Steel Markets
Headwinds for UAW/Automaker Negotiations
Written by Sandy Williams
August 29, 2019
Contract negotiations between the United Auto Workers and Ford, GM and FCA are facing unwanted outside pressures.
As a precautionary strike vote is being taken at UAW locals, the FBI reportedly raided homes of UAW presidents in Ohio, California, Wisconsin, Missouri and Michigan as part of a government investigation into bribery allegations.
United Auto Workers officials are also caught in the trade war as they try to negotiate contracts with manufacturers that are receiving confusing signals about auto tariffs from the Trump administration, as well as “orders” to pull any business out of China.
The administration decided to delay the Section 232 auto and auto parts tariffs that were scheduled for May 18 implementation for 180 days. That would put the decision to act or not act sometime in November. If tariffs were imposed, it would be a major headache for auto producers that import many of the components that go into domestically assembled vehicles, potentially adding thousands of dollars to vehicle prices and further cutting into sales revenue.
The administration’s trade strategy puts the auto union in an awkward position, Charlie Chesbrough, a senior economist at Cox Automotive, told the Detroit News.
“Without firm trade policies, OEMs will have a difficult time agreeing to longer-term output levels. Will the U.S. be able to profitably export to China? Will a 25 percent tariff also be placed on European parts and vehicles later this year? Will Europe retaliate in kind, making automotive exports unlikely?”
Trump has also tried to roll back fuel emissions regulations that the auto producers have rebuffed.
Another complication is the financial burden automakers will be taking on as they shift production to electric cars. A financial outlay that comes during a softening of domestic sales.
“The overall interaction of trade, fuel economy and the economy overall, plus the demand for vehicles over the next four years, makes for a very difficult environment to negotiate an agreement,” said Kristin Dziczek, vice president of the Center for Automotive Research.
Sandy Williams
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