Your trusted source for the latest news and insights on Markets, Economy, Companies, Money, and Personal Finance.
Popular

U.A.W. Strike Impacts Vulnerable Auto Supply Chain

More than a week into its targeted strike at the three established U.S. car companies, the United Automobile Workers union has poked holes in a supply chain that has still not fully recovered from the pandemic.

The companies and the union remain far apart in negotiations, and the U.A.W. could expand its strikes to more locations as soon as Friday. Depending on how long the strikes last, it could exact a heavy toll on autoworkers and the three companies — General Motors, Ford Motor and Stellantis, the parent of Chrysler and Jeep. But the work stoppages could also be painful to drivers, car dealers and auto-parts suppliers.

A long and expanding strike will reduce the number of new cars on dealer lots, make it harder for people to repair their vehicles and reduce demand for parts needed to make new vehicles.

So far, the economic damage has been limited because the U.A.W. has struck only a small number of plants and warehouses, but the pain could worsen if work stoppages grow to include many more locations and last weeks or months.

“The economic spillovers from the U.A.W. strike remain contained as we near the two-week mark,” said Gabriel Ehrlich, an economic forecaster at the University of Michigan. “We are seeing some layoffs among automotive suppliers, ranging from seat makers to steelworkers. We would expect these impacts to accumulate as the strike persists and additional targets are announced.”

When the union started walkouts at assembly plants, it appeared to target plants that make popular models, like the Ford Bronco, the Jeep Wrangler and the Chevrolet Colorado. It widened the strike on Sept. 22 to include parts distribution centers at G.M. and Stellantis.

As those popular models become more scarce, dealers are likely to push up prices.

“They took out the ones that are going to hurt the most,” said Jeff Rightmer, a professor at Wayne State University who specializes in supply chain management. “At this point, they’re not going to be able to get that production back.”

New-car sales are expected to rise this month, despite the strike and high interest rates, according to Cox Automotive. And for now, overall inventories for the three companies remain stable, except for the most popular models, according to data from CoPilot, a firm that tracks dealer inventories.

As of Sept. 24, G.M. had enough vehicles on dealer lots to meet demand for 40 to 70 days across its four brands. Ford had enough cars and trucks for 74 days. And Stellantis had more than 100 days across three of its four divisions; Jeep had less than 100 days.

Among the 10 models affected by the first set of U.A.W. strikes, supply for four models has dwindled to less than one month’s sales.

“Once that dries up, they’re not building anything, so it’s important that the strike is as short as possible,” said Wes Lutz, a car dealer in Jackson, Mich., who sells Chrysler, Dodge, Jeep and Ram models.

He has been getting cars from other plants, including large pickup trucks imported from Mexico. But he is worried that an expanding strike could reduce the supply of more models.

An even bigger concern, Mr. Lutz said, is that the strikes at G.M. and Stellantis parts warehouses could soon make it hard to repair vehicles, leaving some drivers stranded. He said that he was working with other dealers to trade spare parts among themselves to keep their service departments going.

Servicing and repairing vehicles is generally the most profitable part of car dealerships. Service departments bring in so much money that they can cover most or all of the costs of running dealerships, said Pat Ryan, chief executive of CoPilot.

That’s why a parts shortage could deal a bigger blow to dealers than not having enough vehicles to sell. If parts are hard to come by for weeks or months, some dealers may suspend repairs and lay off mechanics.

Another group of businesses exposed to the strikes are the companies that make parts and components like batteries and mufflers for new vehicles. Nearly 700 auto suppliers could be hurt by the strike, according to Resilinc, a supply chain monitoring company.

CIE Newcor, an auto components maker, notified workers on Sept. 21 that it expected to lay off 300 employees at four Michigan plants starting Oct. 2. The extent of the layoffs will be “determined by the length of the potential U.A.W. — Detroit 3 strike,” the company said in a regulatory filing.

Much of the auto industry practices “just in time” production, meaning materials are delivered and parts are built and sent to car factories as they are needed.

If smaller suppliers go more than a few weeks without selling products to customers, some may have to seek bankruptcy protection, said Ann Marie Uetz, a Detroit-based partner at the law firm Foley & Lardner who represents auto suppliers. “There is definite strain in the supply chain, and you’re going to see some of them suffer as a result of the strike if it lingers for a month or more.”

Share this article
Shareable URL
Prev Post

Oil Prices Push Up Dividend Yields, Making Energy Stocks Attractive

Next Post

Exploring the Possibilities of Artificial Intelligence at the European Central Bank

Leave a Reply

Your email address will not be published. Required fields are marked *

Read next
Inflation knowledge launched on Tuesday confirmed that value will increase remained reasonable in November, the…
One other start-up founder goes to jail for overstating his firm’s efficiency to buyers. Manish Lachwani, who…