UAW strike limits damage to Detroit 3 — for now

The Detroit Three workers who went on strike early Friday don't churn out the full-size pickups and SUVs that generate the automakers' biggest profits, nor do they build the engines or transmissions needed to keep other factories humming.

Instead, the UAW's unprecedented walkout against General Motors, Ford Motor Co. and Stellantis targeted three assembly plants where a shutdown won't make too big of a dent in the bottom line. The plants make Chevrolet's ninth-biggest seller in the United States, the Colorado midsize pickup; Ford's No. 4 utility vehicle and No. 3 pickup, the Bronco and Ranger; and the Jeep Wrangler, an SUV that dealers aren't expected to run out of for nearly three months.

The plants — Wentzville Assembly in Missouri for GM, Michigan Assembly near Detroit for Ford and Toledo Assembly in Ohio for Stellantis — employ about 13,000 hourly workers, or roughly nine per cent of the UAW's membership at the Detroit 3.

The strategy will have an immediate effect on vehicle production at those plants and on the suppliers that sell to them, but it so far deals only a limited blow to the automakers' overall U.S. operations, analysts told Automotive News. That could change quickly, though, as the union is saving firepower to escalate the strike and ramp up pressure on the automakers if negotiations fail to reach a resolution soon.

"They are not trying to cripple the companies with this," said Marick Masters, a management professor at Wayne State University in Detroit. "What they did is take an intermediate step that's significant enough that it can be felt, but it's not significant enough that the companies won't be willing to come back to the table and sit down and talk without having to take some dramatic course of action."

If the union had initially struck components or transmission plants that in turn force automakers to shut down assembly plants for a lack of parts, Masters said, "you've forfeited the next move."

UAW President Shawn Fain told reporters as he joined picketers outside Michigan Assembly on Friday that the initial plants were chosen because "we've got to start somewhere."

"I'm not going to get into our strategies, but we've got a lot of smart people," Fain said. "We have a strategy we've mapped out and we have a playbook we're going to play by. This is up to the companies. If they come to the pump and take care of their workers, we'll come back to work. But if they don't, we'll keep amping it up."

The strike began two days after Jeep debuted the freshened 2024 Gladiator, which will be built at Toledo Assembly, at the Detroit auto show. The Toledo plant already had begun building the updated 2024 Wrangler, which Jeep unveiled at the New York auto show in April.

Chevrolet and GMC redesigned the Wentzville-built Colorado and GMC Canyon for the 2023 model year. Ford started building its redesigned 2024 Ranger at Michigan Assembly only a few weeks ago.

Across the industry, inventory levels generally have rebounded since the depths of the pandemic and chip shortage, but supplies of new vehicles still vary by brand. Cox Automotive estimated that GM dealers, particularly those selling Chevrolets and Cadillacs, have the tightest supply and are most at risk of exposure to a strike, Chief Economist Jonathan Smoke wrote Friday.

Stellantis brands entered September with some of the highest inventory levels among the Detroit 3, with Dodge at a 127-day supply, Chrysler at 120 and Ram at 100, according to Cox. GM's brands had some of the lowest, with 44 days' supply at Cadillac, 51 at Chevy and 61 at GMC.

"GM sales are likely more vulnerable in a strike, as GM's sales pace is stronger and supply more limited, so any disruption will be a negative," Smoke wrote. "Stellantis sales, on the other hand, have been weak — so with abundant supply, their sales would likely not be impacted for a much longer period of time. Ford is in between."

The automakers likely would be able to make up lost inventory with additional overtime if the strike is short-lived, said Art Wheaton, director of labour studies at Cornell University.

"All of the automakers now know they're not bluffing," Wheaton said. "They will call a strike. They did call a strike. And their behavior at the table has a direct impact on which plants go out next."

The financial burden of the strike should be minimal for automakers early on with most production still taking place, said Stephen Brown, senior director of Fitch Ratings. Based on second-quarter figures, Fitch estimated that Ford has more than $50 billion (all figures in USD) in cash and credit available, while GM has nearly $40 billion. Fitch estimates that Stellantis has around $70 billion of liquidity.

Brown said the targeted nature of the strike gives it a similar feel to the semiconductor shortage that threw a wrench into manufacturers' production plans over the past several years.

"Right now, the strikes are disruptive, but in some ways, this disruption is a little bit akin to what we saw through the semiconductor shortage, where certain plants would go down for a period of time and the OEMs had to quickly adjust production based upon what they could get," Brown told Automotive News. "In some ways, this is kind of similar, where it's not the entire operation in the U.S. going down all at once, but rather sporadic targeted strikes. At least, that's what it looks like right now."

The UAW has a strike fund of $825 million, and at estimated costs of $8 million per week, a strike could last for more than 100 weeks, according to Wells Fargo research published Friday. The three plants that went offline Friday accounted for an estimated 11 per cent of the Detroit 3 light-vehicle production in 2022, the report said.

"They're preserving their strike money as they take this slower approach, and it definitely shows that they may be preparing for a long process," said Colin Langan, a U.S. autos analyst with Wells Fargo.

A full nationwide strike lasting 45 days could cost Ford and GM $80 million to $90 million a day and slash light-vehicle production by 900,000 vehicles, Langan wrote in a research note. A strategy that shifts which plants go on strike is less costly for the companies but "creates a lot of headaches for the automakers as they're trying to create their production plans," he said.

"This probably, if anything, escalates from here and the pain just gets tougher and tougher until they get an automaker to capitulate," Langan said.

Some dealers were not immediately worried. Texas dealer Steven Wolf, who owns Helfman Dodge-Chrysler-Jeep-Ram-Fiat in Houston, said he had expected the union to strike. The stoppage in Toledo would need to last around 45 to 60 days before Wrangler and Gladiator inventories become a problem at his store.

Cox Automotive data shows that dealerships have plenty of Wranglers and Gladiators. Jeep retailers had 82 days' worth of Wranglers, according to Cox, and a nearly seven-month supply of Gladiators.

Wolf said Gladiator sales have been "decent" so far this year but that the pickup has been heavily incentivized, with a discount of 10 per cent available.

"It looks like they're going the humane way about it by not doing a complete shut-off," Wolf said of the strike. "As far as inventory, I think most Chrysler dealers have plenty of inventory to weather a short storm. If it goes on for a long time, it could be painful."

The UAW is making "a statement using Jeep," Wolf added. "They could have played tougher ball and gone to one of our plants that supplies all the plants, but I think they're trying to say, 'Hey, look, we want to negotiate in good faith, this is what we're going to do.' But it can get worse if they don't sit down at the table and start working it out."

Michael Martinez contributed to this report.