As the historic Union Auto Workers (UAW) strike against the Big Three U.S. automakers—General Motors, Ford, and Stellantis—continues to unfold, what impact will an enduring strike have on automotive manufacturers, and will there be a domino effect that impacts the tiered suppliers?
For a quick look at the impact of the current UAW strike on the automotive supply chain from an expert’s perspective, we asked WIT Supply Chain Expert Robert Handfield, Ph.D., Bank of America University Distinguished Professor of Supply Chain Management and Executive Director, Supply Chain Resource Cooperative, for some of his thoughts.
WIT: Where do GM, Ford, and Stellantis stand in terms of their supply as of today?
Handfield: At the moment, the Big Three are in pretty good shape. They have roughly 40-50 days of inventory, and for their more popular models, like trucks and SUVs, they have up to 70 days of inventory.
WIT: What will be the impact on tiered suppliers if the strike continues?
Handfield: In the short term, there isn’t likely to be a significant impact on suppliers, particularly Tier 1 suppliers who also produce for other automotive companies, like Toyota, BMW, Honda, and Hyundai, not involved in the strike. However, if the strike endures after a few weeks, we’ll likely start to see a cascading effect. There will be less demand for things like steel, less demand for paint, less demand for plastics, and so on, which will then drive less demand for goods and services further upstream with Tier 2 and Tier 3 suppliers. These smaller suppliers, especially small tool or die shops, plastic injection plants, and other producers of niche products, may start to lay off workers as demand diminishes. Big picture—this rolling effect could stifle the country’s economy.
WIT: What does the strike mean in terms of hindering EV goals?
Handfield: There is less inventory of electric vehicle models since procuring materials for batteries and other EV components has been an issue with many suppliers. If the strike continues, the inventory of electric vehicles on dealer lots will likely decrease, driving higher prices. The strike could also impact used car prices if supply cannot keep up with demand.
WIT: How would the UAW strike impact EV industry competition?
Handfield: Tesla will surely exploit this situation, as will Toyota, which also produces a lot of EVs. In fact, Toyota’s stock was up $50 a share last week. The simultaneous strike against the Big Three undoubtedly gives other players in the market an opportunity to drive revenue and market share.
WIT: What’s at stake for union workers and the automotive industry in general?
Handfield: What the UAW wants are higher wages, shorter work weeks, and stronger job security for its workers; they have put a lot on the line to get GM, Ford, and Stellantis to renegotiate their terms. There is significant automotive manufacturing in Mexico, in places like Pueblo and Saltillo. With the free trade agreement between the two countries, the Big Three may begin moving more production to these areas, reducing the UAW’s presence in the United States.
As part of their agenda, the Biden administration has incentivized domestic manufacturing. It will continue to press for more job creation at home, so companies will unlikely want to go offshore. However, if the strike continues to impact revenue, there is no guarantee this won’t happen.
The last GM strike in 2019 lasted about a month. In this instance, the uncertainty of the rolling, unpredictable strikes at targeted plants for all the Big Three has put the automakers on their heels.
In terms of litigation, if the strike persists, we may see breach of contract disputes begin to arise, as well as conflicts with parties claiming Force Majeure.
The Risk of Litigation and the Experts Best Suited to Support Counsel
The UAW strike amplifies the automotive industry’s vulnerabilities and forces stakeholders to rethink strategies, relationships, and business models. The threat of legal action may take shape in the form of:
- Breach of contracts, as different parties aren’t able to fulfill contractual obligations
- Force Majeure claims, where a party claims the disruption caused by the strike was an unforeseeable “act of God.” The validity of such claims would depend on the specifics of the contract and the circumstances.
- Consumer lawsuits, if consumers believe they’ve been unfairly treated, misled, or overcharged due to the disruption, they might sue.
- Regulatory and compliance issues, if companies are unable to meet regulatory requirements due to supply chain issues, facing penalties or legal actions from regulators
- Shareholder actions, if shareholders believe that a company’s management did not adequately prepare for or respond to supply chain risks
To prepare for potential litigation, counsel should consult with leading industry experts. Supply chain experts can provide insights into standard practices, expected challenges, and the reasonableness of a company’s actions given the circumstances. They can also detail how disruptions could have been anticipated or mitigated. Automotive industry analysts can provide insights into industry norms, trends, and benchmarks and provide context around company actions compared to industry-wide responses. And economic and financial experts can assess economic damages resulting from disruptions, such as lost profits, increased costs, or valuation impacts.
However the automotive industry evolves, consulting with leading experts will keep counsel a step ahead, ready to help clients mitigate risks and prepared for legal disputes that arise.
For more information about how WIT can help inform your litigation strategy and to learn more about our automotive expert teams, contact us to discuss your expert witness needs. Follow us on LinkedIn and Twitter to stay up-to-date on our latest insights.