How Will the UAW Strike Impact the Auto Supply Chain?

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On Sept. 15, the United Auto Workers (UAW) began a walkout when labor talks broke down between the union and three auto manufacturers (GM, Ford and Stellantis). The two sides were negotiating over pay, job security and benefits, with the UAW demanding a 40% pay raise over the four years of the contract (workers haven’t had a raise since 2019).

According to The New York Times, the strike is not a full-scale walkout by the union’s roughly 150,000 members, but a “limited and targeted” work stoppage by about 12,700 workers that the union has threatened to expand if talks remain bogged down. “It began after workers’ four-year contracts expired,” the publication explains. “The union must negotiate separate deals with each of the companies on issues including pay and retirement benefits.”

Along with the wage increase, the UAW is also seeking cost-of-living adjustments that would increase wages to compensate for inflation. “And it wants a reinstatement of pensions for all workers, improved retiree benefits and shorter work hours, as well as an end to a tiered wage system that starts new hires at much lower wages than the top UAW pay of $32 an hour,” The New York Times points out.

The UAW’s strategy of using a series of limited, targeted strikes at all three American automakers is fairly unique. “While it's too early to say whether the strategy will work, momentum appears to be on the side of the union, with companies having to guess which part of their supply chain might be hit next,” NPR reports.

Only certain models of cars are affected for now, but The New York Times says that if the strike lasts long enough to start affecting inventories, car dealers will have fewer vehicles on their lots and may start pushing up prices on the ones they do have. “This comes at a time when car prices had already been rising, and the average interest rates on auto loans had been climbing — making it harder for buyers to afford cars,” the publication adds.

Measuring the Supply Chain Impacts

In “UAW’s surgical strike pinpoints weak spots in carmaker supply chains,” Financial Times says that the targeted strike approach “threatens to revive the supply chain shortages that have bedeviled the auto industry in recent years, where a small disruption can cause rippling chaos in the wider system.”

“The interconnected nature of automotive manufacturing, where parts arrive just in time to be used in production, makes it difficult for carmakers to plan when they do not know which plant or distribution center will be targeted next,” Financial Times points out.

“So far the UAW has opted to strike at assembly plants that manufacture popular products, such as the Ford Bronco and Stellantis’s Jeep Wrangler, creating a noticeable impact without crippling the companies,” the publication continues. “That could change if the next round of strikes hits plants that manufacture more lucrative trucks such as Ford’s F-series, GM’s Chevrolet Silverado or Stellantis’s Ram, or if the union selects a facility that supplies key components used in many models.”

More Unpredictability Ahead 

In assessing the potential impacts of the UAW strike on the auto supply chain, Spencer Shute, principal consultant at Proxima, a Bain & Company procurement and supply chain consulting firm, says the strike has the potential to send the automotive supply chain into a bullwhip effect in overdrive. This is largely due to the “unpredictability of striking locations,” he says, which UAW President Shawn Fain has coordinated in order to get laborers the best deal possible.

“This will cause canceled orders, surplus and possible bottlenecks across the supply chain,” Shute predicts. “Not only is this an upstream supply chain concern but also a downstream concern as the inevitable impact on consumers in the auto market unfolds.”

Some companies may benefit initially from reduced supplier orders coming from companies like GM, Ford and Stellantis, Shute points out, but as the strikes progress and prolong, “disruption will impact the whole automotive supply chain even further than the initial blow, and forecast predictability will be greatly reduced, creating even more uncertainty for the entire industry.”

Shute says suppliers will be looking to other auto manufacturers to prevent their supply chains from having too much “on-hand product” while simultaneously working to ensure supply chain continuity (once the strikes are over). “Compounding economic conditions have already started to impact the new car market but expect the non-UAW manufacturers to work on securing greater market presence during this time,” Shute adds.