Well, folks, the United Auto Workers went and did the thing they said they were going to do. One plant from each of the Big Three is now on strike, and more could follow if the automakers don’t come back to the table with terms the union finds more amenable. Sound like a threat? That’s exactly the point.

Today’s morning roundup looks at the fallout from the strike from a few angles. Let’s get right down to it.

Welcome To The Stand Up Strike

Unable to reach a deal with General Motors, Ford and Stellantis at the stroke of midnight, the UAW has ordered a historic “stand up strike” at three different plants—historic because it’s the first time all of the automakers have been hit by this, ever.

Here’s how this works: UAW workers at those three plants are no longer working, full-stop. The rest of the American auto industry is still business as usual. But over time, more plants—more locals, in union parlance–could be called to join the strike. You’d imagine you’d be have to be pretty tactical in the three plants you pick for this, and the UAW truly did that:

• GM Wentzville assembly in Missouri (Chevy Colorado and GMC Canyon)
• Stellantis Toledo assembly in Ohio (Jeep Wrangler and Gladiator)
• Ford Michigan assembly plant and paint (Ford Bronco and Ranger)

That’s where we’re at now. And all of those are important, volume-selling trucks and SUVs, but not the most important, most volume-selling trucks and SUVs. Not yet. It’s basically Shawn Fain saying, “Sure is a nice F-150 factory you got there. Would be a shame if something… happened to it, huh?”

The Toledo strike in particular feels like a very calculated middle finger to Stellantis, where labor relations are said to be the poorest and with workers drawing particular ire at the astounding $26 million compensation of CEO Carlos Tavares. That strike hits Jeep’s historic hometown and its most iconic current model—not to mention a profitable, popular vehicle. That one feels personal.

What does this mean for consumers? At the moment, probably nothing. But the longer these strikes go on—not to mention if they grow—the flow of those models to dealers will run out, leaving buyers with another supply crisis and higher prices, while guys like Stellantis CEO Tavares stand out on the freeway with their empty pockets turned out trying to hitch a ride to a bus stop in Chicago. OK, maybe not the last one. But the impact won’t be immediate, but the longer this takes, the more it will hurt the automakers’ bottom lines.

What Does The Union Want?

From the New York Times‘ Dealbook, here’s a quick refresher on what the union is after:

• “A 40 percent pay raise over four years, which would bring wages for many full-time workers to roughly $32 per hour.
• Reinstate cost-of-living adjustments, which have become a central plank in contract negotiations amid high inflation.
• A four-day workweek, a demand that’s grown in popularity since the pandemic scrambled workplace culture.”

I’d add that the four-day workweek is a tactical move that would likely result in more auto workers being hired, and thus a bigger union. It needs that because membership has been declining for decades now.

The union also wants an end to the hated tiered employment system that stratifies worker pay based on experience. As a quick refresher, the UAW is asking for a number of benefits they sacrificed to help keep their employers afloat during the Great Recession, and in recent years union leadership was too busy being corrupt and going to prison for corruption to fight for these things. Now, they have a guy up top who quotes Malcolm X on his social media channels.

Moreover, they’re fighting for their futures—union representation and commensurate pay at the EV battery plants (which are often joint ventures) to ensure that the likely electric auto industry of tomorrow comes with the fair pay and good jobs it once did.

Here’s Why That’s Bad News For Joe Biden

President Joe Biden has called himself the “most pro-union president in history” but also the biggest environmental champion America’s had in decades. (Feel free to disagree with me here, as is your right, but: I have my issues with how the EV tax credit scheme turned out, but I do think this administration has done an impressive job with green investments.)

The thing is, the Washington Post has the smart take about how those two things may be at odds right now—and it all comes down to the battery plant thing above. After all, none of the tax incentives around that are tied to whether the plants are union or not. And Biden’s relationship with the UAW is considerably frostier than you’d imagine:

Biden’s push to help the auto industry transition to clean energy technologies has become a key sticking point for autoworkers, who fear the shift to electric vehicles will mean fewer jobs and lower pay. The UAW — which has pointedly withheld an endorsement of Biden’s reelection — has specifically chided the administration for facilitating billions of dollars in tax incentives and loans for automakers without requiring them to share the benefits with union laborers.

Fain’s harsh comments about Biden’s approach to the EV transition earlier this year created a sense of tension with the White House, which did not know the upstart union leader well before his March election, according to a senior administration official who spoke on the condition of anonymity to discuss internal deliberations. Still, Biden invited Fain for a half-hour meeting in the Oval Office this summer and relations have improved in recent months, the official said.

Biden, who sought unsuccessfully to include certain pro-union provisions in the Inflation Reduction Act, has publicly urged the carmakers and electric battery companies to hire union workers and pay them a fair wage.

“We’re going to transition to an electric vehicle future made in America — and it will protect and expand good union jobs,” Biden wrote on X, formerly known as Twitter, on Tuesday.

As that story notes, unlike the railway strikes last year (which ended with real criticism of Biden on the labor side) it’s not clear how much the president will be able to intercede this time. And he he’s come off vaguely neutral so far; Biden “has not publicly endorsed the UAW’s list of specific demands or criticized the auto companies’ offers,” the Post said.

Which side are you on, boy?

The Wider Economic Effects Of A UAW Strike

Will America be sent into a recession if our supply of Wranglers runs out? Unlikely. And to be clear, I don’t think this will turn into some protracted, war-of-attrition long-term shutdown like the Hollywood strikes. Different product, different issues at stake (mostly) in the auto industry, and it’s in nobody’s best interest to drag this out forever.

Here’s the New York Times again, gaming out the possible impacts of this action:

According to an August report from the Anderson Economic Group, a 10-day strike against all three automakers would result in total economic losses of $5.6 billion. Around $3.5 billion of that would result from lost wages and production, with the remaining $2.1 billion borne by consumers, who wouldn’t be able to get necessary repairs and replacement parts, and by dealers and their employees.

Mr. Zandi said a six-week strike would have a “measurable but ultimately modest” effect on overall gross domestic product, perhaps a decline of two- or three-tenths of a percentage point. But he said damage would start to mount, given economic headwinds like rising interest rates, the return of student-loan repayments and a potential government shutdown in October.

If the strike lasted through the end of the year, Mr. Zandi said, “that would be enough to push this economy close to the edge of a recession, given everything else that’s going on.”

A 40-day strike against General Motors in 2019 had limited economic effects. One key difference this time is inventories. Total domestic car inventories, which includes new and used cars, have increased from a record low in February 2022 but are less than a quarter of what they were in September 2019.

Again, I think a strike through the end of the year is quite unlikely. But it’s going to sting. It’s also going to sting consumers if it drives up car prices, which I don’t have to tell you have been through the roof lately.

And, of course, the strikes will have wider impacts on suppliers as this a global, interconnected business. Here’s Bloomberg quoting the U.S. boss for Aisin, the Toyota affiliate that isn’t unionized here but has plants everywhere and makes all kinds of things:

“We would see a direct impact,” Scott Turpin, president of Aisin’s US subsidiary said Wednesday. “If they were to shut down or idle their facilities, obviously that would curtail our shipments to them,” he said of General Motors Co. and Stellantis NV.

“We do purchase from companies that also are direct suppliers to the Big Three,” he said in an interview at the North American International Auto Show in Detroit. “We’ve got a handful of suppliers that are fragile, so we worry about what might happen to that supply base.”

And that’s one example of many just in the auto industry.

Your Turn

What do you think happens next? What plants do they strike on after this, and who blinks first here?