Impact of UAW Strike on the Supply Chain

Impact of UAW Strike on the Supply Chain

It’s been six weeks since the UAW (United Auto Workers) union began its strike against the country’s largest automakers, and there’s no sign of resolution. This week, in fact, the union expanded its walk-off to a Ram pickup plant in Michigan. This move—along with the union’s strategy throughout the strike—represents a strategic departure from past strikes. Rather than beginning a strike at all locations of one automaker, the UAW this time began with a strike at one plant of each automaker (Ford, GM, and Stellantis), expanding the scope of the strike almost weekly.

The UAW makes up about 150,000 members of the workforce at the three big automakers, and there are currently about 40,000 of them on strike at various locations. Another 5,000 walked out last week in Texas. In addition to OEM production plants, the UAW is also striking at 18 different warehouses. This represents a new approach to striking, one that has the potential to prove more impactful for the union.

The approach has left the automakers at a distinct disadvantage because they don’t know when or where their workers might strike next. The union is also leveraging additional power because it can play the automakers off of each other.

While consumers have yet to feel the pinch of the strike, the supply chain is starting to face disruptions. The first place to see the impact is parts suppliers. The automakers have directed them to continue building parts but to hold off on shipping. Now, the suppliers are in a position of having to stockpile and fill their warehouses, which comes at a cost. At some point, however, you can expect the automakers to cancel orders for parts, and then the suppliers will begin to suffer a shortage of cash.

UAW Strike and the Supply Chain

This is the ripple effect of the supply chain. If the parts makers aren’t getting new orders and have less cash on hand, the impact will extend out across the global supply chain. This is especially true for smaller Tier 2 and Tier 3 suppliers, who already have less cash to work with. This will make it difficult when the strike ends—likely abruptly—and those suppliers must immediately pivot and ramp back up their productivity.

Supply chain managers for parts makers must remain on high alert, ready to shut down at a moment’s notice or, conversely, return to normal production. This requires careful planning and understanding of how much labor is required for each product line. They may face the unfortunate task of laying off or diverting workers as production ebbs and flows.

On the consumer end, the signs of disruption are farther out, but they will undoubtedly start to creep into the picture. Some Michigan car dealerships, for instance, are reporting a lack of parts for customers as existing inventory begins to dry up. Those dealers say they are still getting small orders of parts, but they expect that to stop altogether soon as the parts manufacturers eye the possibility of stopped production.

As negotiations remain stalled, supply chains are stuck in limbo, and managers must maneuver wisely.