A union representing workers at General Motors, Ford Motor and Jeep-maker Stellantis has threatened strikes if a contract deal is not reached before the current ones expire on Sept. 14 at midnight.
A strike would ground production to a halt, costing billions of dollars in losses for automakers as well as their suppliers. With the deadline approaching, here’s a look at some key facts about the possible strikes and their costs:
Strike is authorized
The United Auto Workers (UAW) union said on Aug. 25 that 97% of its nearly 150,000 members voted in favor of authorizing a strike at the Detroit Three automakers if agreements over wages and pension plans were not reached before the current four-year contracts expired.
The UAW went on a 42-day strike against GM in 2019 before reaching a new contract, the longest walkout since a 28-day strike at Ford in 1976. UAW workers struck for two days at GM and for one day at Chrysler in 2007.
Prior to 1976, strikes were frequently used as a bargaining tool at Detroit Three. UAW workers went on a strike at GM for 113 days in 1945, according to data compiled by Kristin Dzizcek, an adviser to the Chicago Federal Reserve.
A survey of 99 investors by Morgan Stanley found that 82% were expecting a strike, while 58% believed that a stoppage was “extremely likely.” A significant percentage also anticipate any UAW contract talks could cause wage inflation in the range of 20%-40% over the next four-year period.
The Detroit Three automakers account for about 40% of U.S. new light vehicle sales by units, according to J.P. Morgan. IHS Markit is estimating stoppages at the three automakers to disrupt North American vehicle production by about 75%.
A month-long strike at the three automakers could cut output by as many as 500,000 vehicles, Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions, said in a newsletter. About 1.3 million light vehicles were sold in the United States in August, according to Wards Intelligence data.
The automotive industry has historically contributed 3%-3.5% to the U.S. GDP. As of 2020, it accounted for nearly a 7% share of manufacturing value-added in the U.S. economy, research by Deloitte showed.
In terms of employment, the auto manufacturing sector accounts for 9.7 million jobs, or about 5% of U.S. private-sector employment, according to data from the Alliance for Automotive Innovation.
The effect on automakers and suppliers
Ten-day strikes at all three automakers could cost manufacturers, workers, suppliers and dealers more than $5 billion, according to economic consulting firm Anderson Economic Group.
A weeklong strike at Ford could impact earnings by $550 million, whereas a similar action could shave off $480 million from GM’s earnings and $400 million from Stellantis’ profit, according to Deutsche Bank Research analysts.
GM recorded a $3.6 billion pre-tax loss in 2019 after UAW members went on a strike for 42 days before a new deal with the company was reached. The stoppage cost the workers nearly $1 billion in lost wages, Anderson estimated.