US Electric Vehicle Wave Sparks 'Wage Tsunami'... Labor Demands 30% Wage Increase

Electric Vehicles Require Fewer Parts Than Internal Combustion Cars
Uncertainty Rises Over Job Security and Wage Declines
UAW Negotiations Span 4 Years

Battery Industry Faces Urgent Pressure
Wage Increase Demands Centered on Auto Joint Ventures
"LG Energy Solution-GM Joint Venture Nears 30% Wage Increase Agreement"

An 'wage increase tsunami' is approaching electric vehicle and battery companies. As the transition from internal combustion engine vehicles to electric vehicles rapidly progresses, the burden of employment uncertainty is also being passed on to companies.

The epicenter is the United States. The United Auto Workers (UAW) union is concerned that existing workers may lose jobs and face wage reductions during the restructuring of the automotive industry. Electric vehicles have fewer parts and simpler manufacturing processes than internal combustion engine vehicles. The automation rate of key components such as batteries is also high. The workforce composition is shifting from production workers to development and service personnel.

The UAW represents about 150,000 workers at the three major U.S. automakers: General Motors (GM), Ford, and Stellantis. The existing agreements with these three companies expire on the 14th of next month. The UAW has indicated that if negotiations with the three companies do not progress by then, they will strike. Accordingly, the UAW is demanding a 40% wage increase over the next four years, provision of alternative jobs in case of plant closures, and expanded living expense payments.

On the other hand, the three automakers argue that if they meet all of the UAW's demands, they will not be able to compete with non-unionized automakers like Tesla. It is estimated that fulfilling the UAW's demands would cost the automakers such as GM and Ford an additional $80 billion (approximately 107.44 trillion KRW).

'Wage Increase Tsunami' Coming... Domestic Companies Also on Alert

The wage increases in companies across the ocean are expected to have a considerable impact domestically as well. Currently, the labor and management at Korea GM are struggling to find common ground in this year's wage negotiations due to significant differences in their positions on the scale of wage increases, including base pay and performance bonuses. A Korea GM official said, "Since a significant wage increase is expected at U.S. GM, there is a sentiment that after observing the results of the headquarters' negotiations, demands at the Korean site should also be increased." Korea GM returned to profitability last year after nine years. Additionally, the export performance of the small SUVs Trax and Trailblazer produced at the Korean plant is strong, raising the union's expectations considerably.

The deadlock in labor negotiations at Hyundai Motor and Kia has a similar background. Both Hyundai Motor and Kia have continued to achieve record-high business performance this year following last year. The unions argue that since the company's performance has improved, the benefits should be fairly distributed to employees. The Hyundai Motor and Kia unions have set a demand to increase the base pay by 184,900 KRW and to receive a fixed 30% of company profits as performance bonuses. The base pay increase far exceeds last year's largest increase of 108,000 KRW, which was proposed by the upper-level organization, the Metal Workers' Union.

Similar to the U.S., conflicts between labor and management are emerging as jobs decrease due to the electrification transition. Since layoffs are difficult under regulations, Hyundai Motor and Kia have been coping by allowing the workforce to naturally decrease through retirement and resignation without new hires for several years. The unions have been demanding new hires for years. This year, Hyundai Motor and Kia have made extension of retirement age a key demand in negotiations. The inability to flexibly adjust the markets for newly developed or existing vehicles or the operation status of each global plant is also due to the requirement that labor and management agree when deciding the types and volumes of vehicles assigned to each plant.

Concerns of Domino Effect in Batteries... "LG Energy Solution-GM Joint Plant Agrees to 30% Increase"

The domestic battery industry, which is engaged in large-scale joint ventures with the three major U.S. automakers, is also under urgent pressure. LG Energy Solution plans to operate six battery plants with Hyundai Motor (1), GM (3), Stellantis (1), and Honda (1). SK On plans to operate joint plants with Ford (3) and Hyundai Motor (1). Samsung SDI is also establishing joint battery plants with Stellantis (2) and Hyundai Motor (1).

Among these, the possibility of wage increases for workers at the LG Energy Solution and GM joint venture Plant 1 (located in Ohio), which began operations at the end of last year, has been raised by major foreign media. The labor and management of Ultium Cells, the joint venture of the two companies, are reportedly close to an agreement to increase the hourly wage of Ohio plant workers from the current $15.50 (about 26,920 KRW) to over $20 (about 26,700 KRW), an increase of about 29%, and to provide retroactive wage increases to regular employees. Ultium Cells has not responded to foreign media reports.

The Ohio plant of Ultium Cells has about 1,400 workers. If labor costs increase by more than 30%, the annual burden is expected to rise by over 10 billion KRW.

The UAW has declared that this year it will focus on wage increases for workers at electric vehicle battery plants. UAW President Shawn Fain stated, "The top priority in this summer's wage negotiations with automakers is wage increases for battery plant workers," and mentioned, "The wage level at Ultium Cells' Ohio plant is about half that of internal combustion engine plants." Ultium Cells pays hourly wages of $15.50 to $16.50 (about 26,920 KRW to 21,945 KRW), whereas traditional automotive plants pay $32 (about 42,560 KRW).

U.S. President Joe Biden, who is preparing for re-election next year, is also mindful of the demands of the automotive union. President Biden has urged the three major U.S. automakers and the UAW to reach a smooth negotiation settlement amid conflicts over the transition to electric vehicles and improved working conditions. In a recent statement, he said, "I support a fair transition to a clean energy future," adding, "That means ensuring that the jobs at the three automakers are good jobs that can support families."

This content was produced with the assistance of AI translation services.