The automakers of Detroit and United Auto Workers won’t be alone as they begin negotiations this week over wages and working conditions that will govern the move tram in the next few years.
Tesla CEO Elon Musk and the automaker’s increasingly profitable and efficient electric vehicle factories will be hidden participants, like the Japanese automaker Toyota and its lean manufacturing system has been around for the past 30 years.
Tesla has an operating profit advantage over common engine And Ford ranges from nearly $2,800 per vehicle to GM up to $3,970 per vehicle for Ford, based on Reuters Analyze financial results at each car company.
Stellantis’ North American operations last year earned operating margins better than all three per vehicle, earning $8,365 per vehicle to beat Tesla’s latest second-quarter numbers by nearly $1,200. That’s partly because North American Stellantis focuses on combustion pickup truck And Jeep car SUVs command huge profits.
Looking ahead, Detroit Three executives say new contracts with UAW must allow them to “compete” as their U.S. operations shift to electric vehicles, which are losers for today’s older automakers.
Stellantis CEO Carlos Tavares has warned the rapid transition to electric vehicles due to mandatory regulations is “out of bounds” that consumers can shoulder. Stellantis cited rising costs to switch to electric vehicles when it announced plans to close a Jeep factory in Belvidere, Illinois.
Manufacturers in Detroit are expected to bring comparisons to Tesla to the negotiating table, people familiar with the process said.
“Tesla today plays the role of the Japanese and German automakers in the 80s,” he said. Harley Shaiken, a professor of labor at the University of California, Berkeley, who has followed US industry.
UAW President Shawn Fain, in a statement Wednesday, offered his own interpretation of the term “competition”.
He said: “As we set out on this EV journey, we kept coming up with the same grueling scenario from companies; that we had to stay ‘competitive’, which was nothing more than a constant race to the bottom in an attempt to chase the lowest bidder for the lowest pay.”
Tesla’s Cost Advantage
Tesla factory workers in the US do not join the union. Musk has resisted the UAW’s attempt to host Tesla’s Fremont, California factory. He posted a tweet in 2018 warning that workers could lose their stock options if they joined a union, an action that the National Labor Relations Board later deemed illegal.
Analysts say Tesla workers earn about $45 an hour in wages and benefits. That compares to about $64 to $67 an hour at Detroit Three facilities represented by the UAW.
Automakers don’t detail the man-hours it takes to build their vehicles — and those numbers vary based on varying degrees of vertical integration.
But using an estimated 30 man-hours to assemble a vehicle, Tesla would have a direct labor cost advantage of up to $660 per vehicle over one in the Detroit Three.
That distance gives Tesla the ability to offer more features in its vehicles at a given price point or at a discount without risk.
Hourly labor costs are just one part of Tesla’s overall edge in electric vehicle profitability, an advantage it is using to lower prices and gain market share in the electric vehicle market.
Musk’s comment on Wednesday that he might have a Tesla humanoid robotOptimus, doing useful work in factories next year is Detroit’s least problem.
Ford CEO Jim Farley says Tesla has a $2,000 advantage in distribution costs because it doesn’t agency with whom to share profits.
Tesla also pioneered the use of large “giga castings” to replace many parts with single pieces of cast metal, saving production equipment and assembly time. Tesla executives in March outlined plans to cut production costs in half with what they call “cannedless assembly,” which could eliminate many steps on the traditional assembly line.
In the second quarter, Tesla made between $150 million and $250 million battery Chief Financial Officer Zach Kirkhorn said Wednesday on a conference call.
Taken together, manufacturing subsidies under the Inflation Reduction Act and battery material cost reduction helped boost Tesla’s second-quarter profit from $625 to $1,000 per vehicle, based on company disclosures.
Tesla made $5,000 in operating income per vehicle for the second quarter, according to the company’s disclosure.
On a similar basis, Ford reported $3,220 per vehicle in the first quarter, while GM reported $4,400 per vehicle in total pre-tax profit per vehicle for the first quarter.
GM and Ford report second-quarter financial results next week.
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