Doug Sheridan Writes
“ If step one of Bidenomics is funneling cash to green industries, step two is cleaning up the distortions created.”
If step one of Bidenomics is funneling cash to green industries, step two is cleaning up the distortions created. That explains Joe Biden's plan this week to spend billions to prop up union jobs in EV production that the gov't is forcing on automakers.
Biden admin will offer $12 B to help auto companies retool plants for EVs. Car makers can apply for loans and grants from the Energy Dept, but the scoring system comes with a Big Labor catch. The program gives preference to “projects that are likely to retain collective bargaining agreements.”
This is a de facto admission Biden’s much-heralded EV transition will cost more jobs than it creates. It’s also a subsidy for union jobs that might otherwise be lost in the transition to EVs. The predictions are that EV assembly jobs will grow by more than 17% in the coming decade.
But each EV can be built with about 30% fewer workers than a gas-powered car, and many plants are opening in right-to-work states. Union jobs will also be lost in gas-powered auto assembly. Auto suppliers, many of which are unionized, could also lose jobs because EVs use fewer parts.
The $12 B comes in addition to the subsidies already flowing to EV production. The IRA includes $393 B in clean vehicle tax credits by 2032, along with incentives in related areas like battery manufacturing. Even with the subsidies, it isn’t clear consumers would choose EVs over cheaper gas-powered cars and trucks.
The UAW celebrated the EV subsidies when the law passed last year, but the union failed to convince politicians to attach a provision to limit tax breaks to union-made cars. The new $12 B payoff is intended to make up for that failure without having a vote in Congress.
The new subsidy is also intended to strengthen the UAW’s hand in its current contract negotiations with the Big Three auto makers. Auto makers will still have to pay to avoid a strike. The current contracts expire Sep 14, and UAW members have approved a work stoppage if no deal is reached.
Ford publicized its offer, which includes a 15% bump in compensation over four years plus cost-of-living adjustments. The UAW wants a 40% increase over four years, as and guarantees on EV jobs. The $12 B is supposed to induce General Motors, Ford and Stellantis to give the UAW what it wants. But union labor could make Detroit less competitive with Tesla and foreign EV makers.
If auto makers leap at the new money, the cost will fall on them and taxpayers. Nudging investment toward more costly production will inflate the cost of EVs, and the companies will end up taking bigger losses. As usual with Bidenomics, one bad subsidy begets another, and the offer is pay more, get less.
Our Take: The federal gov't continues to lead automakers down the rabbit hole, and Detroit continues to follow. If Americans balk at EVs, the companies will be in for a world of hurt. In that case, they'll look to a taxpayers to bail them out—as they have so many times before.