You sound very confident, which is really bad when you're wrong.
First, let's take apart this "work at cost" thing. The cost for the publisher is virtually 0. Authors work free or pay. Reviewers work free. There's some administration, which $0.10 per download would easily cover (and then some). Instead they charge $35.95 per download (UC presumably pays less).
You're right that uploading papers to a free, popular pre-print server like arXiv is a great thing to do, except top Elsevier journals will reject your paper if you do.
So how can Elsevier afford to be expensive and get exclusive rights? That's the rent it extracts from publishing prestigious journals. Deciding which journal is prestigious is a hard coordination game. Even with a lot of effort (which researchers at UC and worldwide are exerting in various ways), it takes time to change the status quo.
UC simply feels, likely correctly, that the tables have turned far enough that Elsevier can now be taken out of the game.