Why September will be a momentous month for US industry
It is one of the great set-piece moments in the US industrial calendar.
At the start of pay negotiations, which take place every four years ahead of the expiry of existing contracts in September, the leaders of the big three US carmakers traditionally shake hands in front of the cameras with the leader of the United Auto Workers (UAW) union.
The tradition goes back almost a century: Wayne State University in Detroit, America’s car-making capital, has unearthed photographs dating back to the 1930s showing the UAW leaders of the time shaking hands with a leader from Ford, Chrysler or General Motors.
The then UAW president Ron Gettelfinger and Ford president Alan Mulally take part in the ceremonial handshake in 2007
This was the precursor to another established tradition under which the UAW would select a lead company with which to negotiate. Then, once a deal had been struck, the other carmakers would follow the first company’s lead in a process known as ‘pattern bargaining’.
So it was a seismic moment when, in July this year, the UAW’s new president, Shawn Fain, declined to take part in the handshake.
Instead, he held what were described as a “member’s handshake”, during which he met with workers at the big three (Chrysler is now owned by Stellantis, also the parent company of European carmakers Peugeot and Fiat) as they came off their shifts.
It was intended to lay down a marker to the carmakers that this was a very different UAW leadership.
Mr Fain, 54, was narrowly elected president of the UAW in March this year on a platform of promising a tougher approach to pay negotiations.
His victory, over the existing president Ray Curry, was historic in that it was the first in which the president, and other leading officials, were chosen by a direct ballot of members rather than in a proverbial smoke-filled room in which delegates chose the leadership.
Shawn Fain, pictured in July, shaking hands with members outside a Ford assembly plant in Michigan
Mr Fain, in winning, toppled a faction of the union that had controlled it for decades.
On being elected, Mr Fain – who began his career as an electrician with Chrysler – immediately served notice on the carmakers that he did not intend this to be business as usual, declaring: “We’re here to come together to ready ourselves for the war against our one and only true enemy: multibillion corporations and employers that refuse to give our members their fair share. It’s a new day in the UAW.”
If that didn’t make the carmakers sit up and take note, Mr Fain’s refusal to take part in the traditional handshake did, as he told the union’s 389,000 members on his social media feed: “I’m not shaking hands with any CEOs until they do right by our members, and we fix the broken status quo with the big three. The members have to come first.”
For good measure, he very publicly threw a Stellantis pay offer in a bin.
Mr Fain’s approach is making waves on Wall Street.
There are real concerns that Mr Fain – who carries around with him one of his grandfather’s payslips from Chrysler in 1940 – will bring out his members at all three carmakers if a deal is not reached by the time the existing contracts expire on 14 September. Such action would be unprecedented.
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Members at the three have voted for strike action in the event of negotiations breaking down, by an average of 97%.
Strikes would cause immense disruption at a time when the carmakers are having to invest billions in electrification while trying to cut their costs in response to inflation.
Yet, with Wall Street putting the odds of strike action at the big three as better than events, the two sides look set for collision.
The UAW is not only seeking to restore past benefits lost in previous pay negotiations, but also to cut the working week to 32 hours.
It is also seeking a significant pay rise, the extent of which it has not made public, but which has been reported by the Wall Street Journal as 46%.
That would severely hobble the big three’s competitiveness against foreign rivals, from Germany and Japan – which tend to have less union representation in their workforces, as well as the likes of non-unionised Tesla.
Some 150,000 of the UAW’s members work for Ford, GM and Stellantis but strikes at all three would be huge because the union has traditionally singled out an individual carmaker for strike action rather than attacking several targets at once. It would also be a risk.
The union has a strike fund of $900m (£716m) – half of which would be eaten by a six-week stoppage in which striking members at the big three were each paid $500 (£398) a week.
That is why it has been suggested that Mr Fain may adopt another tactic, bringing out its members at the car parts makers instead, in time depriving the big three of components and forcing them to temporarily close plants while still having to pay workers.
UAW President Shawn Fain
That, though, would also be a risk for the UAW, as it is not nearly as well represented among the parts makers.
Mr Fain’s election is not just rattling Wall Street – but also in Washington. Mr Fain has refused to say whether the union will endorse and provide support to Joe Biden as he seeks re-election to the White House next year.
He told the Boston Globe at the weekend: “I’ve tried to be clear with people: The days of us just freely giving endorsements are over. Our endorsements have to be earned.”
Those comments speak to his unease that, as the Biden administration offers huge subsidies to businesses involved in the transition to net zero, it is not doing so with sufficient protection for carmakers.
He was particularly unhappy at a $9.2bn (£7.3bn) loan awarded by the Biden administration in June to a joint venture between Ford and a South Korean company to build three battery factories in Kentucky and Tennessee.
Mr Fain felt the loan should have come with strings attached on wages and working conditions.
He told the Globe: “We support a green economy. We have to have clean air, clean water, but this transition has to be a just transition. Workers can’t be left behind.”
Mr Fain’s election must also be seen in the context of changing circumstances in America’s unions.
The powerful Teamsters union, like the UAW, has also jettisoned the ruling faction that has run it for decades in favour of more radical leadership. Its aggressive stance is credited with having won it a pay deal with United Parcel Services reckoned to be the most generous in the company’s history.
Part-time workers at UPS were awarded a reported 50% pay rise while other concessions agreed by the company included a promise to instal air conditioning in all of its trucks.
Mr Fain is clearly optimistic that he has the wind to his back and can secure similar wins for his members. If he succeeds, other union leaders will be taking note.
It is why the month of September promises to be a momentous one for US industry.
There has been a surprise contraction in retail sales in December, despite the month being key for many retailers due to Christmas shopping, official figures show.
Retail sales fell 0.3% last month, according to the Office for National Statistics (ONS).
No drop at all was expected, not least a 0.3% drop. Sales growth of 0.4% had been forecast by economists.
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The figures are of significance as they measure household consumption, the largest expenditure across the UK economy.
Low household consumption can mean economic growth is harder to achieve. The government has repeatedly said growth is its top priority.
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The December drop is due to a “very poor” month for food sales, which sank to the lowest level since 2013, hurting supermarkets in particular, the ONS said.
The data is in contrast to reports from supermarkets themselves, which reported stellar Christmas trading.
It suggests that small shoppers bore the brunt of the decline.
Clothes and household goods shops had a better month and reported strong Christmas trading, it added.
These retailers rebounded from falls in recent months.
The ONS also revised down November retail sales growth. Rather than growth of 0.2% in a time of Black Friday discounting, sales rose just 0.1%.
What does it say about the economy?
When the data is not seasonally adjusted to account for Black Friday falling later last year, a brighter picture is shown.
“Our figures when not adjusted for seasonal spending show overall retail sales grew more strongly than in recent December”, the ONS senior statistician Hannah Finselbach said.
Behind the headline figure is more positive news, sales volumes excluding petrol increased 2.9% compared to December 2023.
It caps off a week of news that paints a mixed picture of the economy.
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Inflation in the UK falls
While prices are rising at a slower pace than expected, overall growth is weaker than expected.
Friday’s data means it’s now more likely the economy flatlined in the final three months of the year.
Analysts Pantheon Macroeconomics said the statistics raise the risk of a small GDP fall during the quarter.
No growth was already recorded from July to September, the ONS said.
Fears have been raised over the robustness of Britain’s trade sanctions against Russia after the main government department enforcing the rules admitted it has no idea how many cases it is investigating.
HM Revenue and Customs (HMRC), which monitors and polices flows of goods in and out of the country, says it had no central record of how many investigations it’s carrying out into Russian sanctions. It also said that while it had issued six fines in relation to sanction-breaking since 2022, it would not name the firms sanctioned or provide any further detail on what they did wrong.
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The disclosures were part of a response to a Freedom of Information (FOI) request from Sky News, as part of its wider investigation into the sanctions regime against Russia.
In recent months we’ve reported on data showing flows of goods, including dual-use items which can be turned into weapons, from the UK into Caucasus and Central Asian states. We’ve shown how luxury British cars are being transported across the border from the Caucasus into Russia. And we’ve shown the contrast between rhetoric and reality on the various rules clamping down on trade in Russian fossil fuels.
But despite the challenges facing the sanctions regime, information on the enforcement of those sanctions is quite scant. The Office of Financial Sanctions Implementation (OFSI) has so far only imposed a single £15,000 fine for breach of financial sanctions – in other words those moving money in or out of Russia or helping sanctioned individuals do so.
HMRC has so far issued six fines in relation to Russian sanctions, but it refused to name any companies or individuals affected by the fines – or to provide any further details on what they were doing to break the rules. And, unlike other organisations, such as OFSI, it has never said how many cases it is working on – giving little sense of the scale of the pipeline of forthcoming action.
Fines
Asked by Sky News to provide such details under FOI legislation, HMRC said: “The number of current investigations which may involve these sanctions, regardless of the eventual outcome, is not centrally recorded.
“To determine how many investigations are within scope of your request would require a manual search of a significant number of records, held by different business areas. Not all investigations reach the level of formal cases being opened, but these investigations are still recorded as compliance activity which would need to be manually reviewed to provide an answer.”
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Mark Handley, a partner at law firm Duane Morris, has spent years monitoring the information released on sanctions cases. He said: “If you’re trying to organise an organisation like HMRC in terms of resourcing and all the rest of it, you would think that they might know how many investigations they have ongoing and how to staff all of those. So I’m surprised that they didn’t have that number to hand.”
HMRC also said it would protect the privacy of companies fined for breaking sanctions rules. The FOI response continued: “HMRC do not consider that disclosing the company name would drive compliance, promote voluntary disclosure or be proportionate.”
This is in stark contrast to other countries, notably the US, where companies are routinely named and shamed in an effort to drive compliance.
Enforcement
Leigh Hansson, partner at legal firm Reed Smith and a sanctions expert, said: “The US loves to name and shame, and I think from a US compliance perspective, it’s actually done quite a lot in further enforcing compliance both within the United States and globally.
“Because once you see a company [has] been fined or they’re placed on the specially-designated nationals list, all the other companies in their industry call around going: ‘hey, am I next?’
“And they want to know what it is that the company did – how did they violate sanctions?”
“One of the things the United States does in these penalty announcements is they provide background on the things the company did wrong, but these are also the things the company did right… And the information that they publish is quite helpful.”
The absence of such disclosure in the UK means both businesses and the public more widely have less clarity on the rules – which in turn may help explain why the regime has been more leaky than expected, with goods still flowing towards Russian satellite states, despite the fact that sanctions prohibit even indirect flows of goods to Russia.
Mr Handley said one consequence of the secrecy from HMRC is that “you’re operating in a vacuum, at the moment. Because the government’s not giving you the information that tells you what kind of conduct gets you to a civil settlement as opposed to a criminal prosecution”.
“So, again, even if you’re keeping the name anonymous, you can help businesses and individuals behave better and properly by giving more information,” he added.
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