LDN - Business

Automakers' contract negotiations will decide potential EV future for idled Illinois plant

[July 05, 2023] By Bianca Flowers

BELVIDERE, Illinois (Reuters) - A shuttered Illinois Jeep assembly plant will be at the center of a power struggle between the United Auto Workers union and Detroit's automakers as the manufacturers double down on cutting costs to fund an accelerated transition to electric vehicles.

When the Stellantis factory in the northern Illinois town of Belvidere was idled in February, it left union members in shock as they had not expected the shutdown until June.

"They wanted to reduce us even more which seemed like an impossible feat," Matt Frantzen, the local union president in Belvidere, said of the decision following a prior elimination of two work shifts at the factory. "We were seeing the writing's on the wall."

The threat of more plant closures is just one item on a contentious agenda as negotiators for Detroit's automakers and the UAW formally start negotiations in mid-July to replace an expiring four-year contract.

Legacy automakers face billions of dollars in losses on EVs over the next several years, analysts said, as they replace high-volume combustion vehicles with low-volume EVs powered by expensive batteries.

General Motors, Ford and Stellantis executives have said they must reduce labor costs as they overhaul U.S. factories to build EVs to match Tesla and other non-union manufacturers.

UAW President Shawn Fain has countered there should be no jobs lost because of the shift to EVs. Fain and UAW leaders have used social media and visits to Washington to turn the spotlight on the Detroit automakers' robust profits and hefty pay packages for executives, rather than the cost of the shift to EVs.

Fain has called for substantial pay hikes for workers, and for restoring cost-of-living adjustments and ending lower wages for new workers. His agenda and the combative rhetoric of his campaign to build support have many industry executives and analysts factoring in a strike once contracts expire in September.

The real question is how long will UAW workers stay off the job, said Mark Wakefield, co-head of AlixPartners' automotive practice.

"I am very concerned about it," Wakefield said last week. "It doesn’t look good at the moment. It's very difficult to forecast. Is it a week or two, or three or four months."

GM CEO Mary Barra and Ford CEO Jim Farley have sought to defuse tension with the union. Both have signed off on multibillion-dollar investments in U.S. factories where UAW members build combustion vehicles, and both have said they want to bring workers along as they shift toward EVs.

'GET TO THE TABLE'

"It's important that we actually get to the table and we start to problem solve," Barra told CNBC in a recent interview.

In an opinion piece published in the Detroit Free Press last week, Farley said the automaker's management and union workers "share common goals - reaching a new deal that allows us to stay ahead of the changing industry landscape, protecting good-paying jobs in the U.S. and continuing to offer innovative and affordable products to our customers."

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A general view of Stellantis' Belvidere Assembly Plant, in Belvidere, Illinois, U.S., June 27, 2023. REUTERS/Bianca Flowers

Stellantis CEO Carlos Tavares has warned that more factories could be forced to close as more costly EVs take sales from combustion models. He has so far stuck to his decision to put the Belvidere plant on track for closure in the face of UAW criticism.

In April, Stellantis offered voluntary exit packages to 33,500 U.S. employees in an effort to streamline its restructuring plan toward EVs. Around 1,680 union workers company-wide agreed to take the buyout, according to a union representative.

A spokesperson for Stellantis declined to comment on the number of employees who have accepted buyouts and said the process is still ongoing.

Meanwhile, several hundred of the Belvidere plant's roughly 1,300 laid-off UAW workers are in limbo, either waiting to be transferred or hoping state officials can sway the automaker with generous tax incentives to keep jobs local.

Robert Stacy, 52, who has worked for Stellantis since 2006, said he is concerned that if he is offered a transfer and turns it down, he will lose his health insurance that his disabled wife relies on to supplement costs for hospital visits and prescription medication.

Auston Gore, a 32-year-old assembly operator, left his family behind after struggling to find another job that would pay his current rate of $31.77 an hour. He opted for a voluntary transfer to a Stellantis plant in Toledo, Ohio.

"The situation I was put in, I felt like my arm was being twisted by the company," he said.

Politics could play a role in deciding the Belvidere plant's future, and the broader restructuring of the U.S. auto industry.

During a speech in Chicago last week, President Joe Biden outlined his plan to invest $2 billion from last year's Inflation Reduction Act to accelerate domestic manufacturing of EVs and resuscitate plants that are struggling.

Illinois Governor J.B. Pritzker has also stepped up efforts to salvage the 58-year-old Belvidere plant that once employed 4,500 union workers.

A spokesperson for Stellantis said the state recently purchased 170 acres of land next to the idled plant in Belvidere. The governor has not confirmed the land purchase or whether it is related to tax credits to sway the company to bring in a new product, or repurpose the facility for EVs.

UAW Regional Director Brandon Campbell said the incentive package that Illinois is offering Stellantis is comparable to deals offered in Michigan and Indiana.

"There's a lot of hope and a lot of incentives from the state level."

(Reporting by Bianca Flowers in Belvidere, Illinois; Additonal reporting by Joseph White in Detroit; Editing by Ben Klayman and Matthew Lewis)

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