United Auto Workers union members at Stellantis’ lucrative truck plant in Sterling Heights, Michigan, walked off the job on Monday morning which Bloomberg said was a surprise hit designed to extract further concessions in the sixth week of the strike against Detroit’s three biggest automakers.
The plant, which makes the Ram 1500 pickup, the automaker’s bestselling model, employs about 6,800 union members, the UAW told Bloomberg in a statement. It took the total number of workers on strike at Stellantis to 14,750 and over 40,000 across all three car companies, the report said.
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The UAW reportedly escalated its strike against Stellantis as it criticised the automaker for lagging behind Ford and General Motors in addressing its demands.
“Currently, Stellantis has the worst proposal on the table regarding wage progression, temporary worker pay and conversion to full-time, cost-of-living adjustments (COLA), and more,” the UAW told Bloomberg in a statement.
In response, Stellantis reportedly said it was “outraged” at the strike escalation even after it improved its offer to the union last week with a 23% wage increase and a 50% increase in retirement contributions. The UAW is now asking for a 25% raise, Bloomberg had reported last week.
“The UAW has decided to cause further harm to the entire automotive industry as well as our local, state and national economies,” the automaker said in a statement emailed to Bloomberg. “These actions not only decrease our market share, but also impact our profitability and therefore, our ability to compete, invest and preserve the record profit sharing payments our employees have enjoyed over the past two years.”
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By GlobalDataThe report noted negotiations were still ongoing. The union was waiting for a counteroffer from Ford and planned to respond to the latest offers from GM and Stellantis shortly, according to a Bloomberg source. UAW president Shawn Fain would likely give another update later this week, the source added.
Bloomberg noted Fain last week had raised hopes a deal was close while also warning that getting to the finish line could require striking more plants to pressure the companies into some final concessions.
“We’ve got cards left to play and they’ve got money left to spend,” Bloomberg quoted Fain as saying on 20 October.
“That’s the hardest part of the strike. Right before a deal is when there is the most aggressive push for that last mile.”
According to Bloomberg, by going after the Sterling Heights plant, Fain was ratcheting up pressure on Stellantis CEO Carlos Tavares who had transformed the Detroit underdog into the most profitable automaker by tightly managing costs – adjusted H1 2023 operating margin was 14.4%. Ford reported adjusted EBIT margin of 8.3% and GM 9.7%.
The report noted the Ram plant in Sterling Heights is the automaker’s largest US assembly plant.
Citing Cox Automotive, Bloomberg said Stellantis had a 114 day supply of the Ram 1500 on 17 October, well above the 62-day industry average.
Sterling Heights was forecast to produce 300,000 vehicles this year Bloomberg said, citing AutoForecast Solutions. It also makes an older, less expensive version of the Ram 1500, the Ram Classic, in Warren, Michigan. Classics and a heavy duty Ram are built in Saltillo, Mexico. The company sold over 468,000 Ram models in the US in 2022, making it the highest volume model.
“Taking out one large plant from Stellantis is a big hit” because it has fewer US plants than GM or Ford, and AutoForecast Solutions analyst told Bloomberg.
About 12% of Stellantis’ production workforce is made up of lower paid temporary workers, the highest proportion of the Detroit Three, the report noted. Under the current contract, temp workers at Stellantis start at $15.78 an hour with no guaranteed path to a full time job which starts at $18.04 and tops out at $31.77 after eight years. Ford and GM temps start at $16.67 an hour, and the companies are required to convert them to full time after a certain period.
Bloomberg said Stellantis had offered to boost temp worker pay to $20 an hour, compared with a $21 an hour offer at Ford and GM.
The union was still negotiating with all three for a path for future temps to be converted to full time work, Fain reportedly said last Friday.
Bloomberg also noted, going into the negotiations, Stellantis had pushed to expand its pool of temp workers to help navigate the transition to electric vehicles. Tavares has said EVs would cost 40% more to make than ICE vehicles, a burden he couldn’t pass on to buyers.
Earlier, the report added, roughly 5,800 workers had walked off the job at a Stellantis Jeep plant in Toledo, Ohio, at the outset of the strike on 15 September, while another 2,150 workers at parts distribution centres had been on strike since 22 September.
Taking down Sterling heights, known locally as SHAP, meant a weekly production loss of 5,600 trucks, which would more than double the impact of the strike on Stellantis to over $200m in lost profits a week, according to estimates from a Wells Fargo analyst, Bloomberg said.
Before Monday’s walkout, the strike had already cost Detroit’s three major automakers over $2bn in EBIT, according to Deutsche Bank.
The estimated $399m Stellantis loss had been the least among the three, with GM losing $802m in profits and Ford foregoing $888million EBIT, a Deutsche Bank analyst wrote in a 23 October note.
The UAW’s selective strike strategy has been successful in preserving its strike fund, according to a Wells Fargo analyst. Before the union struck the Ram plant, it estimated the UAW strike fund would fall to $750 million by the end of this week, from about $825 million before the strike began on 15 September. “That implies that the UAW can continue the current pace of strikes for 36 more weeks,” the analyst wrote.
Bloomberg said United Auto Workers President Shawn Fain had indicated last Friday he was close to deals with General Motors, Ford and Stellantis, though he warned that getting to the finish line may require striking more plants to pressure the companies into final concessions.
Fain didn’t call for any more walkouts at US factories, saying he’d received improved offers from GM and Stellantis, but nonetheless told his members there’s “more to be won”, Bloomberg added.
