SUMMARY
- United Auto Workers union considers strike against Detroit's Big Three.
- Potential 10-day strike could result in over $5 billion in economic losses.
- Current strategies make all three automakers vulnerable to work stoppages.
Detroit's iconic Big Three automakers might face a significant challenge soon. If the United Auto Workers union chooses to strike when the current labor contracts conclude next month, we're potentially looking at a staggering economic impact. A fresh report from the Michigan-based Anderson Economic Group (AEG) sheds light on this pressing issue.
The numbers are alarming. An interruption from nearly 150,000 UAW workers at General Motors, Ford Motor, and Stellantis could lead to a blow of over $5 billion in just ten days. This prediction from AEG isn't just a shot in the dark. They've considered possible losses that might affect the UAW workers, the manufacturers, and the auto industry as a whole. Remember, all this hinges on whether or not new agreements can be made before the existing contracts expire on Sept. 14.
One might think, "A short strike? Perhaps not too damaging." But Tyler Theile, vice president at AEG, offers a different perspective. With current vehicle inventories just around 55 days, even a brief work stoppage could have long-term repercussions, making this situation more precarious than the last UAW strike. Rewind to 2019, and you'll recall a 40-day national strike against GM. This disruption came at a steep price of approximately $3.6 billion in lost earnings for the automaker.
The union's approach to negotiation has also seen a change. Historically, the UAW would target one primary company out of the Big Three for initial bargaining. But there's a fresh wave of assertiveness in the new union leadership, and they aren't pledging allegiance to this old strategy. This change puts all three automakers on edge, making them susceptible to a potential strike. Echoing this sentiment, AEG CEO Patrick Anderson remarked, "This is a different year than 2019. It’s a different environment now."
As the clock ticks towards the contract expiration, potential financial ramifications loom large for these companies. GM could face losses of $380 million from a 10-day strike. In comparison, Ford might see losses around $325 million, with Stellantis potentially enduring a $285 million hit.
It's crucial to note that these numbers exclude UAW strike pay and other effects like unemployment benefits and taxes. However, not everyone sees this potential strike as a death knell. A recent note from RBC Capital suggests that the potential impact of a strike might be less severe than projected, given GM's resilient bounce back post the 2019 work stoppage. But a simultaneous strike against all three? That's uncharted territory, with effects that could ripple out faster than anticipated, particularly for suppliers already grappling with supply chain issues.
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