UAW Strike Could Put Auto Suppliers, Michigan Economy In Crisis, Analysts Say

Three of the leading U.S. automotive companies face uncertainties after a contract dispute with the United Auto Workers (UAW) union was not resolved Thursday night.

Union workers at several Ford Motor Co F, General Motors Co GM and Stellantis NV STLA are now on strike and the impact on automotive production and prices is a key item being watched by investors.

Here’s a look at what some experts are saying.

Joe Brusuelas on UAW Strike: While the UAW strike could have an impact on the automotive sector, it could be less than feared at the given time, RSM US Chief Economist Brusuelas said.

“The targeted labor action is impacting far less workers than the total 146,000 potential strikers and appears to be targeting final assembly plants and not overall production,” Brusuelas said.

The current strikes only impact 12,700 workers, Brusuelas added.

“It is important to note that the total number of workers that could be involved in the labor action accounts for 0.1% of total private sector employment.”

Brusuelas said the impact on the economy from the UAW strike “represents barely a ripple in the national economy.”

The strikes could impact the price of automobiles for consumers, the economist warned.

“Auto inventories remain tight, and should the strike escalate, one should anticipate an increase in prices of new and used autos within two months.”

Related Link: 10 Big 3 Auto Suppliers To Watch With UAW On Strike 

RBC on UAW Strike: The UAW strike could be significantly more impactful on automotive suppliers than the OEMS, RBC Capital analyst Tom Narayan said.

“Our theoretical math suggests that labor cost increases should largely be manageable for the D-3 OEMs. Further, an extended work stoppage should keep inventories low and support prices staying elevated, which should be a near-term offset for higher wages,” Narayan said.

The analyst recalled the 2019 strikes having a “quick snapback,” which could happen once again.

“For the suppliers meanwhile, an extended work stoppage would be far worse especially since they cannot really build inventories. As such, we favor the OEMs over the suppliers on UAW.”

Narayan has a Sector Perform rating on Ford and Outperform ratings on General Motors and Stellantis. 

Moody’s on UAW Strike: The city of Detroit and other local governments impacted by auto strikes could be an item to watch, according to Moody’s analyst Ted Hampton.

A report from Hampton showed Michigan has the largest share of UAW auto workers with around 47% of the members working in the state.

“Depending on the strike’s duration and outcome, the labor stoppage could impede the state’s efforts to keep its hold on the U.S. auto industry — and the jobs and tax revenue it produces,” Hampton said.

The analyst said the UAW strike showed Michigan is still “disproportionately exposed to the domestic auto and auto parts industries.”

Michigan has faced risks of factories being built in southern states before the strikes, which could add to the troubles, the analyst said.

“Through the terms of its eventual resolution, the current strike could undermine Michigan’s position in the industry as the Detroit-based companies compete with the all-electric and union-free Tesla Inc TSLA.”

Read Next: With UAW On Strike, Biden Says EV Shift Should Benefit Both Workers, Automakers 

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