Auto strike goes up a notch but supply chains yet to feel major impact

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The strike called by the United Auto Workers (UAW) against the Big Three US car-makers went up a notch last Friday, as the union targeted spare parts centres serving General Motors and Stellantis. So far there have been some hiccups in supply chains, but logistics providers are still waiting to see a major impact.

One week into the clash with the big auto makers in their contract negotiations, the UAW upped the ante with a second wave of strike action. In the first step some 13,000 workers had downed tools at three factories on 15 September to advance negotiations over their contract, which expired the day before.

The first three factories shuttered by work stoppages were a General Motors plant in Missouri, a Ford factory in Michigan and a plant in Ohio that turns out Jeeps for Stellantis.

The UAW had asked for pay increases of 40%, significantly more than the employers’ offer of a 20% raise over 4-1/2 years. In addition, the union wanted to eliminate wage gaps separating newer and older employees, and workers in certain component operations and those in assembly plants.

Union leadership had warned that lack of progress in the negotiations would trigger a second wave of strike action on 22 September. Stating that no material progress had been made, the union expanded the strike, calling on 5,600 workers at 38 parts centres serving General Motors and Stellantis to join the action.

The UAW did not expand the strike against Ford, stating that the negotiations with this auto maker had shown some progress, although “serious issues” remained to be resolved.

In a separate development Ford struck an agreement with the Unifor labour union in Canada to avoid a walk-out.

UAW president Shan Fain commented that targeting parts distribution centres turned the union’s campaign into a nationwide strike. Disrupting the flow of auto parts also has a direct impact on consumers.

The union is pursuing a novel strategy in this strike. Historically, contract negotiations have been carried out with one auto maker at a time. By going after production plants of all Big Three OEMs, this clash has targeted a broader front from the first day of work stoppages.

The initial repercussions on supply chains have been modest, though, noted Robert Gulyas, global VP automotive and industrial at Crane Worldwide Logistics.

“International suppliers didn’t have to do anything,” he remarked.

Much of the early fall-out was due to lack of communication. On the first day of the strike many suppliers were not aware that a stoppage was already in progress and dispatched trucks to the targeted factories, he reported.

If the strike gathers momentum there will be a scramble for space in warehouses and yards to store parts that cannot be used, he warned, adding that those facilities would fill up quickly in the event of a fully fledged stoppage.

A second phase of a full strike would see cargo halted and suppliers idling their production facilities, while finished cars would pile up at factories and containers would pile up at ports, he said.

Tier one auto suppliers were busy discussing various scenarios in the run-up to the strike, looking at where to place parts and what spare capacity would be available, he observed. By most estimates, second and third-tier suppers would be most severely affected by a major strike. According to one observer, even a limited strike would have disastrous consequences for those suppliers, as their margins are razor-thin.

Mr Gulyas noted that the end of the strike will not bring immediate relief.

“When it’s over we will see a huge need for emergency freight. Stopping and then re-starting production takes time. There will be shortages of commodities, there will be a need for charters,” he reflected.

There is also the possibility of more strikes hitting the automotive sector while the dispute between the UAW and the Big Three continues. Last week some 190 unionised auto workers went on strike over pay at automotive supplier ZF Group in Alabama, which supplies Mercedes Benz with front axles. Although the striking workers are UAW members, their action is unrelated to the clash between the Union and the Big Three, according to ZF Group.