Massive subsidies and other goodies in the Inflation Reduction Act are not enough to satisfy the United Auto Workers union.
The UAW now seeks a “Just Transition” to EVs. Their new concern is a “race to the bottom” started by Elon Musk.
Question of the Day
How can car manufacturers make money as Tesla cuts prices and the White House and unions demand higher output and wages?
Please consider Elon Musk Squeezes His Electric-Vehicle Competitors
The Inflation Reduction Act includes truckloads of subsidies for electric vehicles, including tax credits for battery makers and consumers. But despite these handouts, traditional automakers still don’t expect to turn a profit on the cars for several years. Ford recently forecast its electric-vehicle division would lose $3 billion this year and committed to getting in the black in 2026.
In the first three months of this year, Ford’s electric vehicles posted a negative 102% operating margin—that is, its losses on electric-vehicles exceeded its sales. Yikes. Ford blamed a battery problem in its much-hyped F-150 Lightning pickup for interrupting production. Even if it weren’t for that, Ford still would have posted a huge loss.
Automakers and the UAW are preparing to begin collective-bargaining over a new national labor agreement this summer. UAW leaders have made clear their goal is to increase wages and benefits at new electric-vehicle battery plants, where workers currently earn about half as much as their counterparts at other factories.
Stellantis recently announced it would offer buyouts to 31,000 hourly employees. Ford last year announced it was laying off 3,000 white-collar and contract employees to finance its electric-vehicle expansion. Automakers will almost certainly have to issue more pink slips, if only because manufacturing electric vehicles requires significantly less labor than gasoline-powered cars.
“The federal government is pouring billions into the electric vehicle transition, with no strings attached and no commitment to workers,” UAW President Shawn Fain wrote to his members on May 2. “The EV transition is at serious risk of becoming a race to the bottom.”
Mr. Fain is threatening to withhold the union’s endorsement of Mr. Biden unless his administration backs a “just transition” to electric vehicles. Translation: The union wants the White House to wield subsidies and regulation as a cudgel to drive its labor agenda. But all this will do is render automakers less competitive in a race in which they’re starting laps behind Tesla.
The risk isn’t merely that U.S. automakers can’t catch up; it’s that they could crash right out of the gate.
Understanding Tesla’s Lead and the UAW’s Predicament
Tesla is in front partially because it was first. But it’s also in a great position now because of cheap money by the Fed, subsidies on which only it gained, and energy tax credits.
The cheap money, subsidies, and tax credits should not have happened.
Thank the Fed for the cheap money. Thank Biden for the subsidies, regulations, energy credits and the Inflation Reduction Act.
In the push to reduce carbon emissions, Biden handed out tax credits that Tesla could sell at a huge profit to other automakers who could not meet the regulatory requirements that Biden imposed.
Three Things to Expect
- The UAW will seek handouts that it gets, not Tesla.
- Look for Biden to accuse Tesla of dumping cars because it now makes a profit and the big automakers can’t.
- Look for Biden to force unionization on Tesla.
This is all in the name of a “Just Transition”.
What a hoot.
Everything Biden does adds inflation pressures.
Please note The Inflation Reduction Act Price Jumps From $385 Billion to Over $1 Trillion
Expect more of the same when Biden tries to impose a “just transition”.
This post originated at MishTalk.Com.
