US Car Industry in Turmoil as Unions Expand Strike Action. Will Elon Musk Be the Big Winner?

The United Autoworkers Union declared strike action in the US last week shutting down selected manufacturing sites of the Big Three manufacturers—Ford, Stellantis and General Motors—mostly in Detroit, the traditional home of US car manufacturing.

The Union is demanding that the Big Three negotiate new wage deals that include a 40% increase in wages for its members, amongst other things. Most analysts believe that the demand is unrealistic at this time but undeterred, the UAW has now announced an extension to the strike to include dozens of parts distribution centres across the country.

The Union is hoping that the move will cripple the ability for the Big Three to be able to provide the parts required for the very lucrative repairs and maintenance side of the business and thus bring the manufacturers to the table sooner rather than later. Mr Fain, the UAW Boss, said, “we’re focussed on moving the companies at the bargaining table, right now we believe that we can get them there.”

This is the first time in history that the UAW has called a strike in all of the Big Three who manufacturer about 45% of all the cars sold in the US of A; of the rest, about 36% are manufactured by Japanese manufacturers in non-unionised factories. Thus far, the strike is thought to have cost the Big Three about USD1.6 million in losses.

It is clear that the Big Three may well be inexorably damaged by this strike action. In the short-term, lack of supply will mean customers will seek out alternative products manufactured by those companies not impacted by the strike. In the longer term, the higher wages will mean more expensive products and thus reduced price competitiveness.

Safe to say then that Elon Musk has already won, probably. The legacy car manufacturers were already having problems competing with him as they grappled with generations of legacy expenses as they tried to plot the path from ICE to EV powered vehicles. On top of this, Elon Musk’s Tesla has already announced a raft of cost-cutting initiatives aimed at slashing up to 50% from the cost of his cars as the company adopts advanced automation techniques, the likes of which will never be allowed over at the Big Three.

July saw the profit at Tesla increase by 20% after they reduced the pricing of their vehicles. Right now, the cost per hour of labour is USD45 per hour; after the strike it is estimated that it may be as high as USD136 over at the Big Three. It does then look like the UAW may well accelerate the EV lobby in the US of A and by default, that makes Elon Musk the big winner from this strike.