A strike at the three major U.S. automakers – General Motors, Ford and Stellantis – would threaten the livelihoods of up to 143,000 workers and the profits of some of the country’s leading companies.
However, the economic consequences could go far beyond the actors directly involved. Companies could suffer lost spending due to striking auto workers. Auto suppliers could come to a standstill. Consumers may balk at higher prices.
A six-week strike would cost the U.S. two-tenths of a percentage point of economic growth over a three-month period ending in December, Mark Zandi, chief economist at Moody’s Analytics, told ABC News.
“This is a small but significant impact,” Zandi added, noting that a potential strike would weaken the U.S. economy as it faces other threats such as high oil prices, a federal government shutdown and the end of a moratorium on student loan payments be .
As the weeks pass and automakers sell off inventories already dwindled by a pandemic-era supply shortage, auto prices could rise, threatening the Federal Reserve’s efforts to reduce inflation, Zandi said.
A shorter strike against all three automakers, lasting 10 days, would still cost the U.S. economy $5.6 billion in losses, according to a report released last month by the Anderson Economic Group.
The losses include about $860 million in direct wage foregone by autoworkers and nearly $1 billion in lost production – both of which would be exacerbated by the resulting loss of economic activity, the report said. The report said consumers and dealers will suffer an additional $2 billion in losses as car owners delay repairs and sellers lose inventory.
The biggest economic impact would come from lost wages suffered by potentially tens of thousands of United Autoworkers (UAW) members, economists told ABC News.
“Wage losses have a direct and immediate impact on every striking UAW worker’s household and their purchasing power in the economy,” Tyler Theile, vice president and director of public policy for the Anderson Economic Group, told ABC News.
“Whatever their purchasing power may be today, it would be significantly different tomorrow,” Theile added. “That’s where the economic impact starts to ripple throughout the economy.”
Workers who take part in the work stoppage are to receive strike pay of $500 per week, which for many workers would be less than half of their previous income. Such workers would be less likely to eat at a restaurant or go to a movie theater, which would reduce those companies’ revenues, Gabriel Ehrlich, an economic forecaster at the University of Michigan, told ABC News.
“It adds up,” Ehrlich said.
If the strike drags on for several weeks, workers at companies along the supply chain could suffer from the same dynamics, as lost production would lead to furloughs and loss of income, Erik Gordon, an economics professor at the University of Michigan, told ABC News.
Initially, suppliers of auto components such as dashboards and sound systems may retain workers in the hope that a quick resolution to the strike would require a surge in activity as automakers build up lost inventory, Gordon said. Over time, a secure supply of such components would lead to a slowdown in production.
Andrew Kelly/Reuters, FILE
“These suppliers will initially close shifts and then potentially stop all production,” Gordon said.
According to a report written by Ehrlich, a four-week strike against all three automakers would result in 161,000 job losses in Michigan alone. A prolonged strike would result in more than 300,000 job losses in the state, Ehrlich noted.
In addition to workers and related businesses, consumers could also suffer as dwindling inventories at automakers lead to higher prices.
Due to the ongoing impact of supply chain disruption during the pandemic, the big three automakers have a fifth of the inventory they had in 2019, when a 40-day strike against General Motors had little impact, Theile said.
Gordon said supply shortages caused by the strike could lead to higher sticker prices.
“It’s a terrible time for consumers to buy a car,” he said. “If you need to buy a car, one thing is certain: you won’t get a great bargain.”
On Thursday evening, the White House confirmed that President Joe Biden had spoken with UAW President Shawn Fain and leaders of major auto companies to discuss the status of ongoing negotiations.
Biden made the calls as the clock continues to tick toward a possible strike.
Comments are closed.