The following piece was written by Mary Williams Walsh, managing editor of News Items. Prior to joining News Items, she was a reporter for The New York Times, covering the intersection of finance, public policy and the aging population. You can read her NYT profile by clicking on this link.
This piece began with an email from Jim Cramer, the maestro of CNBC’s ‘Mad Money,’ who suggested we pay attention to the possibility of a strike by the United Auto Workers on September 14th. We did. More accurate: Mary did. Here’s her report.
About this time last year, President Biden held a virtual roundtable to parade the big-name unions and corporations that supported the Inflation Reduction Act. The United Auto Workers stepped right up, saying the bill “puts the interests of working families and retirees before the ultra-wealthy and Wall Street.”
The bill passed by a hair’s breadth. Companies pounced on its loans and tax incentives for climate-friendly investments, especially in electric-vehicle and battery plants. A year after enactment, analysts count tens of thousands of new or incipient jobs.
But the UAW has pulled its support, saying the law has set off a new race to the bottom. It wants Congress to attach stronger labor provisions to the law’s green-energy incentives. Unlike other big unions, it has not endorsed Biden’s candidacy for a second term. “We want to see national leadership have our back on this before we make any commitments,” says the union’s president, Shawn Fain.
There’s little appetite in Congress for revisiting the Inflation Reduction Act. But the UAW will soon have a way to put more pressure on. Its labor contracts with the Big Three automakers—Ford, General Motors, and Stellantis, the corporate successor to Chrysler—will expire on September 14. Fain says the 150,000 union members employed by the Big Three are prepared to strike. He met briefly with President Biden in July, and asked him to use the bully pulpit to support the union.
Bloomberg reporters asked unnamed management negotiators what was on the table and were told that if the union got everything it wants, labor costs would soar to more than $150 an hour, from the current $64. The estimate included a 46 percent wage increase, restoration of defined-benefit pensions, cost-of-living increases and a reduction of the work week to 32 hours.
A union spokesman didn’t deny that those were among its demands, saying, “record profits mean record contracts.”
A UAW strike would undercut Biden’s efforts to portray himself as “the most pro-union president in history,” especially if the strikers contend that one of the laws at the center of “Bidenomics” is driving a race to the bottom. Biden wants to take credit for weaning America off fossil fuels, creating good jobs and rebuilding domestic manufacturing after more than two decades of globalization — —in essence, for making good on “making America great again” (unlike Trump who, in the Biden campaign’s narrative, failed to do so).
Yet at the same time, Biden must also deal with the fallout from Fitch Ratings’ recent downgrade of America’s credit; an adult son in legal peril over tax evasion and more; a likely battle over how to keep the government running when the new fiscal year starts on October 1, and God knows what else. How will it look to the taxpayers subsidizing the new electric-vehicle plants if, in the middle of all that, Biden says the plants should be filled with UAW members getting pensions for working a 32-hour week?
(Trump, by the way, is already having fun with Biden’s UAW problem, releasing a video that called the Inflation Reduction Act a “ridiculous Green New Deal crusade” and adding, “I hope United Auto Workers is listening to this, because I think you’d better endorse Trump.”)
UAW officials don’t seem tempted by Trump’s solicitations, but they also say Biden has no business portraying himself as a friend of organized labor.
“I am tired to death of hearing how the Biden administration is the most pro-labor, is my best friend,” said Dan Vicente, director of the UAW’s Region 9, in a long interview this month with Bloomberg News. Region 9 includes Pennsylvania, New Jersey, and parts of New York State.
“I'm tired of hearing it, because when you give out billions of dollars of taxpayer investments, with no guarantees of those jobs falling under our Master Agreements, which would make those our jobs, that doesn't feel like you're my friend, Biden. It doesn't make me feel like you're my buddy, Joe.”
(The entire interview is well worth reading or listening to, and it’s available here.)
As the UAW leadership now sees it, the Inflation Reduction Act is a trap. The union’s membership peaked at 1.5 million back in 1979, the year Chrysler got a then-unheard-of $1.5 billion federal bailout. Chrysler raised the money to repay the taxpayers, in large part, by getting labor concessions. That made G.M. and Ford demand concessions too, to stay competitive with Chrysler–and later, with the foreign-owned automakers that set up non-union plants in the U.S. South. That’s been the story for the last 40-plus years. UAW members still make a higher wage than their non-union counterparts, but they assemble fewer cars and their numbers have fallen below 400,000.
The leadership sees what’s in store now that Washington is pushing electric vehicles to meet carbon targets: It’s only a matter of time before the internal combustion engine is history. And since the Inflation Reduction Act doesn’t specify that the new electric vehicle jobs are to be UAW jobs, the union sees itself shut out of the one part of the industry that represents the future. Unless they fight, they’ll be history too.
There’s something else driving the UAW leadership, too–an effort to corrupt its predecessors dating back to 2009, when the company then known as Fiat Chrysler emerged from bankruptcy and began running millions of dollars through a purported “national training center.” The money was secretly used to buy the loyalty of certain UAW officials, who in turn showed their gratitude by swaying labor negotiations.
The scheme grew and spread, fueled by free credit cards, secret mortgage payoffs, lakeside retirement cottages, lavish union conventions and other perks. At first the money came from Fiat Chrysler, but then vendors of union swag started paying kickbacks, too. In 2014, union dues were increased for the first time since 1967, and some of that money was siphoned off by the leadership. One participating UAW officer landed on the board of General Motors. Another agreed to support a merger of Fiat Chrysler and G.M. Eventually G.M. filed a RICO suit, describing a multimillion-dollar conspiracy, by the CEO of Fiat, to use UAW contract negotiations to weaken G.M. so that Fiat could take it over. (The accused Fiat CEO died in 2018; G.M.’s RICO suit was thrown out by the judge.)
The indictments started being unsealed in 2017, and by 2022, 17 UAW officials and Fiat Chrysler executives, had been sent to prison. To avoid a federal takeover, the UAW agreed to reforms that included direct elections–an end to the previous practice of letting each outgoing president pick his successor, to be ratified by delegates to one of the lavish conventions subsidized by the members’ dues.
The resulting election was a heated contest between what remained of the old guard and a reform slate who campaigned on their lack of any connection with the disgraced leaders who had been stealing the members’ money and doing management’s bidding all those years, sticking the rank and file with tainted contracts.
When the ballots were counted last March, the reformers won by a narrow margin: less than 500 votes out of about 150,000 cast.
That’s why the UAW made its 180-degree turn on the Inflation Reduction Act. The union president who praised it a year ago was voted out and replaced by Shawn Fain. Fain’s slate of reformers have ample reason not to trust the established order, President Biden included. But still…. A 32-hour workweek?
The UAW now has its eye on one of the new subsidized battery plants, in Lordstown, Ohio. It’s run by Ultium, a joint venture between General Motors and a Korean company, LG Energy. It makes batteries for the Cadillac Lyriq, the GMC Hummer EV, and the Chevy Silverado EV, as well as for battery-powered locomotives produced in Erie, Pennsylvania.
Because the plant is a joint venture, General Motors says it isn’t bound by the terms of the UAW master agreement. Instead, the Inflation Reduction Act requires Ultium to pay the local “prevailing wage” if it wants to get the law’s tax incentives.
Lordstown once was home to a big General Motors plant where long-term workers earned $31 an hour. That plant was shut down in 2019, so those $31-an-hour jobs no longer count toward the area’s prevailing wage. Workers at the Ultium plant start at $16.50 an hour and can work their way up to $20 over seven years.
Workers at Ultium voted for UAW representation last December, but they do not yet have a contract. When UAW president Fain paid the Lordstown workers a visit, he stopped for breakfast at a Waffle House across the street and checked what the starting wage was there: $18 an hour.