GM’s future is electric. That poses challenge for Motor City workers.

Rebecca Cook/Reuters
Striking United Auto Workers walk the picket line in Hamtramck, Michigan, on Sept. 25, 2019. The General Motors assembly plant there is scheduled to close, and the company has reportedly backtracked on an offer to build electric pickup trucks there.
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Can Motor City thrive if the motor is electric? That’s a big question General Motors and striking autoworkers are wrestling with as they bargain over a new labor contract.

Facing a once-in-a-century technological tsunami from electric and autonomous vehicles, the automaker wants flexibility on wages and work arrangements to prepare for the change. Keeping wages for temporary workers low might help the company produce the batteries and other key components of future vehicles.

Why We Wrote This

For a century “Detroit” has been synonymous with the auto industry. Talks between GM and striking auto workers are partly about whether it can remain a magnet for engineering talent and car-making creativity.

The union also wants Detroit to prosper – by creating as many well-paid, middle-class jobs as it can when the new technologies come on board. But even if jobs can stay in Michigan, there’s a catch: Electric vehicles have fewer components and are far simpler to assemble than conventional cars. That means fewer union workers will be needed.

In the end, both sides need each other, says Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “The UAW is going to have to give GM some flexibility. But GM will have to build into their flexibility some higher costs.”

For a once-in-a-century shift that will upend the auto industry, General Motors’ foray into the future is decidedly modest.

Its battery plant – the first U.S.-based battery assembly facility owned by any major automaker – is tucked away in the back of a large industrial park here in Brownstone Township, a suburb of Detroit. The plant entrance, built into a loading dock, looks virtually indistinguishable from the scores of other loading docks here, except for the glass doors and concrete steps with bright yellow banisters. Fewer than 50 employees work here, assembling batteries and rooftop modules for GM’s Cruise, an electric, potentially driverless, GM taxi that is being tested in San Francisco.

The Brownstone plant illustrates the dilemma facing the automaker and workers: How do you prepare for a technological shift that looks inevitable, but whose arrival date is far from certain? That question hangs heavily over the contract talks between GM and the United Auto Workers (UAW), whose strike against the automaker has stretched into its fourth week. But it’s also a reason for compromise, because the technology threatens to disrupt Detroit’s position in the global auto industry and may portend the outsourcing of key, valuable components to other parts of the country or the world. Both sides have an interest in avoiding that.

Why We Wrote This

For a century “Detroit” has been synonymous with the auto industry. Talks between GM and striking auto workers are partly about whether it can remain a magnet for engineering talent and car-making creativity.

“It’s going to be they realize that they have to come to an agreement,” says Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “And the UAW is going to have to give GM some flexibility. But GM will have to build into their flexibility some higher costs.”

The technologies of electrification and automation are so disruptive – some experts put it on par with the triumph of the internal combustion engine a century ago – that it’s anybody’s guess who will build the most valuable components – or where. 

In the wake of Tesla’s success in Fremont, California, electric vehicle start-ups are popping up on the West Coast. Eager not to be left behind, Germany and eight other European nations agreed last month to set up a consortium for producing EV battery cells, although details still have to be worked out. China represents the biggest threat to the Motor City with its vast push to create an EV industry. By some estimates, it already has more than 60% of the world’s EV battery manufacturing capacity.

Detroit’s Big Three – as well as the union representing workers, the United Auto Workers – are keenly aware of the threat.

A center of automotive talent

Detroit has so many advantages, including a broad base of engineers and workers with deep experience in building cars, that some observers say the threat is overblown.

“There’s no chance that Detroit is going to shrink or be less important than it is today,” says Jim Taylor, a former GM executive and now co-CEO of Seres, an EV company based in California and owned by Chinese automaker Sokon. No matter if batteries and autonomous navigation are added to cars, there is still a recognizable vehicle to assemble and Detroit excels at that, he adds.

Others say the disruption of Detroit has already begun. “Do the mainstream automakers become the buggy-whip manufacturers of a bygone era? I don’t know,” says Bob Kruse, another veteran of GM who is now chief technology officer at Karma Automotive, a luxury plug-in hybrid company in California. (Mr. Kruse makes clear he’s not speaking for the company, which is owned by Wanxiang Group in China.) “It depends on how quickly they recognize what is happening and adapt.”

Both California EV companies have opened tech centers in the Detroit area to take advantage of the region’s engineering talent.  

Detroit’s future also may depend on which way the technology evolves: as incremental improvements or an unforeseen breakthrough or series of breakthroughs, says Professor Gordon.

The first path could help Tesla and the Chinese automakers who have already made large commitments to existing technology. The second path could rapidly boost the fortunes of one of the many EV startups.

For their part, GM, Ford, and Fiat Chrysler are keeping their options open, pushing to add hybrid options to existing models rather than committing to a raft of new EVs. In contract talks, GM reportedly proposed reopening its Hamtramck, Michigan, plant with production of an electric truck and its Lordstown, Ohio, plant by producing EV batteries there. But some reports now say GM has withdrawn that proposal in the ongoing talks.

Even here at the Brownstone facility, GM shifted battery production away from the plant and cut the workforce by nearly half earlier this year. Brownstone now assembles batteries exclusively for the Cruise program. The batteries for the Chevy Bolt, GM’s flagship all-electric car, are made by LG Chem, a South Korean company.

While GM is eager to preserve such flexibility in contract talks, given the uncertain future, the UAW wants to create a more stable workforce by bringing temporary workers up to union wages more quickly. Those workers currently make about half of what full-time UAW employees earn.

But the union also wants to maintain jobs in Detroit, where it has had the most success organizing workers. And that puts the union in a tough spot. How does it encourage GM and the other automakers to make batteries with union labor at places like Brownstone, often at a cost of $30 or more per hour, when they can buy batteries from LG Chem, which reportedly pays its workers $16 an hour?

“This [technological] shift is an opportunity to re-invest in U.S. manufacturing. But this opportunity will be lost if EVs or their components are imported or made by low-road suppliers who underpay workers,” the union said in a report calling for a new U.S. industrial policy. 

Fewer workers needed

Even if battery assembly grows in the U.S., EVs remain a threat for the union. Electric drivetrains are much simpler to assemble than internal combustion engines and they eliminate the need for a transmission, exhaust and emissions systems, and a fuel tank. That means it will take fewer workers to assemble them. In March, the director of the union’s research division said EVs could lead to the loss of 35,000 UAW jobs, just over a quarter of the total union workforce employed by the Big Three.

For all the hype about electric cars, they still account for less than 2% of U.S. auto sales. One big factor: They cost more than conventional cars, due to the high cost of batteries. Those costs have fallen dramatically in the last decade and should fall to the point EVs become cost-competitive with conventional cars sometime in the 2020s, many analysts say.

Driverless cars look to be even more far off in the future. But in some areas, that technology could speed the adoption of EVs, according to the UAW report. For example, an office park could adopt electric driverless shuttles, because the driving environment is more predictable than city streets and because EVs are less costly to run and maintain than conventional buses, making it easier to justify the higher upfront cost.

“I can assure you that 50 years from now, all of our personal transportation needs will be met with electric propulsion,” says Mr. Kruse of Karma Automotive, which expects to build and ship about 500 of its new hybrid Revero GT this year, with a starting price of $130,000. But technological adoption “is a slow process. It takes time.”

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