The Economic Consequences Of The UAW Strike: An Analysis

Author: Brett Hurll                                                                                                                                                                                                                            Sept. 18. 2023

---

The recent strike by the United Auto Workers (UAW) has sent ripples through the United States automobile industry and beyond, as the union took a previously unseen targeted approach. Home to nearly 150,000 workers, the UAW has been negotiating contracts with the 'Detroit 3' – Ford, General Motors (GM), and Stellantis (formerly Fiat Chrysler). But failing to reach an agreement before the deadline, the union undertook a formidable strike, directly interrupting the production of high-margin products like Sport Utility Vehicles (SUVs) and pickup trucks, upon which these companies heavily rely. 

A Targeted Approach

 Remarkably, the strike was not waged against single automakers. Instead, the union opted for a targeted intervention against all three companies, focusing on the facilities where their most profitable vehicles are manufactured. This strategy amplified the strike’s disruptive potential: all three automakers have increasingly concentrated their efforts and resources on lucrative vehicles while progressively phasing out cheaper sedans. This unfolding scenario has even heightened the strike's reverberations across the industry. A targeted disruption at only one of the Detroit 3 facilities could generate a domino effect cascading down the complex supply chain, as has been observed during the pandemic, when even minor closures substantially affected sales and inventory (CNN, 2023). 

The Ripple Effect

 The reverberating impact does not stop at the doors of these companies. Hundreds of suppliers that provide essential parts to the manufacturers would be significantly affected. After the last UAW strike, suppliers experienced a troubling period as production at General Motors ground to a halt for 40 days. If repeated, this scenario would jeopardise other automakers dependent on the same component manufacturers, causing industry-wide disruptions (Politicom, 2023). An industry interconnected by a globalised supply chain could demonstrate the butterfly effect in real-time: the strike’s potential impacts could ripple far beyond the original site of the dispute.

Economic Implications 

UAW strikes affect more than the automobile industry. There are ripple consequences to the economy, primarily felt in communities where autoworkers live. During the strike, workers receive $500 a week in strike pay from the union, which only substitutes about 40% of their regular pay. Reduced income ensues, potentially resulting in diminished local spending (The New York Times, 2023). Should they continue for a protracted period, strikes could destabilise the companies supplying parts to automakers, affecting even more workers. Conversely, according to economists, the strike’s impact on the broader U.S. economy is expected to be relatively minor. Even if all 150,000 workers strike until late October, this would result in roughly a two-tenths of 1% reduction in the country's GDP for the last few months of the year (NPR, 2023). 

Concluding Thoughts 

In short, the UAW strike could have significant, although not crippling, impacts on the economy. The effects are likely to be more keenly felt in communities where alleys of the Detroit 3 are located. Yet, this recent strike’s collateral damage could have far-reaching consequences affecting suppliers and the nationwide automobile economy at large. A strategic, diversified supply chain mitigation strategy is, therefore, an imperative risk management tool for resilient operations. The striking development in the union's tactics emphasizes the interconnectedness intrinsic to modern industries, a condition that will doubtlessly continue to shape strike dynamics and their societal reverberations in the future.

References

CNN Business. (2023). UAW strike could impact auto industry more than you think. https://www.cnn.com/2023/09/15/business/car-prices-auto-strikeuaw/index.html 

Politico. (2023). UAW strike could have massive impact on auto industry. https://www.politico.com/news/2023/09/14/uaw-strike-biden-info-00115977 

The New York Times. (2023). UAW strike could have far-reaching economic consequences. https://www.nytimes.com/2023/09/13/business/economy/uawstrike-economic-impact.html

NPR. (2023). How a UAW strike would impact the economy. https:// www.npr.org/2023/09/14/1199584526/how-a-uaw-strike-would-impact-theeconomy