UAW nearing automaker strike as Ford blasts union

By David Shepardson

(Reuters) -A first-ever simultaneous strike against the Detroit Three carmakers by the United Auto Workers grew increasingly likely on Thursday with little progress reported in talks hours before a contract deadline expires.

The union – which represents 146,000 U.S. auto workers – is asking for 40% pay raises and major improvements in benefits as part of what it calls “audacious” demands.

In response, Ford Motor (NYSE:) CEO Jim Farley told CNN the proposal to hike wages by 40% would “put us out of business.” He said there were no talks going on, and that the automaker has received no counteroffer to its plan to offer 20% pay hikes.

“Nothing is going on,” he told CNBC.

General Motors (NYSE:) earlier said it hiked its contract offer to a 20% wage hike for U.S. autoworkers over four and a half years – including 10% in the first year – to avoid a strike that is set to begin at 11:59 p.m. if no deal is reached.

GM CEO Mary Barra told employees the company still hoped to reach a deal: “Remember: we had a strike in 2019 and nobody won.” GM reported a $3.6 billion pre-tax loss in 2019 after the 42-day walkout.

The third Detroit automaker, Chrysler parent Stellantis (NYSE:), has offered pay hikes of 17.5%, the union has said.

Coordinated strikes would represent arguably the most ambitious U.S. labor action in decades and could impact U.S. economic growth, depending on how long they last.

The UAW’s demands include restoring defined benefit pensions for all workers, 32-hour work weeks and additional cost-of-living hikes, as well as job security guarantees and an end to the use of temporary workers.

Farley said if the UAW proposal had already been in effect the company would have lost about $15 billion from 2019-2022 instead of earning about $30 billion and “gone bankrupt by now.”

“The future of our industry is at stake,” Farley said in a letter to employees urging the UAW to “stay at the table” and reach a deal. “Let’s do everything we can to avert a disastrous outcome.”

‘DISASTROUS OUTCOME’

UAW President Shawn Fain said Wednesday a strike was likely as automakers rejected the pension, 32-hour work week and other benefit improvements sought. He also criticized proposed changes to profit sharing that would cut payments to workers.

The UAW has outlined plans for a series of strikes targeting individual, undisclosed U.S. auto plants if agreements are not reached by late Thursday, rather than a full walkout. The union plans to disclose the initial plants during a 10 p.m. ET event.

UAW organizing director Brian O. Shepherd said in an online event Thursday that the strike strategy is to give “negotiators maximum flexibility” to get autoworkers “the contract they deserve.” He added a full walkout “is still on the table.”

Fain said Wednesday that the pay raises offered by the Detroit Three to auto workers were inadequate even as automakers said the union had yet to formally respond to their latest, more generous offers.

“The clear winner in this Game of Thrones Battle between the UAW vs. GM/Ford is Tesla (NASDAQ:),” said Wedbush analyst Daniel Ives. The Detroit automakers could face higher costs and complexity in the future that Tesla and other non-union automakers will not face as they expand electric vehicle production, he said.

AID FOR SUPPLIERS

The U.S. auto sector, including parts manufacturers, employs almost 1 million people, according to the U.S. Bureau of Labor Statistics.

Biden administration officials are discussing emergency aid to protect smaller firms that supply U.S. auto manufacturers, according to a source with knowledge of the matter. The White House declined to comment.

Fain outlined a strategy to “create confusion” with a series of work stoppages targeting individual U.S. plants if no deal is reached.

Stopping work at a key engine or transmission plant, for example, could have a cascading effect by depriving other factories of parts they need to produce vehicles. Another option would be to strike at profitable pickup truck or SUV assembly plants.

Fain said it was still possible that at a later date all of the auto workers could strike.

A full strike would hit earnings at each affected automaker by about $400 million to $500 million per week assuming all production was lost, Deutsche Bank has estimated.

Some losses could be recouped by boosting production schedules after a strike, but that possibility fades as a strike extends to weeks or months. A UAW strike would not affect European and Asian carmakers like Toyota (NYSE:), Honda (NYSE:) and Mercedes, whose U.S. plant workers are not represented by the union.

U.S. President Joe Biden has encouraged the parties to stay at the table “to get a win-win agreement that keeps UAW workers at the heart of our auto future,” White House economic adviser Jared Bernstein said Wednesday.

“These workers are again at the forefront of their industry, and they’re not getting paid like it,” said Senator Sherrod Brown, a Democrat from Ohio, a state with thousands of auto industry workers, on the Senate floor Thursday.

The UAW said it was planning a rally in Detroit on Friday that will include Fain, Senator Bernie Sanders and other members of Congress, coinciding with a first of day of expected walkouts.