UAW Contract Talks Will Likely Avoid Detroit Three's New Mobility Ventures

Nothing will come easy as the United Auto Workers union hammers out new labor agreements with the three Detroit-based automakers over the next three months.

The union is still angry over General Motors’ plans, announced in late 2018, to close plants in Michigan, Ohio and Maryland. UAW President Gary Jones has said he wants to curb manufacturers’ use of temporary workers, who make less money, have less job security and don’t add to the union’s membership.

Management points to generous profit-sharing checks distributed earlier this year – an average of $10,450 at GM, $7,600 at Ford and $6,000 at Fiat Chrysler – as the type of gain-sharing that rewards the UAW’s flexibility. For example, the union’s acceptance of two-tier wages has allowed the hiring of younger workers at a lower-cost and boosting profit margins.

But the great sales boom is ending. Sales, while still strong in historical terms, are starting to decline. New car prices, now over $37,000 on average, are limiting the number of people who can afford them.

Technology is quickly redefining the industry.

Increasingly automated, connected and shared vehicles, many of which are being tested in fleets of robo-taxis, threaten the future growth of personal vehicle ownership.

But the UAW likely will get little, if any, role or representation in these “new mobility” ventures, primarily because the viability of those new technology investments won’t be determined in the scope of a four-year labor agreement.

Consider the following: Chevrolet has sold about 4,000 Bolt EVs in the first half of this year. This is the car to which Cruise Automation, in which GM has invested about $1 billion, is adding its own automated technology for test fleets operating in San Francisco.

It is true that UAW workers are building the Bolt at GM’s Orion Township, Michigan, assembly plant. In March the company announced it will invest $300 million in that plant to equipment that plant to build another electric-powered vehicle which could add up to 400 jobs.

Still, unanswered questions are everywhere. Will enough consumers buy EVs to keep an entire assembly plant busy in the long term ? Will automated ride-hailing services ever be profitable ?

Uber and Lyft, lost $1 billion and $1.14 billion, respectively, in the first-quarter of 2019, and they are spending little or nothing on manufacturing vehicles.

According to The Motley Fool’s Adam Levine-Weinberg, Cruise lost $600 million in 2017 and $700 million in 2018. This week, its CEO Dan Ammann said the company will delay commercial deployment of self-driving vehicles until next year. Cruise originally planned to launch that service this year.

GM is now just one of many investors in Cruise. Others include Honda, which made a $750 million equity investment in Cruise, and the SoftBank Vision Fund, the Tokyo-based conglomerate that has invested heavily in new technology startups.

In May, a group of institutional investors led by T. Rowe Price and Associates, announced it was putting $1.15 billion into Cruise, bringing its valuation to $19 billion, despite that fact it is operating tests of human passenger and fast-food deliveries in San Francisco.

To put that in perspective, GM’s market capitalization, the conventional metric of value, is about $57 billion at its current stock price.

Ford has invested $1 billion in Argo AI, a Pittsburgh automated vehicle startup. Then, earlier this month, Volkswagen agreed to put $2.6 billion into Argo AI and collaborate with Ford on automated and electric vehicles.

FCA has been supplying up to 62,000 Chrysler Pacifica Hybrid minivans to Waymo for its fleet of self-driving vehicles.

The multi-dimensional nature of these partnerships and investments, not to mention the highly uncertain returns that may or may not be generated by Cruise, Argo AI or Waymo, make it impractical and unrealistic for any of the Detroit three automakers to make promises to the UAW about compensation or jobs in this area.

In short, the electric vehicles that will be the test beds for shared mobility are smaller and simpler to assemble. They won’t need as many people to make.

Then the software, radar, sensors and cameras that deliver their self-driving capability, will be created outside the bricks and mortar of GM, Ford or FCA plants.

Electric powertrains are simpler from an engineering standpoint. There are fewer components. The assembly of battery packs is highly automated.

That likely means fewer workers will be needed in plants where EVs are produced.

The UAW could push for training programs that could give some members a chance to transition to jobs with the more software-oriented partners in the “new mobility” ventures.

Whether companies such as Cruise Automation, Argo AI or Waymo would go along with such an initiative is another question.

That is just another reason why these contract talks will be the most difficult in years.