Does the United Auto Workers Union Want a Strike?

The United Auto Workers union is threatening to strike if Detroit auto makers don’t agree to new labor contracts by Sept. 14. A walkout would be painful for both sides and the U.S. economy. But the bigger risk is an agreement that makes it harder for U.S. auto makers and workers to compete with non-union rivals amid the government-mandated electric-vehicle transition.

UAW President Shawn Fain, who was narrowly elected in March, has taken an aggressive line in negotiations with Detroit’s once Big Three. Last week he sneered at GM’s offer of a 16% pay increase over four years, plus $11,000 in inflation payments and bonuses. Ford last month offered to increase pay by 15% and eliminate two-tier wages for newer workers. Mr. Fain called it an “insult.”

He’s demanding a 40% increase in hourly wages over four years, restoration of defined-benefit pensions for all workers, job guarantees, cost-of-living adjustments and a 32-hour workweek with overtime paid when employees work more. By one industry estimate, the union’s demands would add more than $80 billion to each auto maker’s labor costs over four years.

The companies’ labor costs would rise to more than $150 an hour from about $65 now. Non-union workers at foreign manufacturers earn an average of $55 an hour including benefits, while those at Tesla make about $45. Mr. Fain’s outsize demands suggest he wants a strike to show he’s a tough negotiator.

Despite their higher labor costs, Detroit auto makers have been raking in profits by dint of their popular SUVs and trucks. But their future profitability isn’t guaranteed as government EV mandates will impose hefty costs and make their gas-powered SUVs and trucks obsolete. Ford lost nearly $60,000 on each EV it sold during this year’s first quarter. Auto makers are currently using profits from gas-powered vehicles to ramp up EV production and subsidize their sales.

Mr. Fain risks repeating the mistake of his predecessors by making demands that render U.S. auto makers and workers uncompetitive against non-union foreign rivals with factories in southern right-to-work states. Detroit auto makers’ market share shrank to 47% in 2008 from 71% in 1998.

Growing losses eventually pushed Chrysler and GM into bankruptcy. Tens of thousands of union workers lost jobs, though the blow was softened by an $80 billion bailout from the federal government. The UAW agreed to lower wages and to accept 401(k)s rather than traditional pensions for new workers in return for a share of auto-maker profits.

Helping resurrect the Big Three was the U.S. shale fracking boom, which drove down oil prices and boosted demand for gas-powered trucks and SUVs. Detroit auto-maker profits have also resulted in hefty worker bonuses most years. Stellantis workers received an average $14,760 in profit-sharing this year.

The UAW’s costly demands will drive more auto and auto-parts production to right-to-work states, which would mean fewer union jobs. Hyundai and LG Energy Solution are building a giant battery factory in Georgia. BMW plans to produce its EVs in South Carolina, as does VW Group’s

Union work rules also make it harder to operate plants efficiently, which is why foreign auto makers and Tesla have tried to avoid them. The U.S. car makers will have to decide how much they can afford to concede to Mr. Fain, and shareholders can decide if it’s too much. But if the UAW drives too hard a bargain, it could drive its own members to the unemployment line.