More than a week after strikes at three of America’s oldest auto companies, the United Auto Workers union has punched holes in supply chains that have yet to fully recover from the pandemic.
Negotiations between companies and unions remain wide apart, and the UAW could extend its strike to more locations as soon as Friday. Depending on how long the strike lasts, there could be significant losses for autoworkers and three companies: General Motors, Ford Motor Co., and Stellantis, the parent company of Chrysler and Jeep. But work stoppages can also be painful for drivers, auto dealers and auto parts suppliers.
A prolonged and escalating strike reduces the number of new cars on dealer lots, makes it harder for people to repair cars, and reduces demand for the parts needed to make new cars.
So far, economic damage has been limited as the UAW has only attacked a small number of factories and warehouses, but the work stoppage has spread to more locations and will continue to grow in recent weeks and months. If so, the pain may get worse.
“The economic impact of the UAW strike remains subdued as the two-week mark approaches,” said Gabriel Ehrlich, an economic forecaster at the University of Michigan. “We are seeing layoffs among auto suppliers, from seat manufacturers to steelworkers. We expect these impacts to accumulate as strikes continue and additional targets are announced.”
When the union began striking at assembly plants, it appeared to target plants that produce popular models such as the Ford Bronco, Jeep Wrangler and Chevrolet Colorado. On September 22, the strike expanded to include GM and Stellantis parts distribution centers.
As these popular models become rarer, dealers are likely to jack up prices.
“They eliminated the ones that would hurt the most,” said Jeff Reitmer, a professor at Wayne State University who specializes in supply chain management. “At this point, we won’t be able to get that production back.”
Despite the strike and high interest rates, new car sales are expected to increase this month, according to Cox Automotive. And for now, overall inventory at the three companies has remained stable except for the most popular models, according to data from CoPilot, a company that tracks dealer inventory.
As of Sept. 24, GM had enough vehicles on dealer lots across its four brands to meet 40 to 70 days’ worth of demand. Ford said he had a 74-day supply of cars and trucks. And Stellantis spent more than 100 days in three of his four divisions. The Jeep’s lifespan was less than 100 days.
Of the 10 models affected by the first UAW strike, supply of four models has been reduced to less than a month’s worth of sales.
“It’s important to keep the strike as short as possible because once the strike dries up, you can’t build anything,” said Wes Lutz, a car dealer in Jackson, Michigan, who sells Chrysler, Dodge, Jeep and Ram models. Ta.
He obtains vehicles from other factories, including large pickup trucks imported from Mexico. But he is concerned that the spread of the strike could reduce the supply of even more models.
An even bigger concern is that strikes at GM and Stellantis parts warehouses could soon make it difficult to repair vehicles and leave some drivers stranded, Lutz said. He said they are working with other dealers to exchange spare parts with each other to keep the service department running.
Car maintenance and repair is generally the most profitable part of a car dealership. CoPilot CEO Pat Ryan said the service division brings in enough cash to cover most or all of the dealership operating costs.
So parts shortages can hurt dealers more than not having enough vehicles to sell. If parts are difficult to obtain for weeks or months, some dealers may stop repairs and lay off mechanics.
Another group of companies targeted by the strike are those that manufacture parts and components such as batteries and mufflers for new cars. According to supply chain monitoring firm Recilink, nearly 700 auto suppliers could be affected by the strike.
Auto parts manufacturer CIE Nucor notified workers on September 21 that it plans to lay off 300 employees at four plants in Michigan starting October 2. The scope of the layoffs “depends on the duration of the potential UAW–Detroit 3” strike, the company said in a regulatory filing.
Much of the automotive industry practices “just-in-time” production. This means that materials are delivered as needed and parts are manufactured and sent to car factories.
Ann Marie Wetz, a Detroit-based partner at the law firm Foley & Lardner, which represents auto suppliers, said some suppliers face bankruptcy protection if small suppliers don’t sell products to customers for more than a few weeks. He said he may have to apply for the same. “There are clear tensions in the supply chain and if the strike drags on for more than a month, parts of the supply chain will be hit.”