US car firms face strike as contract talks hit deadline

WATCH: UAW strike: What do both sides say?

Staff at three of America's biggest carmakers are poised to strike in an unprecedented co-ordinated action.

With current labour contracts set to expire on Thursday night, the United Autoworkers Union said the companies had not put forward acceptable offers.

The fight threatens to trigger higher prices for buyers and major disruption for the firms: GM, Ford and Stellantis.

The UAW said the likely strike would start on Friday at a small number of sites - with the potential to expand.

"We are seeing movement from the companies, but they're still not willing to agree on the kinds of raises that will make up for inflation on top of decades of falling wages," UAW president Shawn Fain said on Wednesday in an update to workers about the negotiations, which are ongoing.

With the deadline looming on Thursday evening, the White House said that President Joe Biden spoke on the phone with Mr Fain about the negotiations, but provided no further details.

The union had sought a 40% pay increase for its roughly 140,000 members over four years, noting a comparable rise in pay for company leaders.

Talks between the two sides, which kicked off in July, were tense from the start, with Mr Fain forgoing the symbolic handshake with executives that has traditionally launched negotiations. Last month, 97% of members voted to authorise a strike.

As of Wednesday,the three companies have upped their initial proposals, with Ford offering a 20% hike in pay over the contract term, GM offering 18%, and Stellantis, the owner of Jeep and Chrysler, 17.5%, Mr Fain said.

Workers said the companies could afford to be more generous, after years of record profits.

"In my opinion we are owed this," said Paul Raczka, who works in a Stellantis factory in Michigan making Jeep Grand Cherokees.

Image source, Paul Raczka

The fourth generation in his family to work in the industry, Mr Raczka said such jobs, which came with good healthcare and secure pensions, had provided an "awesome living" for his parents - a way of life that no longer feels possible today.

The 31-year-old said he cannot even afford to buy the car he makes.

"We are still sitting on the backburner while these CEOs are making, you know, upwards of $20m a year," he said. "We're going to the grocery store, saying, 'well, what do we really need this week?'"

Mr Fain, who was elected to his position just a few months ago promising to take on the companies, cast the fight in biblical terms, saying it was part of a broader battle with the billionaire class and an act of faith that change was possible.

"We fight for the good of the entire working class and the poor," he said. "We're not the problem... corporate greed is the problem."

Jim Farley, chief executive of Ford, told reporters earlier this week that he hoped to avoid a strike but there was a limit to what the company was willing to concede.

"We have to protect the sustainability of the company," he said.

US carmakers are already grappling with a sales slowdown and costs associated with new investments as they shift production to electric vehicles.

A 10-day strike by all workers at the three firms could cost the car companies nearly $1bn (£800m) and workers nearly $900m in lost wages, according to estimates by the Anderson Economic Group. It said the total hit to the economy could amount to more than $5bn, as the effects of the strike spread.

Image source, Getty Images

UAW president Shawn Fain declined the traditional handshake with company executives at the start of negotiations

Tyler Theile, vice president at the firm, said a stoppage would have to be "pretty lengthy to move the needle on national economic indicators."

But she warned that the decline in spending from lost wages, even if just a few factories are involved, will have significant impact locally - and could build in unexpected ways, given other risks, such as inflation and high interest rates, facing the economy.

"I think targeted strikes at specific locations has the potential to add up to a more significant economic impact than some are saying at this point," she said.

Coming into the strike, the supply of cars, which has been strained since the parts shortages of the pandemic, remains far lower than it has been in the past.

Analysts said that could also mean a prolonged walkout leads to higher prices for buyers.

Ford, GM and Stellantis together account for about 40% of US car sales, though their share has dropped sharply over the last quarter of a century, as foreign firms such as Toyota make inroads.

Those companies have successfully fended off unionisation campaigns and face lower labour costs.

But labour tensions in the US have been rising, as a tight labour market and pay hit by rising prices embolden workers.

Last year, there were more than 420 work stoppages, up more than 50% from the prior year, according to research from Cornell University.

Delivery giant UPS narrowly avoided a walkout earlier this year, and writers and actors in Hollywood remain on strike.

The last time the car industry faced a strike was in 2019, when workers at General Motors walked off the job for six weeks.

GM worker Jessie Kelly, who participated in that walkout, said she had been trying to save up in anticipation of another stoppage.

Image source, Jessie

Jessie Kelly says she supports a strike despite the costs

UAW participants are due to receive $500 in weekly strike benefits from the union, but that would still be significantly less than her wages, she said.

"My strike bills will not cover my mortgage, let alone the grocery bills, let alone the lights and the everything else. So it is gonna definitely be a struggle," she said.

Ms Kelly, who lives near Detroit, said she supported the fight, despite the costs, noting that her pay has not kept pace with rising prices and is quickly eaten up by childcare and housing expenses. The 33-year-old said she had just two weeks of holiday a year, which she was typically forced to use for emergencies.

"At the end of the day, we all want to work for a corporation that is making good money. We just want our fair share of that," she said. "At some point we have to say enough is enough.

"The CEOs are gonna keep paying themselves more and more money and we're the only ones being left behind."

Additional reporting by Michelle Fleury and Nathalie Jimenez in Detroit.