UAW strike on Detroit 3 would cost economy billions, report says

A strike by the UAW against Ford Motor Co., General Motors and Stellantis could cause a recession in Michigan and take a bite out of the nation's GDP, according to recent analyses.

A 10-day strike alone against the Detroit 3 would result in more than $5 billion in economic losses, according to an analysis released Thursday by Anderson Economic Group. The estimate includes wage losses of $795 million and manufacturer losses of $1.2 billion, plus the financial hit to automotive suppliers, dealers and industry at large.

A strike on all three companies would be "akin to taking down 2% of U.S. GDP and could incite intervention analogous to what occurred in the rail sector," according to a Bank of America analysis released last week.

A strike is becoming more likely as the Sept. 14 contract expiration draws near and negotiations between UAW President Shawn Fain and the automakers appear to be making little progress. Fain literally trashed a contract proposal from Stellantis, fueling speculation the union could target the Ram truck and Jeep maker, but Fain has not ruled out striking against all three. The automakers have stayed mostly mum on the talks.

In its loss estimate, the East Lansing, Mich.-based consulting firm applied the same methodology as its economic calculations for the GM strike in 2019, which lasted six weeks with more than 48,000 on a work stoppage.

"When the UAW went on strike against GM in 2019, Michigan experienced a single quarter recession," Anderson said in a news release. "In 2023, there is the potential that a strike could involve more manufacturers, more workers, and more plants.

"If that happens, even a short strike would impact economies throughout Michigan and across the nation."

In an alternative hypothetical, Anderson's firm concluded that a strike against only Ford would result in $1.2 billion of losses over 10 days.

The impact on consumers and dealers could be more acute than the 2019 strike because of major differences in inventory levels. Vehicle inventory has recovered from rock bottom during the COVID-19 pandemic to 162,000 units in June, but that's still just a fifth of the inventory on hand in 2019, according to Anderson's firm.

"Consumer and dealer losses are typically somewhat insulated in the event of a very short strike," Tyler Theile, vice president of the firm, said in the release. "However, with current inventories hovering around only 55 days, the industry looks different than it did in during the last UAW strike."

The strike is worrying more than the automakers at the negotiation table. Suppliers up and down the tiers are vulnerable to financial losses. For small tier 2 and 3 suppliers that are already dealing with liquidity problems, a strike could be the fatal blow, according to Alex Calderone, president of  Calderone Advisory Group LLC in suburban Detroit.

"Rising interest rates, escalating material and labor costs, and fluctuating production volumes already have them on the ropes," Calderone said in an email. "In my opinion, even a short strike could push many over the edge."

The clash between the union and automakers has also gotten the attention of the White House. President Joe Biden on Monday called for "all sides to work together to forge a fair agreement." Last month, Biden tapped senior adviser Gene Sperling to liaise with the union and auto companies during the negotiations. The president also met last month with Fain when union leaders were at the White House to brief senior staff on their positions in the talks, according to a White House official.

The Biden administration averted a rail strike last year by passing legislation to prevent a work stoppage. Federal intervention could also be in play if a strike were to occur on the Detroit 3.

"Such intervention would likely be counterproductive for the UAW," the Bank of America analysis said.