‘We’re in the abyss’: How the UAW strike could hit the economy

While the current economic impact of a targeted strike by the United Auto Workers (UAW) is limited, the threat of a full walkout looms over contract negotiations with auto giants Ford, General Motors and Stellantis.

Right now, that threat is hard to quantify — any estimate will depend on the length of the strike and how many more workers are called to the picket line.

Even so, the economic impact of a full-fledged 10-day strike against the Big Three could top $5 billion, the Anderson Economic Group estimated in an August report.

A months-long work stoppage could also eat into the Big Three’s cash holdings, Fitch Ratings warned Friday, particularly if the targeted strikes balloon to a widespread shutdown.

And autoworkers are already being laid off by some companies, as thousands more UAW members brace for making just $500 per week on the picket line.

“Nobody knows now. We’re in the abyss,” Pete DeVito Jr., and automotive director of the United Service Workers Union, told The Hill in a phone interview. 

After the negotiations broke down before the union’s contract expired at midnight last Friday, UAW President Shawn Fain called on nearly 13,000 workers to strike at three plants — one from each of the Big Three.

“We expect the initial financial impact of this first round of strikes to be limited, since the UAW is only striking one plant each at Ford, GM and Stellantis,” Stephen Brown, senior director at Fitch Ratings, said in a written statement.

During a Facebook Live event hours before the contract deadline, Fain warned that while the initial strike is limited, the union won’t rule out an all-out strike. 

Additional strikes could come as soon as Friday at noon without “serious progress” in contract negotiations with the Big Three, Fain said Tuesday.

All three automakers have “robust liquidity positions that will help them to withstand a potentially drawn-out period of production disruption,” Brown added.

A Stellantis spokesperson declined to comment on the current cost of the targeted strikes but said the impact of a strike would depend on the length of the disruption.

Spokespeople for the UAW, Ford and General Motors did not return The Hill’s requests for comment.

Workers are already being laid off

Automakers and suppliers are already planning to lay off nonstriking workers and are ringing alarm bells about the potential long-term impacts.

Ford temporarily laid off 600 workers Friday, citing “knock-on effects” from the strike, and General Motors said it would likely lay off around 2,000 employees, the Detroit Free Press reported.

A Michigan auto supplier also plans to temporarily lay off nearly 300 employees starting Oct. 2, according to a Worker Adjustment and Retraining Notification (WARN) filing. The supplier, CIE Newcor, said in the filing that it tentatively anticipates a one-month layoff, but it would depend on the length of the strike.

A company official did not immediately return The Hill’s request for comment on the filing.

The UAW has amassed an $825 million strike fund, and the union has said it would extend stipends to workers laid off as a result of the strikes.

But the $500 per week stipend for striking and laid-off workers is well under their weekly earnings on the job.

“The first impact of a strike will be felt in auto worker homes and communities, who will see a drop in revenues, as strikers shift to spending less,” Juscelino Filgueiras Colares, a business law professor at Case Western Reserve University, told The Hill in an email. 

“Next, depending on the length and scope of the strike […], part suppliers will see a decline in orders, which will also affect workers’ compensation and their communities,” he said.

Another shock to the auto market

DeVito also warned that consumers could bear the brunt of higher car prices, which had just begun to fall from historic highs during the pandemic.

“You’re going to see the prices go back up to COVID levels for the customer,” said DeVito, saying the dealers will need to maximize profits.

High interest rates and inflation have slowed demand for cars, leaving manufacturers and dealerships with high inventories that could help stabilize prices for some vehicles, Colares told The Hill.  

“They see their dealers have high inventories; they have had major losses after manufacturing EVs that few consumers can afford or want … and they now face intense competition from Tesla and growing Chinese EV manufacturers,” he said.

Why the Big Three, autoworkers are at odds

The transition to electric vehicles (EVs) underlies the wage, benefit and job security demands the union is making. The union asks include representation for battery plant workers, substantial wage hikes, reduced work hours and restored pensions.

Automakers have argued that their counteroffers are historically generous and the workers’ demands are unrealistic, especially as the companies make massive investments in EV development and manufacturing.

But the union has pointed to skyrocketing company profits and CEO pay at the Big Three in recent years, money it says the companies have not been shared fairly with workers.

Profits at the Big Three collectively rose by 92 percent, and CEO compensation jumped 40 percent from 2013 to 2022, according to an analysis by the Economic Policy Institute released last week. 

Inflation has eaten into auto manufacturing workers’ average hourly wages, which dropped 19.3 percent in real dollars since 2008, the left-leaning think tank found.

“These are legitimate factors in what’s led the UAW here today,” DeVito said. “We hope this is a short interruption for everybody’s sake and doesn’t progressively get worse.”

In remarks at the White House on Friday, Biden said record profits should be shared with workers and that he understood workers’ frustrations. But the president stopped short of endorsing the strike, and acknowledged that the companies have made “significant offers.”

During an interview Monday with MSNBC’s “Morning Joe,” Fain said the White House would have no role in the negotiations.

“This battle is not about the President, it’s not about the former president, or any other person prior to that. This battle is about the workers standing up for economic and social justice and getting their fair share, because they’re fed up with going backwards,” Fain said.

Zack Budryk contributed.