Global MFG - Sep 20, 2019
As GM Strike Stretches On, Supply Chain Starts to SufferBen Foldy | Wall Street Journal
By stopping all production at GM's U.S. plants, the strike is also beginning to affect the web of manufacturers that produce parts that go into the company's cars. The companies most affected so far are those that operate on a "just-in-time" basis, delivering difficult-to-ship parts like seats and door panels to GM's assembly plants from factories located nearby, said Michael Robinet, executive director of automotive advisory services at IHS Markit.
Automotive suppliers idle plants and lay off workers; ‘it goes right to the bottom line’
Companies that supply parts to General Motors Co. are being forced to idle plants and lay off workers, as the national strike called by the United Auto Workers completes its fourth day.
Nearly 46,000 full-time GM workers walked off the job on Monday after the UAW and GM were unable to agree on a new four-year labor agreement before the previous one expired. As of Thursday afternoon, talks were continuing between the company and the union, but the stoppage was likely to enter a fifth day. The strike is now the longest nationwide strike against GM since the 1970s.
By stopping all production at GM’s U.S. plants, the strike is also beginning to affect the web of manufacturers that produce parts that go into the company’s cars. With no vehicles being made, those companies can do little but wait until the strike ends, industry experts say. Economists estimate that every automotive assembly job impacts between five and eight other jobs.
“When you don’t know whether it’s going to last one day or six months, it’s kind of hard to make decisions,” said Sheldon Klein, who works with suppliers as the co-chair of the automotive practice at Butzel Long, a Detroit-area law firm. “It goes right to the bottom line for most suppliers.”
The companies most affected so far are those that operate on a “just-in-time” basis, delivering difficult-to-ship parts like seats and door panels to GM’s assembly plants from factories located nearby, said Michael Robinet, executive director of automotive advisory services at IHS Markit.
Some of those plants have already laid off their workers temporarily or announced they are going to do so, as they reduce or idle production because of the continuing strike.
At least three companies around Lansing, Mich., have shut down their plants that supply the two GM assembly plants nearby, according to Todd Collins, who represents many of those plants’ workers as the president of UAW Local 724. He estimated that around 75% of his local’s roughly 1,800 members have been impacted by the strike.
Nexteer Automotive, which makes steering components and has a plant in Saginaw County, Mich., informed workers on Wednesday that it would be temporarily reducing its workforce on account of the GM strike, according to a company statement. Nexteer didn’t provide specifics on which plants might be affected or how many staff might be laid off.
Already there are signs that the work stoppage is rippling beyond just those nearby plants and into the broader automotive supply chain. A typical finished vehicle is made from roughly 30,000 individual parts manufactured by hundreds of different companies, and companies that provide products to GM will themselves have networks of suppliers.
Stripmatic Products Inc., a Cleveland-based maker of suspension and chassis components, sells to other suppliers that provide products to GM for their pickup trucks and SUVs.
The company, which estimates GM is responsible for around 35% of its business, first felt the strike’s impact on its business Wednesday when a GM-related order was roughly halved.
Bill Adler, Stripmatic’s president and chief executive, said his company would likely make changes to its planning, if the strike continues for longer than a week or two.
“You always hope these get resolved in a few days, not weeks or months,” Mr. Adler said.
Union negotiators for the UAW hope a new contract will keep open idled GM plants, increase pay and benefits for less-senior employees and provide job security for temporary workers, who are also striking. GM hopes to tamp down its labor costs to better insulate itself from a potential slowdown in U.S. sales.
The strike is having cross-border implications as well. GM said Wednesday that it was temporarily laying off roughly 1,200 workers at an assembly plant in Oshawa, Ontario, on account of a shortage of necessary parts that would come from the company’s U.S. plants.
In the U.S., given the importance of the automotive supply chain to the country’s Midwest, a prolonged strike of more than a month could have serious implications for the region’s economy, said Mark Zandi, principal economist at Moody’s Analytics.
“That’s a lot of jobs in the industrial Midwest and likely would tip the region into a recession,” Mr. Zandi said.#automotive #manufacturing