How potential UAW strike could impact the economy

Automaker Stellantis on Friday offered the United Auto Workers a new four-year deal that would increase employees wages by 14.5%, the latest back and forth between the company and its employees as they try to hammer out a new labor contract before the current one expires. 

The wage increases, which would be for most workers, wouldn't include any lump sum payments, Mark Stewart, chief operating officer of Stellantis North America, said in a letter to employees.

The proposal by Stellantis, formerly Fiat Chrysler, is a counteroffer to the UAW, which is seeking much heftier pay bumps. The proposal also includes a $6,000 one-time inflation protection payment in the first year of the contract and $4,500 in inflation protection payments over the final three years of the contract.

In addition, the counteroffer includes boosting hourly wages from $15.78 to $20 for temporary workers and speeding up the progression timeline from eight years to six years for employees who are moving through the pay scale from starting wages.

The proposal from Stellantis, formed in a 2021 merger of Fiat Chrysler and France's PSA Peugeot, is closer to the union's demands of 46% across-the-board increases over four years, but both sides still are far apart. 

The union's demands also include a 32-hour week with 40 hours of pay, restoration of traditional pensions for new hires, union representation of workers at new battery plants and a restoration of traditional pensions. Top-scale UAW assembly plant workers make about $32 an hour, plus annual profit sharing checks.

About 146,000 UAW members at the three Detroit automakers could go on strike when their contracts expire at 11:59 p.m. Thursday.

"We remain committed to bargaining in good faith and reaching a fair agreement by the deadline," Stewart said. "With this equitable offer, we are seeking a timely resolution to our discussions." 

In a statement Friday, the union called counteroffers from Stellantis, General Motors and Ford "disappointing" and said President Shawn Fain will discuss them with members.

Fain warned earlier this week that the union plans to go on strike against any Detroit automaker that hasn't reached a new agreement by the time contracts expire.

Chances of a strike

Even though wage increases are still being negotiated, there's still a 60% to 65% chance the auto workers will strike next week, said Benjamin Salisbury, analyst at Height Securities. The UAW is financially prepared for the strike to be lengthy, Salisbury said in a research note. 

"The UAW reportedly has an $825 million strike fund, which it uses to pay eligible members who are on strike," Salisbury said. "The strike pay is $500 per week for each member. If all UAW members at GM, Ford, and Stellantis, strike and make use of the strike fund, it would last approximately 11 weeks."

Detroit's big three automakers would lose more than $5 billion if union employees stopped working after 10 days, according to analysis from Michigan consulting firm Anderson Economic Group.

A strike against all three major automakers could cause damage not only to the industry but also to the Midwest and even national economy, depending on how long it lasts. The auto industry accounts for about 3% of the nation's economic output. A prolonged strike could also lead eventually to higher vehicle prices.

Ford's counterproposal offered 9% raises and lump sum payments over four years, while GM's offered 10% plus lump sums.

In:
• Labor Union
• United Auto Workers
• Stellantis
• Auto Industry