A tentative deal has apparently been reached between Ford and UAW workers – who have been not-working in order to leverage themselves more pay for less work. Ford has agreed, apparently, to pay these workers 25 percent more over the next four years, plus cost-of-living adjustments and a “three year path to top wages,” whatever that means.
Here’s what it will mean for you – if you’re looking to buy a new Ford in the future: It’s going to cost you more. Because someone’s going to have to pay for these raises – and benefits. People who think Ford will pay are like the people who think government benefits are “free” – or that public servants are answerable to the public.
How much more all of this is going to cost isn’t yet known. But that it will cost is as certain as the price we pay for government benefits.
Ford will pay by trying to recoup its losses. It will raise the prices of the vehicles it sells in order to make up for what it pays the workers who assemble them. This will make selling them more difficult, especially given rapidly rising interest rates (as on car loans) and the rapidly diminishing buying power of the currency people are obliged to use to buy things with. When two small plastic bags of groceries cost $100 it’s kind of a deterrent to sign up for a car loan that costs $700 per month – which is about what the average monthly car payment is right now.
How many people will sign up for a loan that costs them another $100/month – or even $50?
The breaking point has probably already been passed – and we won’t fully appreciate this until after we’ve long passed it. Just the same as the people on Titanic did not fully appreciate the situation until some time had passed after the ship hit the iceberg.
In this case, the “iceberg” is the unwillingness of UAW workers to grasp the fact that they only get paid if people buy – and that if it becomes more expensive to sell a car, then fewer people will buy. If fewer people buy, there is less demand for what’s not selling. And less need for more workers.
Hans Landa from Inglorious Basterds might call that a Bingo!
The UAW’s position, of course, is that Ford can afford to pay; more finely, that Ford’s buyers can afford to absorb the cost of paying workers 25 percent more – plus the cost of benefits. This presumes Ford is a kind of charity operation rather than a business that’s in business to make a profit (including for shareholders). This becomes more difficult to do when what you’re trying to sell costs too much for many people to buy.
Already, the average cost of a new vehicle is nearly $50,000 – which is about $15k higher than it was only three years ago. That’s a disincentive to buy, all by itself. Now add paying twice as much (or more) in interest on the loan, using money that’s lost 15-20 percent of the buying power it had three years ago.
It’s the perfect time to add another straw to the camel’s back, eh?
The UAW – and the Big Three – are caught up together in a kind of dance macabre. They both avoid dealing with the real problem that besets them both, even as they both haggle with each other over peripheral matters.
What ought to matter – to both – is the existential threat they’re both facing, much as they try to turn away from it. That being “electrification.” More finely, the forcing of “electrification” via the out-regulating of anything that isn’t battery-powered.
They think it will be business-as-usual when they no longer work to build cars, after the latter have been forced off the market in favor of battery powered devices. The cost of trying to sell them to people who cannot afford or do want them will be UAW jobs, as fewer workers are needed to shepherd a device down the line. Most of the work can be performed by machines, automatically. And even if there were just as much work involved in putting together a battery powered device, if it costs beyond a certain sum to sell, it won’t sell.
That plus the other costs of battery powered devices that a growing number of people have clearly decided they’re unwilling to pay will render the 25 percent pay raise just leveraged by the UAW as valuable as a Confederate States of America dollar long before four years from now.
When nothing’s selling because no one’s buying , few will be working.
. . .
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