Auto worker strike explained: the pay gap, the talks and what Biden is doing

Industrial action billed as “the biggest auto strike in generations” got under way late on Thursday night for 150,000 US autoworkers, with employees at Ford, Stellantis and General Motors walking off the job at 11.59pm after contract negotiations failed to reach a deal.

Related: The United Auto Workers may soon strike. Every American should support them | Bernie Sanders

It’s the latest in a series of strikes called or threatened by workers in industries including shipping and logistics, TV and movie production and hotel and leisure. Given its scale, the strike could deal a significant blow to the US economy as well as the auto industry.

Why is it happening?

The United Auto Workers (UAW) union says workers have never been fully compensated for the sacrifices they made after the 2008-09 financial crisis, when they agreed to a raft of cuts to save the industry. The carmakers received huge bailouts and soon returned to record profits.

Workers are pushing for at least a 40% wage increase over four years in a new contract; an end to two-tier wage systems in which new hires are paid significantly less for doing the same work; an increase to benefits for retirees and return of a defined pension instead of a 401k; reinstatement of cost-of-living adjustment raises; a 32-hour working week; job security protections; and protections for workers affected by plant closures.

How big is the pay gap?

The vast disparity in pay between workers and their bosses is one of the UAW’s biggest bones of contention.

• General Motors CEO Mary Barra made $29m in 2022 – 362 times the median wage of $80,034 at the company.

• Ford CEO Jim Farley made $21m in 2022 – 281 times the median worker of $74,691.

• Stellantis CEO Carlos Tavares made $24.8m in 2022 – 365 times the average worker’s $67,789 wage.

CEO pay at the big three companies jumped by 40% between 2013 and 2022. Meanwhile, auto manufacturing workers have seen their average real hourly earnings fall 19.3% since 2008, according to the Economics Policy Institute.

Starting wages at GM’s Ultium Cells battery plant in Lordstown, Ohio, are just $16.50, according to the UAW. Meaning it would take 16 years for a full-time worker to earn what Barra earns in a week.

Who’s leading the charge?

The UAW president, Shawn Fain, was elected to head the union as part of a reform campaign within its ranks, aimed at taking a more aggressive approach towards bargaining after workers had accepted concessions amid bankruptcies during the 2008 economic recession. Workers have yet to regain those concessions, or a share in the $250bn profits the big three automakers have raked in over the past decade.

How did the strike begin?

In late August, the UAW announced members voted about 97% in favor of the strike authorization. The union has never gone on strike at the big three automakers simultaneously.

A minute before midnight on Thursday, after their contracts expired, UAW members walked out at three assembly plants in Michigan, Missouri and Ohio. The union said that about 13,000 workers were affected.

The Detroit Free Press reported that the Stellantis complex in Toledo, Ohio, erupted in cheering and honking of horns as the strike began.

When did the UAW last strike?

Workers at General Motors last went on strike in 2019. It lasted 40 days and cost the carmaker $3.6bn. In 2019, contracts were reached with Fiat-Chrysler, now Stellantis, and Ford without a strike occurring.

What happened to talks?

Talks are going on, “in good faith”, General Motors chief executive Mary Barra said on Friday morning. But management and workers failed to reach an agreement by the midnight deadline when current contracts expired and so the strike began. Fain has previously posted video updates on negotiations in which he has thrown copies of proposals from the automakers in the bin, criticizing the companies’ offers.

In the UAW’s most recent negotiation update, Fain criticized the counteroffers from Ford, Stellantis and GM, saying they keep in place two-tiered wages for workers; rejected their retirement and pension proposals; called wage proposals from Ford and GM “shameful and insulting”; and characterized Stellantis’s offer as “deeply inadequate”. The union has called for significant wage increases that reflect the salary increases of the companies’ CEOs.

“It doesn’t make up for inflation, it doesn’t make up for decades of falling wages and it doesn’t reflect the massive profits we generated for this company,” said Fain.

The automakers have criticized the union’s proposals and claimed they are not “feasible”.

How serious could it get?

In the first instance, the UAW planned “standup” strikes aimed at individual auto plants, with members from three plants walking out overnight after talks failed.

Under this strategy, a strike flares without warning at targeted, individual plants. Then additional locations follow – ramping up the pressure on the companies. UAW says as time goes on, more locals may be called on to join the strike.

“This gives us maximum leverage and maximum flexibility in our fight to win a fair contract at each of the big three automakers.” The option to strike across all facilities is “still on the table”.

What are the costs?

The automotive industry contributes about 3-3.5% of the US gross domestic product (GDP), the broadest measure of the economy.

Vehicle supply – just recovering from pandemic shortages – would be hit hard. A month-long strike at the three automakers could cut output by as many as 500,000 vehicles, according to Sam Fiorani, vice-president of global vehicle forecasting for AutoForecast Solutions.

Ten-day strikes at all three automakers could cost manufacturers, workers, suppliers and dealers more than $5bn, according to economic consulting firm Anderson Economic Group.

Is the White House getting involved?

Biden appeared to support the strikers when he spoke at a press briefing hours after the strike began on Friday. The president said in his White House address: “Record corporate profits … should be shared by record contracts for the UAW.”

He also expressed regret that the strike had not been averted but urged both parties to return to the negotiating table. “No one wants a strike but I respect workers’ rights to use their options under the collective bargaining system and understand their frustrations,” Biden said.

“I do appreciate that the parties have been working around the clock. It is my hope that the parties can return to the negotiating table to forge a win-win agreement.”

His comments came after business groups had been pushing the White House to intervene to avert a strike. Hours after the strike began, the president also reportedly said he would send aides to Detroit to mediate.