Consumers face higher car prices, lower inventory with auto workers on strike

DETROIT, MI - JUNE 10: 2021 Jeep Grand Cherokee Ls come off the line at the Stellantis Detroit Assembly Complex-Mack on June 10, 2021 in Detroit, Michigan. The plant is the first new auto assembly plant in Detroit in thirty years, and will manufacture the 2021 Jeep Grand Cherokee L. (Photo by Bill Pugliano/Getty Images)

(GA Recorder) — Economic experts and researchers say that the auto workers strike could have far-reaching economic consequences for businesses and consumers, depending on its duration. In addition to workers’ job losses, consumers could see higher prices for cars and depleted inventory.

The United Auto Workers union, representing about 150,000 auto workers, walked off the job late last week after failing to reach a contract deal with the “Big Three” auto manufacturers, Ford, Stellantis, and General Motors. It is the first time in union history that a strike has affected all three automakers, the Michigan Advance reported.

The union is seeking 32-hour work weeks, a 46% pay increase over four years, and improved benefits, including pensions and paid time off, the Michigan Advance has reported. Union members also are demanding the right to strike over the closure of plants and the elimination of tiered workers. Tier 2 workers, who are newer, receive less pay and benefits than Tier 1 workers and also work more on electric vehicles that may not be covered by union contracts, according to MarketWatch, which some members argue hurts the effectiveness of the union.

The union also wants more security for its members as the auto industry continues to produce more electric vehicles.

“Given the EV transformations currently underway in the auto sector, the UAW will be looking to establish as much security as possible for its members. Top concerns include what labor demand will look like in the new EV landscape and how to ensure that wage gains keep pace with high inflation and record automaker profits,’’ according to a University of Michigan analysis.

Experts say the weight of any work stoppage is dependent upon the number of workers who walk off the job, their location and its duration. Meanwhile, consumers could see higher prices for materials, including steel and auto parts, reflected in their car purchases and repairs.

UAW president Shawn Fain has said the union and companies are far apart on priorities such as pay increases, with the companies offering half or less than half of what the union has proposed.

In a statement, Ford said the company “has bargained in good faith in an effort to avoid a strike, which could have wide-ranging consequences for our business and the economy. It also impacts the very 57,000 UAW-Ford workers we are trying to reward with this contract.”

The last auto workers strike was in 2019 when 50,000 GM workers walked off the job for six weeks. General Motors lost $3.6 billion, Reuters reported.

The Anderson Economic Group, an economic research and market analysis group, has estimated that a 10-day strike by all of the 150,000 union members would total $5 billion in economic losses. If the strike affected only one automaker, the company would lose $325 million and the loss of direct wages would total $341 million. For every 2,000 employees on strike at one location, there could be up to $10 million in lost wages, which would be felt locally, said Tyler Marie Theile, director of public policy and economic analysis at the Anderson Economic Group. The estimate does not factor in strike pay, unemployment benefits, or reputational damage to companies or the union in its assessment of the economic impact of a strike. Auto workers on strike can receive $500 in union benefits.

The Advance reported picket lines at Ford’s Michigan Assembly, GM’s Wentzville plant in Missouri and Stellantis’ Jeep plant in Toledo, Ohio.

Michigan faces the greatest economic impact. A one or two week strike at Ford could result in the loss of 28,000 jobs, according to a University of Michigan estimate. Outside of Michigan, Kentucky, Ohio, Illinois, and Missouri would be affected by a Ford strike. Ohio and Indiana face a potential Stellantis strike and Indiana, Missouri, Ohio, New York, Texas, Tennessee, Kansas, and Kentucky, a General Motors strike.

Theile said Southern plants may see more of an impact than they did in 2019 because of the growth of auto manufacturing and assembly and battery manufacturing in the region if the walkout is lengthy.

“The most important driving factor there is going to be is the number of UAW workers striking. Since in the South, UAW participation and representation is not as dense as it is up in the Midwest, we likely wouldn’t see quite a strong impact, at least early on,” Theile said. “If a strike were to become quite lengthy, many manufacturing and assembly facilities are shut down and 1st and 2nd tier suppliers are shut down, that’s going to start to have a rippling effect through the automotive industry. And facilities that are not on strike and not represented by the UAW will not be fully insulated from the economic impact.”

Ali Bustamante, deputy director of the worker power and economic security program at the Roosevelt Institute, a progressive think tank, said the expansion into Southern states has somewhat “hedged the impact of a strike” because there are both unionized and non-unionized shops.

Staff members keep vehicles clean at the North American International Auto Show in Detroit on Sept. 14, 2022. (Andrew Roth/Michigan Advance)
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