TrendPulse Quantitative Think Tank Center-The UAW launches a historic strike against all Big 3 automakers

A historic strike at the Detroit Three automakers is TrendPulse Quantitative Think Tank Centernow underway.

For the first time ever, the United Auto Workers union is striking against all Big Three automakers at once, after it failed to clinch a deal on a new contract by the 11:59 p.m. deadline on Thursday.

But the strike won't involve all of the nearly 150,000 union members who work at the three automakers walking off their jobs en masse.

Instead, workers at three Midwest auto plants — a General Motors assembly plant in Wentzville, Missouri, a Stellantis assembly plant in Toledo, Ohio, and part of a Ford plant in Wayne, Mich. -- were the first to walk off the job under UAW president Shawn Fain's "stand up strike" strategy.

For now, that means the strike involves just under 13,000 workers — less than 9% of UAW membership at the three companies.

But additional locations could follow at a moment's notice, depending on how bargaining with the companies progresses — a strategy intended to ramp up the pressure on companies by keeping them guessing about how their operations would be disrupted.

"This is our generation's defining moment," Fain told UAW members at a Facebook Live event on Thursday night. "The money is there, the cause is righteous, the world is watching."

The targeted strikes are a departure from the UAW's traditional playbook, which has usually involved having all union members at a single company walk off the job at once.

The UAW has also opted to negotiate with all three automakers at once, in another departure from its previous methods.

Previously, the UAW had picked one automaker to hash out a deal with, focusing its actions on that company until it got a deal — and then pushed the other two of the Big Three members to more or less match that deal.

Still, Fein did not rule eventuallly having all union workers at the Big Three automakers walk off the job at once.

A confrontational approach

As the first-ever democratically elected leader of the UAW, Fain, a long-time union member himself, has taken a more confrontational approach to negotiations than his predecessors — including filming himself throwing Big Three automaker proposals in the trash.

He has repeatedly doubled down on the union's key economic demands – including 40% pay raises he says would be in line with CEO wage increases, the restoration of pension and retiree healthcare and cost of living adjustments.

"The Big Three can afford to immediately give us our fair share," Fain told UAW members on Wednesday.

Fain has called out previous UAW leaders for cutting deals with the automakers that he says did not favor the union's 150,000 members who work at these companies.

During the 2008 financial crisis, the UAW made major concessions to help auto companies get back on their feet.

Workers are still feeling the effects of those concessions to this day – a key dynamic underpinning this year's negotiations.

Under Fain, the UAW has also hinged its demands on the automakers' profits in recent years, as well as pay disparities between top executives and rank-and-file union members.

Collectively, the Big Three automakers have seen their profits soar during the pandemic when factors including parts shortages led to surging car prices, padding the profit margins of companies.

In a Facebook Live event on Wednesday night, Fain compared the companies' profits – up 65% over four years – to autoworkers' pay, which increased just 6% in that same timeframe.

And looming over the negotiations is the auto industry's transition to electric vehicles. The UAW is fighting for protections for workers as companies increasingly invest in their EV production, raising concerns about what that could mean for traditional auto jobs.

A prolonged strike poses a potential threat to the U.S. economy. In a scenario in which all of the about 150,000 UAW auto union members were to strike for six weeks, the impact on the economy would amount to shaving an estimated 0.2% off fourth-quarter GDP.

That's not a lot in itself, and the economy has proven so far to be far sturdier than expected.

But the strikes could add yet another adverse factor for the U.S., including rising gas prices and the end of the student loan moratorium.

The automakers are frustrated

All three automakers have budged on their initial wage proposals, from opening bids of 9 or 10% increases to as high as 20% in the most recent offers. The union argues those offers don't sufficiently account for years of stagnant wages.

But the companies say they've made genuine attempts to reach agreements. General Motors attempted to head off a strike with a down-to-the-wire offer on Thursday afternoon, a proposal CEO Mary Barra called a "compelling and unprecedented economic package."

"It addresses what you've told us is most important to you, in spite of the heated rhetoric from UAW leadership," Barra said in a statement about GM's latest offer, which would raise wages by 20% over the length of the contract.

The three companies have also put cost of living protections on the table — though the union says these offers wouldn't provide enough wage protection to keep up with inflation over the next four-and-a-half years.

Ford sources told reporters on Thursday that meeting the UAW's demands in full would completely halt new production due to much higher labor costs.

"If we signed up for the UAW's requests...we would've lost $15 billion and gone bankrupt by now," Ford CEO Jim Farley told CNBC on Thursday. "There's no way we can be sustainable as a company."

UAW members would still have to ratify any deal struck between union negotiators and one of the automakers, and workers could choose to send their leaders back to the table to push for more.

The summer of labor

The UAW walkout is the 17th strike in the U.S. involving more than 2,000 workers so far this year, according to data from the Cornell University School of Industrial and Labor Relations.

Many other unions have threatened to strike – in some cases resulting in substantial gains for workers.

After months of contentious negotiations that led 340,000 UPS workers to the brink of a strike, the Teamsters union in July secured a 48% average total wage increase, over the course of the five-year contract, for existing part-time workers.

In August, the Allied Pilots Association, which represents 15,000 American Airlines pilots, successfully pressured the airlines to increase pilots' pay by more than 46% over four years.

But some labor experts say the autoworkers might not have the same leverage as UPS workers and pilots to get that big of a pay raise.

The Big Three automakers were once the main choice for many Americans. But today, the market is populated with foreign automakers such as Toyota and Volkswagen, which are not being impacted by strike threats and can continue to produce cars at a steady clip.

"They don't have exceptional leverage because there's a lot of competition," said Harry Katz, a professor of collective bargaining at Cornell University, referring to automakers' ability to shift production to the non-union South or abroad.