The United Automobile
Workers’ strike against the Big Three manufacturers that began earlier today is
exacerbating the most significant political vulnerability of President Joe
Biden’s drive to build a clean-energy economy.
A trio of bills Biden
passed through Congress during his first two years in the Oval Office has generated a torrent of private-sector investment into
clean-energy projects. But so far most of that green investment and
the jobs it will create are flowing into red-leaning communities that are
generally hostile to both the Democratic Party and labor unions.
Congressional Democrats
provided all the votes for the legislation that is catalyzing the rapid growth
of the new green economy. But with so many of the new energy projects
benefiting red places, many people in progressive circles worry that this
historic transformation will fail to generate either sufficient political
rewards for the president and congressional Democrats, or as many good-paying,
blue-collar jobs as Biden has repeatedly promised.
Fear that the shift to
electric vehicles will reduce the number of quality jobs in the auto industry
is the backdrop for the strike the UAW launched at midnight today. In both
public and private, union officials have made clear their belief that the auto
industry is using the technological transition to mask a second, economic,
transition.
They worry that the
companies are using the shift from internal-combustion engines to carbon-free
electric vehicles to simultaneously shift more of their operations from
high-paying union jobs mostly in northern states to lower-paying, nonunion jobs
mostly in southern states.
Moreover, the union and
its allies worry that the massive federal subsidies Biden’s agenda is providing
the companies for the EV transition is inadvertently underwriting that
transition toward lower-wage and nonunion plants. As Shawn Fain, the UAW’s new president, put it earlier this week: “There’s a lot with
the EV transition that has to happen, and there’s … hundreds of billions of our
taxpayer dollars that are helping fund this, and workers cannot continue to be
left behind in that equation.”
As the strike approached,
the Biden administration took conspicuous steps to respond to those concerns by
announcing a suite of multibillion-dollar Department of Energy loans and grants
designed to incentivize the auto companies to convert existing, unionized
plants to EV production.
“The president’s policy
position is absolutely clear: He’s pro-union,” one senior White House official,
who asked not to be identified while describing internal discussions, told me.
“He thinks that companies that are receiving the benefits should respect the
right to organize, should not interfere with workers’ ability to exercise that
right, and he wants to see these jobs be good union jobs. From a policy
perspective there is no daylight between the president’s policy preferences and
where the UAW is, or the other unions are.”
The challenge for the
Biden administration in delivering on that pledge is the decisions that the
auto companies and other industries are making in response to the bills he signed to promote more domestic investment:
the bipartisan infrastructure law, a measure to encourage more U.S. production
of semiconductors, and the Inflation Reduction Act, which contains federal
assistance for the domestic manufacture and deployment of low-carbon energy
sources.
The tax subsidies and
federal grants and loans in those bills have triggered a towering wave of new
domestic investments across a broad range of industries producing clean energy.
The big auto manufacturers alone have announced nearly $90 billion in spending
on manufacturing facilities to produce EVs in just the past two years,
according to the Center for Automotive Research, a nonpartisan Michigan-based
think tank.
Suppliers to the
companies, including firms producing semiconductors for automotive use, are
investing billions more in the EV transition. Brookings Metro, a nonpartisan
think tank, calculated that total private-sector
investment in EV manufacturing under Biden has reached nearly $140 billion.
This building surge dwarfs
the typical amount of annual investment in the auto industry over the past
quarter century, but still likely represents only a down payment on what’s
ahead. “There’s a lot of innovation that is going to happen over the next 20 years,
in terms of product, process, technology,” Alan Amici, the center’s president
and CEO, told me.
For Democrats, the rub
is how much of this capital is flowing into red places hostile
to unions and represented by House and Senate Republicans who voted against the
legislation that triggered the investments. (Every House Republican this spring
also voted to repeal all of the Inflation Reduction Act’s incentives for
clean-energy production.) The biggest recipients of the new investments include
more red states than blue ones, Brookings has determined.
Red states are receiving
so many of the new projects partly because they have lower tax rates and
electricity costs. But most analysts agree that companies have also channeled
so much of their new investments toward red states because most of them have “right
to work” laws that make it more difficult for unions to organize.
In the auto industry, this
preference for states resistant to unions has translated into a surge of
investment in the South. Brookings Metro calculated that the South has
attracted 55 percent of the total private investment in electric vehicles and
batteries under Biden. That’s more than double the portion of the new
clean-vehicle investment that has flowed into the Midwest, whose existing auto
plants are largely unionized.
That torrent of new money
includes plans to build EVs or their batteries by Hyundai and Rivian in
Georgia, Toyota in North Carolina, Tesla in Texas, BMW in South Carolina,
Mercedes-Benz in Alabama, General Motors in Tennessee, and Ford in
Tennessee and Kentucky.
The EV investments
announced so far are projected to generate at least 65,000 jobs across the
region, Stan Cross, the electric-transportation-policy director for the
Southern Alliance for Clean Energy, told me. Far more job growth is virtually
certain in the years ahead, Cross said, largely because such investment
patterns are self-reinforcing: Companies that provide parts for the big
manufacturers are already locating around their new southern plants, such as
the $1 billion in investment announced by suppliers near Hyundai’s Georgia
facility.
This southern EV boom is
reinforcing a long-term shift in the auto industry’s center of gravity that has
weakened the UAW’s position. Heavily unionized, Democratic-leaning Michigan
still employs many more people in the industry than any other state. But starting
in the mid-1990s in plants by Mercedes in Alabama and BMW in South Carolina,
the industry’s employment has steadily shifted to the South.
Since the early ’90s, the
South’s share of total auto-industry employment has roughly doubled from 15 to
about 30 percent, while the Midwest’s share has fallen, from 60 to about 45
percent, Karl Kuykendall, a regional economist at S&P Global Market Intelligence,
told me. Kuykendall said he “would not be surprised” if the pace of this
regional transition accelerates as the companies move deeper into the
technological transition to electric vehicles.
Hardly any of the auto
plants in the South are unionized. And wages even for manufacturing workers are
much lower in the region and in other red states than in the Midwest, as
Michael Podhorzer, a former political director for the AFL-CIO, has calculated.
The disparity between largely union and nonunion regions across the U.S.
creates an enormous challenge for the UAW.
In the strike that began
this morning, it is seeking a raise of about 40 percent over the next four
years, and the restoration of automatic pay increases for inflation, as well as
health and retirement benefits that it surrendered when the companies faced
bankruptcy amid the 2008 financial crisis. But even if the union succeeds at
winning a favorable contract, that could just increase the incentive for the
auto industry to shift more jobs to nonunion plants across the South.
While foreign automakers
have invested heavily in the South, the fabled Big Three domestic auto
manufacturers (General Motors, Ford, and Stellantis) still mostly rely on
facilities across the industrial Midwest. But the announcements by Ford and GM
that they plan to build battery plants in Kentucky and Tennessee may signal a
shift in that strategy.
As important to the UAW,
Ford, GM, and Stellantis are structuring their EV-battery plants, in the North
and the South, as joint ventures with foreign partners that are not subject to
the national labor agreement the companies are now negotiating. The union has
to negotiate separate contracts with those plants—where the companies are
offering much lower wages than in their unionized facilities.
“From all evidence,
automakers appear to be utilizing the shift to electric vehicles to do
everything in their power to lower job quality for the very workers they are
relying on to make this transition happen,” Jason Walsh, an executive director
of the BlueGreen Alliance, a coalition of labor unions and environmentalists,
told me. Those concerns have prompted the UAW to demand in the contract talks
that the auto companies guarantee that workers now building
internal-combustion-engine vehicles will be assured jobs as the companies
switch toward manufacturing more EVs.
Early on, the Biden
administration appeared somewhat obtuse to these concerns, even though Biden
has sympathized more overtly with organized labor than any other Democratic
president in decades. Speaking before a Silicon Valley industry group in early
June, Energy Secretary Jennifer Granholm turned heads among labor leaders when
she said the administration was “agnostic” about where
companies choose to site their clean-energy investments.
Her department, perhaps
reflecting that perspective, a few weeks later approved more than $9 billion in
federal loan guarantees to Ford and a Korean partner to build their EV-battery
plants in Kentucky and Tennessee, two right-to-work states. Fain, the union
president, immediately issued a statement condemning
the loan guarantees and declaring that the administration was “actively
funding” a “race to the bottom” in wages and benefits “with billions in public
money.”
Fain’s message appears to
have been received. The administration’s tone was different in late August,
when the Energy Department announced that it was making available $2 billion in
grants and $10 billion in loan guarantees under the Inflation Reduction Act (as
well as another $3.5 billion in grants under the infrastructure bill) to
subsidize the conversion of existing plants to make electric vehicles and their
batteries.
“We are going to focus on
financing projects that are in long-standing automaking communities, that keep
folks already working on the payroll, projects that advance collective
bargaining agreements, that create high-paying, long-lasting jobs,” Granholm told reporters at the time.
That message reflected
Biden’s own priorities, the senior White House official told me this week: “All
I would say is, the president is not ‘agnostic’” about where the clean-energy
investments are flowing. “He’s the president for all of America. But all of
America ought to respect the right to organize. He is trying to move the system
toward good-paying jobs and more union density.”
Labor allies agree the
administration is now focusing more on the potential challenges for workers in
the EV transition than it did earlier in Biden’s presidency. The late-August
Energy Department announcement “is a very clear indication that the Biden administration
is hearing what union workers are saying and is trying their best to be
responsive to that,” Walsh said.
The problem for the
administration is that it has limited tools to shape how the auto companies
make their investments. Generally, under the kind of federal loan and grant
programs that Granholm made available in August, the administration can
encourage companies to preserve existing plants and also to remain neutral in
labor organizing campaigns when the firms open new clean-vehicle facilities.
All indications point to
Biden using that leverage more aggressively than he did earlier in his
presidency. Over time, the senior White House official said, the administration
“has strengthened its negotiating posture” to demand “stronger community benefits”
from companies seeking the loans or grants.
But the Inflation
Reduction Act’s biggest incentives for building electric vehicles are generous
tax credits for both producers and consumers. And those credits are available
to companies that build and source a specified share of their materials for EVs
domestically whether or not they use union labor.
When the House passed its
version of the Inflation Reduction Act in 2021, it included another $4,500 tax
credit to consumers for EVs built largely with union labor, but Senator Joe
Manchin of West Virginia, a Democrat, insisted on the removal of that provision as
one price for his vote that allowed the overall package to pass the Senate.
That now looks like an
extraordinarily consequential concession. “This is happening because Joe
Manchin pulled the union requirements out of the IRA and that really opened the
door to this perverse situation where, by law, the administration has constraints
about how far it can push to ensure that there are going to be good quality
jobs in this transition,” says Adam Hersh, a senior economist at the Economist
Policy Institute, a left-leaning think tank.
Looming over all these
maneuvers is former President Donald Trump’s relentless attack on Biden’s
clean-energy agenda. In speeches, Trump has repeatedly declared that Biden’s
intertwined proposals to promote EVs will “kill countless union autoworker jobs forever, especially in
Michigan and the Midwest.”
Trump, and some of the
other 2024 GOP candidates, have pledged to repeal the IRA’s clean-energy
incentives as well as Biden’s proposed fuel-economy standards for cars and
light trucks, which would require the companies to massively shift their sales
toward EVs over the next decade. In effect, Trump is presenting the transition
to EVs as another example in his broader claim that the left is seeking to
uproot and transform America as his supporters know and understand it.
While many labor leaders
have endorsed Biden for a second term, Fain has pointedly withheld the UAW’s
endorsement. And Fain has publicly warned that Trump’s
denunciation of the EV transition could find a receptive audience among his
members if the union can’t win a generous contract and strong guarantees of job
security. Given the importance of the industrial Midwest to the president’s reelection
hopes, Biden may have nearly as much at stake as Fain in the outcome of this
strike.
Ronald Brownstein is a senior editor at The Atlantic and a senior
political analyst for CNN.
