The current United Auto Workers (UAW) strike at auto plants around the country highlights one symptom of what has been wrong with U.S. manufacturing for quite some time. Namely, the desire of many of our D.C. politicians, such as Joe Biden, to pick winners and losers in areas of business. Shortly after taking the oath of office, Biden began an assault on the oil and gas industry. Part of that assault has included a very hard push to transition to renewable energy, even though we are not ready for such a transition when viewed from either a technological or infrastructure standpoint.
While we should all support a move to diversify our sources of energy, the free market (rather than government policy) should be the driving force behind such diversification. If you have doubts about this, I encourage you to read up on some of the problems that Germany is now encountering as a result of poor energy policies driven by its government. The current push toward electric vehicles (EVs) and the UAW strike provides an example of government policy gone wrong here at home. The relationship between the government EV push and the strike also highlights a controversial topic within many publicly held manufacturing companies in the U.S.—the question of appropriate CEO salaries.
In a joint statement released by UAW President Shawn Fain and Congressman Ro Khanna in early September 2023, they declared that the electric vehicle industry would receive $300 billion in government subsidies between now and 2030. They also said that union workers should share in the profits that will be made off these subsidies. It was further stated that U.S. automakers have enjoyed record profits for the last several years after having been bailed out by the government over a decade ago during the financial crisis that began in 2008. Since that time, they state that the CEOs of Ford, GM, and Stellantis have received pay raises of 40%. Did you notice the common theme of government bailouts and subsidies in the preceding sentences?
Although there may be legitimate arguments, either pro or con, regarding the bailouts of the industry that occurred years ago, I believe the government's efforts to force companies to make more electric vehicles (EVs) and entice people to buy them are wrong on a number of levels. As referenced earlier, infrastructure and technological issues have not been addressed. For example, concern over the length of charging times and the lack of public charging stations for EVs is common knowledge. Additionally, you only need to do a Google search to learn of severe problems with the U.S. electric grid. Attempting to use coercion to add an additional load to an already problematic grid system is a bad idea. In addition to developing policies to incentivize EVs, the Biden administration is also taking steps to put in place regulations that, in the words of Alexander Stevens of the Institute for Energy Research, are “creating a regulatory framework that will essentially outlaw the internal combustion engine. President Biden’s administration has partnered with automakers to force people into EVs as the administration has set an ambitious target of 50 percent electric vehicle sale shares in the U.S. by 2030.”
Despite the government subsidies, reports suggest that U.S. automakers are losing money on EVs. Ford is expected to lose $3 billion on EVs this year, which will add up to $5.1 billion in losses over the last two years. If you ever wonder why car prices are increasing so fast, you may want to consider that the cost of the push to EVs could be a factor. This brings us back to the current strike. Although UAW leader Fain says they support EVs, he appears to understand that the government push away from traditional autos is unlikely to be suitable for his members. On the other hand, the automakers counter that the expensive transition to EVs is a primary reason they are not able to meet UAW demands. A September 13 article on NPR.org quotes union members expressing fears that the production of EVs will require fewer workers than traditional automobiles. These fears and the government money involved in the EV push appear to be the driving forces behind the strike. The NPR story summed it up: “The federal government is spending billions of dollars to accelerate the transition to electric vehicles and incentivize more of that production to come to the U.S. The UAW has been pressuring the Biden administration to ensure that workers, not just corporations, benefit from that federal money.”
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