The month-long Strike by hourly workers at the Detroit Three automakers is starting to have an impact on various businesses, including airlines and auto parts makers. Analysts are warning that if the strike continues, the financial consequences could worsen. The United Auto Workers (UAW) strike has already resulted in a total economic cost of over $7 billion, causing companies to assess the losses in revenue during a time of economic uncertainty and persistent inflation.
According to University of Michigan professor Erik Gordon, the damage caused by the strikes will extend beyond the period when UAW members return to work. Workers will also be cautious about their spending since strike pay is lower than regular pay. The strike has already affected major companies such as Delta Air Lines, which reported a significant decline in business in Detroit. PPG Industries included a profit hit in its fourth-quarter forecast, and Union Pacific stated that the strike has had a small impact so far.
Trucking firms and suppliers that provide parts for General Motors, Ford Motor, and Stellantis are among the most vulnerable to the strike. These companies deliver components that are assembled into cars, and both they and their workers will suffer, according to Gordon. Investors will be closely monitoring major parts suppliers such as Aptiv, Magna International, Lear, and American Axle, as they are expected to report the scale of the financial impact they may experience.
BofA Global Research analyst John Murphy predicts that suppliers will feel the effects of lower volumes in the fourth quarter, although the impact will not be evenly distributed. Companies like Lear and Magna have a double-digit sales exposure to the three automakers, while Aptiv has an exposure between 8% and 9%, as stated in their latest annual filings. Anderson Economic Group estimated that the economic losses related to supplier wages and earnings reached approximately $2.67 billion by the fourth week of the strike.
French car parts maker Forvia warned of possible temporary layoffs due to a larger sales hit in October resulting from the strike. Autoliv, the world’s largest producer of car airbags and seatbelts, has experienced a limited impact from the strike so far, but its CEO, Mikael Bratt, sees it as a potential risk if it continues.
The UAW has launched simultaneous strikes against the Detroit Three automakers, demanding a 40% wage increase, including an immediate 20% raise, improvements in benefits, and coverage of EV battery plant workers under union agreements. However, an agreement has not been reached yet, and the shares of automakers and suppliers have declined since the strike began on September 15.
