collectively known as the Big Three. Today, my colleague Neil Baudet on the tangled, decades-long dynamic that explains why such a walkout looks increasingly likely. It's Tuesday, September 12th. Neil, we are here to talk with you about a very big potential strike.

And it occurs to me that this has already been a summer of uniquely intense labor activism in the United States. It has. It's been quite a summer. The Hollywood writers went out on strike. They were followed by the Hollywood actors. They're still on strike. The Teamsters and UPS were negotiating a contract. There was a threat of a strike there. In the end, they did come up with a contract. There was a local hotel strike in Los Angeles. So it's been a really busy summer in terms of labor movement. And now we're coming to what could be the biggest labor conflict of the year, and that's a potential strike between Ford, GM, and Stellantis, which is the parent of Chrysler on one side, and the United Auto Workers on the other side. And why might this be the biggest? Because the auto industry is a big piece of the U.S. economy. It's the largest manufacturing sector. It employs

150,000 UAW workers. And the union is threatening to strike all three companies at the same time. It's never done that before, and the impact would be significant. It would cost the automakers billions of dollars in lost revenue and profit. There would be a ripple effect among their hundreds of suppliers. And in the Midwestern states, it could bring local economies to a halt. And is a strike likely, Neil? I think a strike is almost certain. You have these two sides, the United Auto Workers and the three companies that have a long and fraught history with each other. It's kind of like a

marriage that has had its ups and downs and its trauma and pain. And it is all coming to a head in these contract talks that are coming down to the wire. Well, Neil, tell us about the history, the trauma and the pain of this long, complicated marriage between the big three automakers and the UAW, this union that represents their workers, and why, in your mind, it might result in a strike that could shake the economy. What's that backstory? So if we go back to the 1960s, the big three automakers were practically the entire U.S. auto industry. They made nine out of every ten cars that were sold in the United States. And because of that, the union had a great deal of power. If they went out on strike, they could shut down a whole chunk of the U.S. auto industry. And in fact, that happened in 1970. The negotiations go on in Detroit with little hope of averting a strike

and more than half a dozen General Motors plants in the United States and Canada. We feel that we work hard in the shop, building these good cars for General Motors and for the customers. And we feel that if this is the way that we have to do, we have to strike, then we're going to hit the street. They were on strike against GM for 67 days. General Motors has been on strike for more than two weeks now. And in Flint, Michigan, a GM strike takes $8 million a week out of the economy.

And it really shook the U.S. economy and brought most of the auto industry to a halt. Good evening. General Motors and the United Auto Workers have announced tentative agreement on a new three-year contract, an agreement that would end the strike, which has now threatened the nation's economy. And that win in 1970 was just one of a series of victories for the union in contract negotiations. The new contract calls for a three-year increase in wages and fringe benefits, which would give the auto workers an extra $1.80 an hour and would cost GM in the third year an extra billion and a half dollars. They got increased wages and increasingly richer benefits.

Their health care is almost totally covered by the companies. So what happened was the autoworkers were able to live a very comfortable middle-class life. They could send their kids to college, have a cottage on the lake and a boat. And it really set the standard for middle-class people in the United States and helped lift the wages of non-union workers and other unionized workers in different industries. It feels like, in a sense, everybody was winning at this stage of the marriage, right? I mean, the big three are selling almost every car being bought in the U.S. They're doing well. And because of the leverage that it has, the union and its workers are doing very well themselves. Everybody's kind of winning.

Yes, but then that starts to change. These people all have one thing in common besides a happy smile. They all own dependable Toyota Corollas. What happens is foreign competition arrives. All across the country, you'll see signs announcing the best gas mileage car in America, the Honda Civic 1300. Toyota and Honda start selling more and more cars in the United States and taking market share away from the big three. Toyota, who could ask for anything more? And then in the 80s, both Honda and Toyota and then others start building their own plants in the United States.

And they go to states where they can have non-union workers and pay lower wages. And so suddenly the big three go from the 60s, where they dominated the industry and were making a lot of money, to a very difficult competitive situation where they're losing market share, they're woefully uncompetitive in terms of cost, and especially on quality. And so the balance in the industry starts to shift. And Ford, GM, and Chrysler are kind of reeling from the 80s on. And this, I should acknowledge, is the era where I grew up in, the early and mid and late 80s. And I remember my mom showing up at home with a light blue Toyota Camry. We had always previously owned American cars. She bought into this vision,

or her family did, of the very reliable, dependable foreign car. And from then on out, we never owned American cars. That is a really common experience for lots of people. It happened in my family. My father bought a 1980 Chevy Citation, which was probably one of the worst cars ever made. And it broke down so often that then he switched to Toyota. And then when I went to buy my first car, I bought a Honda. And that happened for people all across the country. And what that did was alienated customers from the big three for almost a whole generation. So the big three are losing market share, but their workers are still doing relatively

well. And I'm going to assume that this is when the marriage starts to fray. Right. The workers are getting relatively high pay and good benefits, but the big three are losing market share and they need to downsize. So the union is concerned about, well, when plants close, what happens to those workers? And they negotiate a deal in 1984 to create something they called the jobs bank. They would close a plant, but the workers would stay on the payroll, making most of their wages. That does not sound very efficient. It's not.

They had to report for work and more or less sit in a room and they could read books and play board games and hang out. And the automakers thought it would just be a temporary thing. They would only do this for a few years. They'd restructure. They'd come back better than ever. They'd regain market share. And they would reopen these plants and they would need these workers. But in the end, that didn't happen. They never

really regained their competitive edge. And there were thousands of these workers on the payroll who were not producing cars. And so that put another big cost on their books. And so how do the big three deal with this? That seems extremely expensive. It is expensive. So they had to find ways to save money elsewhere. And they had to use cheaper materials and design cars that were less costly to produce. And so what you ended up with was some really crappy cars.

And I think if you talk to GM executives today, they will admit back in the day, they made some really crappy cars, but that was all they could do on the budget they had. And so it just made the competitive problem get even worse. Right. Because if you're already struggling to keep up with a more dependable foreign import like Toyota, and your solution is to make crappy cars with cheaper materials, you're not going to close that gap. Exactly. Okay, so what happens next? Well, they get to the mid-2000s, and they're really struggling to make money. In one year, Ford loses $12 billion.

Wow. And they come to the contract talks in 2007. And the automakers go to the union. They explain that they are in dire straits, in danger of collapse. They open their books. And the union sees how bad it is and realize that they can't keep asking for more. They have to do something to help these companies get back on their feet. We're learning more about the concessions UAW workers will be asked to make at the Fort Clay Como plant. And that's when you have two measures that really make a big impact. One is the union agrees to let the automakers hire new workers at about $15 an hour.

That's about half of what the top union wage was, which was $28 an hour at that time. And they also create a trust fund to cover the cost of retiree health care. So this gets Ford, GM and Chrysler out of the health care business. And that's a big burden off their books. Now, UAW leadership told our Michael Mahoney today that they are not happy at all with this concession package. Nonetheless, they are urging their rank and file to pass the package for fear that if they do not, that they could force Ford into bankruptcy. At that time, they also agreed to finally get rid of the jobs bank. They came up with some terms where people who were in the jobs bank would take early retirement, and then they stopped putting people into the jobs bank. Members of the United Auto Workers

Union have ratified a package of concessions designed to reduce General Motors' labor costs. It's a huge inflection point for the industry because for decades it had always been more, more, more for the union. And this is a point where finally that stops and the union has to take a step back from the kind of wages and benefit gains that they've been used to. What once seemed impossible is now all but inevitable. General Motors is expected to officially file for bankruptcy tomorrow morning. The next thing that happened was the financial crisis. Chrysler will receive billions in bailout money from the federal government.

The company will enter bankruptcy to clear its books of debt that it couldn't bargain away. They get some more changes to their labor terms and go through a deep restructuring. And finally, these companies are freed of the things that have been weighing them down for so long. And they're freed to go back to focusing on making good cars and competing against their foreign rivals. And does that actually happen? Do they become more competitive? Yes, they're able to put a lot more money into design and nicer materials. So they have these plush interiors. They develop fuel efficient engines and new transmissions. And instead of making crappy cars, they start making really nice cars. First rule of taking the world by surprise, do something the world will actually notice.

Introducing the entirely new Ford Fusion. The Ford Fusion was redesigned and came out, and it was a real head-turner. It's an entirely new idea of what a car can be. GM did the same thing with the Chevy Malibu. Here's a fact. Chevrolet Malibu has better highway fuel efficiency than Honda Accord or Toyota Camry. And then the market starts to shift to trucks and SUVs, which is really their forte. And a blockbuster quarter for General Motors.

North American profit doubled. Their profits take off. U.S. auto sales posted their best month in 10 years. Their profits take off. By 2015 or 2016, they're making record profits. This is a perfect example of a company that is in the sweet spot of the market right now. In the last five years or so, GM has been making close to or more than $10 billion a year, which was just unimaginable years ago. billion a year, which was just unimaginable years ago. We're finally seeing scale and profitability at General Motors. The first time we've seen such things in all of their regions in many, many years. So it becomes like this golden era for the big three automakers. So the lesson here seems to be very clear, that once unshackled from uncompetitive labor costs and labor contracts that provide for things like a jobs bank that are deeply inefficient, the big three can plow money into their actual products, the cars they make, and they make them beautifully and high performing.

And it sounds like reliable and people want to buy them and the companies thrive. True. Except for the workers, they look at these profits and think, hey, wait a minute, when are we going to get back what we gave to the companies, the concessions that we made? When are we going to see our wages rising as fast as the profits are rising? The hour wage is rising as fast as the profits are rising. And suddenly, they get a new union leader. And he tells them, you're right. We are going to fight.

We are going to get back what we've given up. We'll be right back. So, Neil, tell us about this new labor boss. Sure. His name is Sean Fain, and he comes to power in a really interesting way. Before, the union president was elected by a group of delegates who were more or less chosen by the union president and his associates and it was a patronage system you know you do a favor for the boss you get a good job in the union hierarchy and it was not a democracy and so these leaders over time were not really responsive to what the members wanted. And you had a series of contracts, 2011, 2015, 2019, that didn't address what the rank and file were calling for.

And at the same time, there was a lot of corruption in the union. Well, from a lakefront house built up north just for him to months-long stays at a Palm Springs resort. And the feds say Dennis Williams didn't pay a dime for it. There were two past presidents and other senior officials who used union money for golf vacations. Former UAW president Gary Jones has been charged in the corruption scandal that's rocked the union. They bought high-priced liquors, all kinds of expensive apparel, expensive cigars. Wow. And it has caused all kinds of ripples, lots of firings,

and now the possibility of some major jail time. And these two presidents were actually sent to jail. And because of this corruption, there's a federal investigation. And the upshot of that is, finally, we are following breaking news from overnight as the United Auto Workers are just a few votes away from naming a new president. The union has their first direct election for a UAW president. And this outsider, Sean Fain, eventually wins in a runoff by a razor-thin margin. Today we say, no corruption, no concessions, no tears. Our job, starting here and now, is to unite the UAW and get back in the fight.

This is about ending sellout unionism and ending company control. It is an honor of a lifetime to be elected to lead our union, and I'll never forget that the first time the members of the UAW were given the right to vote, we chose change, we chose to fight. And so for the first time in a long 80-plus year history of the UAW, they have a democratically elected leader chosen by the members themselves. So tell us about this first truly democratically elected leader of the UAW, Sean Fain.

Sean Fain is 54. He is an electrician. He worked at Chrysler for many years. He worked at Chrysler for many years, and then he himself got a position in the union administration. His grandfather was also a union worker, and he carries around his grandfather's very first pay stub from when he started working as a union laborer years and years ago. And he carries that around because that's his identity. He really identifies himself as a working class person with working class values. And he keeps that paste up to remind him of that. So from the moment that he started campaigning, he promised the members that he was going to fight. If he were elected, the union would go back to their more few months, what exactly is Fain demanding from the companies? He wants a significant increase in the hourly wage. He has made an opening bid of 40%.

Big raise. Yeah. 40%. Big Riz. Yeah, he points to the CEOs of the three companies and on average between them, their compensation has gone up 40% over the last four years. So he says if the CEOs get 40%, we deserve 40%. He's probably not going to get that and probably knows that, but that's what he's aiming for. He also wants to restore retiree health care paid by the companies. He wants to have a new kind of jobs bank if plants close. And he wants to undo this wage structure that was put in place where entry-level workers get paid significantly less than veteran workers. What else? sometimes 10-hour days, 12-hour days. And what Fain says is that work-life balance

isn't just for the managerial class, that he's trying to get to a point where these workers cannot be compelled to work those sorts of long hours and long weeks and give them some relief on that front. So this is a very ambitious set of demands. Not at all, it sounds like, what the big three have been used to giving their workers over the past few decades. Yes. I mean, the union hasn't made demands like this in the 21 years that I've covered the auto industry.

And what are Fain's tactics, this fighter of a labor boss, as he is making these very ambitious demands? He uses a lot of populist tactics. We're fed up, just like all the working class is fed up, with watching these companies take in billions in profits. We've watched the CEOs rake in millions in salaries. He's been going to rallies at plants to fire them up. As we stand here today, I'm here to tell you there's a new day in this union, and it's time to end corporate greed. And when he makes these speeches or these videos,

he's very confrontational with the automakers. UAW family, I'm going to be blunt. Everything they're looking for in this document is about concessions. Chrysler put forward a proposal of terms that he didn't like. So I'll tell you what I'm going to do with their proposal. I'm going to file it in its proper place because that's where it belongs, the trash, because that's what it is. And on the video, he very ceremoniously took the document

and dropped it into a wastebasket and said, that's where it belongs in the trash. As we've said from day one, September 14th is a deadline, not a reference point. I got a question for all of you. Are you ready to rumble? Well, to that point, what specifically have the big three said about these ambitious demands and the fiery terms in which they are being delivered? Well, all three automakers have hinted or suggested that they know they are going to have to pay higher wages. But on the other issues, they really don't want to go back on the entry-level wages, and there's no way they're going to agree to a new jobs bank. This idea of the four-day work week, they're not going to go along with that. Retiree health care is another one.

They don't want to go back into that business. So it's a very delicate balance. They know that because they are making such significant profits, they have to give back to their workers and reward them. But they have to be careful not to go too far to put themselves back into an uncompetitive situation. They're basically saying, we don't want to go back in time the way you're asking us to. And, you know, I suppose that makes some sense given the history of this marriage that you have told us, that the big three may still feel, despite their profits, pretty scarred by the labor contracts of the 60s and 70s and 80s that they feel left them so saddled and financially burdened and

unimaginative in their ability to make good cars. Yes, exactly. And one of the big reasons why they are so careful is they are in a very competitive situation because of electric vehicles. Explain that. Well, the industry is making this historic shift to electric vehicles, and all the automakers have to invest tens of billions of dollars to develop new technologies, new batteries, new vehicles, build new plants, retool the plants that they have to make EVs. Right. So they have a huge investment that they have to make. They need to continue making significant profits in order to make those investments. So they're very careful not to get into any kind of labor

deal that really diminishes the amount of money they're able to work because they fear down the road they'll be in another really tough competitive situation with a big disadvantage the way they were 20 and 30 years ago. So from what you're saying, the big three are unlikely to meet all of Fain's demands. So that's why I'm guessing you think that a strike is very much in the realm of possibility. But I'm curious, what happens if the UAW gets a lot of what it's asking for, either through negotiations that avert a strike or through a very costly strike that might start in the next couple of days? Well, it would be a very big moment for organized labor. The union has been shrinking over the decades and its members have been giving up things rather than getting things. But that

could change if they deliver in terms of higher wages and some improved benefits, it could give a tailwind to other efforts to unionize. The foreign automakers have plants in the South that are non-union. The UAW has tried to organize there, but the workers down in the South are like, what are we going to get from the UAW? Your plants are closing, you're giving back on wages. going to get from the UAW. Your plants are closing, you're giving back on wages. If there's a big win here for the UAW, that changes. All of a sudden, you know, you might have workers in the South saying, hey, wait a minute, you know, maybe we could get higher wages. Maybe we could get better working conditions if we were part of a union. So there's a lot hanging in the balance here for the union and the labor movement

in a broader sense. And what happens if the Fain playbook fails here? That would be a major setback for organized labor, because Fain has a lot in his favor. The companies are making big profits. He has the backing of his members. They're ready to walk out. And if he can't achieve his goals in that situation, that doesn't bode well for other labor organizations. And the question is, if they go out on strike, how long does it last? A three-day strike or a one-week strike could be something that the automakers can bear and the workers can bear. But if it's something that goes on for weeks and weeks,

both sides could be damaged by it. But for Sean Fain, that pain is what may be required to get what he sees as a fair share for the workers and a fair contract. And to get the UAW back to what it was years ago, this powerful, influential union that got continuous gains for its members and set a standard for working class people all across the country. Well, Neil, thank you very much. Glad to be here. Thank you. Well, Neil, thank you very much. Glad to be here. Thank you.

The UAW's contract with the Big Three is set to expire at 11.59 p.m. on Thursday night. Sean Fain has said that unless the union's demands are met before then, a strike would begin shortly thereafter. A strike would begin shortly thereafter. We'll be right back. Here's what else you need to know today. On Monday, the death toll from the devastating earthquake that struck Morocco over the weekend grew, rising to more than 2,800 people. At the same time, government officials there pushed back against criticism that rescue operations have been slow and uncoordinated, saying that the government's response has been, quote, swift and effective.

And the U.S. Food and Drug Administration has approved a new round of vaccines against COVID, just as infection rates begin to rise across the country. Federal regulators are expected to follow up today with a recommendation for exactly who should receive the new shots, which will be made by Pfizer-BioNTech and Moderna. That recommendation and the state of the virus will be the subject of tomorrow's Daily. Today's episode was produced by Diana Nguyen, Carlos Prieto, Sydney Harper, and Rochelle Bonja. It was edited by John Ketchum and Lisa Chow. Fact-checked by Susan Lee. Contains original music by Dan Powell, Mary Lozano,

Rowan Emisto, and Diane Wong, and was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Landefurk of Wonderly. That's it for The Daily. I'm Michael Barbaro. See you tomorrow.