Examining The Potential Cost Of A U.S. Auto Worker Strike
As Reuters reported, last week members of the United Auto Workers (UAW) Union voted overwhelmingly to authorize a strike at three U.S. automakers if an agreement is not reached before the employees’ current four-year contract expires Sept. 14, 2023. The strike would affect nearly 150,000 UAW members in Michigan at Ford, GM, and Stellantis plants.
An average of 97 percent of members at the three automakers approved the action.
A new analysis by consulting firm Anderson Economic Group (AEG) estimates a strike could result in a total economic loss of more than $5 billion after 10 full days. That number includes total wage losses of $859 million and manufacturer losses of $989 million. AEG calculated the total economic loss by estimating potential losses to UAW workers, the manufacturers, and to the auto industry more broadly.
Another analysis by Evercore ISI’s Chris McMally found GM and Ford risk a more than ten percent reduction to their earnings while suppliers like American Axle, which generated an 55 to 65 percent of its revenue from operations dependent on UAW workers, also would be affected.
UAW President Shawn Fain has said union members want the new contract to include:
- Wage increases of 46 percent;
- An end to a tiered wage system that pays new hires less than industry veterans;
- Reinstatement of a cost-of-living adjustments; and
- Restoration of a defined-benefit pension plan for new hires that ended in 2007.
In a research note, Barclays analyst Dan Levy said a strike is “highly likely.”
As a reminder, MSCI’s Economic Summit, set for Sept. 11-12, 2023 just outside of Chicago, will feature analysis of end use demand from the automotive and light truck sector. Join the MSCI industrial metals community to hear from Executive Director Automotive Advisory Services at S&P Global Michael Robinet. Register here.