September 29 Update on the UAW Strikes
On Friday, the United Auto Workers (UAW) President, Shawn Fain, announced the strike would expand to include 7,000 new members—bringing the total number of members on strike to a staggering 25,000. Now the strike covers 21 states and 41 distribution centers, including two new, crucial plants: Ford’s Chicago assembly plant and GM’s Lancing Delta Township plant.
The Chicago assembly plant is Ford’s largest and oldest plant, opened in 1924. This plant shutdown will not only impact consumers but also police and fire municipalities, as it produces the Ford Explorer, Police Interceptor Utility, and Lincoln Aviator. GM’s Lancing Delta Township, conversely, is GM’s newest US plant. Opened in 2006, this plant is responsible for building the Buick Enclave and the Chevrolet Traverse.
Shawn Fain also announced that no additional members would strike at Stellantis at this time, as favorable negotiations were underway.
Small Businesses Feel the Effects of the UAW Strike
There are 4.8 million Americans in the auto parts manufacturing business, but the damage will hit smaller auto suppliers that are further down the supply chain the hardest. Resilinc CEO, Bindiya Vakil, said in an interview with Bloomberg this week, that suppliers—especially small mom-and-pop shops—are feeling the brunt of the impact. These companies, that produce products like seatbelts and upholstery, may not have the cash flow needed to sustain operations while the strike continues.
The effects of the strike are already rippling through the automotive supply chain. While companies do have some excess inventory available, the automotive supply chain is experiencing layoffs, furloughs, auto parts shortages, and idling operations. Two Detroit auto suppliers that manufacture shifts, pinions, gears, and other parts for the Big Three have filed notices of potential layoffs with the state of Michigan. GM and Stellantis have laid off more than 2,000 additional workers due to the strike.
How Will the UAW Strike Impact the Economy?
Before the strike started, we met with Bob Chiaravalli, the founder of Strategic Labor and Human Resources, to discuss the supply chain impact of the UAW Strike. As the strike continues, Bob’s insights as a labor lawyer and labor strategist are crucial to understanding where the strike is headed.
Disruptions caused by the strikes can halt the entire production line; the impact of which can cost your organization millions of dollars per hour. As a result of the strikes, new vehicle prices may go up by at least 10%. The strikes could also drain excess supply, force suppliers into bankruptcy, and push sales to non-union brands.
Resilinc data shows that, as of September, Labor Disruptions are up 97% year over year. Labor disruptions, including strikes, are one of the top 5 disruptions impacting the automotive industry this year—and on the list of megatrends for 2024. Since 2017, the auto industry has consistently ranked in the top five most disrupted industries (of the industries that Resilinc tracks.)
Labor disruptions are just the latest impact on the already volatile automotive industry that has been tackling chip shortages, export restrictions, worker shortages, and forced labor violations. These issues could be further exacerbated by the UAW strikes—fueling inflation and potentially crippling these three major vehicle manufacturers.
Resilinc Recommendations: How Can Automakers Weather the Storm?
There are several steps automakers can take to mitigate risks from the UAW strikes.
#1 Map Failure Points in the Supply Chain
Right now, automakers that have mapped their supply chain have an advantage over competitors. These automakers know which parts are coming from which sites, and, more importantly—which are critical to revenue. The automotive supply chain is a complex ecosystem of different suppliers. While larger parts like chassis and engines are crucial—being unable to secure even a $0.01 part could potentially impact billions of dollars in revenue.
Resilinc recommends that automakers map possible failure points through EventWatchAI and Multi-Tier Mapping to gain visibility into strikes taking place at sites and supplier sites. Resilinc has mapped 65% of the automotive, industrial, and heavy machinery supply chain—including over 1,500 sub-tier suppliers that are used by over 100 Tier-1 and Tier-2 suppliers. Of these suppliers, 55% consistently confirm the impact of a disruption.
#2 Make a Contingency Plan and Assemble a Team
Automakers must have a plan in place for when a strike occurs. After mapping the supply chain, automakers should assess the amount of inventory buffer that exists and where they have access to other options for manufacturing, such as non-union suppliers that are qualified to support production demand. Where possible, Resilinc recommends multi-sourcing on UAW-affected component suppliers and qualifying parts as a priority. Automakers should also build a cross-functional team that includes security, legal, labor exports, operations, and finance and purchasing.
#3 Support Your Small Suppliers
Finally, automakers must make sure to support smaller suppliers that are struggling to stay afloat amid the strikes. Companies should assess suppliers’ financial health down to Tier-3 to see who needs the most assistance. Next, companies should rank suppliers by their impact on revenue—not the cost of the part.
From here, there are several support options, such as placing orders in advance to meet future demand, paying suppliers up front on delivery, extending loans, or giving suppliers money/raw materials, and relaxing service level agreements.
***
The UAW strikes are shaking up the automotive industry and currently impacting small manufacturers the most. As the strikes continue, be sure to check our blog and special reports for updates on the automotive supply chain impact. For a more in-depth look at the steps you can take to protect your supply chain, download our latest Special Report: UAW Strike Triggers Global Automotive Supply Chain Disruptions.
