For years Tesla (TSLA) has avoided, or at least minimized, the impact of labor strife and unionization at its plants across the globe. But it seems the times, and growing favorable public opinion for workers to get more for the fruits of their labor, have changed the calculus.
Late on Thursday CNBC reported that Tesla told workers at its Giga Nevada plant that some battery production workers there will see pay increases of around 10% starting in early January 2024.
According to internal memos and workers at the plant, Tesla informed workers that “cost of living adjustments” would result in a bump in pay to $22 from $20 an hour on the low end, and to $34.50 an hour from $30.65 on the higher end. In addition, the company is streamlining some worker tiers, such that several of those making between $26.20 and $30.65 an hour will be bumped up to $34.50 an hour.
If you ask UAW president Shawn Fain and other industry experts, they would say you can thank the UAW for those gains at nonunion plants.
“Nonunion workers can thank the UAW for their recent pay raises,” said AutoForecast Solutions analyst Sam Fiorani to Yahoo Finance in late November. “It was entirely expected that wages would go up in the face of recent labor changes,” he said, referring to recent wage hikes at nonunion Toyota, Nissan, and Hyundai plants.
Labor expert Marick Masters of Wayne State University calls what these foreign automakers are doing the “union substitution” strategy.
“Clearly, such actions by nonunion companies can be viewed as part and parcel of a ‘union substitution’ strategy, which seeks to deter unionization in specific companies by paying workers sufficiently comparable wages,” Masters said to Yahoo Finance.
Tesla CEO Elon Musk is no fan of unions or organized labor and has deterred workers' efforts to unionize at Tesla’s plants. "I think it's generally not good to have an adversarial relationship between one group at the company and another group," Musk said at last month’s New York Times DealBook Summit. "I disagree with the idea of unions … I think the unions naturally try to create negativity in a company."
Whether he likes unions or not, it seems Musk and Tesla will have to pay workers more, or have more run-ins with unions — whether it comes to pass with Fain and the UAW at Tesla plants in Fremont, Calif., or Austin, Texas, or more likely stronger auto unions abroad.
A major thorn in Tesla’s side has been the recent labor dispute between Tesla and 130 repair mechanics at 10 Tesla repair workshops across Sweden represented by the IF Metall union. On strike since October, the mechanics gained more support from other unions and pension funds who have invested in Tesla.
Fifteen Swedish unions have now joined the strike in sympathy at the request of the IF Metall, with transporters for example refusing to deliver vehicles, while other issues like license plate delivery stoppages and the cessation of trash collection at Tesla workshops have created headaches for Tesla in the area. In parts of Scandinavia like Denmark and Finland, some unions are pledging not to unload or transport Tesla vehicles bound for customers in the Swedish market.
Yahoo Finance did not immediately hear back from Tesla’s European press office with regard to the strikes in Sweden and other Scandinavian countries. (Note: Tesla has not maintained a press office in North America for several years now.)
For Wall Street and investors, what happens in those Scandinavian countries bears watching as spillover effects could come stateside, thus raising costs for Tesla.
“If Tesla gives into the unions around this ongoing dispute it could create a growing brush fire that eventually gets to the UAW and US into 2024,” Wedbush analyst Dan Ives wrote in a note to investors on Dec. 16. “This speaks to why this current dispute and how Tesla handles it politically speaking/negotiations within Sweden is an important issue for the ramifications down the road Musk & Co. might face with other unions globally in this current climate. We will [be] watching this situation carefully over the coming weeks/months.”
High costs for Tesla products are a concern for bulls like Ives, and of course Elon Musk, with Tesla’s 50% CAGR (compound annual growth rate) for global deliveries one of the main metrics for Tesla’s rich valuation.
“I just can’t emphasize enough how important cost is,” Musk said during Tesla’s recent earnings conference call, adding, “We have to make our products more affordable so people can buy [them].”
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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