Democrats hit a major speed bump Thursday in their plan to supercharge new electric vehicle tax credits for cars and trucks built by domestic, unionized workers when Sen. Joe Manchin III, a key swing vote, said he opposes that kind of preferential pro-labor treatment.
The Automotive News reported that the West Virginia senator, a moderate Democrat, criticized such pro-union provisions in the budget reconciliation package as “wrong” and “not American” while participating in an event announcing Toyota’s $240 million investment in a components plant in his home state.
“When I heard about this, what they were putting in the bill, I went right to the sponsor (Sen. Debbie Stabenow, D-Mich.) and I said, ‘This is wrong. This can’t happen. It’s not who we are as a country. It’s not how we built this country, and the product should speak for itself,” Manchin told the Automotive News in an interview. “We shouldn’t use everyone’s tax dollars to pick winners and losers. If you’re a capitalist economy … you let the product speak for itself, and hopefully, we’ll get that, that’ll be corrected.”
That position puts Manchin at odds with Stabenow and other members of Michigan’s congressional delegation, and could disrupt his party’s sweeping efforts to accelerate deployment of electric vehicles across the country — a key part of their plans for tackling climate change.
Democrats’ budget reconciliation package pending in the House would grant up to $7,500 in tax credits for plug-in electric vehicles, but those credits would be boosted an additional $4,500 if the vehicle’s final assembly takes place at a U.S. facility operating under a union-negotiated collective bargaining agreement.
Winners and losers
That’s expected to benefit companies such as General Motors Co., Ford Motor Co. and Stellantis NV, but disadvantage those that don’t use union labor in their U.S. operations such as Toyota and Tesla. Other countries have objected to the provisions on the grounds that they violate trade agreements, and international car manufacturers — many of whom have significant operations in America — have taken issue with the labor protections.
The trade association Autos Drive America earlier this year launched an ad campaign opposing the provisions on behalf of its members, which include international automakers such as Honda, BMW, Toyota, Mercedes-Benz, Hyundai and others.
The group’s president and CEO Jennifer Safavian said in a statement earlier this year that half of all vehicles made in the United States are built by Americans who work in nonunion operations.
“Prioritizing among American auto workers creates an unlevel playing field that will limit consumer choice and punish non-unionized American workers, their families, and their communities," Safavian said in the statement.
Rep. Andy Levin, D-Mich., said in an interview earlier this month that supporters weren’t backing off the provisions in the face of such criticism. He said it’s ironic that some international automakers are based in countries with high unionization rates and suggested their U.S. operations represent a way for them to tap into cheaper nonunion labor.
“Union workers in the auto industry helped build the middle class in this country,” Levin said. “They make better wages, benefits and pensions than the other workers and the idea that we shouldn't reward that — we are about making work dignified, making it paid, making it valued and rebuilding the middle class.”
In a statement Thursday, Stabenow made similar points and said that she supported Manchin two years ago on legislation to help members of the United Mine Workers of America in West Virginia.
“At that time, some argued his bill was unfair and was picking winners and losers. But we rejected that argument and stood together to protect union pensions,” Stabenow said. “This issue is no different. Standing up for hardworking Americans is always the right thing to do.”
Republicans have been vocal in criticizing the additional tax credit proposal as a misguided handout to labor organizations, characterizing it as a way for Democrats to pay back campaign contributions that flow from those groups.
But Manchin isn’t the only Democrat who has raised concerns about the protections.
Rep. Terri A. Sewell represents an Alabama district where Mercedes-Benz and Hyundai have announced plans to build electric vehicles. She said during the House Ways and Means markup of the budget reconciliation package that there shouldn’t be a choice between unionized and nonunionized workers.
Manchin is likely to hold as much influence as anyone over the shaping of the budget reconciliation package because the 50-50 Senate split means Democrats can’t afford to lose a single member of their caucus. If he does insist on striking the union protections, that could potentially have repercussions for the tax credits as a whole.
Labor leaders, after all, pushed for some kinds of protections to accompany the increased tax credits and singled out other companies such as Tesla for criticism over not using unionized workers.
Lindsey McPherson and Laura Weiss contributed to this report.