End Game of the UAW Strikes?
End Game of the UAW Strikes?
A C-Suite Quick Take
As of October 24th, the UAW is on strike at the most profitable plants of all 3 Detroit automakers. The strikes have now lasted longer than the 40-day strike at GM in 2019.
After striking Ford’s Kentucky truck plant on October 11th, the UAW struck Stellantis’ Michigan plant on October 23rd and GM’s Texas plant on October 24th. Each of these plants is their respective company’s most profitable.
All the Detroit 3 have said that they are at the limit of what they can offer without jeopardizing investment. Bill Ford – Chairman of the Board and descendent of Henry Ford – made a public appeal to UAW leaders and members noting past union-friendly actions.
Shawn Fain stated publicly that the companies have more to give, but his escalation of the strike would be necessary even if he did not think the UAW could win more concessions.
The UAW is continuing to bargain with all three companies, though at separate “tables”.
As soon as next week, the UAW might be able to persuade members that a tentative agreement would represent the maximum that could be achieved. However, Fain will probably choose further escalation, which may well be in the best interest of the Detroit 3 due to lower ratification risk.
The key decision makers in the end game are the UAW rank-and-file members. Ratification is the critical objective of both UAW leaders and the Detroit 3.
With the decision to strike the most profitable plants at all the Detroit 3, the UAW has transitioned to an end game for the strikes. All the Detroit 3 are now only breaking even at best and the pain is evenly distributed among the companies. Shutting down GM’s Arlington SUV plant on the day GM announced 3rd quarter earnings is only the latest example of the UAW’s success at framing the strikes and keeping them in the news.
The Detroit 3 have tried to counter the UAW’s message with public statements designed to change the narrative and, more importantly, influence union members. All have stated that their offers are historically generous and that they cannot go higher without risking the future of the companies. Bill Ford talked at length about Ford’s commitment to American manufacturing from the Rouge plant, aware that it was the site of a famous battle between union organizers and Ford strikebreakers. He seemed upset that 40 years of effort to build a relationship between Ford and the UAW have crumbled. There has been little sign that the statements of Ford or other Detroit 3 leaders are having much impact, which is not surprising from a game theory perspective. More effective tactics have been partial coordination among the Detroit 3 on their offers to the UAW. According to Fain, the 3 companies have made identical wage offers – front-loaded increases that will lift wages by 25% by the end of the contract in 2028. The UAW’s effort to play the companies against each other does not seem to have provoked a bidding war.
Shawn Fain stated that the Detroit 3 have more to give. His escalation of the strike was necessary even if he did not think that the UAW could win more concessions. He needs his members to believe that he is tough and that the UAW has applied as much pressure as needed to extract the best possible deal from the companies. Without striking the profit centers of the Detroit 3, this argument would not have been credible.
Striking the most profitable plants at all 3 companies shows that the UAW is committed to simultaneous bargaining at least until a tentative agreement is reached at one of the companies. This will increase the overall cost of the strike for both the Detroit 3 and the UAW’s strike fund. It will complicate both ratification and extending the “pattern” reached to the other two companies. Essentially the UAW is acting as if they were bargaining in Germany, where unions bargain with employer groups rather than individual companies. Since the Detroit 3 are at different tables and have constraints on how much they can coordinate, the end game will be challenging.
There were signals in the press that UAW leaders at GM and Ford think that an agreement is close. Now that the strike has escalated, it is conceivable that the members would ratify a tentative agreement backed by Fain as soon as next week. But announcing a tentative agreement without more time and additional escalation would be risky for the UAW leadership. UAW members – as shown repeatedly in 2015 and at Mack Trucks in 2023 – are quite willing to reject an agreement recommended by their leaders. Such a rejection would be disastrous for Shawn Fain. Time and strike escalation reduces the chance of rejection. Since the cost of additional escalation is much smaller than the cost of failed ratification, Fain will likely escalate. This may wring additional concessions, but – more importantly – build his brand and reduce the ratification risk. Whether they know it or not, such escalation and delay might be in the best interest of the Detroit 3, since a failed ratification would create havoc.
The importance of ratification makes the end game fundamentally hard to predict. The key decision makers in the end game are the UAW members voting on a tentative agreement. The UAW members do not necessarily behave strategically, and it is hard to know how much their expectations have been raised. Both the companies and the UAW leadership will be holding their breath as the votes are counted.