The United Auto Workers (UAW) strike against Detroit automakers has entered its third day, and one thing is clear: Tesla CEO Elon Musk will be the winner of the storm. And the billionaire isn't even involved. The UAW announced the start of a strike in the early hours of last Friday (September 15) local time, with approximately 12,700 workers participating in the strike. Last Saturday (16th), union negotiators resumed negotiations with representatives of the three major car companies.
General Motors, Ford Motor and Stellantis Motors, the three largest automakers in Detroit, are expected to increase wage expenditures due to pressure from unions. But so far, their proposals have not satisfied the unions.
What is certain is that for these car companies, no matter what happens and no matter the outcome of the strike, they will definitely spend more money. and
Currently, the biggest threat to traditional car companies does not come from peers, but from electric car manufacturer Tesla.
In March of this year, Musk revealed that he planned to use his own advantages to set a goal to reduce the manufacturing cost of Tesla's next generation car by 50%. It's an ambitious agenda that will rely on advanced automation, savvy engineering and other changes.
Musk's actions this year also show that Tesla can use its lower cost structure to fight price wars with competitors around the world to increase sales.
In July this year, Tesla reported a 20% increase in second-quarter profits even after price cuts. At the same time, due to serious losses in electric vehicles, Ford Motor Co. said it would slow down the production growth of electric vehicles.
By contrast, established U.S. auto companies are still undergoing a costly transition from gasoline-powered cars to electric vehicles and are now facing rising payroll costs.
So far, many analysts expect Detroit automakers to eventually absorb these increased payroll costs. Barclays analyst Dan Levy warned investors in a recent report, "The bigger question is,
In the labor negotiations between the UAW and Detroit auto companies, these companies have proposed different salary increases, which can reach up to 20% within four years. However, UAW Chairman Shawn Fain has relaxed his tone and proposed a salary increase of about 30%, which is lower than the original demand of at least 40%.
Industry data shows labor costs (including wages and benefits) at these Detroit automakers are estimated to average $66 an hour.
Wells Fargo estimates that meeting all of Fein's initial requests would raise the Detroit company's average hourly labor costs to $136.
By comparison, industry data shows Tesla’s average hourly wage is only $45, and Tesla employees are not unionized.
So what does Tesla rely on to lock in employees?
UAW workers' bonuses have always been profit-sharing, while Tesla workers receive stock options, which have no direct cash cost to the company.
Options allow employees to buy stock at a certain price after working for the company for a certain period of time. Tesla's stock price has been on a rocket ride over the years, albeit with its share of turbulent times. The company's shares have more than doubled this year.
Musk has said that stock options given to employees make his factory workers among the highest-paid workers in the industry, and said that a significant number of production line workers "have become millionaires through company stock awards over the years."
Focus on labor cost disparities is a classic part of labor negotiations in Detroit.
"Working people need to share in this world the economic justice they deserve," UAW President Fein said in an interview last Wednesday.
Last Thursday, Musk criticized the UAW in an article, and he also boasted that his factory has a "very good atmosphere." He wrote, "We encourage playing music and having fun. It's very important to give people something to look forward to at work. By the way, our pay is higher than the UAW, but performance expectations are higher."
However, some analysts believe that the impact of the UAW strike may affect Tesla. It is worth mentioning that Musk basically blocked the formation of labor unions last year.
Art Wheaton, a labor expert at Cornell University, said,
"I don't think Elon Musk has that super awesome, shiny glow anymore," he said.