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Business News/ News / World/  UAW Strike Exposes Biden’s Green-Energy Conundrum

UAW Strike Exposes Biden’s Green-Energy Conundrum

The president’s climate agenda is directly impeded by his support for union labor. It’s time to choose.

UAW Strike Exposes Biden’s Green-Energy ConundrumPremium
UAW Strike Exposes Biden’s Green-Energy Conundrum

(Bloomberg Opinion) -- From the start, President Joe Biden’s administration has been beset by two divergent goals. It wants to accelerate the transition to a green-energy economy, and it wants to offer unconditional support to organized labor. Last night’s walk-out by the United Autoworkers Union shows what happens when these imperatives collide.In an unprecedented labor action, workers from General Motors Co., Ford Motor Co. and Jeep-maker Stellantis NV all walked off the job at selected factories in three states on Thursday, after a weeks-long negotiating process broke down. The stakes are high if a deal remains elusive. By one estimate, a 10-day strike could reduce total US output by $5.6 billion, including $859 million in lost wages and nearly $1 billion in forgone earnings. A longer dispute could raise already inflated car prices, hammer steel producers and parts suppliers, narrow product selection, delay rollouts, and impose broad economic damage in states such as Michigan, Ohio, and Wisconsin.Union leaders have wielded this leverage to make big demands, including a 40% wage increase over four years (since reduced slightly), 40 hours pay for a 32-hour workweek, restored cost-of-living allowances, a return to defined-benefit retirement plans, added retiree medical benefits, more paid time off, and much else. They also want workers at EV battery factories to get the same wages and protections as those at traditional plants — and have even withheld their endorsement of Biden’s re-election effort unless he backs them on the issue.Asking for a raise after years of punishing inflation — and amid soaring corporate profits — is surely reasonable. (Awkwardly, GM Chief Executive Officer Mary Barra made nearly $30 million last year.) Yet there are two problems with the UAW’s approach.One is that meeting the totality of these demands would incur unsustainable expenses. Hourly labor costs would surge from about $64 to more than $150. That compares to about $55 per hour at non-union US plants of foreign automakers and about $45 an hour at Tesla Inc. factories. All told, the Big Three could be paying up more than $80 billion each over four years if they agree. Expansive structural changes, such as reinstating traditional pensions for new workers, would prove even more burdensome over the long term. Government policy is compounding this challenge. The Biden administration has offered enormous subsidies for EVs, while the Environmental Protection Agency plans to mandate that 67.5% of new vehicles sold by 2032 be electric (up from 5.8% last year). Yet even though EVs require about 30% fewer labor hours per unit, most of them remain hugely unprofitable thanks to elevated battery prices. In other words, if the automakers are going to stay in business during this transition, they’ll need to find far more efficiencies. (This is one reason they’re opening battery plants in non-unionized right-to-work states.)You can see the dilemma. If Biden’s EV vision is to be realized, Detroit will likely need fewer workers with less generous compensation packages, precisely the opposite of what the UAW would like. If he wishes to remain an unequivocal union backer, he’ll need to support saddling the car companies with significant new costs, making their green transition all the harder and more expensive. In a hint of what’s to come, the Department of Energy last month extended $15.5 billion in loans and grants to automakers to speed the conversion to EVs. Crucially, in doling out this largess, it says it will prioritize projects with higher wages and (perhaps you’ve guessed) unionized workers.Biden must make a choice. Does he want to navigate the green transition as quickly and efficiently as possible to head off climate change, which he frequently dubs an “existential threat"? Or does he want to continue rewarding his union friends as lavishly as possible? The answer can’t be “both."More From Bloomberg Opinion:

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Published: 17 Apr 2024, 01:20 AM IST
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