Auto wage hikes complicate the search for an affordable EV

The economics of making and selling electric vehicles are proving far trickier to cobble together than their supply chain might suggest. — Bloomberg

NEW YORK: A combustion engine has about 2,000 moving parts. An electric motor, by comparison, has about 20.

However, the economics of making and selling electric vehicles (EVs) are proving far trickier to cobble together than their supply chain might suggest.

Detroit’s recent standoff with the United Auto Workers (UAW) union has added another wrinkle.

After coordinated strikes lasting six weeks, the UAW reached agreements with Ford, Stellantis and General Motors that would bring pay up by as much as 33% over the life of the contracts.

The deals are already elevating wages outside the union tent – Toyota immediately raised hourly rates for its US assembly workers – and the UAW is now planning an aggressive push to unionise factories run by Volkswagen, Hyundai and Tesla.

As both sides dig into the fight over the future of auto manufacturing, the results stand to impact how many EVs make it onto American roads and how much they cost.

“For folks interested in green, this is just going to be a longer game than they thought,” said James Womack, research director of MIT’s International Motor Vehicle Programme and founder of the Lean Enterprise Institute.

One of the many purported advantages of EVs was the assumption that they would require less work to put together. In practice, though, EV assembly isn’t proving much more efficient than that of gas-burning cars – at least not yet.

The labour advantage, long seen as critical to keeping down costs and prices on electric models, probably won’t be as meaningful as auto executives had anticipated, especially if they have to raise wages.

It’s also still unclear how widespread that wage growth will be.

Most workers currently building lithium-ion batteries for the Big Three do so as part of joint ventures using non-union labour.

General Motors works alongside LG Energy Solution, while Ford Motor paired up with South Korea’s SK On and Stellantis joined forces with Samsung SDI.

The partnerships were a quick and tidy way for Detroit carmakers to gain competency and reduce risk, but the UAW has called them a ploy to cut labour costs.

“The Big Three have made their intentions clear, as they attempt to exploit the transition to EVs to create a race to the bottom,” the union wrote in a recent white paper.

Getting these joint-venture factories into the UAW was a priority for president, Shawn Fain, who did score some wins at the negotiating table.

While the agreements don’t pull joint-venture plants into the union directly, new joint-venture employees will get 75% of the pay rates in the union contracts.

Fain told Bloomberg that current GM and Stellantis employees could be “leased” to their respective joint ventures, an arrangement that would leave their pay intact.

The two companies also agreed to a “card check” process to make it easier for new workers at joint ventures to unionise.

Ford Motor, however, resisted Fain’s battery push; chief executive officer Jim Farley accused the union of “holding the deal hostage over battery plants.”

Ford isn’t discussing the specifics of its current agreement, but a brief from the union says it allows some union workers to transfer into some of the joint-venture plants. A gaggle of proposed battery factories, however, remains up in the air. — Bloomberg