The United Auto Workers (UAW), which launched an intermittent strike at Ford, General Motors, and Stellantis manufacturing plants, has expanded the action to 38 locations in 20 states. Automotive manufacturers, which have been struggling with electronics supplies since 2020, could face another disruption to their supply chain as the labor dispute continues.
“Depending on the status of the strikes that are rolling across different sites, various semiconductor suppliers could be impacted,” Rob Handfield, professor of supply chain management at North Carolina State University, told EPSNews. “They are likely going to strike at the SUV and large truck plants first and depending on the contractual requirements, this may or may not impact the semiconductor supply chain. And the big three have gotten much better at providing forecasts and keeping higher levels of inventory, so they may not be dramatically impacted.”
Source: UAW news site
This is the first significant action from the automotive workers union since the pandemic.
At least 6,100 workers from the three carmakers and their suppliers have been laid off or are likely to be affected as a result of the work stoppages at the three striking plants, the companies told the Wall Street Journal.
The Anderson Economic Group, a consulting firm in Michigan that tracks the automotive industry, estimated Friday that the strike has caused about $1.6 billion in economic damage, including more than $500 million for the companies and more than $100 million in wages lost to strikers and layoffs, the AP reported.
UAW President Shawn Fain said their strategy is to keep the companies guessing through factory shutdowns that they may not have expected or prepared for. Not calling an all-out strike allows members to continue working and earning wages, sparing the UAW from using its funds to compensate striking workers.
“The Stand Up Strike is a new approach to striking. Instead of striking all plants all at once, select locals will be called on to stand up and walk out on strike,” said the UAW website.
A significant impact on suppliers
While the strike affects only a few automakers, the impact could be global on the supply chain. About 80 percent of one of the companies serves many other manufacturers, including those building electric vehicles.
“The tier ones — or the top-level suppliers – have probably have taken measures already [such as cutting] discretionary spending, for example. But the longer it goes on, they could start running into furloughs and things like that. What it really hits are the lower-level suppliers, the tier-twos, the tier-threes,” said Jeff Rightmer, a professor of global supply chain at Wayne State University in Detroit, during a recent interview. “They’re typically much smaller, maybe even family-run, and the margins are razor thin. So, a disruption really throws them into turmoil. And you could see, possibly, some of them just close up shop and liquidate.”
Data from FourKites shows that between Aug. 20 and Sept. 14, there was a substantial uptick in rescheduled over-the-road auto shipments originating in Mexico and bound for the United States.
“At this point in the strike, we have seen minimal disruption to our business from our mainly tier-one and tier-two supplier customer base that supports automotive manufacturing,” Gabe Osorio, director of marketing at electronics distributor TTI Inc., told EPSNews by e-mail. “We have received notice from some customers warning of potential slowdowns or shutdowns should the strike linger on but so far none have executed on that.”
“From our supplier perspective, they are taking an approach — again so far and as long as this does not drag on — of using this time to “catch up” on deliveries, capacity production, etc.,” Osorio added.
UAW plans to strike at distribution centers
Source: UAW news site
During an online address on Friday, UAW president Fain said members would walk out at 38 parts-distribution centers across 20 states. This new development will also impact dealerships, who depend on parts delivery to service their customers’ vehicles. Crimping the flow of components from the centers will likely disrupt GM and Stellantis dealers’ service operations, potentially leading to longer wait times for customers.
“While the distribution centers don’t manufacture parts, which are used for repairs and other service work, the downstream impact of their closure on thousands of GM and Stellantis dealers and their customers could more quickly inject disruption into the retail end of the business,” said the Wall Street Journal.
The strike’s expansion to parts-distribution centers and its potential impact on dealerships further complicate an intricate situation. Customers may face longer wait times for vehicle repairs and services, compounding the challenges faced by dealerships and potentially harming the reputation of the affected automakers.
The transition to electric vehicles creates anxiety
The EV transition will significantly lower the number of jobs in the automotive sector in the short term since OEMs don’t need the same number of components and workers on an assembly line as they do to manufacture cars with internal combustion engines.
Last year, Ford chief executive Jim Farley told the Financial Times that the EV transition might require 40 percent fewer workers.
That’s why the UAW is asking to continue making internal combustion models and more hybrids. Also, they want to ensure that workers who make electric batteries and other components in the new EVs get union benefits.
The longer the strike continues, the more extensive the damage
“The UAW is targeting the most profitable part of the automotive industry, the expensive models, the SUV,” says NCU’s Handfield. “This has a significant impact on the electronic industry. The big OEMs could survive by reducing forecasts and stop ordering more chips, but the small ones could be forced to close shop.”
Ultimately, the longer this strike persists, the greater the damage it could inflict on the automotive sector, especially on smaller businesses and the intricate web of suppliers that sustain it.
“Time will tell where this ultimately goes, as I wrote this [Friday] the UAW walked out on 38 more Stellantis parts locations but did not add any additional Ford sites, which is certainly a positive,” said TTI’s Osorio. “Again, there seems to be a sense of positivity or belief that even though the rhetoric around the strike from both sides is harsh, that a quick resolution is achievable.”
“Our Stand Up Strike is moving Ford, and that is why we have not expanded our strike there. However, Stellantis, like GM, is refusing to make significant progress and so the Stand Up Strike there has expanded to its 20 parts facilities. Our strategy is applying pressure where it is most needed,” said the UAW.
The UAW’s strategic approach has created uncertainty for the major automakers and an entire ecosystem of interconnected industries, making a swift resolution imperative to mitigate the far-reaching economic repercussions of this labor dispute.
The post UAW Strike Will Cost Billions Across the Supply Chain appeared first on EPS News.
