While the United Auto Workers’ targeted strike against the Big Three vehicle manufacturers continues into its third week, an 11th-hour deal with Greensboro-based Mack Trucks over the weekend averted a walkout by thousands more members.
The tentative pact also illuminates an economic trend that has gained momentum since the passage of the Inflation Reduction Act a little more than a year ago, and likely will accelerate as more U.S. drivers shift from gas-powered cars and trucks to plug-in vehicles.
The UAW’s deal with Mack covers nearly 4,000 employees in three states, but not workers at the company’s only American facility that assembles electric trucks. That’s because the workforce at the plant — in Roanoke Valley, Virginia, about 100 miles north of Mack’s headquarters — is not unionized like the UAW members who now must vote on whether to ratify the pact.
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The Roanoke Valley factory began operations in 2020. Mack, like a growing number of automobile manufacturers, selected a site in a Southeastern state where “right-to-work” laws make it difficult for unions to get a foothold. That’s because workers in Virginia — like those in North Carolina — don’t have to join a union to get and keep their jobs.
The Southern migration, fueled largely by foreign automakers looking for lower labor costs as they entered or expanded in the U.S. market, began in earnest in 1983 with a Nissan assembly plant in Tennessee.
BMW, Kia, Mercedes-Benz, Toyota, Volkswagen and Volvo were among the companies to eventually follow Nissan to the region.
Today, the UAW’s demands on Ford, General Motors and Stellantis (formerly Chrysler) ultimately could cut many of the union’s members out of the shift to electric-vehicle manufacturing while fueling an already-steady wave of investment in North Carolina and other Southeast states.
‘Risky’ strategy
Foreign and domestic companies have announced plug-in vehicle projects totaling $11.5 billion in North Carolina since President Joe Biden’s landmark legislation became law in August 2022.
That ranks sixth nationally, while five of the seven leading states for electric-vehicle-related commitments after the IRA’s passage are in the Southeast. Overall, more than half of $165 billion in new commitments tied to EV manufacturing over that period were in the Southeast, according to a report from the Environmental Defense Fund.
Michigan ranked second on the EDF’s list of top states for recent electric-vehicle investments, but labor strife there and in other union states could make North Carolina even more attractive for the evolving EV industry.
“The unions have cited record auto industry profits as justification for their demands of higher wages, worker flexibility and improved benefits,” said Wake Forest University professor Mark Curtis, whose research includes the economic impact of the growing clean-energy industry, particularly for workers. “It is certainly true that profits (for Ford, General Motors and Stellantis) are high, but making these demands now is risky given that automakers appear to me more willing than ever to relocate production to new regions like the Southeast.”
On their own, workers here can’t bargain for higher pay and better benefits the way union members can.
“It is a big help for recruiting, and is one reason why auto-related manufacturers have migrated to ‘open-shop’ labor states in the South,” said Michael Walden, the William Neal Reynolds Distinguished Professor and extension economist at N.C. State University.
However, that doesn’t mean cheaper North Carolina workers will be less qualified than their union brethren, Curtis added.
“There’s still significant numbers of skilled laborers in the region who have weathered the ebb and flow of manufacturing jobs over the decades,” he said. “Automakers, and particularly the Big Three, realize that to remain competitive they need to compete with companies like Tesla and Toyota that have far fewer unionized workers and lower labor costs.”
Watching wages
North Carolinians needn’t look far to see that scenario playing out.
Vietnamese automaker Vinfast says the 7,500 employees at its Chatham County EV-manufacturing facility will earn an average of $51,000 per year. That’s more than $15,000 below the average pay for a UAW member working 40 hours a week in a Big Three manufacturing facility.
In the Triad, Toyota, whose $5.8 billion investment in its EV battery plant in Liberty would be the largest ever in North Carolina regardless of industry, has said its 2,100 employees at the facility will make an average of $62,234 – more than $4,000 less than the UAW members.
Meanwhile, as the union presses on with its demands on behalf of about 150,000 members working in Big Three facilities, those jobs involve building gas-powered vehicles that will gradually be phased out.
That’s why the evolution of electric-vehicle manufacturing will shape the future of the auto industry’s workforce, said Stephen Holland, a UNC Greensboro professor who studies the economic impact of EVs.
“How much of the production process is automated and how many workers do you need, and what is the required skill level?” Holland asked. “Will they need a college degree? And will the unions move up in that space, where employees with advanced degrees are union members as well?”
The need for tech-heavy ancillary products already is powering a higher-wage sub-industry.
For example, the average expected pay for the more than 13,000 jobs at four planned North Carolina EV-charger manufacturing facilities announced since the IRA’s passage tops $82,000.
‘Fresh ecosystem’
The surge in EV-related investments is being driven largely by the Inflation Reduction Act’s $7,500 federal tax credits for qualifying new plug-in vehicles.
To be subject to the full credit, an EV must be assembled at a North American facility, at least half of its battery components must be produced in North America and 40% of the battery’s critical minerals — like graphite, lithium and cobalt — must originate in the U.S. or with a recognized trade partner.
Both percentages increase incrementally in the coming years.
Those requirements for domestic assembly and sourcing offered instant incentive for companies not burdened with making their existing factories and workforces fit an emerging industry.
“EVs demand a fresh ecosystem of technologies, components and skillsets,” explained Curtis, from Wake Forest. “With this comes the freedom, and indeed the necessity, to rethink optimal locations for these new facilities. Such a ‘clean slate’ scenario is already shaping out to be a windfall for ... North Carolina and the wider Southeast.”
While legacy U.S. automakers with largely union factories have been slow to roll out electric vehicles, Tesla, with a non-union workforce, has dominated American EV sales.
From the beginning, Elon Musk’s company has focused on producing higher-end vehicles, noted Holland, from UNC Greensboro.
“In retrospect, I think that ended up being a brilliant strategy for Tesla,” Holland said. “But the real fundamental element of the (future) EV space is the low-end, entry-level cars, and Tesla’s probably not going to go there. That would be a space for the American automakers to enter, but often those cars are just not that profitable.”
‘Fighting over the leftovers?’
Holland pointed to a period a half-century ago when new entries to the U.S. automobile market triggered a transformation of the entire industry.
“In the 1970s and 1980s we saw a lot of Japanese cars coming in and selling into the low end — relatively inexpensive, smaller, fuel-efficient (vehicles),” he said.
American manufacturers followed suit, but the Japanese used their American foothold to introduce luxury vehicles, including Toyota’s Lexus line and Honda’s Acura models.
Chinese manufacturers, who are more focused on affordable EVs than U.S. companies, could potentially find success with a similar strategy, Holland said.
“The real issue is the Chinese are really taking the lead on EVs,” he explained. “It’s going to be really crucial how the American legacy companies make this transition, and part of that is going to be how their workforce transitions as well.”
While the UAW expresses concern that its members will be left behind in the EV transition, the current negotiations have generated little discussion about what the shift should look like for the companies or how existing employees could be part of it.
“Are they just going to be fighting over the leftovers from the old legacy gas vehicles?” Holland asked. “Or are they going to be able to move forward and develop a really good position in electric vehicles where they can both have lots of good jobs and be leaders in this industry?”