Future job growth in the U.S. auto industry depends on supportive industrial and labour policies

As the inevitable transformation of the U.S. auto industry unfolds, supportive industrial and labour policy can help the industry reclaim its role as a source of well-paying, stable jobs, according to a report released on September 22 by the Economic Policy Institute.  “The stakes for workers in how policymakers manage the coming shift to all-electric vehicles” was written in collaboration with the BlueGreen Alliance, AFL-CIO Industrial Union Council, United Auto Workers, United Steelworkers, and The Greenlining Institute.   

Authors Jim Barrett and Josh Bivens report on the likely employment and job-quality implications of a large-scale shift to Battery Electric Vehicles (BEVs) under various scenarios. Their key findings: employment in the U.S. auto sector could rise by over 150,000 jobs in 2030 under two conditions: 1. Battery electric vehicles rise to 50% of domestic sales of autos in 2030 and 2. U.S. production of electric vehicle powertrain components increases. Supportive policies are seen to make the difference between job losses and job gains. 

The report further states: “For the auto sector to continue providing good jobs for U.S. workers, strong labor standards—including affirmative efforts to encourage unionization—will be needed. … The jobs embedded in the U.S. automobile supply chain once provided a key foundation for middle-class growth and prosperity. A cascade of poor policy decisions has eroded employment and job quality in this sector and this has helped to degrade labor standards across U.S. manufacturing and throughout the overall economy …. The industry transformation coming due to the widespread adoption of BEVs provides an opportunity to reverse these trends. The transformations necessary to ensure that this shift to BEVs supports U.S. employment and job quality—investment in advanced technology production and strengthening supply chains—will redound widely throughout manufacturing and aid growth in other sectors as well.”  

The report is summarized in “What Will It Take for Electric Vehicles to Create Jobs, Not Cut Them?” (New York Times , Sept. 22) .

Government committee recommends further study for support for workers amid transition to electric vehicle production

The Standing Committee on Environment and Sustainable Development presented their report, The Road Ahead: Encouraging the Production and Purchase Of Zero-Emission Vehicles In Canada to the House of Commons on April 13.  The Committee had received eighteen briefs and heard from twenty-one witnesses since the Fall of 2020 – available here.  The importance of reducing transportation emissions was accepted, and the topics of discussion included purchase incentives, expanding ev charging infrastructure and the impact on the electricity sector, the potential of hydrogen-powered vehicles, and more. The resulting report makes thirteen recommendations, to which the government is requested to respond. Amongst the recommendations: the existing federal incentive program for EV purchase be continued and expanded to include used EV’s, that the price cap be eliminated, with eligibility geared to income; that the Government of Canada build on existing initiatives, like the Green Mining Innovation program, to improve the environmental performance of Canadian minerals used in battery and hydrogen fuel cell production; and that the federal government  work with provincial and territorial governments to develop recycling and end of life management strategies for ZEV batteries.

Recommendation #6 addresses the concerns of workers: “The Committee recommends that the Government of Canada study opportunities to support automotive sector workers while facilities are transitioning to produce ZEVs, and consider dedicated funding to retrain automotive sector workers for ZEV production.”

Most of the input to the Standing Committee was from industry representatives, but the report attributes Recommendation #6  largely to the testimony of Angelo DiCaro, Research Director of Unifor on November 23, 2020.  From the report: “Witnesses cautioned that it will be challenging to reorient Canada’s automotive sector to produce ZEVs. It takes time for producers to bring vehicles to market, and to retool facilities and retrain workers to produce ZEVs.  Angelo DiCaro suggested that the Government of Canada should ensure that the employment insurance system will support workers during plant retooling. He also noted that the transition to ZEVs could threaten jobs in Canada’s automotive parts sector, especially among businesses that produce parts for the powertrains that propel ICEVs. To compensate, Mr. DiCaro said that Canadian governments should set rules about the afterlife of vehicles that could create jobs in vehicle disassembly and recycling.”    

Specifically, when asked later by NDP MP Laurel Collins, “what kind of retraining and income supports do Canadian auto workers need to support a just transition to a zero-emissions future?” DiCaro identified the powertrain segment of the auto parts industry as the most vulnerable, and continued…. “as plants transition, as will happen with Oakville, we have to see how long these transition times will take in our next round of bargaining. I can assure you that, if this is going to be a two-year or a 16-month transition to get that plant retooled, there are going to be questions about income supports for those workers as they retrain and wait for these cars to come online….. This is front and centre. I think the act of collective bargaining gives us an opportunity to explore that. Certainly our employment insurance system and our training systems are going to have to be looked at more carefully.”

International roadmap to guide the auto industry through disruptive times

The International Labour Organization (ILO)  hosted government, employer, and union representatives at a Technical Meeting on the Future of Work in the Automotive Industry, from February 15th to 19th. Canada’s auto industry union, Unifor, participated in the meeting. As reported in a  press release from the union confederation IndustriALL,  the virtual meetings were at times “confrontational”, but the resulting final document  is called a roadmap for the industry to guide it through its current disruptive transformation.  

The final document, which will proceed to the Governing Body of the ILO in November 2021, sketches out the challenge:

“The industry is at a turning point: technological advances, climate change, demographic shifts, new consumer preferences and mobility concepts, and a transformative era of globalization are rapidly changing the organization of production and work in the industry. The transition to a carbon neutral economy, new mobility patterns and changing consumer preferences are driving investments in new mobility solutions, electric and autonomous vehicles, cleaner production with alternative materials, and greater circularity.”

The Conclusions of the Technical Meeting, agreed-upon by union, management and government, includes the concepts of Just Transition, decent work, gender equality and lifelong learning.  Amongst the conclusions, this recommendation for future actions:

“Governments, employers’ and workers’ organizations should: (a) support the industry navigate through its transformation, accelerated by the COVID19 crisis, and mitigate the impact on enterprises and jobs; (b) advance decent and sustainable work in the automotive industry; (c) promote the acquistion of skills, competences and qualifications and access to quality education for all workers throughout their working lives to address skills mismatches now and in the future and encourage more women to study STEM; (d) jointly engage in formulating and implementing coherent and comprehensive economic, trade, fiscal, education and sustainable industrial policies, incentives and actions, in accordance with national law and practice, to: (i) create an enabling environment for entrepreneurship, increased productivity and for sustainable enterprises of all sizes to grow and generate decent and productive work; (ii) improve working conditions and safety and health at work and extend social protection to all workers in order to promote decent work; and (iii) facilitate a just transition to a future of work that contributes to sustainable development in its economic, social and environmental dimensions.”

How will electrification of vehicles impact auto workers?

Threats to traditional auto manufacturers are outlined in “The top trends killing the auto industry” in Corporate Knights (Feb. 3), including the climate crisis, the fall of fossil fuels, electrification and autonomous EV fleets, unfunded pension liabilities (US$14.4 billion for G.M., US$10.2 billion for Ford), as well as  shifting government policies, and dampened demand in general. All the more reason to celebrate the good news about investment in EV production in Canada by GM, Ford and Fiat-Chrysler , as well as GM’s January 2021 announcement that it will  sell only zero emissions vehicles by 2035. In February, Ford announced its target to sell EV’s only in Europe.  But the good news is complicated, as described in  “Auto industry peers into an electric future and sees bumps ahead” (Washington Post, Feb. 6)  , and by  “Canada and the U.S. auto sector’s abrupt pivot to electric vehicles” (National Observer, Feb. 15) . For Canada, the challenges include competition for the development of battery technology and the policy challenge of the new “Made in America” Executive Order by President Biden on January 25.  Despite the brief and optimistic overview presented in  “Jerry on the Job: How the president of Canada’s largest union, Jerry Dias, is driving the country’s electric vehicle push” (Corporate Knights, Feb. 4), our highly integrated North American auto industry has a complicated path forward. 

One of the most important issues ahead is how the conversion to electric vehicles will impact the jobs of current auto workers. In late 2020, Germany’s Fraunhofer Institute for Industrial Engineering conducted a detailed study of this issue on behalf of the Sustainability Council of the Volkswagen Group.  Employment 2030 Effects Of Electric Mobility And Digitalisation on the Quality and Quantity of Employment at Volkswagen (Nov. 2020) is an English-language summary of the full, detailed study, which modelled the impacts of digitization and electrification in the industry. Although the study is specific to  VW production in Germany, its findings are instructive, and include that job losses will be less than anticipated, ( a decrease of 12 percent in this decade, mainly due to planned output volumes and higher productivity).  Digitization will result in a need for new skills, “will necessitate a profound change in corporate culture”, and will include higher employee expectations for job flexibility. A summary appearing in Clean Energy Wire   states: “ …. there is no uniform employment trend in the ‘transformation corridor’ over the coming decade. Instead, there will be a complex, interconnected mixture of job creation, job upgrading and job cuts. It argues that it will be vital to ensure that small and medium-sized enterprises (SMEs) do not fall victim to this reorganisation, and warns that Germany’s automotive sector must establish new forms of cooperation so as not to “recklessly surrender the field of mobility to new market players.”  The study is also summarized in a press release by  VW (with links to the full study in German).

Benchmarking corporate Just Transition policies gives auto manufacturers like Tesla a low score

The World Benchmarking Alliance (WBA) announced in February that will combine its existing Corporate Human Rights Benchmarking  with its Climate and Energy Benchmarking of global corporations, to produce a Just Transition Benchmark Assessment .  The WBA has a practical objective:

“Trade unions and civil society organisations can use the transparency provided by these assessments to hold companies accountable, and governments can use them as evidence to inform policy making for a just transition. Additionally, investors and the companies themselves will be able to use the assessments as a roadmap to move towards practices to ensure no one is left behind in the decarbonisation and energy transformation.”

Assessing a just transition: measuring the decarbonisation and energy transformation that leaves no one behind  outlines the methodology of this new assessment exercise and invites stakeholders to contribute in an ongoing process till 2023. The proposed outcome is to publish Just Transition Benchmark assessments of approximately 450 companies in high-emitting sectors – in publicly available rankings,  as are the many other reports of the World Benchmarking Alliance. Assessing a just transition also includes results from a pilot project of the automotive sector to illustrate how the Just Transition assessments will be done. It synthesizes the findings from the WBA Automotive Benchmarking for 2020  with its Corporate Human Rights Benchmarking .

Global auto manufacturers are racing to produce electric vehicles, but are they respecting workers’ rights?

In combining the findings of the two existing benchmarking initiatives, Assessing a just transition states: “…. Some companies that demonstrated action on climate issues, such as low-carbon transition plans, emissions reduction targets and climate change oversight, disclosed very little, if any, information on how they manage human rights, and vice versa. This lack of correlation suggests that many automotive manufacturers still consider climate and human rights issues separately, to be addressed independently of each other, despite the fact that they are increasingly recognised as interconnected.”

A brief case study highlight of Tesla states:  “….. when observing the company’s approach to managing human rights, Tesla scores in the bottom third of companies assessed in the CHRB with an overall score of 6.3/100. This approach has come under recent scrutiny, with a 2020 shareholder resolution demanding Tesla improve its disclosures on human rights governance, due diligence and remedy. While the resolution did not pass (24.8% voted in favour), it highlights that even when a company contributes to decarbonisation, a lack of essential human rights policies and processes to prevent abuse of communities and workers cannot be overlooked.”

Related reports:

The WBA  Corporate Human Rights Benchmarking Report for 2020 Key Findings  includes five sectors: Agricultural products, Apparel, Extractives & ICT manufacturing – and for the first time ever, 30 companies in the Automotive manufacturing sector.   The report states: “The average score for automotive companies is 12%, the lowest score ever for a CHRB-benchmarked sector. Two thirds of the companies scored 0 across all human rights due diligence indicators. These poor results suggest implementation of the UNGPs is weak across the sector.”

Twenty-five “keystone” companies in the automotive industry have been benchmarked for their progress towards Paris goals since 2019. Results of the 2020 report are here , and a blog in December 2020 summarizes the results in  “A tale of two automotive companies: sluggish incumbents and opaque disruptors in the race to zero-emissions vehicles”.

 

50% Clean Power by 2025: 3 Amigos Summit sets tone of international cooperation

3 amigos waving.jpgOn June 29, 2016 the Three Amigos – the leaders of Canada, Mexico and the U.S.,  issued a  “North American Climate, Clean Energy, and Environment Partnership Action Plan”   , summarized by Clean Energy Canada here .  The Plan sets a target of 50 per cent clean power generation by 2025 for North America – with “clean” including energy from nuclear, fossil fuels if produced with carbon capture and storage technologies, and improvements in energy efficiency. The Plan also calls a for shared vision for a clean North American automotive sector, including harmonized regulations, and for collaboration on cross-border electricity transmission projects, specifically naming the Great Northern Transmission Line, ( Manitoba to Minnesota), and the New England Clean Power Link, (Quebec to Vermont). The recent Brexit vote loomed large over the leaders’ meetings; as  the Institute for Energy Economics & Financial Analysis stated: “As Europe is disintegrating, North America is integrating, and it’s integrating in a way that I think provides real and substantive and tangible benefits to the citizens of the three countries.” In a similar vein, Inside Climate News verdict was, “Whatever their respective individual contributions, the three nations’ vow to work in concert is what most excites advocates of strong climate action. And the possibility of a common price on carbon. ”

What might excite advocates of Just Transition for workers is the final statement of the joint press release , which pledges to:  “Invest strategically in communities to help them diversify economies, create and sustain quality jobs, and share in the benefits of a clean energy economy. This includes promoting decent work, sharing best practices, and collaborating with social partners such as workers’ and employers’ organizations and nongovernmental organizations on just transition strategies that will benefit workers and their communities….Protect the fundamental principles and rights at work of workers who extract and refine fossil fuels, and who manufacture, install, and operate energy technologies.”

A group of economic think tanks, including Pembina Institute, Canada 2020, and the World Resources Institute collaborated on Proposals for a North American Climate Strategy   in advance of the Summit meetings. Their recommendations are mostly recognized,if not resolved:  “.. . the United States, Canada, and Mexico should consider the cost of carbon in long-term decision-making; commit to a methane reduction goal and cooperate to reduce black carbon; coordinate their leadership efforts in international forums; work to ensure effective carbon pricing throughout the continent; collaborate to accelerate the shift to clean energy; develop a North American strategy for sustainable transportation; work to strengthen resilience and equity in a changing climate; and develop a coordinated forest and land use strategy.”    For some reaction, see “Dirty or Clean, politics drive cross-border energy deals”    in the Globe and Mail (July 4) , or “ Steering toward a North American electric auto pact ”   in  Policy Options  (August) .  And from the Montreal Gazette, an Opinion piece to bring things back to earth: “After the Three Amigos summit, Canada has work to do on carbon pricing”  .