Workers at the Detroit 3 are set to make up to $35 more an hour than at Tesla thanks to new union contracts
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- Detroit's hourly labor costs could soar to $90 an hour, according to one estimate.
- The UAW won 25% wage increases after a long, bitter strike.
- The UAW wants to use these wins to organize other auto factories.
It's a good time to look for a job at a Detroit Three factory.
After a bitter strike, a new four-year contract struck between the United Auto Workers and Ford, which GM and Stellantis have used to build their tentative agreements with the UAW, includes 25% raises over the term of the pact.
That's expected to drive Detroit's hourly labor costs, the average amount of wages and benefits spent per worker per hour, up to $90 an hour, according to Wells Fargo estimates based on the Ford agreement.
At Tesla and foreign car companies, that same hourly labor cost sits between $45 and $55 per hour, industry experts estimate.
Heading into contract talks this summer, the labor cost gap between the Detroit Three and Tesla was already sizable. While Ford, GM, and Stellantis were spending about $66 an hour on their factory workers, Tesla was spending just $45 an hour.
These huge cost increases are likely to be tough for Ford, GM, and Stellantis to swallow, and some of that cost may be passed on to customers, analysts predict. At one point during the strike, Wedbush predicted that EV prices could be driven up some $5,000 and "torpedo" Ford and GM's electric vehicle business model.
Throughout the strike, Detroit executives warned of the advantage higher labor costs would hand to their competitors. Ford Chairman Bill Ford called out Tesla specifically in remarks he made to hourly Ford employees in the fifth week of the union's historic work stoppage, saying, "Toyota, Honda, Tesla, and others are loving this strike because they know the longer it goes on, the better it is for them."
How the new UAW contracts can reverberate
UAW leaders and other labor experts see things differently.
The pending historic contracts for the UAW are primed to give the 88-year-old union new life after years mired by a federal investigation into a dues-stealing scheme. The wins the UAW notched in this strike could reverberate across the industry if the union can use these contracts to aid in organizing efforts at companies like Tesla, Toyota, and Volkswagen.
UAW President Shawn Fain often shot down the insinuation that the union and Detroit Three should be united against their competitors.
"Workers at Tesla, Toyota, Honda, and others are not the enemy—they're the UAW members of the future," Fain said last month.
On a livestream over the weekend, Fain hinted at the union's future ambitions.
"When we return to the bargaining table in 2028, it won't just be with the Big Three," Fain said, "but with the Big Five or Big Six."