In three hours, the major strike in the United States will begin.

A major strike is imminent!

Negotiations between the United Auto Workers (UAW) and the Detroit "Big Three" are still ongoing, with only three hours left until the expiration of the contract.

UAW has reduced its demand for a 36% wage increase over four years, while the "Big Three" have raised their initial wage increase to a maximum of 20%. UAW also hopes to end the two-tier wage system, where new employees take four years to reach the same wage level as veteran employees, but the "Big Three" disagree.

If an agreement is not reached in three hours, UAW will hold a simultaneous strike against the three major Detroit automakers, marking the first time in 88 years in the history of the union.

Strike Strategy

UAW President Shawn Fain said in a Facebook live speech on Wednesday evening, "To win the negotiations, we may have to take action," and added that even if an agreement is not reached, UAW does not intend to conduct a company-wide strike, but the strike will escalate if there is no progress in the negotiations. "We are preparing to strike these companies in an unprecedented way."

According to Fain's strategy, if an agreement cannot be reached, a series of strikes will be targeted at individual U.S. factories to "create chaos," but the specific factories to be struck have not been disclosed, only stating, "We will strike where we need to strike."

Fain said, "We are making progress... but there are still significant differences on key priorities." UAW will disclose the factories to be struck when the contract expires at 11:59 p.m. Eastern Time on Thursday.

This strategy will help preserve the union's $825 million fund but will hinder production and disrupt the production plans of automakers. The strategy may also prove to be risky, as employees who remain on the job may work without a contract, which has raised concerns among some members.

Fain was elected UAW President earlier this year by a narrow margin, and he described this negotiation as a referendum for the entire working class, determining what blue-collar workers should receive in an era of growing corporate profits and significant wage increases for other unions.

Fain said in Wednesday night's live broadcast:

"The whole world is watching as we fight for the interests of the entire working class."

Fain hopes to secure the union's position in the upcoming era of electric vehicles and ensure that union workers have jobs in dozens of battery and electric vehicle assembly plants being built in Tennessee, Indiana, and other states. Fain is also working to restore the trust of union members after years of bribery scandals shook the union leadership.

Ford CEO: Company will go bankrupt if UAW demands are accepted

The risk of a prolonged strike and costly labor agreements are putting pressure on automakers trying to transform into efficient and high-tech companies.

These companies have invested billions of dollars in electric vehicles and battery production, which is an expensive bet that may take several years to pay off. They must prove to investors that they are cutting expenses in other business sectors, and a significant increase in labor costs may come at an inopportune time. Car industry executives are still grappling with the high cost of transitioning to battery-powered vehicles. They are working hard to narrow the gap with electric vehicle leader Tesla and are concerned that more generous labor agreements will further exacerbate their cost disadvantage compared to their competitors, as the latter's factory workers are not unionized.

Under the current contracts of the "Big Three," including benefits, the average hourly labor cost is about $65, while Tesla and Asian automakers have hourly labor costs of $45 and $55, respectively.

Ford CEO Jim Farley said in an interview with CNBC on Thursday, "If Ford agrees to the UAW's demands, 'we would lose $15 billion and go bankrupt.'"

Analysts estimate that the union's initial demands would roughly double the hourly labor costs for automakers. The UAW has stated that labor costs account for less than 5% of the cost of each vehicle for these companies.

Fain said on Wednesday, "Given that the compensation of these three automaker CEOs has increased by 40% in the past four years, and the amount spent on stock buybacks has risen by 150%, the focus of the automakers and the 'corporate media' on widespread economic losses is misguided."

He added:

"They pretend that if we get our fair share, the sky will fall. When they say we will destroy the economy, we are not destroying the economy, but their economy, the billionaire economy. That's what they're worried about... They want to scare the American people into thinking that it's the auto workers who are the problem."

Both sides are prepared

Oxford Economics estimates that if the nearly 150,000 union workers of these three companies ultimately go on strike, it could lead to about one-third of U.S. car production being halted, putting pressure on the labor market and driving up new car prices.

The consulting firm states that on an annualized basis, this would directly reduce U.S. GDP by up to 0.3%. Including indirect effects, as long as this standoff continues, the impact on GDP will be even greater, reaching 0.7%.

Wall Street News previously mentioned that if the UAW launches simultaneous strikes against the Big Three automakers, the daily economic losses could reach $500 million. And a prolonged strike would hit the automotive supply chain and its workers, depress prices of key commodities, especially steel, and could also impact Biden's 2024 election. Oxford Economics Chief US Economist Michael Pearce predicts that based on past strike situations, industrial output will decline by up to 40% overall. However, when discussing the broader economic impact, he stated:

"Once the dispute is resolved, any damage should be completely eliminated, so the impact on GDP for the entire quarter may be negligible."

Anderson Economic Group, a Michigan-based consulting firm, estimates that if the strike continues for 10 days, the three companies' workers will lose $859 million in wages, while the companies themselves will lose $989 million.

Both sides are prepared. The UAW has a strike fund of $825 million, which it will use to pay workers $500 per week.

Stephen Brown, an analyst at Fitch Ratings, stated that the liquidity of the three companies - cash, securities, and revolving credit facilities - is "quite strong." General Motors has $39 billion, Ford has $51 billion, and Stellantis, headquartered in Europe, has €66 billion.