Adrian Sainz/AP Photo
Ford CEO Jim Farley talks about a new Ford electric pickup truck factory under construction in rural Tennessee, March 24, 2023, in Stanton, Tennessee.
The UAW’s tentative agreements with the Big Three automakers, which eliminate the two-tier wage scale under which the union has labored for more than a decade and provide significant benefits to lower-wage and temp workers, have been hailed as a turning point in the fight for a prosperous working class. Of course, the auto industry is simultaneously going through a separate turning point: the transition from the internal combustion engine to electric batteries.
The goal of UAW leadership was to manage these shifts in tandem, so that upgraded electric vehicles would not create a de facto lower-wage tier. Ultimately, the success of this effort will be determined by the success in organizing EV plants outside the Big Three; already, the union is reinvigorating the existing Tesla organizing committee. But the UAW has now made significant advances in the Big Three’s electric-vehicle sites, which they are poised to take across the country as a new model for what EV manufacturing can look like.
“They told us for years that the EV transition was a death sentence for good auto jobs in this country,” said UAW president Shawn Fain in a recent Facebook Live event. “We stood up and said no.”
That’s a big win for the transition to EVs, amid questions on whether the auto industry will be able to overcome its short-term struggles. Over the past month, General Motors has abandoned its target of 400,000 EV assemblies by the middle of 2024; Honda canceled a co-development with GM for an affordable compact electric SUV; Ford pushed back its EV targets and delayed $12 billion in investments; Hertz killed an ambitious proposal to add EVs to its fleet of rental cars; and even Tesla’s Elon Musk is sounding dour after falling profits.
Just when autoworkers have notched their biggest victory in decades, auto executives now appear unsure of the road ahead. And while certainty on the labor picture will help, the ultimate assistance may have to come from staid central bankers in Washington.
HERE’S WHAT WE KNOW about the Big Three contracts as they relate to EVs. GM went the furthest by allowing workers at its Ultium Cells battery plants, a joint venture with South Korean firm LG Energy Solution, to decide, with no opposition from management, whether to unionize and join up with the GM master agreement. That will apply to the existing Ultium plant at Lordstown, Ohio, and future plants in Michigan and Tennessee, as well as GM’s proposed Indiana battery facility that’s a joint venture with Samsung SDI, also from South Korea.
At Stellantis, which actually doesn’t yet make a domestic electric vehicle but has a handful of hybrids, Fain has said that the Belvidere, Illinois, plant, which was previously shuttered, would reopen and expand to include EV production and a new battery facility. Sources have indicated to the Prospect that those workers would fall under the master agreement. Stellantis has proposed joint-venture battery plants with Samsung and StarPlus Energy; those have not gone forward yet, but could fall under the master agreement as well.
The situation at Ford is a little more complex. Ford has plans for a wholly owned battery site in Marshall, Michigan, known as BlueOval Battery Park (which uses technology licensed from Chinese firm CATL), and a wholly owned EV manufacturing campus in Spring Hill, Tennessee, called BlueOval City. In its contract, the UAW received “transfer rights” into those facilities, meaning that its members can transfer in to work there. Once workers transfer in, and a majority of them sign cards indicating their desire to unionize the facilities, then they get brought into the master agreement.
Just when autoworkers have notched their biggest victory in decades, auto executives now appear unsure of the road ahead.
But Ford also has a joint venture for batteries called BlueOval SK, with three proposed plants in Kentucky and Tennessee. It’s unclear when those plants, managed in conjunction with South Korea’s SK On, would have the opportunity to get into the master agreement.
Of course, many of these battery plants are hypothetical at this point, and maybe well into the future. Ford’s postponements of EV spending included the Marshall, Michigan, battery park, though Tennessee’s BlueOval City is proceeding as planned. There has been controversy surrounding the use of a Chinese partner for the battery technology at the Michigan plant. But Ford executives have cited weakening sales for delaying investments, claiming that customers won’t pay elevated prices for new EV models.
This is a reference to the burgeoning competition in the EV space. Among the car-buying public, the early EV enthusiasts are all drained out, so lower prices are what’s left to lure in buyers. A company like Tesla, with its production long since scaled-up, can slash costs, while startups still must spend on building capacity, as do established auto companies needing to retool. That means incumbent automakers lose more and more on each EV sale, sometimes tens of thousands of dollars. Their gas-powered products are effectively subsidizing the transition, as Robinson Meyer has explained.
Earlier, Ford fretted about staying competitive if it had to increase labor costs at EV facilities. But the parallel agreements at GM and Stellantis mitigate that to an extent, especially if the UAW builds on the momentum and organizes non-union EV facilities like Volkswagen’s in Chattanooga, Tennessee, the new Hyundai plants in Georgia, or Tesla facilities in California and Texas.
Many of these plants are in the South, where the UAW has failed many times before. But the Big Three deals establish a beachhead in Tennessee, at least, at Ford’s BlueOval City and at GM’s future battery joint venture in the state. Winning a union election in the South has had to overcome the political establishment’s fight to keep unions out. But now, the UAW can hold the Tennessee Ford and GM plants up to other companies’ workers as a model that benefits Southern workers, too, without bringing down the plague of calamities that Southern pols say invariably come with unions.
An early proof of the power of the Big Three deals can be seen at U.S. Toyota plants, where non-union workers will see immediate wage hikes.
WHAT THE UAW CANNOT CONTROL is interest rates, which have now become the counterweight to federal government subsidies under the Inflation Reduction Act. For EVs, interest rates affect the financing costs for the consumer in a big-ticket purchase, and the financing costs for the manufacturer, which must build and retool component and assembly plants. When Musk lamented the “enormous challenges” in bringing his DeLorean-as-designed-by-a-child Cybertruck to market, he mainly focused on interest rates.
Automakers haven’t been alone in this squeeze. Offshore wind companies, clean-energy manufacturers, and, really, green firms of any kind have slumped. There’s a real time mismatch here: The subsidies for production are prized, but the factories have to be built to obtain them. The high costs of capital are preventing manufacturers from spending at the level needed for the energy transition. Indeed, oil companies are merging, in a manner that suggests confidence in their continued presence for many decades to come.
Overall, the news isn’t all bad. U.S. electric-vehicle sales project almost 50 percent higher in 2023 than in 2022. And the UAW deals, if anything, brighten the picture. The Big Three, now armed with four and a half years of labor peace, can plan their investments more confidently, with their non-union competitors feeling the pressure from the union’s battle-worn activists. In addition, “there’s intrinsic value having the UAW on board with the EV transition,” said Corey Cantor, an analyst with BloombergNEF. “Automakers probably don’t see it that way, but having these balances will in some ways make their lives easier.”
Cantor has pointed out that several automakers, like Hyundai and Volvo, continue to lead with their EV offerings. Toyota, which has stayed out of the EV game, just added $8 billion in investment to a North Carolina battery plant. Stellantis just bought a 20 percent stake in a Chinese EV startup. And a $5 billion Canadian subsidy for a new battery factory in Quebec shows that the Biden administration’s “race to the top” theory on green subsidies can still work to lure in more public investment, even with high interest rates.
But there may be a lid on that success. Analysts have marveled that high interest rates haven’t stopped the economy’s stupendous growth. But the investment-heavy green transition is a prime area where those high rates can have an impact. Congress and the White House made converting off fossil fuels a priority with their actions, but the Federal Reserve is offsetting it. And until that changes or the government uses federal credit programs to ensure lower investment costs, the EV industry’s struggles are sure to continue.
