If the ten-day strike threatened by the United Auto Workers union (UAW) materializes, the total cost to the economy could be higher than $5 billion, according to research newly published by Anderson Economic Group or AEG.
The full economic loss would only occur if the UAW strike affected all of the Big Three or Detroit Three automakers – GM, Ford, and Stellantis – at once, with lesser losses if strikes only occurred at one or two.
AEG says the economic losses would occur in three ways. These include lost wages to the striking workers from the UAW and lost profits to the automakers. Additionally, the production halt would affect other businesses and industries heavily dependent on the Big Three such as dealerships or auto component suppliers.
The researchers pointed out that a 2019 strike of 48,000 UAW workers, approximately a third of the number that could potentially go on strike in the near future, caused a measurable recession in the state of Michigan for three months (one quarter). While the 2019 strike involved less workers, it lasted much longer than the 10-day labor halt possible in 2023, continuing for six weeks.
Dealerships and consumers would likely feel the negative effects of a current UAW strike faster. “About one-fifth of the inventory that was on-hand in 2019” is currently at Big Three dealerships, AEG VP Tyler Theile points out. Because average inventories are now at roughly 55 days supply “a strike in current conditions would likely affect dealers and customers much sooner,” she noted.
With negotiations apparently failing to produce significant agreement between GM, Ford, and Stellantis and the UAW, the chance of a major strike seems higher. A union vote on strike authorization is currently set to occur during the week of August 21st.
Neither side is seemingly prepared to budge on their position as of mid-August as the two sides attempt to hammer out a new four-year contract. The UAW wants an immediate 20 percent pay raise – part of a 46 percent increase over the life of the contract – COLA, a return of pensions that were dropped during the “Great Recession,” a 32-hour work week, and union representation at the GM Ultium battery plants.
The automakers claim in return that the UAW demands would raise their annual expenses by $80 billion, potentially leading to the outright destruction of the companies. GM argued “it’s important to protect U.S. manufacturing and jobs in an industry that is dominated by non-unionized competition.”
Meanwhile, President Joe Biden called on “all sides to work together to forge a fair agreement” and develop “a contract that sustains the middle class.”