Macroeconomics Report: Auto Industry Analysis, Labor, and Wages

This report provides an analysis of the macroeconomic factors affecting the US auto industry, with a specific focus on the labor negotiations between the United Auto Workers (UAW) union and major automakers. The report examines the potential impact of these negotiations on wage rates, production costs, and overall economic growth. It highlights the conflict arising from the automakers' desire to cut labor costs to remain competitive, particularly in light of the increasing sales of electric vehicles, and the UAW's stance on maintaining or increasing worker compensation. The report references the financial crisis, industry downturns, and inflation as contributing factors to the current situation. Furthermore, it projects potential outcomes, including unemployment and reduced production, if negotiations fail, underscoring the auto industry's significant influence on the broader economy. The report also includes references to relevant academic literature supporting the analysis.

Running head: MACROECONOMICS
Macroeconomics
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Table of Contents
Article Review...........................................................................................................................2
References..................................................................................................................................3

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Article Review
The US auto industry is going to face a tough situation in the near future as the United
Auto Workers Union (UAW) is going to bargain for increasing the wage rates. The auto
manufacturers are aiming to cut labor cost in order to reduction of production cost to compete
with foreign auto manufacturers. During the period of financial crisis, the wages of the
workers were cut down to cope up with the trembling market conditions (Drauz). General
Motors, Ford and Fiat are cutting the cost by pulling down the wage rates arguing that the
there is need for investment in new electric car ventures and the low sales value of the cars. It
has been forecasted that after peak sales the auto industry is going to face some slowdown in
the industry. Pattern bargaining is done for making wage contract but salary for workers are
mostly similar for every companies. The car manufacturers are of the opinion that their
objective is to make the company more competitive and provide the workers with two-tier
salary system under which the new workers will be paid less. However, the UAW is in
disagreement with the two-tier payment system and thus it can be predicted that there will be
conflict between the UAW and the auto manufacturers and thereby labor strike may happen.
The problem has occurred due to the low growth in the real wage rate and the
inflation that occurred in the economy (Krugman). If the negotiations do not work out
successfully then there is possibility of increased unemployment and there by reduction in
production due to loss of workers. Therefore, the auto car industry will suffer from slowdown
and thereby the economy will face low growth since automobile industry has significant
influence over the economy.

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References
Drauz, Ralf. "Re-insourcing as a manufacturing-strategic option during a crisis—Cases from
the automobile industry." Journal of Business Research 67.3 (2014): 346-353.
Krugman, Paul. "Inflation targets reconsidered." ECB Forum on Central Banking,
Conference Proceedings. 2014.