In addition to By turning everyone into an epidemiologist, the Covid-19 pandemic has given the public insight into the global network of manufacturers, assemblers and shippers behind virtually every consumer good that arrives at your door. Or driveway. Auto prices soared as automakers struggled with a supply chain bogged down by labor shortages, chip shortages and shipping delays.
Now factories at the Big Three automakers in Detroit have closed again after nearly 13,000 members of the United Autoworkers Union walked off the assembly lines at three plants owned by Stellantis, Ford and General Motors. Workers want reforms including higher wages and shorter work weeks as the industry faces unprecedented changes related to the transition to electric vehicles.
One consequence of a prolonged strike could be a supply crisis that, like that caused by Covid, could push up consumer prices for cars and parts. Meanwhile, the broader auto supply chain could face a new stress test that could affect hundreds of companies and thousands of workers beyond those who put the finishing touches on cars.
“There’s never a good time for a strike, but suppliers have been through proverbial hell over the past three and a half years,” said Mike Wall, an auto analyst at research firm S&P Global Mobility. There was the pandemic, sure, but also a related microchip shortage that hit hard because vehicles now require more computer components; a raw materials crisis influenced by the war in Ukraine; inflation; and interest rate increases.
The Big Three carmakers themselves may not have the most to fear from a prolonged strike. A 42-day strike against General Motors in 2019 cost the automaker $3.6 billion in losses, which isn’t pocket money. But the damage could be most severe for smaller auto suppliers further down the supply chain, who sell parts that go into larger systems, such as seats or heating, and for their own raw material suppliers. About 4.8 million Americans work in auto parts manufacturing, according to the Motor & Equipment Manufacturers Association, an industry group.
If automakers fail to reach an agreement with the UAW, a nasty domino run will begin within the auto supply chain in the coming weeks and months. The Detroit giants will tell their largest suppliers to stop sending them new parts, and these companies will in turn tell their own suppliers to stop sending them new parts. “They are not publicly traded companies and may not have access to the money they need if the suppliers say, ‘Stop sending us stuff,’” said Erik Gordon, a professor at New York University. Michigan Ross School of Business.
For the first time in the history of the American auto industry, this workers’ strike is targeting all three major American manufacturers simultaneously. Building cars depends on long-term contracts, and in the event of a prolonged strike, suppliers could rely only on the business they already have with foreign automakers or non-union manufacturers, including Toyota, Honda and Tesla.
The UAW has pushed back against the idea that its strikes would harm the U.S. or its workers. “It’s not going to destroy the economy, it’s going to destroy the economy of the billionaires,” said UAW President Shawn Fain. Good morning America earlier this week. The union has partly justified its demand for a 36 percent pay increase for employees over the life of the contract by pointing out that executive pay has risen further in recent years. “The billionaire class gets away with everything. The working class lives paycheck to paycheck and feeds on the scraps,” Fain said.