The approaching of the American Black Swan! General Motors proposes a 10% salary increase, and the union angrily responds as "extremely insulting"!

The "black swan" of the US economy and capital markets is getting closer.

The largest three US automakers, General Motors, Ford, and Stellantis, have voted to approve the possibility of a large-scale strike if new labor contracts cannot be reached by September 14.

On Thursday, September 7, in order to avoid a major strike, General Motors proposed the largest pay raise plan in decades as part of a new contract proposal submitted to the United Auto Workers (UAW).

General Motors announced that the wages of most of the approximately 46,000 UAW-represented employees will increase by 10%, while new or promoted employees will be eligible for up to a 56% wage increase over the four-year agreement. Even temporary workers will see their wages increase by about 20% to around $20 per hour.

Based on the current wage structure, the starting wage for UAW members at General Motors is approximately $18 per hour, and after a four-year "growth" period, the highest wage can exceed $32 per hour.

The proposed contract by General Motors also includes two additional one-time payments of 3%, increasing the total wages by 16%; an additional $5,500 bonus; a one-time $6,000 payment to address inflation; and a $5,000 inflation protection bonus during the term of the agreement, which is only eligible for current employees. In addition, this proposed contract does not include pension benefits for employees who entered General Motors after 2007.

Although the proposed wage increase is the largest in a UAW contract since 1999, it falls far short of the union's demands, which include a 40% hourly wage increase, a reduction in the weekly working hours to 32, and the restoration of traditional pension benefits.

UAW President Shawn Fain is not satisfied with General Motors' proposal, calling it "an insulting proposal that falls far short of a fair agreement for American autoworkers":

General Motors has made an insulting proposal after six weeks of refusing to engage in sincere negotiations, only after being charged by the National Labor Relations Board. This proposal falls far short of a fair agreement for American autoworkers. When we say we need economic justice from General Motors by 11:59 p.m. on September 14, they either don't care or aren't listening. The clock is ticking, don't waste any more of our members' time.

The UAW is the largest labor union in the United States, with approximately 146,000 members, accounting for about 56% of the total workforce in the US automotive manufacturing industry, only in the Detroit "Big Three" - General Motors, Ford, and Stellantis.

A week before General Motors made this proposal, the UAW filed charges with the National Labor Relations Board against General Motors and Stellantis, accusing them of unfair labor practices and lack of sincere or timely negotiations.

At that time, General Motors stated that the 40-day strike against General Motors during the final round of negotiations in 2019 resulted in a loss of 300,000 vehicles in production. General Motors also stated that this caused the automaker to lose $3.6 billion in earnings. The union, on the other hand, stated that the strike is not the goal, but there are still significant differences between the two sides in key demands.

Currently, the U.S. automotive industry is in the throes of transitioning to electric vehicles, facing increasingly fierce market competition and high costs. Some analysts believe that if the "Big Three" agree, it would be "no different."

The "Big Three" also believe that UAW's demands are "excessive."

Mark Stewart, Chief Operating Officer of Stellantis North America, bluntly stated that UAW's demands are "outrageous" and could result in job losses for workers. Stellantis threatened to move the production of RAM1500 from suburban Detroit in the United States to Mexico.

In a recent statement, Ford proposed a 9% pay increase, which can be paid in a lump sum, resulting in a 15% increase in workers' income over the four-year contract period, far from UAW's demands.

If UAW decides to initiate a strike, the production of the "Big Three" may have to come to a halt, resulting in losses of up to billions of dollars.

According to estimates by the labor research think tank Anderson Economic Group (AEG), a 10-day strike would result in a total wage loss of $859 million for the three major automakers, with losses of $989 million for the "Big Three," including $380 million for General Motors, $325 million for Ford, and $285 million for Stellantis.

In a previous analysis, Deutsche Bank estimated that the strike would result in a production loss of $400 million to $500 million per week for each automaker.

The automotive industry (including foreign companies operating in the United States) accounts for about 3% of the U.S. Gross Domestic Product (GDP). As one of the long-standing pillar industries, a strike by half of the industry's workers will not only cause the "Big Three" to suffer huge losses but also impact the future economic performance of the United States for a period of time.

According to an investor report from SuMi Trust, a 10-week strike is expected to result in a production loss of 1.5 million vehicles. In comparison, the 2019 strike resulted in a production loss of 300,000 vehicles.

Cox Automotive, the largest automotive O2O trading platform in the United States, stated that during the labor negotiations in 2019, the U.S. automotive supply was 3.73 million vehicles, which was basically enough to sustain 86 days of sales under normal conditions at that time. Currently, industry inventory is close to 2 million units, which can only sustain 56 days of sales supply.