UAW Strike Threats Show Peril of Stellantis’ Investment Promise

An escalating labor dispute between automotive manufacturer Stellantis NV and the United Auto Workers has landed both parties in murky legal territory with threats to call workers off the job for the second time in two years.

Two UAW locals in California and Colorado have authorized the international union to call a strike if Stellantis continues delaying capital investments that the company committed to in last year’s collective bargaining agreement. The automaker hit back with a barrage of lawsuits last week, threatening the union with monetary damages if it calls workers off the assembly line.

The growing conflict demonstrates the perils of contractual capital investment commitments, according to legal and industry observers, with any outcome of the current disputes potentially impacting the use of those clauses in labor contracts or chilling the production of EVs if automakers perceive too much risk.

If a court were to find Stellantis in violation of its bargaining agreement it could face a court order to accelerate its investments. The union, on the other hand, could be hit with thousands of dollars in damages and widespread worker discipline if they’re found to be striking unlawfully.

The lawsuits are “a perfect example of why these types of provisions can be problematic,” said David Pryzbylski, a partner with Barnes & Thornburg LLP. “If you’re boxing yourself into a commitment like this with a labor union, it’s going to make it tougher for you to change course down the road.”

Contractual Promises

As part of its landmark 2023 contract agreement, Stellantis said it would make $19 billion in new investments, including reopening a shuttered EV plant in Belvidere, Ill., and building the new Dodge Durango in Michigan factories.

These types of investment provisions are rare, found mostly in companies with a long-standing union relationship, according to labor scholars.

Workers frequently get layoff protections but securing language about new investments is “a real breakthrough,” said Rebecca Givan, a labor relations professor at Rutgers University.

“These manufacturers have, time after time, closed plants and cut jobs and the workers need to know that the jobs will exist for the contract gains to mean anything at all,” she said.

The pact seemed like a potential watershed moment for the auto company and the union, but went sideways only months later.

Stellantis, driven by what it says is a dropoff in EV demand among consumers, delayed its plans to reopen the Belvidere plant. The union has alleged the company is waffling over the location of the Durango’s production.

In response, more than a dozen union locals filed grievances and unfair labor practice charges with the National Labor Relations Board over what they say is a breach of contract.

“Stellantis is one of the most profitable auto companies on the planet, and makes its money off of the American market,” UAW Stellantis Department Director Kevin Gotinsky said in a September 16 statement. “UAW members generate that profit and build the product that keeps this company running. We will take action if necessary to stop Stellantis from violating our contract and abandoning the American worker.”

Stellantis cited “highly volatile” market conditions and says that the contract gives them the right to pull the commitments based on dipping demand.

UAW President Shawn Fain called out the company at the Democratic National Convention, saying the automaker was trying to pull out of its commitments, and threatened to take “whatever action necessary.”

“Nobody has a crystal ball, so the market conditions could fall apart and leave you in a tough spot,” Pryzbylski said.

Courts to Weigh Strike Legality

In response to the grievances and strike authorization votes, Stellantis filed a flurry of nearly a dozen lawsuits against UAW and its locals last week. The company alleges that Fain has embarked on a “sustained, multi-month campaign” to force the company into making business moves and filed “sham” grievances to justify a potential strike.

It’s asking various district courts for a declaration that the union cannot go on strike and guarantees that the company would be awarded monetary damages in the event of the strike.

The automaker’s argument hinges on a memorandum of understanding that details the investment promises. The language of the agreement states that the business moves would have to be run by the automakers product allocation committee and would be “contingent upon plant performance, changes in market conditions, and consumer demand continuing to generate sustainable and profitable volumes.”

“This gives the company a considerable amount of latitude,” said Marick Masters, a professor emeritus of business at Wayne State University, noting another contract between the UAW and General Motors. That contract gave the union the right to strike over plant closures and the company’s failure to comply with the investment provisions.

But Masters added that he didn’t see similar language in the Stellantis agreement. “So I have some reservations,” he said.

Pryzbylski said the “emergency exit” clause won’t save Stellantis from litigation.

“It’s a good safeguard conceptually, but the problem is that once that language is there, it’s open to multiple interpretations and that’s going to be subject to the grievance process,” he said.

‘Serious’ Violations

UAW’s CBA with Stellantis contains a no-strike, no-lockout clause, which is designed to protect both parties from volatility during the lifetime of the agreement.

But the union claims it will be able to go on strike, despite that clause, because the company has violated their contract.

“The company’s failure to honor its commitments in the US investment letter is a serious concern to all bargaining unit members,” Fain said in a letter to Stellantis leadership obtained by Bloomberg Law. “Stellantis’s layoffs and plant closings are what is going to harm our members, which is why we plan to enforce our contract by every means necessary.”

US Supreme Court precedent in Mastro Plastics Corp. v. NLRB holds that unions may walk out on strike while a CBA is in effect if the employer has committed “serious” unfair labor practices.

Pryzbylski said it may be a toss-up if a court finds Stellantis’ actions to be serious enough to warrant a strike, and that workers could risk their jobs if they decide to walk off.

“You are going to have to win before the National Labor Relations Board, the federal appeals court, and then potentially the Supreme Court,” he said. “If they’re wrong at any of those levels, then the whole strike is unprotected and their members can be disciplined or discharged and UAW could face monetary damages.”