UAW strike cost the economy $1.6B in first week, expected to grow quickly

The first week of the UAW strike against the Detroit 3 is projected to result in $1.6 billion in economic losses, according to estimates by East Lansing-based Anderson Economic Group.

But with 38 more parts distribution centers joining the strike Friday across the U.S., that amount is expected to grow exponentially.

So far, the losses have been concentrated in Michigan, Indiana, Alabama, Kansas, Missouri and Ohio, where plants are shuttered over the strike. UAW Shawn Fain announced new locations walking off the job in 20 different states on Friday, including six GM facilities and seven Stellantis centers in Michigan.

Ford Motor Co. was spared as negotiations progressed.

Some 5,600 additional workers have now joined the strike on top of the 13,000 of the 146,000 members who began the strike one week ago. The new GM sites employ roughly 3,400 workers, including 1,600 near Flint. The Stellantis sites employ about 2,100 workers.

"Because the auto industry is highly integrated across suppliers and assembly plants, shutting down one plant will cause layoffs and shutdowns at other plants," Patrick Anderson, principal and CEO of AEG, said in its latest report. "That includes supplier businesses, especially those that are dependent on a handful of contracts with the OEMs."

Detroit-based seating supplier LM Manufacturing earlier this week temporarily laid off 650 workers due to the strike. The company, a joint venture between Canadian auto supply giant Magna International and minority-owned LAN Manufacturing, made the move after the strike halted production of Ford Motor Co.'s Bronco, among various other makes and models by the Detroit 3.

Other suppliers are holding on as long as they can, but the longer the strike continues, the more likely more suppliers will begin mass layoffs.

It's unclear the impact of the 38 General Motors and Stellantis parts distribution centers added to the UAW strike Friday. Those plants mostly support auto dealers and aftermarket parts but also serve as warehousing for less critical auto parts from suppliers.

U.S. auto dealers have an inventory average of about 55 days, which is low for industry standards, but does isolate them from production impacts. The strike on parts distribution will likely impact dealers' service departments quickly, however.

However, auto suppliers will still be negatively impacted, Anderson said in a statement.

"For those Tier 1 and Tier 2 suppliers with business with GM and Stellantis, it just became almost impossible to plan for production in the coming weeks," Anderson wrote.

Some of these suppliers, which often have small-margin contracts with just a handful of plants, are at risk of closing down. There is no $825 million strike fund to hold suppliers, and they don't have a vote in this strike. The most serious damage is occurring to the workers and owners of these firms. We estimated the first-week cost of the UAW's 'stand up' strike was at least $1.6 billion. The lost wages in the next week will be substantially more."