Ford and GM workers already make $20 more per hour than Tesla employees – Autoblog
- Detroit executives have Tesla in mind as they reject the UAW’s big demands.
- The labor cost gap between the Detroit 3 and Tesla is already staggering.
- Tesla is the “clear winner” in the UAW strike, one analyst said.
Tesla is at the heart of the Detroit 3’s resistance to the United Auto Workers union’s demands for hefty pay increases.
The UAW launched a first wave of targeted strikes last week after months of negotiations for new labor contracts with Ford, GM, and Jeep-owner Stellantis. The Detroit 3 are reluctant to give in to the union’s demands for 40% pay increases and shorter work weeks, saying such a hit to their labor costs would be catastrophic.
So far, the UAW has only walked out of three final assembly factories in Michigan, Ohio, and Missouri. This targeted work stoppage is costing the union some $6.5 million per week, according to estimates from Deutsche Bank, leaving plenty in its $825 million strike fund coffers should the union expand the strike as negotiations heat up.
The automakers always go into their quadrennial contract negotiations with the UAW with the goal of remaining “competitive” with other companies that do not use union labor. In the past, this competitiveness has been focused on foreign automakers like Toyota and Honda, but in this round of talks, Tesla has taken center stage.
The labor cost gap between the Detroit 3 and Tesla is already staggering. Tesla spends about $45 an hour on labor (this cost combines hourly wages and benefits), while Ford, GM, and Stellantis are currently spending about $66 an hour on their labor, according to industry analysts.
If the UAW gets its way on pay increases and things like reviving pensions, Wells Fargo has estimated that the Detroit 3’s hourly labor costs could more than double to $136 an hour.
As Detroit looks to take more of a leadership role in the automotive industry’s shift to electric vehicles, one analyst has said the UAW strike is “a potential nightmare situation for GM and Ford.”
How Tesla benefits from the UAW strike
Tesla, which does not use union labor, will have an immediate advantage over its domestic competitors by way of simply continuing to churn out vehicles while Ford and GM deal with strike-related bottlenecks.
But Elon Musk’s electric car company has even more to gain in the long-term, though, if his competitors’ manufacturing math equation changes drastically.
Already Tesla has been able to be more nimble on pricing this year, igniting a price war that has chipped away at the value of already unprofitable EVs like Ford’s Mustang Mach-E. Meanwhile, Tesla has been able to continually churn healthy profits while slashing prices over and over.
Any rise in labor costs for Ford and GM will inevitably raise the prices of their electric cars, further extending the timeline to profitability for this segment, analysts say.
“The clear winner in this Game of Thrones Battle between the UAW vs. GM/Ford is Musk and Tesla,” Wedbush analyst Dan Ives wrote in a note on the first day of the UAW strike. “Its biggest potential EV 313 competitors now face mounting costs/complexities in the years ahead depending on how this ultimately plays out.”