To The Moon

Stellantis hiked its offer to UAW members to include pay raises of nearly 21%, including an immediate 10% increase.

The proposal comes after thousands of workers walked off the job Friday at three key auto plants.

Meanwhile, Ford and GM resumed negotiations with the UAW.

Tesla isn't involved in the United Auto Workers' negotiations with General Motors, Ford and Stellantis, but it's the elephant in the room regardless.

Why it matters: For the Detroit Three, the competitive threat from non-unionized Tesla heightens the importance of reaching a reasonable contract that allows them to build affordable electric vehicles.

Meanwhile, the UAW has a vested interest in obtaining lucrative deals if it ever wants to resuscitate its efforts to organize Tesla workers — or those at any other automaker, for that matter.

Threat level: The UAW's deals with GM, Ford and Stellantis expire at 11:59 p.m. Thursday — and analysts at Evercore ISI and Wedbush Securities predict a greater than 85% chance of a strike at all three, which has never happened before.

The UAW this week reportedly lowered its wage increase demand from 40% to 36%, signaling some progress at the bargaining table, but the parties remain far apart on benefits.

Anderson Economic Group reports that a 10-day strike at all three would lead to direct losses of $5.6 billion and a possible one-quarter recession in Michigan, Indiana and Ohio.

Zoom in: Behind the scenes, automakers say the cost gap between them and Tesla is a big reason why they're struggling to compete with the EV titan.

Tesla currently makes vehicles at an estimated labor cost of $45 to $50 per hour, whereas the Detroit Three make vehicles for about $64 to $67 per hour. Both figures include wages, benefits and profit-sharing.

Between the lines: Tesla's profits per vehicle are higher than any of its global rivals, and CEO Elon Musk is using that advantage as a weapon in a price war that is squeezing industry rivals.

Aside from paying lower wages and benefits, Tesla has padded its profit margins by winnowing production costs at its factories.

It uses large castings in place of many small metal parts, for example, and brought many parts of its supply chain, including battery manufacturing, in-house.

For its next model, a $25,000 global car, it's building an even more efficient assembly plant in Texas.

Those efficiencies have enabled Tesla to rapidly scale its operations, posing a growing threat to the established U.S. automakers.

In 2017, GM's sales volume was 85 times larger than Tesla's. By 2022, that had shrunk to less than a five-fold advantage.

"The competition in the auto industry is fierce, and the UAW, GM, Ford and Stellantis need to keep that foremost in mind when they negotiate this contract," Anderson Economic Group CEO Patrick Anderson tells Axios.

What they're saying: "We're here to win. This is a very intense marketplace," GM president Mark Reuss said at Tuesday's Automotive News World Congress in Detroit.

"The goal is to reward our team members ... and we also have to invest in the future in that intense marketplace to win," Reuss said.

Ford, meanwhile, likes to boast that it employs the most UAW workers and builds the most cars in the U.S., but CEO Jim Farley also is adamant about protecting the future.

"We will not make a deal that endangers our ability to invest, grow and share profits with our employees," Farley said recently.

The big question: After the contract dispute with the Detroit Three is over, will the UAW go after Tesla?

"The battery factories and imports and Tesla and other producers of [EVs] are not unionized — it's a long-run problem for the union," says Harry Katz, a professor at Cornell University's School of Industrial & Labor Relations.

Keep in mind: The sprawling plant in Fremont, California, where Tesla makes many of its EVs was previously a GM-Toyota joint venture with unionized workers.

The UAW tried and failed to sign up Tesla workers there in 2018 and has accused Musk of illegally stifling organizing efforts.

The National Labor Relations Board agreed, and an administrative law judge sided with the UAW, but the union has since said little about its efforts to target Tesla.

Musk is a vocal critic of the UAW, having repeatedly called attention to the union's recent corruption scandals and arguing that workers are better off without a union.

Separately, a group affiliated with the Service Employees International Union is trying to organize Tesla software workers in Buffalo.

The bottom line: Tesla stands to gain if the automakers, the UAW or both emerge wounded from the contract talks.