Home BusinessEconomic News Auto Workers’ Strike Hits 11 Days. The Economic Cost Is Spiraling.

Auto Workers’ Strike Hits 11 Days. The Economic Cost Is Spiraling.

by Stella Morgan

General Motors (GM) and Stellantis (STLA) are currently facing a challenging situation as a widening strike by U.S. auto workers enters its 11th day. In contrast, Ford (F) has been spared from the strike’s expansion to parts distribution plants, although its Michigan assembly plant continues to be impacted.

The economic impact of the strike is estimated to have surpassed $5 billion, according to recent research. Both President Joe Biden and former President Donald Trump are scheduled to visit Michigan in the coming days, highlighting the significance of this issue.

For GM and Stellantis, a prolonged strike at parts distribution plants could significantly impact their profits, as stated in a note to clients by analysts at Deutsche Bank. While automakers have managed to build up new vehicle inventories in preparation for the initial phase of the strike, this situation may change over time. Furthermore, the strike could also affect suppliers, dealers, and consumers, depending on its duration.

The Detroit Three automakers, including GM, Stellantis, and Ford, are currently negotiating with the United Automobile Workers (UAW) union. On Friday, the strike was expanded to include 38 parts distribution centers owned by GM and Stellantis. The initial strike action had targeted one vehicle assembly plant at each of the three automakers.

However, Ford has been spared from the widening strike as the UAW acknowledged that the company has made more efforts to meet the demands of the workers. Currently, more than 18,000 UAW members are on strike.

Ford has made progress in contract negotiations with the UAW in certain areas but has also emphasized that there are still significant gaps to be addressed on key issues.

The strike by the UAW began on September 15, with simultaneous strikes at the Detroit Three assembly plants following the expiration of their previous four-year labor agreements. The automakers had proposed 20% raises over 4-and-a-half years, but the UAW is seeking 36%, as well as 32-hour work weeks and the reinstatement of traditional pension plans. The union has justified its demands by pointing to rising automaker earnings and is seeking more profit-sharing.

On the stock market, Ford stock rose by 1.2% on the day, just below the falling 50-day moving average. Additionally, Canada’s autoworkers union, Unifor, ratified a new three-year labor agreement with the automaker on Sunday.

As the strike expands, some GM and Stellantis dealers may face challenges in sourcing parts. The sale and installation of components are typically lucrative for car dealers like AutoNation (AN) and Lithia Motors (LAD). GM stock gained 1.5% on Monday but remains below a falling 50-day line, while Stellantis shares eased 0.6% but found support near a rising 50-day line. Tesla (TSLA), which has no workers’ union, rose by 0.9%.

However, the UAW is preparing for another attempt to organize Tesla’s factory workers, according to a top union official. The UAW aims to secure big wage and benefit gains that would encourage workers at other nonunion plants in the U.S., including those of foreign automakers, to organize as well.

The strike by the United Auto Workers has already bitten the U.S. economy, resulting in economic losses of over $1.6 billion in just the first week, according to an analysis by the Anderson Economic Group. This figure includes company losses, lost direct wages to auto workers, and consumer and dealer losses. The think tank estimated that after 10 full days, the total economic loss from the strike would exceed $5 billion.

Both President Biden and former President Trump are heading to Michigan to address the strike. Biden, who is promoting electric vehicles, is navigating the demands of striking union workers, while Trump argues that the shift to electric cars threatens the livelihoods of auto workers.

In conclusion, the widening U.S. auto workers’ strike is creating challenges for General Motors and Stellantis, while Ford has been spared the strike’s expansion to parts distribution plants. The economic impact has already surpassed $5 billion, and both President Biden and former President Trump are actively involved in addressing the situation. The strike not only affects the automakers but also has implications for suppliers, dealers, and consumers. As negotiations continue between the automakers and the UAW, the outcome will determine the resolution of this strike and its effects on the industry.

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