The Real Reason behind the Massive Strike of American Auto Workers: Anti-Electric Cars, but the Winner is Musk

The strike by the United Auto Workers (UAW) against the Detroit "Big Three" has been ongoing for over a day.

This strike is part of the UAW's broader fight to protect workers' interests during the transition to clean energy. It is estimated that the electrification process could result in the loss of 35,000 automotive jobs.

Meanwhile, successful new players in the electric vehicle field, such as Tesla and Rivian, have not formed unions.

Regardless of the outcome of the strike, the "Big Three" will undoubtedly spend more money, and any wage increases will further enhance Tesla's significant cost advantage in the electric vehicle industry.

The real opposition is "technological displacement"

As new technologies continue to develop, many companies plan to transfer production away from unionized workers using these new technologies, and it's not just automotive workers who are threatened.

The core issue behind the months-long strike by Hollywood screenwriters and actors against movie studios is the opposition to "AI displacement."

In June of this year, dockworkers at West Coast ports in the United States expressed concerns about the increasing number of robots during renegotiations of their employment contracts. At the same time, as automation levels in the aviation industry increase, labor unions in the United States have consistently resisted reducing the number of crew members from two to one.

The UAW, with its 88-year history, has also experienced previous technological changes, including the adoption of automated production lines in factories in the 1970s.

However, Ian Greer, Director of the Cornell University School of Industrial and Labor Relations, stated that the transition to electric vehicles is "much more disruptive" to existing jobs because it could eliminate many positions and significantly alter or relocate others.

He added that the UAW "is concerned that automotive workers will bear the cost of this transition."

He said:

"This is an unresolved question of whether manufacturing workers in the internal combustion engine sector can transition to new jobs or whether they will have to go through a period of unemployment. These are very important questions for a movement that is about ensuring people have good jobs."

UAW President: Workers must not be left behind

And this is a more complex process.

UAW President Shawn Fain has repeatedly emphasized that the transition to electric vehicles must be a "fair transition" and that "workers must not be left behind." Electric vehicles currently account for about 8% of new car sales in the United States.

Musk has already won

One thing is clear: Elon Musk has already won.

Regardless of the outcome of the strike, the "Big Three" will undoubtedly spend more money, and any wage increases will further enhance Tesla's significant cost advantage in the electric vehicle industry. In March of this year, Musk revealed his ambitious goal of reducing the manufacturing cost of Tesla's next-generation vehicles by 50%, leveraging his own advantages in advanced automation, lean engineering technology, and other transformations.

Tesla's actions this year demonstrate that it can engage in price wars with competitors around the world, thanks to its lower cost structure, in order to increase sales.

In July of this year, Tesla announced a 20% increase in second-quarter profits even after price reductions. Around the same time, Ford announced a slowdown in the growth of electric vehicle production due to significant losses in the electric vehicle sector.

Industry data shows that the labor cost (including wages and benefits) of the "Big Three" in Detroit is estimated to average $66 per hour. In comparison, Tesla's wages are $45 per hour. The company, founded 20 years ago, does not have a labor union.

Previous analysis indicated that the wages paid by the "Big Three" in Detroit were 38% higher than those of Tesla. If workers were to go on strike, this gap could widen further.

According to Bank of America, meeting all of Fein's initial requirements would raise the average hourly labor cost of the "Big Three" in Detroit to $136.

How do UAW workers compare to Tesla workers? Stock options.

One question is why Tesla workers are willing to accept lower compensation compared to UAW workers.

The key reason is stock options.

UAW workers have traditionally seen wage growth through profit-sharing bonuses, while Tesla workers receive stock options, which do not have a direct cash cost to the company. Over the years, despite periods of turbulence, Tesla's stock price has generally soared, more than doubling this year.

Musk has stated that employee stock options make his factory workers the highest-paid in the industry and that a "significant number" of production line workers have become millionaires through stock rewards over the years.

So far, many analysts expect the "Big Three" in Detroit to eventually absorb the increased costs.

However, Barclays analyst Dan Levy cautioned investors in a recent report:

"The bigger issue is the increasing pressure it puts on them to transition to the electric vehicle world."

Tesla may also be affected in the future

According to Glassdoor estimates, the average hourly wage for technical personnel at Tesla ranges from $23 to $32. Tesla's factory recruitment advertisement in California shows an expected hourly wage ranging from $24 to $67, along with cash, stock rewards, and other benefits.

On Thursday, Musk once again criticized the UAW, boasting about the "great atmosphere" in his factories. Last year, Musk essentially prevented the union from organizing his workers.

He recently wrote on Twitter:

"We encourage playing music, having fun. It's important to make work exciting! By the way, our wages are higher than the UAW, but the performance expectations are also higher."

Nevertheless, some analysts believe that there may be no perfect solution, and Tesla may also be affected by strikes in the future.

Art Wheaton, a labor expert at Cornell University, said that the UAW's ability to obtain higher wages may put pressure on Tesla during the process of reorganizing the union.

He said:

"I don't think Elon Musk will have that super awesome, glamorous glow anymore."