DETROIT — Suppliers are closely watching the UAW's strike against the Detroit 3 and bracing themselves for financial fallout deep into the supply chain if it persists longer than a few weeks.
"There are a lot of small companies out there that are so crucial for the supply chain for the automotive industry that we should not underestimate the risks," Mahle CEO Arnd Franz said in an interview this week on the sidelines of the Detroit auto show. "The negotiating teams at the collective bargaining process have to keep in mind that if we stop making cars, there could be quite a tremendous outfall on the smaller companies in the supply chain."
The automotive supply chain is already in a fragile state after more than three years of pandemic-related impacts on manufacturing and logistics, rising material costs, shortages of key components including microchips and reduced vehicle production volumes. Suppliers, particularly smaller ones and those at the Tier 2 and Tier 3 levels, have seen profits shrink or disappear entirely, even as automakers recorded some of their highest quarterly profits ever over the past few years.
Now, the UAW's strike against General Motors, Ford and Stellantis, if it expands and persists, could threaten the survival of many of those smaller suppliers that are critical to supplying the parts needed for new-vehicle production, industry executives and experts said. Even one missing component, no matter how small, could shut down an entire assembly plant.
"The smaller the entity is, the more at risk it is," said Laura You, a member of Michigan law firm Warner Norcross + Judd's automotive and supply chain industry groups. "So if the [automakers] and Tier 1 suppliers are not willing to work with smaller Tier 2 and Tier 3 suppliers, the reality is they might not have that supplier anymore when the strike is over."