UAW Strike and the Industry’s Supply Base

by Carolyn Mathas

According to a Reuters report, the United Auto Workers Union initiated strikes at three plants owned by Ford, General Motors, and Chrysler (Stellantis). It announced expanding the strike to 38 parts distribution facilities in 20 states owned by GM and Stellantis.

Ford is not subject to this latest action as talks are yielding progress.

In the first week alone, Anderson Economic Group LLC indicated that total economic losses were more than $1.6 billion. The expanded strike will impact the industry and its vast supplier networks. The strike will fuel a rebound in jobless claims in the coming weeks as the strike forces auto manufacturers and their suppliers to temporarily lay off workers.

It’s already happening. Auto parts maker CIE Newcor notified workers last week that it would temporarily lay off 300 workers at four Michigan plants beginning Oct. 2. The supply base for the top three Detroit automakers will substantially impact the economy, especially in the Midwest, involving chemical and metal producers to electronics. U.S. Steel, for example, said it would idle its only operating blast furnace at a plant in Illinois based on an anticipated drop in demand during the strike.

A prolonged strike could do permanent damage to the industry’s network of 5,600, mostly small or mid-size suppliers, employing approximately 660,000 workers.

Already impacted by COVID and chip shortages, the companies were beginning to recover. If the strike is long, many will not be able to survive. Those more profound in the supply chain are small, private companies that rely on limited sources of capital. Now, they are faced with no cash reserves and high-interest rates. If it’s a long strike, the ripple effect will be far-reaching and won’t be good.

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