The United Auto Workers strike against the Michigan automaker is nothing but good news for electric car maker Tesla, which has upended the industry and taken customers away from Ford Motor Co., General Motors Co. and Stellantis, which owns Jeep and Ram. It will seem like nothing.
Tesla can use the work stoppage to further extend its significant lead in battery technology and software without interference from activist unions. While the three incumbent automakers face rising labor costs and struggle to master electric vehicles, Tesla is far more profitable than most automakers and is taking the knife by lowering vehicle prices. You can put it in.
But as union activity revives nationwide, the UAW’s determination to score a major victory for its members is at odds with Elon Musk, who has attacked and ridiculed unions on Tesla and its social media network X (formerly Twitter). This is fraught with risks for CEOs.
The UAW has failed in the past to organize Tesla factory workers, but is preparing for a new effort, a union official said.
Mike Miller, director of UAW Region 6, which includes California, said: “A group of Tesla workers are working together to form a union and create the best possible representation for themselves and their co-workers through collective bargaining.” We are actively discussing it.” and Nevada, where Tesla makes cars and batteries. Tesla also has a large factory in Austin, Texas, not far from GM’s unionized factory in the Dallas-Fort Worth area.
In an interview, Mr. Miller said he needed time to prepare before going public and declined to provide further details or identify Tesla employees. The union organizing effort is separate from a campaign at Tesla’s Buffalo factory, where it makes electric vehicle chargers and employs data entry workers.
But national union representatives are demanding a 40% pay raise from the Detroit automaker along with significant benefits increases, and are wondering what any deal would signal to Tesla’s non-union members. That’s for sure.
“Obviously, this can’t be good for the Big Three, and the public argument is that even if it’s not good for the Big Three, it’s good for Tesla,” said Rahul Kapur, a business professor at the University’s Wharton School. ” he said. of Pennsylvania.
But, he added, “If I’m an auto worker and I hear that my wages are lower than Ford or GM and there’s a significant wage increase, I would want to take that into account.”
UAW President Sean Fein fired a warning shot at Musk on CBS News’ “Face the Nation” on Sunday.
“Most of the employees at these companies live their lives out of desperation so that greedy CEOs and greedy people like Elon Musk can build more rocket ships and shoot themselves in space. ” he said.
Much has changed since 2016, when a group of workers at Tesla’s car assembly plant in Fremont, Calif., began organizing, but they never gained enough momentum to vote.
At the time, Tesla was a struggling startup on the brink of bankruptcy. Tesla currently dominates the electric car market, with a 60% share in the US. The company’s stock market value is much higher than the three oldest American automakers combined. The company is probably in a better position to compensate its workers than its competitors.
But organizing workers is difficult. Activists must get at least 30 percent of workers to sign union cards and force a vote supervised by the National Labor Relations Board. Companies often do everything they can to dissuade workers from joining, hiring lawyers and consultants who specialize in thwarting union movements.
Even if a majority of workers vote in favor of a union, winning raises and benefits could take years of negotiations. Amazon workers at the Staten Island warehouse voted to unionize in April 2022, but Amazon is contesting the results and has not yet begun contract negotiations.
Still, Tesla would be an attractive target for unions. The company reported a profit of $2.7 billion on sales of $25 billion in the second quarter, for a profit margin of about 11%. This profit margin exceeds the profit margins of Ford and GM, even after those companies went through highly profitable periods. Stellantis, formed in 2021 from the merger of Fiat Chrysler and Peugeot, reported an 11% profit margin in the first half of this year, but lost market share in the United States.
Tesla’s strong performance has enabled car prices to drop significantly, making it difficult for established automakers to gain ground with electric vehicles. The least expensive Model 3 sedan costs about $33,000 after federal tax credits, making it cheaper than comparable gas-powered cars.
The conditions for organized labor are better than they have been in recent years. President Biden is a big supporter of labor unions. Hollywood writers and actors are on strike, a high-profile expression of the labor movement. In August, United Parcel Service employees won the largest pay raise in history in a contract negotiated by the International Brotherhood of Teamsters.
Tesla did not respond to requests for comment, but Musk appeared to acknowledge the union threat last week when he said at X that his employees are better off than those at GM, Ford and Stellantis. is. “We pay more than the UAW,” he said, but added, “We also have higher performance expectations.”
Traditional automakers disputed Mr. Musk’s calculations, saying their workers are paid much more and big raises would only widen the gap and hurt their ability to invest in electric vehicles and battery factories. Ford says hourly employees earn an average annual salary of $112,000, including benefits, compared to about $90,000 at Tesla.
Ford’s numbers don’t include stock options Tesla grants to employees, which could be worth a lot of money. Musk said some production workers have become millionaires with the company’s stock.
Stock options can be lucrative, but they also come with risks. Tesla has not provided details on how often or how much it will distribute options to rank-and-file employees. The company said in a regulatory filing that the options these employees receive have a vesting period, meaning the employee must remain with the company for a certain period of time to convert them into cash. Stated.
Brian Schwartz, an Oakland, Calif., attorney who represented Tesla employees in lawsuits against the company, said Tesla employees are left with no options if they are fired or forced to resign due to injury or ill health. He said it was possible.
“There are a lot of questions about options that workers can really trust,” Schwartz said.
The value of stock compensation will fluctuate depending on Tesla’s stock price. The stock peaked at more than $400 at the end of 2021, but plummeted to just over $100 last year before rebounding to $270 this year. Uncertainty can be worrying for workers trying to pay mortgages and pay for childcare.
Rick Eckstein, a sociology professor at Villanova University who researches labor issues, said, “If I were a worker at Tesla, I would want to be paid more while many other companies are making EVs.” I think so,” he said.
Tesla is known as a difficult company to work for, with long working hours and strict deadlines. Mr. Schwartz sued Tesla on behalf of black employees who say they were discriminated against in promotions and job assignments, and suffered racist abuse. Tesla denied the accusations.
Any union push would face strong opposition from Mr. Musk. The National Labor Relations Board found that Musk illegally threatened his employees in 2018 by implying that they would lose stock options if they voted to unionize. The labor commission also found that Tesla illegally fired one of its key organizers.
The Court of Appeals upheld the Board’s decision. Tesla is appealing the court’s ruling, insisting that Musk and the company did nothing wrong.
Without a doubt, this strike poses a major risk to Detroit’s automakers. Detroit automakers will be slow to take Tesla seriously and lose valuable time needed to catch up.
“The real winners of the UAW strike are probably the car companies that have been winning all along,” Gary Black, managing partner of Future Fund, an investment firm that owns Tesla stock, told X.
But Tesla investors’ schadenfreude may be short-lived.
“This strike could be a bellwether,” Villanova’s Eckstein said. “Right now is a hot time for the labor movement.”
