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The loss is close to ten billion! Detroit's three car companies finally compromised.

2024-05-30 Update From: AutoBeta autobeta NAV: AutoBeta > News >


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The six-week-long American car strike has finally come to an end.

According to foreign media reports, General Motors reached a temporary agreement with UAW (United Auto Workers) on October 31, ending a six-week strike. Earlier, UAW reached an agreement with Ford Motor and Stellantis Group, thus formally suspending the strike against the Detroit Big three. The six-week strike has come to an end, and Detroit auto workers will return to work one after another.


It is understood that UAW will get roughly the same pay increase from GM as from the other two manufacturers, including a 33% increase for older employees, and a $2500 payment to retirees in five installments by 2028, which will also cost GM a huge $7 billion. According to the industry view, the increased costs brought about by the new agreement will make it harder for the Detroit Big three to compete with non-unionized brands such as Tesla and Toyota.

In terms of time, Ford was the first car company to reach an agreement with UAW. On Oct. 25, local time, Ford and UAW announced a preliminary agreement that includes a 25% pay increase over a four-and-a-half-year contract, including an 11% increase in the first year, plus a bonus and cost-of-living allowance of $5000. This will bring the actual wage increase for Ford UAW workers by more than 30% to more than $40 an hour. As a result, Ford was the first to end a six-week strike.


General Motors, Stellantis Group and UAW held talks on October 26th local time, hoping to end the six-week strike, especially after Ford Motor has reached a settlement with UAW, the negotiations between General Motors, Stellantis Group and UAW also entered a tense moment, and the two automakers are also eager to end the strike. Finally, Stellantis reached a settlement with UAW on October 28th local time, after UAW workers went on strike against GM's largest plant in North America, and GM reached a preliminary agreement with UAW on October 30th local time.

It is understood that UAW employees re-sign contracts with Detroit's three auto giants every four years, and the union's contract with Detroit's three auto giants expires on September 14. The union requires the three auto giants to raise wages, pensions, health care, unemployment and other security to cope with the cost of living crisis brought about by high inflation in the United States, including a 40% pay rise and a four-day work week, but within the deadline. The two sides did not agree on a new labor agreement and eventually launched a large-scale strike.


Since September 15, UAW has carried out strikes to varying degrees against the three major Detroit car companies, resulting in huge economic losses. On Oct. 26, Ford said the 41-day strike at UAW cost the company $1.3 billion and reduced its third-quarter net profit by $1.2 billion. GM says the strike has cost the company $800 million. Earlier, data released by the US economic consulting firm AEG showed that as of October 19, the economic losses caused by the UAW strike against the three major car companies had exceeded 9.3 billion US dollars, including the losses of car companies, suppliers and dealers.


GM and Ford both downgraded their 2023 performance guidance as a result of the strike. On Oct. 24, GM reported third-quarter revenue of $44.131 billion, up 5.35% from a year earlier. Net profit attributable to ordinary shareholders was $3.038 billion, down 7.32 per cent from a year earlier. GM said it was partly due to a loss of about $200m in third-quarter profit as a result of the UAW strike.

The impact of the UAW strike is long-term, and other car companies, including Tesla, may be the target of the next strike. Prior to this, UAW Chairman Shawn Fain has clearly expressed the goal of the next stage-Tesla. Fain stressed that the success of the contract with the Big three proves that the way the unions are now organized is effective, and that by the time they return to the negotiating table in 2028, the negotiations will not be limited to the Big three.


As we all know, Tesla is the world's largest car company by market capitalization and the largest electric car manufacturer in the United States, with tens of thousands of non-union employees in the United States. It is understood that UAW also tried to organize Tesla workers to form a trade union, but failed. Musk once wrote on Twitter, "nothing can stop the Tesla team of our car factory from voting to form a union." They can do it now if they want. But why pay union dues and give up stock options? " But Tesla's workers in California are planning to form a union, and UAW has promised to provide all necessary resources for collective bargaining at the plant, according to people familiar with the matter.

It is understood that the Detroit three car companies reach a final agreement with UAW, which will lead to a sharp rise in labor costs. GM, for example, will lose $7 billion in the new contract. The next round of negotiations is in 2028, when UAW may demand higher wages, and the strike target is no longer just Ford, GM, Stellantis, but may include Toyota, Honda and other automakers.

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