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The United Auto Workers strike against the Big Three automakers will have repercussions throughout the economy, but it is difficult to assess the extent.
Much will depend on the size of the strike and its duration. And what makes this walkout unusual is that the union is targeting all of the Big Three automakers – Ford, General Motors and Stellantis (Chrysler’s parent company) – but it is not picketing all of their factories. , At least for the moment.
Initially, the strike is limited to three assembly plants – one for each company – with a total of around 13,000 workers.
Here are some of the potential effects of the strike on workers, businesses, car buyers and the economy in general.
The impact on strikers’ expenses
The strikers will not receive wages while they are unemployed. They will receive $500 per week in strike pay from the union. But on average, this will only replace about 40% of their lost wages. This will likely mean reduced spending in the communities where strikers live.
“Maybe you avoid going out to dinner,” says Gabe Ehrlich, an economist at the University of Michigan. “People say, ‘Oh, I prepared for a strike. But there’s not much you can do to save for a strike. Obviously the $500 a week helps. But that doesn’t make up for it full salary.”
The UAW has amassed an $835 million strike fund – enough to last about three months if all of the nearly 150,000 unionized auto workers were on strike. The union will also finance the strikers’ health insurance.
The impact on supply chains
Car manufacturers do not operate in a vacuum.
Companies that supply parts to Ford, GM and Stellantis could also feel the effects of the strike, but probably not right away.
Automakers have experienced several years of parts shortages, so Ehrlich thinks they will be slow to cancel orders from suppliers.
Even if orders slow, parts makers may be reluctant to lay off their own workers, given the tightening labor market.
However, if a strike continues for eight or 10 weeks, Ehrlich believes the impact will likely be significant.
The impact on potential car buyers
There are now more cars in dealerships than there were a year ago, when supplies were still severely limited by the COVID-19 pandemic and computer chip shortages.
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But if you want a specific model from one of the Big Three automakers, the strike could make it harder to find.
Ford has enough vehicles to last about two months. GM’s inventory is a bit smaller; Stellantis’ inventory is a bit larger. So there is a cushion, but it won’t last forever.
New car prices rose 0.3% in August after four months of flat or falling prices. Any loss of production could put upward pressure on prices, although non-union automakers like Honda and Volkswagen will continue to produce vehicles during the strike.
The impact on economic growth
The Big Three automakers are no longer as dominant as they once were, and neither is the UAW. Even if all 150,000 members struck for six weeks, the impact on the overall economy would be limited, reducing fourth-quarter gross domestic product by about 0.2%, said Mark Zandi, chief economist at Moody’s. Analytics.
“This is a small, but significant impact,” says Zandi, “especially in the context of other headwinds to growth in the coming months, including rising oil prices, rising mortgage rates , the end of the moratorium on student loan payments and a possible government shutdown.
The auto industry is also relatively contained, unlike delivery giant UPS or freight railroads, where strike threats last year could have had much more profound effects.
In communities where automakers are concentrated, a six-week strike could be painful but would probably not cause lasting damage.
“This will not fundamentally change the trajectory of Michigan’s economy,” Ehrlich says.
But the longer the strike continues, the more it could reshape the future of the sector. The walkout comes at a time when auto workers are already nervous about the mass transition to electric vehicles, which require fewer people to produce.
“What worries me is if we had a strike that was much more intense, more acrimonious and lasted much longer, would that start to cause automakers to rethink where they invest?” Ehrlich said.
After a long strike by machinists in 2008, for example, Boeing shifted some aircraft production to a new factory in South Carolina, a fiercely anti-union state.