GM to unionise battery production

The United Autoworkers (UAW) union and legacy Detroit automaker GM have reached an agreement to unionise battery production across the OEM’s EV manufacturing facilities. The union hailed the agreement as “guaranteeing that the transition to electric vehicles at GM will be a just transition that brings good union jobs to communities across America”.

The union was poised to walk out of GM’s factory in Arlington, Texas, which the company says “is home to every new full-size ICE-powered SUV in GM’s product line-up sold around the world”, before the deal was agreed.

After the deal was brokered on Friday, the union announced that further expansions to the strike will therefore not be considered this week.

The news rebuffs claims from some commentators, including former president Donald Trump, that the transition to widespread EV production was a bone of contention with the UAW. Anti-EV commentators have argued that the UAW’s ongoing strike is evidence of the union believing the transition to electrification threatens the health of the US auto industry.

These views are typified by Trump’s claims in September that EVs “will all be made in China and the auto industry in America will cease to exist”.  Instead, electric vehicle manufacturing now become one of the earliest areas of progress in the dispute.

“We have been told for months this is impossible. We have been told the EV future must be a race to the bottom. We called their bluff,” says UAW president Shawn Fain.

Locking in costs

Amid a potential flood of cheaper Chinese EVs into US and European markets — albeit the US market is protected by relatively high tariff barriers and Europe seems likely to also raise its fences — US manufacturers have faced the question of how to establish profitable EV value chains. The problem has been especially acute for legacy OEMs like GM and Ford, who have suffered per-unit losses on EVs and seen margins pressurised.

Speaking after the agreement, Fain said the Detroit Three had planned to pay insufficient wages to battery workers to keep up with the competition, and that the deal now prevents GM from doing that. “The plan was to draw down engine and transmission plants, and permanently replace them with low-wage battery jobs,” he suggests.

Union concerns

While this deal provides some security for the future of EV production at GM, the UAW does have some concerns ahead of widespread electrification, including the fact that EV manufacturing requires fewer workers owing to the vehicles having fewer parts.

However, Friday’s agreement addresses the union’s other major concern about EVs, also one shared by China-sceptic politicians — namely that battery production at US automakers will be outsourced to non-unionised jobs at joint ventures (JVs) outside the core OEM, often with US government subsidies footing the bill for JVs between US firms and foreign companies.

Ford recently pressed pause on its plan to build a battery plant in a JV with Chinese battery firm Catl, amid pressure from US legislators, who voiced concerns about Chinese influence and market competition. “Catl's deep ties to CCP forced labour have no place in the American market and make the company exceptionally unfit to receive American taxpayer dollars,” says Representative Mike Gallagher, who chairs the House Select Committee on the Chinese Communist Party.

While concern about the Detroit Three’s ties to Chinese manufacturing provide a rare piece of common ground between the UAW and Republicans like Gallagher, Ford’s decision to pause the JV was described as “a shameful, barely veiled threat by Ford to cut jobs” by the union.

GM’s concession to unionise its battery production, on the other hand, will commit the company to higher operating costs, with the firm’s latest wage offering standing at a 20pc rise and the union looking for more. This further threatens the company’s margins on EVs.

The company is currently propping up its less profitable EV activities with its ICE earnings and has said previously that it anticipates only “low to mid-single-digit margins for our EV portfolio by 2025”. Analysts at the company’s upcoming Q3 earnings call will surely be keen to ask about potential pressure even on this modest aim with a unionised battery workforce.