Members of the United Auto Workers sit on strike outside General Motors’ Detroit-Hamtramck assembly plant on September 25, 2019 in Detroit.

Michael Wayland / CNBC

DETROIT – The Oracle of Omaha is cutting investment in the US automotive industry amid union talks – potentially for good reason.

Warren Buffett’s Berkshire Hathaway said this week it has nearly cut its stake in half General Motors in the second quarter. Although the company did not disclose its reasoning, the end of the year is expected to be a challenging one for the US automotive industry plagued by contentious contract negotiations between the United Auto Workers union and GM. ford motor And Stellantis.

The talks, which involve about 150,000 US auto workers, could cost automakers billions of dollars in additional labor costs, job losses or, in the worst case, both.

The new UAW leadership team has called these talks a “defining moment” for the union. President Sean Fein has already applied tough messaging and some theatrics, including the contract offer being thrown out by Stellantis. in the dustbinAnd there has been little or no talk about “give-and-take” or “win-win” deals.

“They are prepared to strike if there is no agreement,” said Melissa Atkins, labor and employment partner at Obermayer. “With that mindset, I expect it to be very controversial … and given history, there will likely be a strike.”

The union’s aggressive efforts bode well for organized labor and the beleaguered UAW, which is trying to find its footing again after years of federal corruption investigations. Many top leaders in jail For bribery, embezzlement and other crimes – but not for companies or their shareholders.

Here are the numbers investors should know ahead of the expiration date of existing contracts between Detroit automakers and the UAW on Sept. 14 at 11:59 p.m. ET.

$80 billion

Contract proposals made by the UAW to this point would add more than $80 billion in labor costs for each of the largest US automakers over the term of the contracts, Bloomberg News first reported earlier this month.

“One can think of these UAW contracts as a set of three large purchase orders to secure the labor needed to assemble future vehicles, parts and components – these contracts will collectively be delivered during the next four years for approximately are worth $70-$80 billion,” Kristin Dziczek, automotive policy advisor for the Detroit branch of the Federal Reserve Bank of Chicago, wrote in a Wednesday blog post.

Sean Fain, president of the United Auto Workers, greets workers at the Stellantis Sterling Heights Assembly Plant at the start of contract negotiations on July 12, 2023 in Sterling Heights, Michigan, US.

Rebecca Cook | reuters

Demands include a 46% wage increase, restoration of the traditional pension, cost-of-living increases, reducing the work week from 40 to 32 hours, and increasing retirement benefits.

According to media reports, if the UAW meets those demands without any changes to other benefits, hourly labor costs for automakers would more than double from at least $64 per hour to more than $150 per hour.

According to estimates by the Center for Automotive Research, this would be a significant increase compared to wage increases seen during previous four-year agreements. 2019 deals were predicted Increase average hourly labor cost Raises were offered at $11 per employee over the term of the contract for then-Fiat Chrysler, now Stellantis, and $8 per employee at GM and Ford.

Under the current pay structure, UAW members start at about $18 per hour and have a four-year “growth” period to reach top wages of more than $30 per hour.

$5 billion

The loss of work by approximately 150,000 UAW workers at GM, Ford and Stellantis will result in economic losses. Over $5 billion after 10 daysAccording to Andersen Economic Group, a Michigan-based consulting firm that closely tracks such incidents.

AEG estimates the total economic loss by calculating the potential damage to UAW workers, manufacturers and the auto industry if the two sides do not reach tentative agreements before the current contract expires.

In another analysis, Deutsche Bank previously estimated that the strike would affect earnings of approximately $400 million to $500 million per week for each affected automaker.

Strikes can take many forms: a national strike, where all workers under contract stop working, or targeted work stoppages in certain plants over local contract issues. A Strike against all three automakersAs Fenn indicated, the union would be the most effective but also the riskiest and most costly.

$825 million

The UAW has more than $825 million in its strike fund, which it uses to pay eligible members who are on strike. Strike pay for each member is $500 a week – up from $275 in 2022.

Speaking against a backdrop of American-made vehicles and the UAW sign, President Joe Biden, then a presidential candidate, talks about new proposals to protect American jobs during a campaign stop on Sept. 9, 2020 in Warren, Michigan I speak

Leah Millis | reuters

1.5 million

If the union decides to strike against all three Detroit automakers, production losses will skyrocket.

S&P Global Mobility estimates that a 10-week strike would mean lost production of about 1.5 million units, according to an investor note from Mizuho Securities USA.

The company then said that a 40-day strike against GM during the last round of talks in 2019 resulted in a production loss of 300,000 vehicles. it also costs Automaker earns $3.6 billionGM said.

Industry experts argue that a strike against all or any automakers would hit companies’ operations and profits more sharply than four years ago as the US auto industry is still reeling from supply chain problems suffered during the coronavirus pandemic. Used to be.

Vehicle inventory levels for automakers are also lower than what was negotiated four years ago.

Heading into 2019 contract talks, according to Cox Automotive, US vehicle supplies stood at 3.73 million — essentially enough units for 86 days of sales under normal conditions at the time. The industry currently has just under 2 million units, with a supply of 56 days.

“In 2019, there was a lot of slack. Now there’s almost no slack,” AEG CEO Patrick Anderson said Thursday during a webinar with the Automotive Press Association. “If we have to strike, within the first week, the figures will start to get grim for every automaker.”

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