As September 14 contract expirations approach and negotiations between United Auto Workers President Shawn Fain and automakers appear stalled, a possible strike looms.
If that happens, the economic hits from the strike could cause a recession in Michigan and lower the U.S. gross domestic product, warns an analysis by Anderson Economic Group, which found a 10-day strike against the Detroit three would cause over $5 billion in economic losses, among them:
- $795 million in wage losses
- $1.2 billion in manufacturer losses
- Severe financial hits to automotive suppliers, dealers and the automotive industry
According to a recent Bank of America analysis, a strike on all three companies would be comparable to taking down 2% of U.S. GDP.
In an alternative hypothetical scenario, Anderson’s firm concluded that a strike against just Ford would cause $1.2 billion in losses over 10 days.
In a press release, the firm compared its analysis to the 2019 General Motors strike of over 48,000 people for six weeks.
“When the UAW went on strike against GM in 2019, Michigan experienced a single quarter recession,” Anderson noted. “In 2023, there is the potential that a strike could involve more manufacturers, more workers, and more plants. If that happens, even a short strike would impact economies throughout Michigan and across the nation.”
Anderson reported that the impact on consumers and dealers could be more acute than the 2019 strike because vehicle inventory today is at one-fifth of the inventory on hand then.
“Consumer and dealer losses are typically somewhat insulated in the event of a very short strike,” Tyler Theile, vice president of Anderson Economic Group said in the press release. “However, with current inventories hovering around only 55 days, the industry looks different than it did in during the last UAW strike.”
Suppliers at all tiers are also at risk of financial losses in a strike, the firm noted. A strike could be catastrophic for small tier two and three suppliers that are already struggling with liquidity issues, Alex Calderone, president of Calderone Advisory Group LLC, told Automotive News. He noted that suppliers are already struggling with rising interest rates, escalating material and labor costs, and fluctuating production volumes.
President Joe Biden recently stepped into the negotiations, calling on all sides to “work together to forge a fair agreement.” He assigned senior adviser Gene Sperling to liaise with the union and manufacturers during negotiations.
Originally posted on Auto Dealer Today