Members of the United Auto Workers union hold a practice picket in front of Stellantis headquarters in Auburn Hills, Michigan, on September 20, 2023.
Bill Pugliano | Getty Images
With the UAW strike Ford, General Motors and star Entering its second week, the economic fallout is starting to ripple through the U.S. automakers’ vast supply base.
While automakers and their larger Tier 1 suppliers may have the resources to deal with a prolonged shutdown, smaller supplier networks could be hit hard by a prolonged strike or even shut down entirely.
The network includes approximately 5,600 companies, mostly in the upper Midwest, that provide seats, suspension components, wiring harnesses and thousands of other parts used in branded vehicles. That’s a significant number, employing an estimated 871,000 workers, according to the American Automotive Policy Council.
These smaller suppliers have only recently recovered from the shock of the Covid-19 pandemic and the resulting global semiconductor shortage. Now they are under pressure to raise pay for their own workers – in an environment where rising interest rates are making borrowing more expensive – and face the threat of an ongoing strike by autoworkers.
On September 26, 2023, members of the United Auto Workers (UAW) Local 230 held a picket line outside the Stellantis Chrysler Los Angeles parts distribution center in Ontario, California, and held up “UAW Strike” signs.
Patrick T. Fallon AFP | Getty Images
“Many of the suppliers we represent are very, very concerned about what’s going on,” said Dennis Devaney, a Detroit attorney who has represented General Motors and Ford and is a former National Labor Relations Board board member.
Devaney noted that some suppliers are still struggling to supply semiconductors and other parts, in part because their Chinese counterparts are still recovering from coronavirus-related shutdowns and other logistics issues since the global health crisis began.
“From an economic perspective, the last thing they need is a UAW strike,” he said.
Some small suppliers may only be able to hold on for a few weeks if the automaker factories they support are attacked.
Harbor Results, a manufacturing consulting firm near Detroit, estimates that as of the end of 2022, about 30% of these small suppliers were in poor financial condition or, in Harbor’s view, “unable to obtain a bank loan,” and another 21% were in dire straits. Dilemma.
The Motor Vehicles and Equipment Manufacturers Association (MEMA) – a trade group representing automotive suppliers – has requested assistance from the White House, writing in an article published on Monday letter President Biden said it is paying special attention to small suppliers with annual revenue of less than $200 million.
United Auto Workers (UAW) members picket outside a Michigan parts assembly plant in Wayne, Michigan, amid rumors that President Joe Biden may stop by during a visit to Michigan to meet with UAW workers in Detroit stood on the picket line together. September 26, 2023.
Matthew Hatcher | AFP | Getty Images
“These providers are located in every state in the United States and are often the largest employers in a given county or region,” MEMA wrote. “In a recent industry survey, half of these providers were identified as being in financial distress.”
MEMA is asking the president to use existing powers to direct the Small Business Administration to provide low-interest loans to vendors to help them meet payroll so they can restart quickly after the strike is resolved.
“Please be aware that it only takes a single component that a supplier cannot supply to shut down an entire production line,” the association wrote. “We urge you to take immediate action to support the automotive supplier community.”
Supplier layoffs
Faced with a prolonged strike, some smaller suppliers have begun laying off workers or announcing layoff plans.
But the layoffs could expose suppliers to another risk: While the labor market remains tight, these laid-off employees may be able to find other jobs quickly, meaning they may be able to find other jobs once the UAW strike is resolved. Can’t come back.
LM Manufacturing, which makes seats for the Ford Bronco and other cars, temporarily laid off about 650 workers last week in response to a UAW strike at Ford plants in the Detroit area that make the Bronco.The Detroit-based company is a joint venture between privately held LAN Manufacturing and a Canadian automotive supplier Magna Internationala heavyweight.
On September 15, 2023, General Motors workers participated in a strike held by the UAW Local 2250 union outside the General Motors Wentzville Assembly Plant in Wentzville, Missouri.
Michael B. ThomasGetty Images
As of Tuesday, two other Detroit-area auto suppliers had submitted notices of possible layoffs to the state of Michigan.
CIE Newcor, a parts manufacturer owned by Spanish CIE Automotive, submitted a Notice Michigan said on September 14 that it would lay off nearly 300 workers early next month if the strike continues. Privately held Eagle Industries is a manufacturer of automotive molded foam products, explain On Sept. 21, the company said it may soon need to lay off about 171 of its 230 employees “due to changing business conditions.”
“For every job at GM, there are six more jobs in the economy that depend on our operations,” GM CEO Mary Barra told CNBC. “We have to get back to work.”
publicly traded suppliers
Larger publicly traded suppliers, e.g. Lear Corporation,Dana, Magna International and suitable The UAW strike is not expected to go unscathed. However, they have not been widely affected.
Barclays previously identified Dana as one of the suppliers hardest hit by the first round of UAW strikes, which began on September 15 and halted production at one of the Detroit automaker’s assembly plants. The Ohio-based company – a supplier of axles, driveshafts, transmissions and other parts – makes parts for multiple vehicles affected by the strike.
The company did not respond to requests for comment after Dana announced it was temporarily laying off hundreds of Ohio workers as members of the United Auto Workers union reportedly walked out at Jeep and Ford plants.
Wall Street analysts believe that if the UAW strike continues and expands beyond its current three assembly plants and 38 parts and distribution centers, the large publicly traded suppliers will really start to feel the pinch.
Some analysts have also warned that automakers may put additional pressure on suppliers to reduce costs to offset expected losses in any interim agreement between General Motors, Ford and Stellantis, also known as original equipment suppliers, or OEMs. of billions of dollars in growth.
“This creates another point of tension in the debate over OEM supplier business discussions,” Barclays analyst Dan Levy told CNBC. “Some suppliers may be able to fight back legitimately, but there may also be some that do cause more harm. So much complexity.”
Historically, automakers have raised new vehicle prices to offset higher labor costs and protect profits, but inflation and higher commodity costs have pushed up vehicle prices, leaving little room for upside.
Barclays expects the new UAW contracts to add about $2 billion to $3 billion in incremental costs to automakers’ balance sheets annually.
Spokespeople for Lear, Magna and Adient did not immediately respond for comment.
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