Ford, GM, and Stellantis Face UAW Standoff: Potential Implications for Tesla

As Labor Strikes Persist, Tesla Seizes Opportunity Amidst Automaker Negotiations

The “Big 3” automakers, Ford, GM, and Stellantis, find themselves in a precarious position as negotiations with the United Auto Workers (UAW) union continue amid a strike by approximately 13,000 workers. The strike was initiated when previous contracts expired on Thursday, leading to the shutdown of three manufacturing plants. The repercussions of this standoff could be costly for these automotive giants, while Tesla, the electric vehicle (EV) market leader, could emerge as an unexpected beneficiary as the “Big 3” grapple with their transition to EVs.

UAW workers took action by shutting down the Ford Michigan Assembly Plant’s Final Assembly and Paint facilities, according to a Detroit Free Press report on Sunday morning. These strikes also led to the closure of the Stellantis Toledo Assembly Complex in Ohio and GM’s Assembly plant in Wentzville, Missouri.

In the wake of these walkouts, Ford CEO Jim Farley issued a warning, suggesting that the UAW’s demands might push the company toward bankruptcy. Additionally, Ford had to lay off 600 employees at its Michigan plant. GM faces its own set of challenges, with plans to lay off approximately 2,000 workers at its Fairfax Assembly facility in Kansas City, Kansas this week due to parts shortages resulting from the Wentzville plant’s closure, inevitably causing a halt in production.

Initially, the UAW had proposed a substantial 40-percent wage increase over four years. However, in response to compensation increases seen by the automakers’ CEOs, the union revised its demands to a 36-percent increase last week.

Negotiations, though ongoing, remain at an impasse. Ford and GM have most recently offered 20-percent wage increases over the same period, while Stellantis has proposed a 21-percent increase.

In addition to wage increases over the four-year period, the UAW is demanding the reinstatement of cost-of-living allowances (COLA) lost in a 2007 union contract, which could help mitigate the effects of inflation. The list of demands also includes transitioning to a 32-hour work week while retaining the pay of a 40-hour work week, restoring defined benefit pensions, increasing paid time off, limiting the use of temporary workers, and reducing the time it takes for employees to reach top wages.

UAW President Shawn Fain has been drawing a stark comparison between worker and CEO pay increases, initially basing the 40-percent wage increase figure on the compensation increases received by the automakers’ CEOs since 2019. According to Fain, workers have seen only a modest 6-percent wage increase during the same period.

A breakdown by AP News reveals that in 2022, the median worker pay was highest at GM, amounting to $80,034. During the same year, median worker pay at Ford and Stellantis stood at $74,691 and 64,328 euros (~$68,660), respectively.

AP News also reports that GM CEO Mary Barra tops the list in terms of executive compensation, with her 2022 package totaling $28.98 million. Her pay has surged by approximately 34 percent since 2019, as per an analysis by Equilar using public data filings.

Following Barra is Jim Farley, who received nearly $21 million from Ford through his compensation package in 2022, marking a 25 percent increase compared to former CEO William Clay Ford’s pay in 2019.

Stellantis, being a European company, has a different approach to disclosing executive pay compared to GM or Ford. CEO Carlos Tavares reported earnings of roughly 23.46 million euros ($25.04 million) in 2022, as per the automaker’s annual remuneration report. However, this figure includes “realized pay,” detailing previously granted equity values that vested in the same year reports were made. To provide a more accurate comparison, Equilar utilized a similar “grant date” method, which indicated Tavares’ compensation at approximately 21.95 million euros ($23.43 million) last year, marking a 24-percent decrease from former CEO Mike Manley’s 2019 compensation package of 29.04 million euros ($31 million).

It’s worth noting that many CEOs receive a substantial portion of their compensation through stock options and other non-salary methods. In 2022, the largest portion of Mary Barra’s compensation package, $14.62 million, came from stock grants vested over three years. During the same period, Jim Farley received $15.14 million in stock awards, which also have a three-year vesting period, with the final value tied to performance.

Negotiations between the automakers and the UAW are expected to continue throughout the week. Meanwhile, amidst these labor strikes, EV manufacturer Tesla is preparing to launch deliveries of its Cybertruck and Model 3 Highland. The automaker is also initiating a $1.8 billion lease securitization to secure additional funding.

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