Autoworkers have expanded their strikes against General Motors (GM) and Ford (F). The strike against Stellantis (STLA) continues, but it was not expanded because progress has been made in negotiations. Willett Advisors Chairman and CEO Steve Rattner, who also served as the head of former President Obama's Auto Task Force, says this strike may be "tougher" to resolve than others that have been seen in the past. Rattner gave two reasons why: that it's being played out in public and that the UAW has some demands that are "not possible for the companies to comply with." Some of those demands that may be hard for the automakers to deliver, Rattner says, are working 32 hours/week but being paid for 40 hours, the return of defined benefit pension plans, and improving retiree health care benefits. Both President Joe Biden and former President Donald Trump visited the Detroit area this week. Rattner says those visits hurt the ability to get a deal done, saying it "enflames" the situation." Rattner argues that Biden was "egged on" by Trump to visit the striking workers.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
SHAWN FAIN: We will not be intimidated into backing down by the companies or their scabs. Our cause is just. Striking for a better future to protect our communities and to defeat corporate greed is not just our right. It's our duty.
- Joining us now, Willett Advisors Chairman and CEO and former head of the Obama Auto Task Force, Steve Rattner. Steve, it's great to see you again. Obviously, we just heard some fierce rhetoric there from Shawn Fain, which we have come to know him for in this time that he has been at the head of this union and really leading this strike. It seems like on some points, the union has softened its demands to some extent. For example, reportedly now looking for 30% increase instead of a 40% increase. What do you think here? Do we get some kind of agreement given what you've been seeing between the two sides? I
STEVE RATTNER: Think eventually, we'll get an agreement simply because eventually, every strike of consequence like this one does get settled. I would concede that this one looks tougher than many others for two reasons. First, because it's being played out in public, which makes it more difficult for either side, both sides, to back off of demands as the negotiations progress toward some common sense.
And secondly, because the UAW, as I've said, has many, many legitimate requests, demands, whatever you want to call them, but they've also asked for some things that are just simply not possible for the companies to comply with, and we'll have to see how they walk back from that.
- And Steve, when you mention that, impossible to comply with, what are you specifically referring to?
STEVE RATTNER: Well, for example they want to be paid for 40 hours a week but work 32 with one day a week being a personal day off. That obviously is very hard. They want to go back to the old system of defined benefit pension plans, which I certainly think is a better place for workers to be, but it's something that pretty much as a country, we gave up 20 or 30 years ago, and there have been very few new defined benefit pension plans created.
They want to improve retiree health care benefits, which again, I'm sympathetic to, but they have pretty generous ones relative to most other retired American workers. And you simply can't turn back the clock to where we were 20 or 30 years ago and maintain a viable Detroit set of companies.
- Well, and on that point, Steve, how should Americans understand the auto business right now? In other words, the union says, look at these executives making a lot of money. Look at the record profits that these companies are making. How tough is it for the automakers right now? Because on their side, they would say, well, our margins are slim. We can't just be throwing around money willy nilly. Where's the truth of the matter lie?
STEVE RATTNER: As with most of these things, somewhere in between. So look, to take them in order, executive compensation, as I've said over and over again, is out of control across corporate America. The fact that the CEO of General Motors has gone from making 60 times the average worker in the late 1970s to 360 times the average worker today is unconscionable.
But then you say to yourself, do you solve this problem by bringing the top down or the bottom up? I certainly would like to bring the bottom up, but the total dollars involved become very large relative to the dollars you save by bringing the top down. And I'm in favor of bringing the top down, but it's not going to create a pool of money that's going to meaningfully change things for the American workers.
On your second point, yes, they are making record profits. They also are facing pretty tough competitive situation. And I would again point out that if you bought a share of General Motors when the company went public, you would have received some dividends along the way, but the stock price itself has not changed at all, even though the stock market as a whole is almost four times higher than it was back on that day.
So this is a tough business. I have been around this business. It is a tough, globally competitive, relatively low margin business in which costs do matter. And that's why these companies are fighting so hard. I'm very sympathetic to the workers. They have not gotten the kind of increases they need to keep up with inflation. But manufacturing is a very different space than driving a UPS truck or flying an American Airlines plane.
- And Steve, the issue has become very politicized. I don't think that surprises anybody. But the engagement of Biden and Trump, is that helping or hurting, Steve, the ability to actually get a deal done here?
STEVE RATTNER: Hurting. I don't think there's any real precedent or argument for leaders or presidents to get in the middle of these kinds of negotiations. If it involves something like the railroads where there are national economic implications, I can understand that the federal government has a role. But in this case, I think it just simply inflames the situation.
I think that the President should not have gone on the picket lines, but he was egged on by Trump, going to the other factory in Michigan the other night. And I get why he did it, but none of this is helping reach a resolution in my opinion.
- Sort of strike aside for a moment, as you said, you've been around the auto business. Is there a way for US automakers to better compete, whether that is some kind of operational change they should be making, or it's some sort of regulatory or policy change that should be happening?
STEVE RATTNER: Look, I think the auto companies are in a much better place than they were 15 years ago obviously. They are making good profits. They have dramatically improved their management. This was an industry that did not have good management at all, especially General Motors when we showed up 15 years ago. A lot of those problems have been fixed. A lot of those problems have been fixed.
But they are still in a tough, competitive world. And the issue is that you have to think of labor in the auto industry as a worldwide commodity, if you will, that you can source labor from the Midwest where these companies traditionally have done most of their manufacturing. You can source it from the south where there are ununionized plants, both Japanese and other countries, that where the workers get paid 1/2 or 2/3 of what they get paid around the Midwest area. You can source it in Mexico where workers get paid as little as $9 a day and by all accounts are very, very productive.
And that's the problem these companies face. And it's not it's not a pretty picture. And I don't take any joy in it. I take a lot of unhappiness about the situation, but this is the world we're living in, and we have no choice but to try to be competitive, which means holding down costs, unfortunately, including those of labor.
- And Steve, final question. I'm interested, just to pull back the lens here. Of course, we see big labor on the move here. It's not just the UAW. Hollywood actors and writers, UPS workers, airline pilots. The pendulum seems to be swinging here a bit, Steve, back to labor. I'm interested to get your take on that. Why you think that is. What explains that dynamic, and what you think it means for companies across different sectors and industries in terms of their labor expenses and their profit margins going forward.
STEVE RATTNER: Look, I think that's probably a good thing. I think that the power of labor has been circumscribed for 40 years, going back to Ronald Reagan and the air traffic controllers. And that has had consequences for all American workers who have not seen their share of the pie go up commensurately with the share that's gone to corporate profits.
And so if you look at the economy broadly, that is definitely developed now over several decades, as I said, that is not welcome. It's come back up today because we have a 3.8% unemployment rate. There's still 1 and 1/2 open jobs for every American looking for one. And so the supply and demand of labor, just to get back to economics 101 stuff, has swung in favor of the workers, and they're now starting to use that ability. And I'm all in favor of it.
But you have to make a distinction between service industries, you mentioned the screenwriters, for example, and a manufacturing worker. Whether the screenwriters get paid more or less, or the LA hotel workers are on strike at the moment, I believe, get paid more or less, doesn't really change the competitive situation. Those workers have to be sourced locally. If they get paid more, it comes to some degree out of corporate profits. To some degree, probably prices go up a bit. But that's all fine that is simply redressing the imbalances that have occurred.
When you get to manufacturing, which for better or worse, is now a relatively small 10%, 15% of our economy, that's where you get back to this global competition phenomenon that I just described. Where if you pay those workers more, it's going to simply eventually mean-- if you pay them much more, they should get paid more. But if you pay them a huge amount more, it's going to simply result in jobs moving.
When we took over, we got involved with the auto companies in 2009, the number of auto workers in Mexico had just about reached the number of auto workers in the US. Today, there are substantially more auto workers in Mexico than in the US. And that's not an accident. It's not a coincidence. And there's not much you can do about it except to try to find a reasonable balance between having these workers get paid a living wage, a fair wage, but also the companies being able to compete against companies elsewhere in the world that have lower labor costs.
- Steve Rattner, thank you so much for your time today. It was great insight. We appreciate it.
STEVE RATTNER: Thank you, guys.