The strike in the automobile sector in the United States is currently only partial. Only one model from each of the three major automobile manufacturers is affected. But it could expand quickly if no one gives in to workers’ demands. This crisis is the result of three problems. First, American automakers have been overtaken by those in the rest of the world, particularly in Asia. Then the redistribution of wealth in the United States is as bad as it was before the Great Depression of 1929. Finally, Americans refuse to change or even consider changing their automobile-oriented lifestyle.
1) How important is the automobile industry in the United States?
The automotive industry accounts for 3% of the country’s GDP. The company employs 238,000 people in its 250 factories in 31 American states. Automobiles are America’s number one export. Many companies are directly dependent on the automotive industry. However, this industry is threatened by Chinese electric cars, which are cheaper and of very good quality. It is also threatened by new, more cost-effective assembly processes, such as high-pressure casting developed by Tesla.
2) How does the redistribution of wealth affect the automobile industry?
One of the great advances in the American economy came when Henry Ford decided in 1908 to increase his employees’ wages and reduce his production costs so that his employees could buy his brand of cars. This way of conceiving economic relations was so successful that it earned the name of their company: Fordism. However, nowadays employees of automobile companies find it difficult to buy new cars. While companies have paid their shareholders extremely high dividends in recent years, their executives’ salaries have increased by 40%. The employees are therefore demanding a similar increase.
3) Is the automobile-oriented lifestyle reaching its limits?
For energy and infrastructure cost reasons, the automotive lifestyle in North America is reaching its limits. However, given the fierce individualism that is increasingly prevalent in the United States and the poor development of small and medium-sized American cities, Americans are extremely resistant to public transportation. In addition, the latter are anemic in the United States compared to Europe or several Asian countries.
4) What impact will this strike have on Joe Biden’s campaign?
The election campaign for the 2024 presidential election has already begun. Unions are generally close to the Democratic Party. We must therefore expect the White House to endorse union positions. However, a sharp increase in wages for workers in the automotive industry will drive up wages in other sectors, which will contribute significantly to inflation. Therefore, the central bank has to keep interest rates high and so on. Unless central bank chiefs finally admit that the 2% inflation target is artificial and unrealistic under current circumstances.
5) What impact will this have on Canada?
The American automobile industry is integrated into the Canadian automobile industry. A short strike is unlikely to have much impact on Canadian factories. In the longer term, this strike will impact wages in Canada and therefore inflation.
