Suppliers take wait and see approach on GM, UAW strike

DETROIT—As 46,000 hourly General Motors workers began to strike, automotive suppliers are carrying on with production, for now.

GM can carry on for a week or two without running out of parts, according to Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research.

Suppliers have not yet been instructed by GM to slow or stop supply production, said Steven Wybo, senior managing director of turnaround advisory firm Conway MacKenzie.

"Release schedules from GM to suppliers haven't changed yet," Wybo said. "Beyond a week, I see releases going down substantially, which is when we'll start to see some suppliers suffer."

Magna International Inc. confirmed it's maintaining production levels.

"Like the entire supply base, we are in wait-and-see mode," the supplier said in a statement Sunday. "We would like to see both sides get back to the negotiating table, working toward an agreement. Until then, we are continuing to monitor the situation and we remain hopeful for a quick resolution. Although Magna supplies GM on a number of programs globally, it would be premature to comment on the potential impact to our operations right now."

Continental Automotive Systems Inc., the North American subsidiary of Continental AG, also is operating as usual for now.

"Currently, we are watching the situation and will adjust our production schedules in accordance with the customer releases depending on the duration of the strike," a company spokeswoman said in an email.

Seating supplier Lear Corp. declined to comment.

After a week or so, seat and powertrain suppliers likely would begin to shut down dozens of lines and plants across the Midwest, Dziczek said. A prolonged strike would then proliferated through the supply base. Suppliers employ more than 140,000 people in Michigan alone, with a great many supporting products for GM.

"This is our last resort," Terry Dittes, vice president of the UAW-GM department, told reporters following a meeting of the unit's national council. "It represents great sacrifice and great courage on the part of our members and all of us."

A spokesman for the United Automobile Workers union said it was a unanimous vote to strike.

Bigger impact
The impact of the strike, especially one that would last 10 days or more, could leave the Southeast Michigan economy reeling. East Lansing-based Anderson Economic Group L.L.C. said a long strike has potential to plunge the entire Michigan economy into a recession.

"We already know suppliers and contractors that are affected, anecdotally," said Patrick Anderson, president and CEO of Anderson Economic Group. "Places like Delta Township (near Lansing) that are reliant on the GM economy, there's already an effect. If (the strike) gets to the end of the week, we'll start to see furlough notices at major suppliers, and that's when things get bad."

The research doesn't project how large the economic impact of the strike would be, but Anderson said a single-state recession is possible, given the size of GM and its employment base if the strike goes on long enough. He also noted that a prolonged strike would have a lasting effect on the state's economy and the domestic car industry, given negative attention both GM and UAW have received in recent years.

The UAW is embroiled in a federal corruption investigation, with many of its top brass indicted of taking bribes and funding a lucrative lifestyle with union dues. GM is only a decade removed from its government bailout and a few years past a problem with ignition switch failures that led to the deaths of more than 100 people.

"I fear there will be a serious miscalculation by the UAW that could have repercussions for years," he said. "GM is under 17 percent of market share in the U.S. There is ample opportunity for consumers to shop other automakers."

GM has enough inventory that its management can hold out on a deal with the union, Anderson said. The auto maker has thousands of vehicles in its inventory pipeline, with enough cars on lots to maintain a production stoppage of 90 days for Buick models, 133 days for Cadillac models and 125 days for its popular Yukon SUV, the analysis said.

"This is a dangerous situation for the Detroit-based auto economy," Anderson said.