Suppliers look to limit layoffs as UAW strike enters second week

Auto suppliers impacted by the UAW strike against the Detroit 3 are hoping to avoid laying off or furloughing workers for as long as they can, fearing that those workers will find other jobs by the time automakers resume production.

"I sure hope it's not a prolonged labor stoppage," Vitesco Technologies North America CEO Sandy Stojkovski said last week at the Detroit auto show. "If you were to not have jobs for your people for an extended period of time, they're going to find a job somewhere else. Then when it's time to turn things back on, they won't be there."

It figures to be a tricky situation for suppliers moving forward as the UAW strike against General Motors, Ford and Stellantis enters its second week, with automakers and the union still far apart on key issues. The UAW could expand the strike beyond the three initial plants it targeted at noon on Friday if union leaders do not see enough progress in negotiations by then.

Supplier layoffs have so far been limited, but some have already been forced into doing so. Seating supplier LM Manufacturing, a Detroit-based joint venture between Magna International Inc. and LAN Manufacturing, earlier this week temporarily laid off 650 workers because the work stoppage halted production of the Ford Bronco at the automaker's Michigan Assembly plant.

Earlier in the week, Michigan parts maker CIE Newcor said it planned to lay off about 300 employees as it shuts down four of its plants — a move the company blamed on the UAW strike.

More layoffs are expected if the strike expands and the longer it continues, said Laura You, a member of Michigan law firm Warner Norcross + Judd's automotive and supply chain industry groups.

"The shorter the strike, the less likely it is you'll need to furlough or lay off your employees, so the risk that they will find employment elsewhere during a long layoff or furlough is limited," she said. "The longer the strike, the more prominent those two issues become and the harder it will be to ramp up production."

A prolonged layoff could mean workers finding jobs elsewhere at other companies or industries, threatening the supply chain's ability to quickly bounce back once the strike ends. Suppliers, particularly smaller companies, could find themselves without enough workers to ramp back up to full production, hampering new-vehicle production when the strike ends.

To avoid that, suppliers who have been forced to stop or slow down production because of the strike are considering different approaches to keep employees on the job.

Some suppliers are having or considering having employees work on plant maintenance or undergo extra training, while others have considered having C-suite executives go without pay for a period of time in order to cover workers' salaries while work is stopped, sources familiar with suppliers' thinking said.

"We don't have firm plans in place for what this will mean for the work force," a source at a major Tier 1 supplier told Automotive News. "Each site will make plans for affected team members at each location" impacted by the strike.

The financial impact of the strike on suppliers is expected to be significant. A Bloomberg estimate this week found that parts makers for the Detroit 3 could lose up to $38 billion in revenue if the strike expands.

Smaller companies, particularly those at the Tier 2 and Tier 3 levels, are even more at risk after the pandemic, high raw materials costs, uneven automaker production schedules and shortages of key components such as microchips sent profit margins at many of those companies plummeting.

"We see the situation as much more difficult, especially for them, than the last time we went through this in 2019 with the strike against GM," Vitesco's Stojkovski said. "Their balance sheets aren't nearly as healthy, and that's coming after a few years of 13, 14, 15 million units of production per year, despite each year thinking it would be higher than that."