"Can I Have Some More, Please?"

In a world where Elon Musk's Tesla is cutting costs to cut prices, Detroit's Big 3 are being hamstrung by labor strikes.

In the midst of the United Auto Workers strike against major Detroit automakers, an unexpected winner emerges… and it's none other than Elon Musk. And the reality is that despite his lack of direct involvement, Musk's victory was secured even before the strike began or negotiations started two months ago.

This week’s news coverage has heavily focused on the UAW strikes against Detroit’s Big 3 automotive companies. And while General Motors, Ford, and Stellantis were already expected to increase wages due to union pressure, the strike's outcome now hinges on how much the automakers are willing to concede, but one thing is clear: more money will be spent.

This financial strain further highlights Tesla's substantial cost advantage in the electric vehicle (EV) market, as older U.S. peers grapple with legacy expenses while transitioning to electric from gas-powered vehicles.

Tesla vs GM

Take a look at these two, 5-year stock price charts and try to guess which is Tesla’s and which is GM’s? Not hard. If analysts and investors have your company trading sideways for 5 years, it says something about how the world feels about the future cash flow of your company.

Price Cuts

Elon Musk's strategic moves around pricing and input costs this year have showcased how Tesla can leverage its lower cost structure to engage in price wars with global competitors.

It’s working - Tesla is on track to sell more than 1.6 million vehicles this year, up from 1.2 million in 2022.. In contrast, some of Tesla's rivals have faced challenges, with Ford, for instance, announcing a slowdown in its EV production growth.

So, while the United Auto Workers seek more than what Detroit automakers claim they can afford in order to remain competitive, worker pressure on these organizations continues. Despite the Big 3 offering wage increases, the gap between their labor costs and Tesla's remains substantial.

Important to note: Unlike UAW workers, Tesla employees receive stock options, which don't have a direct cash cost to the company, and Tesla's soaring stock prices have bolstered their compensation. As labor negotiations continue, the pressure to close this labor-cost gap may reshape the competitive landscape in the EV industry.

Executive Compensation In Focus

As this labor standoff ensues, it's crucial to understand the UAW's perspective. UAW President Shawn Fain has pointed out that if CEO pay at Detroit’s automakers increased by 40% over the past four years, workers should receive similar raises.

He has initiated negotiations with a demand for a 40% wage increase over four years, coupled with requests for pension reinstatement and cost-of-living increases. While the UAW has adjusted its demands to a 36% wage increase, a substantial gap still exists between the two sides in contract talks, prompting the strike - and most likely, ensuring it continues for the foreseeable future.

Fain's focus on CEO pay mirrors a broader trend, where labor unions emphasize the wealth gap between workers and top executives to bolster their demands for improved compensation and working conditions.

This trend was evident when Netflix shareholders rejected executive pay packages in June, following appeals from the Writers Guild of America to vote against these packages amid a Hollywood writers' strike. The Writers Guild also targeted executive pay at Comcast and NBCUniversal.

Naturally, the response from the Big 3 has been the increase in compensation costs’ impact on COGS of the vehicles they produce. This makes sense, especially in a world where the Big 3 push to transition to electric vehicles, and try to compete with the Tesla’s of the world.

Why Do Executives Make So Much?

So, in the ongoing tussle over wages and labor conditions, one question looms large: why do top executives in these automotive behemoths command such colossal paychecks? Mary Barra, GM’s CEO, makes a reported $29 million a year, for example.

The justifications are as complex as they are contentious. Advocates argue that executive compensation is tied to performance metrics and market competitiveness. Highly skilled and experienced CEOs can steer these massive corporations towards profitability and growth, which, in turn, benefits shareholders. Furthermore, they argue that executive pay is benchmarked against other top executives in the industry, both domestically and globally, to attract and retain top talent.

Critics, on the other hand, argue that executive pay has spiraled out of control, with boards and compensation committees often too cozy with the executives they are meant to oversee. They point to instances where executives receive outsized rewards even in the face of lackluster corporate performance, fueling income inequality.

Looking In The Mirror

Beyond the confines of auto plants and boardrooms, these labor disputes are reflective of the larger ideological clashes that echo across America. It's a battle between differing visions of economic fairness, corporate responsibility, and the role of labor in shaping the future.

At its core, the struggle for equitable wages and better working conditions speaks to the growing outcry against income inequality that reverberates throughout the nation - and really the world. The demand for fair compensation and a more substantial share of the corporate pie isn't confined to autoworkers alone. It mirrors the broader sentiment that hardworking Americans across various sectors deserve a more substantial piece of the prosperity they help create.

The debates surrounding executive compensation, in particular, are emblematic of a national discourse about wealth distribution. While some argue that astronomical CEO pay is a testament to meritocracy and market dynamics, others see it as a symptom of a deeply flawed economic system where the rich get richer while the rest struggle to make ends meet.

Moreover, the negotiations hold up a mirror to the ongoing ideological tussles about the future of work itself. As automation and technology redefine industries, the question of how to ensure that the benefits are shared more equitably among workers becomes a central issue. Labor unions, in these disputes, represent not just the interests of their members but also a vision of a more worker-friendly future.

All eyes are peeled to the TV screens, not just because of the immediate impact on the auto industry but because these conflicts encapsulate the larger questions that America grapples with daily. It's a test of wills between corporate power and the labor force, between unchecked wealth and economic justice, and between preserving the status quo and forging a more equitable future.

What a weird and wonderful world,