Transportation is responsible for one-third of the nation’s greenhouse gases, more than any other sector of the economy. To slash these emissions, President Joe Biden set a goal for half of all new US passenger vehicle sales to be electric vehicles by 2030. The 2022 Inflation Reduction Act (IRA) is providing billions of dollars to assist U.S. automakers with this transition.
As part of the process, automakers have been building or planning battery plants, including about a dozen in the southeast US, six in Michigan, and two in Ohio.
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Battery plants become a sticking point for organized labor
The United Auto Workers recently ended a six-week strike against the “Big Three,” Ford, General Motors and Stellantis (formerly Chrysler), and now have tentative contract agreements.
The unionization at EV battery plants was called the make-or-break issue in negotiations. As the industry transforms, UAW leaders said their workers’ long-term job security depends on it.
Negotiating these types of agreements presented challenges for the automakers, because many new battery plants are like the Ultium plant in Warren, Ohio, which is jointly owned by GM and LG Energy Solutions of South Korea.
Still, both GM and Stellantis have agreed to ease the process for battery plant workers at jointly-owned plants to unionize if they choose, and then be included under the UAW’s master contract, which determines wages and benefits for its members.
“I think this agreement is kind of a landmark in climate policy,” said Jason Walsh, executive director of the BlueGreen Alliance, a partnership of labor unions and environmental organizations.
“It should be tremendously exciting, not just for folks who support the efforts of workers to get their fair share, but it should be exciting to climate advocates because this is what a ‘just’ transition looks like,” he said, referring to that the shift to clean energy needs to be fair and inclusive, and create work opportunities.
Federal fuel efficiency standards are on the rise, consumers are demanding electric vehicles, and the Inflation Reduction Act is helping automakers make the shift to EV production, according to Walsh.
He said the UAW is ready to embrace a future that is moving toward electrification.
“And they have forcefully rejected the false choice posed by some, including a certain former president, that we have to choose between making the transition to EVs and paying workers family-supporting wages. We can do both. And I think these agreements lay a foundation for doing both,” Walsh said.
GM’s inclusion of Ultium workers in Ohio is a good example
Ultium plant workers have already seen an increase from $16.50 to $20 an hour, according to David Green, United Auto Workers Region 2B director, who represents some 180,000 workers in Ohio and Indiana.
And that’s supposed to go up further with the new contract.
“They shouldn’t be making any less than really about $27 [an hour] if the members decide to ratify the agreement. That’s pretty huge, we’re talking like a 75% pay increase by joining the union,” Green said.
What could the UAW deal mean for competition with non-union automakers
Competitors of the Big Three, like Honda and especially Tesla, which dominates electric car sales, are not unionized. In the wake of the UAW strike, non-union Toyota provided a nine-percent pay hike to most of its US factory workers.
Green said they hope to use their success with the Big Three, especially the GM and Stellantis battery plants, to try to convince workers at non-unionized plants that it’s in their best interest to join the movement.
“Make no mistake, our goal moving forward is to go organize, to go talk to the folks at Honda, Tesla, and every place else and explain to them why it’s important to have a voice at the table, what we do for our members and let them make that choice,” Green said.
This effort is critical to deal with climate change, according to Devashree Saha, director of the US Clean Energy Economy program at the World Resources Institute, who has closely followed the move to electric vehicles. She said unionization is necessary for the energy transition.
“Labor unions, community organizations, they are not going to be supportive of the decarbonization agenda if they don’t see themselves benefiting from all the investment that is taking place in the country today,” she said.
But the EV market is slowing
While the federal government offers $15.5 billion in grants and loans to US automakers for the EV transition, plus $3.5 billion to expand electric battery manufacturing, GM said in its recent earnings call that it’s scaling back on the goal to build 400,000 EVs through mid-2024. Ford said in July that it expects to lose $4.5 billion this year in its EV business, and last month said it is postponing $12 billion in planned EV investments.
Ford said customers are not willing to pay a premium for electric vehicles. According to Detroit News, the company expects the tentative contract to increase the cost of its EVs even further.
“I think it’s definitely an open question at this point of how much could this expanded labor agreement lead to increased vehicle prices,” said Kevin Roberts, director of Industry Insights and Analytics with CarGurus.
The average EV costs about 28% more than the average internal combustion engine vehicle, according to Roberts.
Currently, he sees high prices, along with high interest rates and the need for charging stations, as issues that are slowing down EV sales. He said the automakers are figuring out how, and how quickly, it makes sense to increase production.
“If you look at new EV sales rates, they’re up quite substantially year over year. So it is growing,” Roberts said. “It’s just not growing as fast as a lot of the automakers had forecasted. It’s just the slope of growth isn’t quite as steep.”
Devashree Saha agrees.
“I don’t doubt that the transition is already happening, and we are looking at an electrified future. What is still in doubt is the pace of the transition,” she said.
Federal tax credits for people who buy EVs will become easier to get in 2024. Currently, buyers can claim up to a $7,500 credit on their tax return on a new qualifying electric vehicle purchase. Next year, the credit can be applied at the point of sale.
Saha said it’s too soon to know if tax credits will be enough. She sees a need to bring down prices to get a mass adoption of EVs.
“There aren’t a whole lot of cheap EVs that are available in the market,” she said. “So, having that choice of affordable EVs that buyers can choose from, that is going to be a key factor.”
An invitation for workers to return home
In 2019, GM made headlines when it closed its assembly plant in Lordstown, Ohio. Many of the last 1500 workers were offered jobs at other GM plants outside of Ohio. According to Green, GM is now inviting those workers back to Ohio to work at the Ultium battery plant, if they want to come home.