Tesla CEO Elon Musk, known for his outspoken and controversial remarks, recently added fuel to the fire of the debate between corporations and organized labor with his critique of unions.

Musk thinks the ongoing auto union strike is being driven by unreasonable demands that could have far reaching consequences for the automotive industry.

“They want a 40% pay rise and a 32 hour workweek. Sure way to drive GM, Ford and Chrysler bankrupt,” Musk posted on Sept. 26, taking a direct shot at the United Auto Workers (UAW) union.

Musk's comments come at a pivotal moment as UAW engages in a high-stakes strike against major automakers.

President Joe Biden publicly supported the UAW's call for a substantial wage increase during a visit to a General Motors plant near Detroit.

But the president’s endorsement could fall on deaf ears given the precarious state of organized labor in the country.

A bold or foolish move by the UAW?

Union membership in the U.S. has significantly declined, from 20.1% of workers in 1983 to just 10.1% in 2022. Much of that decline has occurred in lockstep with the erosion of domestic manufacturing.

Despite this decline, recent years have seen renewed labor activism driven by concerns about income inequality, job security, and benefits access.

One of the most notable recent examples is the UAW strike, which has been going on for more than two weeks and could easily drag on for months, according to WWJ auto analyst John McElroy.

The “union is shelling out an extra about $1.5 million a week for the people who are laid off,” McElroy said. While that amount is substantial, UAW’s war chest is worth around $825 million.

“I figure the union strike fund could easily hold out until Christmas,” he added.

The UAW is going up against General Motors, Ford, and Stellantis NV simultaneously, a feat that requires significant clout. UAW represents a large segment of the U.S. automotive workforce, so it has plenty of skin in the game.

Ultimately, the strike is about money.

UAW initially demanded a 40% pay increase but has since reduced its demand to 36%. That’s still well above any pay hike the average American has received in decades.

By comparison, in February 2023, Japan’s Toyota agreed with its union to raise employee salaries by 5%, the largest salary increase for that country in 20 years.

The impact of a prolonged strike

The automotive industry, a vital economic driver, relies on millions of jobs, and a prolonged strike could disrupt supply chains, affect production schedules, and lead to financial losses for both automakers and their employees.

If the strike really drags on and auto production declines, prices for new and used vehicles will likely climb.

As the Wall Street Journal notes, the most popular vehicles already have a very tight supply, so it wouldn't take much to spark a substantial price increase. For the typical American, this means higher costs at a time when auto loans are much harder to come by.

Moreover, the UAW's push for wage increases and improved working conditions mirrors a broader movement across various industries. Workers nationwide have been advocating for better compensation, job security, and union representation.

While these demands may benefit individual workers, they can pose challenges for businesses, particularly those navigating a transition to electric vehicles (EVs).

Musk and others are concerned about rising labor costs affecting the EV sector.

Companies like Tesla, Lucid Group Inc., and Rivian Automotive Inc. operate without unions, often using alternative compensation methods like restricted stock units and employee stock purchase plans.

Musk says this has made workers a lot wealthier.

“The UAW stole millions from workers, whereas Tesla has made many workers millionaires,” he wrote last March.

The worry within the UAW and the traditional auto industry is that EVs, which typically have fewer components and require fewer workers, could result in job losses and lower wages.

But if UAW achieves success with Detroit's traditional automakers and garners public support, it might inspire Tesla employees to consider unionization.

“Unionizing is extremely difficult under U.S. law,” said Catherine Fisk, a labor law professor at UC Berkeley. “That said, workers successfully unionized against even stiffer odds in the 1930s. It happened before, it can happen again—it’s just a torturous process.”