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Suppliers feel impact of UAW strike

Contracts between the United Auto Workers (UAW) labor union and General Motors, Stellantis, and Ford, collectively known as the “Big 3” U.S. automakers, expired on September 14. Negotiations on future contracts have stalled over demands regarding pay, pensions, and working hours.

As a result, the UAW launched a “stand-up” strike on September 15, targeting one facility of each automaker in the United States. Around 12,700 UAW workers took part in this first stage of the strike while other employees continued to work under the existing contract. Claiming insufficient progress during negotiations over the first week of the strike, the UAW expanded the action to include all U.S. parts distribution centers of General Motors and Stellantis, raising the total number of striking workers to around 18,300 by September 22.

In addition to the targeted facilities, these strikes have had an impact across the Big 3’s production lines. On September 15, Ford announced it would lay off 600 employees at its Michigan plant whose production lines relied on the output of striking workers. On September 20, Stellantis announced it was laying off 368 employees at facilities in Ohio and Indiana due to strike related storage constraints. On the same day, General Motors confirmed that due to a shortage of parts as a result of the strikes that it would idle its plant in Kansas, impacting around 2,000 employees.

Related autoworker jobs in U.S. and overseas at risk

Each automotive plant job is estimated to support around seven other jobs throughout the automotive supply chain, with around 5,600 U.S. suppliers and more than 690,000 jobs tied to the Big 3 alone. The Big 3’s demand for parts will decline as their production is hit by strikes. However, this demand can account for up to 76% of some suppliers’ revenue. Among the most exposed publicly traded automotive suppliers are Nexteer Automotive Group, ABC Technologies as well as American Axle. As a result, suppliers are already forced to react to the strike with measures such as wage reductions, furloughs or layoffs, or idling plants.

In the first week of the strike, several U.S.-based suppliers planned layoffs impacting thousands of workers in Michigan, Ohio, and elsewhere. Examples include CIE Newcor, a Tier 1 and 2 supplier in Michigan, and ZF North America which employs over 11,000 workers at nine sites in Michigan.

International suppliers have also been impacted, particularly in Mexico which has strong ties to the U.S. automotive industry. Companies in Coahuila and Aguascalientes regions have implemented technical stoppages as a direct result of the strikes. In Aguascalientes Region, around 30-35% of companies export auto parts to the U.S., making the scope for further disruption significant if the strike actions in the U.S. continue for a prolonged amount of time.

Smaller auto parts suppliers and those that mainly rely on business from the Big 3 are particularly vulnerable to the UAW strike. An extended strike could force these companies into bankruptcy. For companies working on thin margins and on a just-in-time basis, this could begin to occur after 1-2 weeks of strike. This would have a lasting impact on the automotive industry even after the strikes end by placing additional pressure on a smaller number of companies, making the supply chain less resilient to future shocks.

Expect impact beyond the automotive industry

Many auto parts suppliers also manufacture components used in a broad array of other industries. For example, Cascade Die Casting Group based in Michigan makes components for the automotive and appliance industries, and has confirmed it expects to be impacted by the strikes. Other sectors where the supply chain has significant overlap with the automotive industry include heavy machinery, agriculture, and aerospace. Temporary or permanent closures of automotive suppliers could therefore also have an impact on production in those industries if companies are worked to idle production sites or close down permanently.

Furthermore, raw materials suppliers and logistics companies are also exposed to the UAW strikes. Each automobile produced in the U.S. contains around one ton of steel, and the strikes could result in a reduction of 3,200 vehicles manufactured per day. On September 18, U.S. Steel Corporation confirmed it idled a blast furnace in Illinois due to this anticipated reduced demand. Meanwhile, the trucking industry observed a roughly 3% increase in rescheduling of over-the-road shipments of auto parts to the U.S. from Mexico in the lead up to the strike. Logistics disruptions like this are likely to worsen in the coming days if the strike goes on.

Prolonged strike actions increasingly likely

Currently, a prolonged strike looks increasingly likely as the UAW demands and the offers given by the Big 3 remain far apart after one week of strike action.

The UAW claims to have a strike fund that could support three months of full strike, but by opting for the limited “stand-up” strike, the fund can likely last even longer. Moreover, so far, the UAW has only mobilized around 12.5% of its membership, meaning the scale of the strikes could increase significantly in the coming weeks if no agreement is reached.

The impact of the strike could also be multiplied if the UAW were to target critical components such as engine or transmission plants, or the companies’ most profitable models such as Ford’s F-150, GM’s Chevrolet Silverado, and Stellantis’ Ram. Both are possible options for the next expansion of the strike.

It is estimated that a month of lost production would cost the Big 3 around $7-8 billion (€6.5-7.5 billion), while suppliers have around $38 billion (€35.6 billion) in revenue linked to the Big 3. As the strike is maintained and expanded, more suppliers will have to adjust their business operations to mitigate lost revenue through layoffs and production stoppages, potentially causing ripple effects through the automotive supply chain in the U.S. far beyond the production sites where the UAW has set up picket lines.

Everstream clients are receiving more detailed insights and recommendations about this risk. 

Contact us to learn how we can give you a complete view of the risks affecting your end-to-end supply chain and what you can do to mitigate them. 


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