Title: The U.S. Auto Industry’s Boom: Shareholders’ Gain, Workers’ Pain
Introduction:
In recent years, the U.S. auto industry has experienced a remarkable recovery following the 2008 financial crash. While this boom has resulted in substantial profits for major automakers and their shareholders, workers’ wages have stagnated, leading to clashes with labor unions. This article examines the disparity between executives’ wealth and workers’ plight, the impact on organized labor, and the challenges posed by the shift toward electric vehicles (EVs).
1. Shareholders and Top Bosses Benefit:
1.1. Financial Times analysis reveals significant gains for shareholders and top executives in the U.S. auto industry over the past five years.
1.2. General Motors, Ford, and Stellantis have returned nearly $85 billion to shareholders through dividends and share buybacks since the financial crisis.
1.3. Bumper profits have left automakers vulnerable during negotiations with the United Auto Workers (UAW), as executive salaries surge while worker wages stagnate.
2. Union Strike Amplifies Negotiating Power:
2.1. The ongoing strike by the UAW has strengthened its negotiating position, given the auto industry’s booming performance.
2.2. The UAW highlights the stagnation of wages and fears that the transition to EVs, which requires fewer workers, may threaten organized labor in U.S. automakers.
2.3. The strike primarily impacts General Motors and Stellantis, while Ford’s operations remain less affected due to an increased wage offer.
3. Automakers’ Concerns and Counterarguments:
3.1. Automakers argue that they need resources to invest in EVs and compete in a challenging global market.
3.2. The UAW’s wage demands, initially a 40% increase and later reduced to 36%, raise concerns about the financial health of automakers.
3.3. Automakers estimate that meeting the UAW’s demands would significantly impact their profitability, potentially leading to bankruptcies and unprecedented losses.
4. Shareholders’ Profits and Dilemma:
4.1. $84.9 billion has been returned to investors since the financial crisis, primarily through dividends and share buybacks.
4.2. GM’s $26.3 billion stock buyback program, conducted between 2012 and 2017, has attracted attention and criticism.
4.3. Shareholders’ gains have raised questions about automakers’ priorities, especially regarding investments in EVs to stay competitive.
5. Booming Profits and Exceptional Challenges:
5.1. Despite declining car sales, combined profits of the three automakers reached $70.3 billion over 2021 and 2022.
5.2. In the case of Stellantis, the merger with PSA and changes in CEO leadership played a significant role in boosting profits.
5.3. The need for significant investments in EVs to compete with Tesla raises concerns about the allocation of funds, given the past emphasis on dividends and share buybacks.
Conclusion:
The U.S. auto industry’s recent success has favored shareholders and top executives, while workers’ wages have stagnated. The ongoing strike by the UAW exemplifies the challenges faced by organized labor amid increasing executive compensation. Moreover, the shift toward EVs poses additional financial dilemmas for automakers. Balancing profits, investing in innovation, and ensuring fair compensation for workers remain pressing issues that need resolution in an industry continually confronting dynamic market conditions.
Summary:
The U.S. auto industry has experienced remarkable financial recovery over the past five years, with shareholders and top executives benefiting significantly. However, workers’ wages have stagnated, leading to tension between labor unions and major automakers. The ongoing strike by the United Auto Workers highlights the disparities and concerns regarding the future of organized labor in the face of the EV revolution. As automakers prioritize profits and shareholder returns, the need for substantial investments in EVs to compete with Tesla raises additional challenges. The industry must find a balance that ensures fair compensation for workers while securing the financial health and competitiveness of automakers in a rapidly evolving market.
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Shareholders and top bosses at General Motors, Ford and Stellantis have fared much better than workers over the past five years, as the U.S. auto industry has enjoyed a stunning recovery from the 2008 financial crash, according to Financial Times analysis.
As the strike called by the United Auto Workers union enters its second week, the sector is experiencing a boom that is strengthening the union’s negotiating position. Filings show shareholders have received nearly $85 billion from the Detroit Three in dividends and buybacks since the crisis.
The UAW Friday expanded strikeshitting GM and Stellantis harder, while refusing to increase pressure on Ford’s operations after increasing its wage offer.
The three automakers remain engaged in heated wage negotiations with the union, arguing they need resources to invest in electric vehicles and to compete in an increasingly difficult global market.
However, the UAW highlights the stagnation of wages and fears that the evolution towards EVwhich require fewer workers to assemble and pick up batteries in non-union factories, endangers the future of organized labor among U.S. automakers.
Philippe Houchois, global automotive analyst at Jefferies, says carmakers’ bumper profits have left manufacturers “cornered” during negotiations.
Big increases in executive salaries, especially at a time when most workers are suffering the effects of soaring inflation, make higher wage demands “such an easy sell for the UAW,” he added. he.
In real terms, the pay of the average worker at the three automakers fell about 20 percent in the five years to 2022 – largely due to a drop in wages at Ford.
Still, automakers warn that the union’s initial demand for a 40 percent increase — now reduced to 36 percent — endangers the financial health of automakers.
Ford CEO Jim Farley said the company would have “already gone bankrupt” if it had paid the wages demanded by the UAW.
Automakers have not publicly said how much the UAW’s request would cost them. Farley estimated that Ford’s combined profit of $30 billion over the past four years would have instead represented a loss of $15 billion, a gap of $45 billion, while sources close to GM suggest a cost much higher, from 80 to 100 billion dollars.
PAYMENTS
Of the $84.9 billion returned to investors since the crash, $52.7 billion was paid out in dividends and $32.6 billion in share buybacks.
These included a one-time $3.5 billion dividend from Fiat Chrysler before the merger with PSA to form Stellantis in 2020 to equalize the value of the combined companies.
Much of that total is due to GM’s $26.3 billion stock buyback program, which the company conducted largely from 2012 to 2017 and which has taken off in the years since bankruptcy.
The payments have also left observers perplexed because they come at a time when automakers need to invest billions in electric cars to compete with Tesla.
“People will say, ‘You told us electric vehicles were going to be expensive, but you wasted so much money on buybacks,’” notes Houchois.
BENEFITS
The three companies’ combined profits reached $70.3 billion over 2021 and 2022, a figure that would have been even higher if Ford had not announced a $2 billion loss last year following the writedown of the start-up Rivian and the autonomous driving company Argo AI.
Profits were driven by chronic price rises global shortages coins collided with strong post-pandemic demand.
For GM, 2021 was the most profitable year since emerging from bankruptcy in 2009, with $10 billion in revenue. Stellantis – which includes France’s PSA following the 2019 merger – made a record net profit of $17.7 billion last year, almost entirely from North America.
Even though the number of cars sold has declined, the combined revenue of the three automakers has reached $4 trillion over the past 10 years.
PAYMENTS
A sore point for the UAW has been the rising incomes enjoyed by top executives, many of whom see their compensation tied to profits or other performance indicators such as shareholder returns.
There are some mitigating factors. Stellantis doubled in size after merging with PSA and changed CEOs, with Peugeot’s Carlos Tavares leading the new business and replacing Fiat Chrysler’s Mike Manley.
Similarly, Ford replaced Jim Hackett in 2020 with Jim Farley, leading to higher wages in 2020.
At GM, CEO Mary Barra’s pay increased 11 percent in real terms in the five years to 2022, compared with a 10 percent drop for the regular worker.
The 29 percent pay increase at Stellantis compares to a 9 percent drop in its average employee’s salary, after accounting for inflation.
Exceptional executive compensation is not limited to the auto industry and is closely linked to broader economic factors.
“In 2021, when the economy was booming after the start of the pandemic in 2020, 82.5% of CEOs received bonuses above target,” explains compensation and data group Equilar.
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