Elon Musk and Tesla’s role in igniting the auto strikes
Elon Musk and Tesla's role in igniting the auto strikes
Tesla’s Influence on the Auto Industry and the Current Strike
Elon Musk may not be physically present at the picket lines in Missouri, Ohio, or Michigan, where autoworkers are currently striking against the Big Three US automakers, but the influence of his company, Tesla, is undeniable. In many ways, Tesla, the world’s most valuable automaker by market capitalization, played a significant role in setting off this strike.
Tesla’s pioneering electric vehicles have ushered in a new era that has completely disrupted the auto industry. As legacy automakers like General Motors, Ford, and Stellantis scramble to compete with Tesla and make the transition to electric vehicles, they have pledged billions in investments and begun restructuring their operations. However, for workers, the “green jobs” being created may be scarcer and lower-paying.
Electric vehicle powertrains require 30 percent fewer assembly hours than conventional gas-powered ones. This means that plants manufacturing EV batteries, which are generally outside the core, unionized auto supply chain, have fewer job opportunities for union workers. The United Auto Workers has experienced a significant decline in membership over the years, with a 45 percent loss between 2001 and 2022. The rise of electric vehicles could potentially lead to even fewer union jobs overall.
The shift towards electric vehicles has prompted legacy automakers to establish new assembly plants, mostly in US states that are hostile towards union organizing, such as Kentucky, Tennessee, and Alabama. Additionally, since many of these plants are joint ventures with foreign battery companies, they are not subject to previous union contracts. This poses a challenge for the United Auto Workers to protect the rights and benefits of autoworkers in these plants.
One of the factors that have intensified the pressure on legacy automakers is Tesla’s ability to cut costs. Comparatively, Tesla spends $45 per hour on labor, including benefits, while the Big Three automakers spend $63 per hour. This significant cost difference has urged competitors to seek new efficiencies and find ways to reduce labor expenses.
Tesla’s willingness to challenge traditional manufacturing approaches has forced legacy automakers to rethink their operations. Tesla introduced large-scale car casts, allowing for the creation of large metal components in one go, eliminating the need for joining multiple small casts. The company also pioneered an automotive chassis building process that can be easily adapted to produce different vehicle models. Tesla’s Silicon Valley roots enabled it to envision cars as software-first platforms, capable of receiving over-the-air updates and modifications, similar to iPhones. Additionally, Tesla aims to automate more of its factories and increase self-sufficiency in sourcing materials for its batteries.
Tesla’s innovative production techniques may soon put even more pressure on legacy automakers. Elon Musk has expressed plans to build a new, smaller vehicle that can be produced at half the cost of the popular Model 3. Although Musk has made ambitious claims in the past that haven’t materialized (remember the promise of 1 million Tesla robotaxis?), Tesla’s disruptive influence on the industry cannot be ignored.
The rise of Tesla and the electric vehicle transition it catalyzed have left legacy automakers, including the Big Three in Detroit, in desperate need of capital. While these automakers have amassed substantial profits over the past decade, reaching around $250 billion, they have also faced significant pressure to distribute a significant portion of these profits to shareholders. The competitive threat posed by Tesla has made every penny crucial for these automakers as they navigate the changing industry landscape.
Amidst these circumstances, the United Auto Workers have been pushing for higher wages, particularly for workers hired after the Great Recession and bankruptcy-era reorganizations, as they often receive lower pay and reduced benefits compared to long-term employees. However, the automakers argue that they face financial constraints and intense competition, making it difficult for them to meet union demands.
When automakers emphasize their financial soundness and make plans to outperform Tesla, it only adds fuel to the fire. Despite the three American automakers forecasted to make $32 billion in profits this year, just slightly lower than last year’s 10-year high, the United Auto Workers remains determined to secure better compensation for its members. UAW President Shawn Fain dismissed the notion of competition, arguing that it often leads to a race to the bottom and expressed concern for workers left behind in the electric transition.
Elon Musk, in his typical quirky fashion, joined the discussion with a post on X, attempting to compare the working conditions at Tesla with those at other automakers. Musk sought to turn the ongoing dispute into a recruitment opportunity, highlighting Tesla’s vibrant work atmosphere and higher pay, albeit with higher performance expectations. Tesla’s past experiences with union organizing have been contentious, with the National Labor Board ruling that the company violated labor laws during an organizing drive in 2017 and 2018. Tesla has appealed the decision.
In conclusion, Tesla’s incredible influence on the auto industry has sparked a wave of changes and challenges. It has propelled legacy automakers to pursue electric vehicle adoption and seek new efficiencies. However, the shift towards electric vehicles has left unionized workers concerned about the potential loss of jobs and diminishing union power. The current strike led by the United Auto Workers reflects the complexities and tensions emerging from this transition. As the industry continues to transform, the balance between innovation, worker rights, and corporate profits remains a pressing issue in the world of automobiles.
