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Home » Technology » ‘They Don’t Need Us Anymore’: Auto Workers Fear Electric Unrest

‘They Don’t Need Us Anymore’: Auto Workers Fear Electric Unrest

GM’s Diesel-Burning Pickups Will Pave Way to the Electric Future
October 2, 2019
Bloomberg

The milkman went missing thanks to the rise of refrigerators. Switchboard operators were done in by the dawn of direct dialing. And in the car industry, auto workers are deathly afraid the engine assembler will give way to battery builders.

Dread over the prospect that plug-in cars — which have fewer parts and require less labor to build — will doom auto jobs helped spark the first United Auto Workers strike against General Motors Co. in over a decade. Ford Motor Co. and Fiat Chrysler Automobiles NV, which are rolling their own battery-powered models to market in the coming years, could face a similar fate if they’re unable to quell the UAW’s concerns that widespread adoption of EVs endangers the employment of 35,000 union members.

“There’s a potential for our jobs to be gone — they don’t need us anymore,” said Tim Walbolt, president of the UAW local representing workers at a Fiat Chrysler transmission components plant near Toledo, Ohio. “It scares us.”

For all the buzz generated by Tesla Inc., the EV era is still in its infancy, with zero-emission autos having reached just 2% of global production. GM has extended the UAW an offer to get in on the ground floor, pitching a new battery plant staffed by dues-paying union members in an Ohio town jarred by job loss. But the overture came with a catch: GM wants to pay the workers less, and the facility is unlikely to need as many staff as an engine or transmission factory would.

A recent study of electric-vehicle production in Europe by consultant AlixPartners found that it took 40% fewer hours to assemble an electric motor and battery than a traditional internal-combustion engine and transmission.

“It’s a bad news story from a labor perspective,” said Mark Wakefield, the head of AlixPartners’s automotive practice. “You would just fundamentally need less people.”

Perversely, GM also arguably has uncertainty on its side at the bargaining table. It’s going to want concessions to cushion itself against the risk that consumer adoption of electric autos remains slow. The carmaker isn’t fully utilizing the factory that builds the Chevrolet Bolt EV north of Detroit, and tepid demand for the plug-in hybrid Chevy Volt put the future of the factory that assembles it in nearby Hamtramck in doubt.

Collision Course

The collision with carmakers over electrification is one the UAW saw coming.

“Electric, to me, is where the real risk is to our membership,” Jennifer Kelly, the union’s research director, said during a collective-bargaining conference in Detroit earlier this year.

It’s almost certain to carry over from the UAW’s talks with GM to negotiations with Detroit’s other automakers. Ford has estimated electric cars will require 30% fewer hours of labor per vehicle and 50% less factory floor space.

“Rationalization of the powertrain portfolio is certainly a huge opportunity for all of us as we start this transition,” Joe Hinrichs, Ford’s automotive president, told investors on an earnings call in April.

Even Fiat Chrysler, a laggard with regard to electrification, has stoked fear at union halls linked to internal-combustion components plants, where rumors are flying that the company plans to outsource work to lower-paying suppliers.

“We cannot help but feel like the left behind stepchildren of the UAW,” Mike Booth, the president of the union’s local in Marysville, Michigan, wrote in a letter to the labor group’s Chrysler council in August. He and other UAW leaders fear that German mega-supplier ZF Friedrichshafen AG, which took over operation of a Chrysler axle plant in 2008, will take work away from the automaker’s machining facility near Toledo and a transmission and castings complex in Kokomo, Indiana.

A Fiat Chrysler spokeswoman categorically denied that another company is seeking to take work from the Toledo or Kokomo operations and called them critical to the automaker’s business. ZF will continue to work with the UAW in Marysville, and an arrangement in which Fiat Chrysler licenses technology from the supplier in Kokomo may be creating some confusion, a spokesman said. He declined to comment on Toledo.

‘Shrinking Bubble’

In August, GM shut down a transmission plant outside Detroit, affecting more than 260 workers as part of a larger restructuring. That may foreshadow other closures as EV production ramps up. The supply chain is where the job risk is greatest, especially for workers employed making engines, transmissions and sub-components that aren’t needed in EVs.

Consultant IHS Markit predicts the introduction of new gas-powered engine families will drop to zero in 2022, from nearly 70 in 2011, as automakers shift spending to electric propulsion. The market for a whole range of parts used in internal combustion vehicles — such as axles, mufflers, fuel tanks and transmissions — will shrink in a range from 6% to 20% by 2025, according to a study by Deloitte Consulting.

“The value chain is shifting and companies and their unions are going to have to figure out how to change themselves or risk becoming part of a shrinking bubble,” said Neal Ganguli, head of the auto supply base group at Deloitte’s U.S. automotive practice.

That’s a problem because engines and transmissions currently account for just under half of automaker manufacturing capacity, Credit Suisse auto analyst Dan Levy estimated in a Sept. 23 note to investors. As a result, automakers may face labor, social and political challenges as they transition to EVs, he wrote.

‘Rough Time’

GM’s EV factory in Lake Orion, Michigan, offers a window into what the UAW is worried about.

While the plant is unionized, the automaker staffs it in part with lower-wage employees under a special contract. What’s more, 64% of the fully electric Bolt model’s content is made in Korea, including the battery.

One of the biggest suppliers is Seoul-based LG Chem Ltd., which makes cells in South Korea and assembles packs for GM and Fiat Chrysler at a non-union plant in western Michigan with a starting wage for technicians of $16 an hour.

That’s close to what Ford pays its entry-level temporary workers, but far below the $28 to $30 an hour for legacy UAW employees. Temp workers at Ford’s engine and transmission plants also can move up into legacy wage brackets, which isn’t the case at LG’s facility.

“The move to electric could weaken the union further,” Joshua Murray, a labor expert and assistant professor of sociology at Vanderbilt University. “Certainly, the UAW is going to have to try to organize the battery plants, but I think they’ll have a rough time.”

Imported Batteries

No major automaker entirely outsources engines, in no small part thanks to displacement and horsepower being the source of marketing buzz and bragging rights for decades. EVs are a different story — even Tesla relies heavily on Japan’s Panasonic Corp. in the making of its battery packs.

Batteries — the single most expensive part of an electric vehicle — are almost exclusively manufactured overseas and mostly by companies relatively new to the automotive powertrain, such as China’s Contemporary Amperex Technology Co. Ltd. and South Korea’s SK Innovation Co.

SK Innovation broke ground earlier this year on a new battery factory outside of Atlanta, which will employ some 2,000 non-union workers. And CEO Jun Kim thinks carmakers will have a tough time replicating what his company does.

“There is a difference between the DNA of automakers and battery makers such as us,” Kim said in a March interview. “There are only a handful of battery suppliers that are capable of delivering high-quality products while guaranteeing cost competitiveness.”

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