On Wednesday morning, the New York Times reported that the United Automobile Workers (UAW) union shut down production at General Motors’ (GM’s) largest US factory, “significantly stepping up pressure on the large US automakers as signs multiplied that the 6-week strike is taking a toll on profits.” The strike in Arlington, Texas, is a lynchpin in the UAW strategy to target GM’s most profitable vehicles. Meanwhile, 200 miles away in Austin, Tesla’s Gigafactory continues to have a non-union workforce. Yes, some Tesla employees have attempted to unionize in the past, but they have seemingly never been close to doing so.
Detroit automakers perceive non-union automakers like Tesla to be a real competitive threat — one that inhibits their ability to agree to striking workers’ calls for cost-of-living wages, bigger benefit packages, and enhanced workplace conditions.
How has Tesla been able to maintain a non-union workforce? Will the all-electric car company be next in line for UAW action?
Even with its halts and hiccups, it’s clear that the auto industry is moving to electric vehicles (EVs). Tesla’s success transitioning from the premium Model S and Model X to the more mainstream Model Y and Model 3 made it nearly impossible for other major automakers to stay strictly with an internal combustion engine (ICE) catalog. Even with growing competition, Tesla’s share of the US EV market was at 50% in Q3 2023.
Tesla workers earn on average about $55 an hour in wages and benefits, compared to $66 to $71 an hour at Detroit’s Big Three, according to CNN research. If the Detroit automakers come to agreement with the UAW, it will widen the gap between those unionized and non-unionized wages. According to Bloomberg, Tesla holds a labor cost advantage in the US of about $1.4 billion to $1.75 billion, or up to $2,700 per vehicle.
If the UAW is successful in its quest to raise base wages for UAW employees by 30%, “that gap would rise above $2 billion, a target that would get any union’s attention.”
Jörn Boewe and Johannes Schulten outline in The Transformation of the Global Automotive Industry that a combination of factors has weakened the UAW in recent years:
- parts of the production process have been relocated and outsourced to states with laws that make it difficult for unions to organize, especially in the Southern Automotive Corridor;
- corruption scandals and resulting internal organizational squabbles;
- the emergence of a union-busting industry;
- tightening of labor laws that had already been anti-union before, especially at state level; and,
- the rise of new non-union and anti-union players in the industry, such as electric car manufacturer Tesla.
Arthur Wheaton, a labor expert at Cornell University, told Business Insider, “This is a fight not just for the people working at Ford, GM, and Stellantis, this is absolutely a fight for all of the working class.”
Advantages Tesla Experiences by Having a Non-Union Workforce
Tesla can benefit from the UAW strikes to continue to develop its battery technology and software, as these are areas in which Tesla is already established, while its competitors remain in relatively early development and manufacturing stages. It should be said that it’s not only Tesla that is a non-union employer — EV battery and production plants thus far in the US are mostly non-union.
Recent Tesla price decreases had already placed the company in an advantageous position. This month, a basic Tesla Model Y was listed at $43,990 before federal and state rebates, taxes, and fees. The Model 3 came in at $38,990 before rebates and charges, and both models qualified for the full federal EV tax credit. The effective prices of these popular Tesla models helped the company to navigate unsettled economic times. CEO Elon Musk noted on the company’s most recent IR call, “I think that there’s very significant price elasticity,” while also alluding to the difficult art of maintaining balance of pricing and profit.
Meanwhile, the Detroit 3 are confronted with new labor contracts that include increases in labor costs. This is happening at the same time they are experiencing fits and starts as they negotiate the new world of EVs.
“As auto companies have adjusted to falling market share, they have also seen rising nominal labor costs,” Kristin Dziczek of the Federal Reserve Bank of Chicago offers as background. These major automakers saw their market drop from roughly two-thirds to two-fifths between 2000 and 2009, Dziczek notes, and it has been hovering in the mid 40% range since the Great Financial Crisis and the bankruptcies of GM and Chrysler/Stellantis. Thus far in 2023, the combined market share of the 3 companies is 39%.
What Does It Take to Form a Union?
According to the National Labor Relations Board, if a majority of workers wants to form a union, they can select a union in one of two ways:
- If at least 30% of workers sign cards or a petition saying they want a union, the NLRB will conduct an election.
- An employer may voluntarily recognize a union based on evidence — typically signed union-authorization cards — that a majority of employees want it to represent them.
Once a union has been certified or recognized, the employer is required to bargain over terms and conditions of employment with a union representative. Even if a majority of workers casts ballots that open up the possibility of a union, negotiations on pay, benefits, and other areas can drag on for years.
Tesla’s Workers Have Attempted to Unionize, Without Success
Tesla has more than 120,000 workers worldwide and production facilities in the US in Fremont, California; Austin, Texas; Sparks, Nevada; and Buffalo, New York. It has imposed new workplace trends that contradict employment practices of traditional car manufacturers that experience high levels of unionization. Many pundits are forecasting the UAW strike against Ford, GM, and Stellantis as setting the stage for organizing at Tesla. Worker attempts to organize at Tesla aren’t new — they have taken place at least 3 previous times.
Failure of Tesla workers to unionize emerged from many areas, including fear of retaliation. As CNN chronicled, “The NLRB has repeatedly cited Tesla and Musk for illegal or improper anti-unionizing activities.”
- They’ve interrogated employees and disciplined employees because they support unionizing.
- The company has fired more than 30 union supporters at the Buffalo Gigafactory, which spurred the union, Tesla Workers United, to file an NLRB complaint alleging the company illegally fired its supporters. Tesla denied such accusations.
- In 2022, the NLRB deemed it unlawful for Tesla to prohibit employees from wearing shirts bearing union logos and insignia.
- Musk was forced by the NLRB to delete a 2018 tweet saying employees would lose their stock options if they formed a union.
Tesla still enjoys an overall stable financial position due to its high market capitalization on the financial markets. To date, it is successfully holding onto the majority of its employees. Tesla’s aggressive tactics to deglorify unionization include granting factory workers stock options, which is largely unheard of in the auto industry. These options typically have a vesting period of 4 years, so employees must remain employed at Tesla to cash them in. Some production workers have become millionaires from their shares in Tesla, Musk has said. Then again, Tesla’s stock had its worst year on record in 2022, losing 65% of its value, with the valuation loss a hard hit for employees, and stock options today are nothing like they were a decade ago.
Tesla, shielded by the sheer willpower of its CEO, has created a cultural workplace climate that is difficult for unions to pierce. Sometimes this is rationalized by claiming that EVs are more computers than transportation, and with the necessity of new technological requirements such as communicativity and battery technology, non-union workers comprise a more appropriate workforce.
As such, Tesla argues that it is a company that operates more within an information paradigm than other automakers.
UAW president Shawn Fain, who is known for critiquing the “billionaire class,” cited Musk during a CBS interview as disingenuous when he claims Tesla workers are paid equally in essence to other automakers. “Most of these workers in those companies are scraping to get by so that greedy CEOs and greedy people like Elon Musk can build more rocket ships and shoot [themselves] into outer space. And that’s unacceptable.”
Michael Cauvel and Aaron Pacitti argue in Structural Change and Economic Dynamics that deindustrialization, globalization, financialization, market concentration, and technological change have become forces that operate through a bargaining power channel. They say that the reduction in the labor share has been driven by lower bargaining power for workers, which, in turn, has driven structural economic changes, weak economic performance in the US, and increased inequality.
Boewe and Schulten concur and remind us that arguments for automaker unionization are more than merely a fight for wages. “Without strong trade unions, a just transformation will not be possible, but without a profound change in industry and resource consumption, the climate catastrophe cannot be averted.”
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