A Raise for Auto Workers May Imperil Biden's Electric Vehicle Ambitions
The president voiced support for the union's goals on the picket line but companies are already struggling to build fuel-efficient cars that Biden wants to prioritize.
On September 25, Joe Biden made history as the first sitting president to walk a picket line when he joined striking members of the United Auto Workers (UAW) in Van Buren Township, Michigan.
Standing with UAW President Shawn Fain, Biden told the strikers through a bullhorn, "You deserve the significant raise you need and other benefits." But a big raise for the UAW could very well come at the expense of one of Biden's core campaign promises.
The strike began on September 15 when talks broke down between the UAW and the Big Three automakers (Ford, General Motors, and Stellantis). Among its demands, the union wants a 36-percent raise over four years, a 32-hour work week, and the reinstatement of pension and cost-of-living benefits that it gave up during the 2008 recession.
It also seeks protections as the industry transitions to a greater focus on electric vehicles (E.V.s), a central priority of Biden's presidency. This year the Environmental Protection Administration adopted rules that would require 67 percent of all new vehicles sold in the U.S. by 2032 to be electric. "The UAW supports and is ready for the transition to a clean auto industry," Fain noted in August. "But the EV transition must be a just transition that ensures auto workers have a place in the new economy." Tied to that transition, the UAW's demands include the right to strike over plant closures and additional job protections in the event that plants shut down.
Autoworkers are right to be worried: According to a 2019 report by the Congressional Research Service (CRS), traditional vehicles "have as many as 2,000 components in their powertrains," and "of the nearly 590,000 U.S. employees engaged in motor vehicle parts manufacturing, about one-quarter—nearly 150,000—make components for internal combustion powertrains."
On the other hand, "an electric vehicle powertrain has only a few" components. "For example, Tesla has said its drivetrain has 17 moving parts, including two in the motor." As a result, E.V.s require significantly fewer parts and therefore fewer man-hours to build: "Electric vehicle powertrains, if built domestically and not imported, would generate production employment," the report noted, "but fewer employees may be needed than at present because vehicle battery packs have relatively few components and are less complicated to assemble than internal combustion engine powertrains."
A July 2023 report from the America First Policy Institute, a think tank founded by former members of Donald Trump's presidential administration, estimated that the Biden administration's E.V. mandate would cost 117,000 auto industry jobs, nearly half of them from Michigan, Ohio, and Indiana.
But the union's demands may not be feasible at the industry's current trajectory. The union is asking for more money and fewer hours as the industry transitions to E.V.s, but established companies are hemorrhaging money on the transition. After previously predicting that it may lose $3 billion this year on its E.V. division, Ford now anticipates a loss of as much as $4.5 billion. Last year, General Motors CEO Mary Barra told investors that the company didn't expect to make a profit on E.V.s until 2025.
Notably, the companies are struggling even after receiving billions of dollars in government subsidies. Most recently, at the end of August, the Biden administration authorized an additional $12 billion in grants and loans for companies to upgrade and retrofit their facilities.
Ford CEO Jim Farley said the UAW's proposals could send the automaker into bankruptcy, while Barra said they were not "realistic." Dan Ives, research analyst for Wedbush Securities, said in a note to investors that the UAW's demands, if fully accepted, could cause automakers "to pass these costs onto the consumer" by increasing E.V. prices by as much as $5,000 each.
By visiting an active picket line, Biden made his preference clear in the fight between unions and management. But depending on how the negotiations go, he may not be able to have it both ways: Either UAW members can get a big raise, or automakers can push forward in the transition to electric vehicles.
