Pat Green is nervous. He has spent the past two years trying to hire talented people to fill the two plants in Grand Rapids operated by Cascade Die Casting Group, which makes aluminum and zinc diecasting for the automotive and appliance industries.
“We’ve got a good team now and I don’t want to lose people because it was hard to find good people,” Green, who is CEO of the company, told the Detroit Free Press, part of the USA TODAY Network, on Monday.
That’s why on the fourth day of a historic United Auto Workers strike against the Detroit Three automakers, Green was intensely planning for ways to ride it out without having to lay off workers if the strike grows and stretches into weeks. He has good reason for planning. On Monday night, UAW President Shawn Fain announced a new strike deadline of this Friday at noon. If Ford Motor Co., General Motors or Stellantis have not made substantial progress toward an agreement with the UAW by that time, Fain will expand the Stand Up Strike to more plants.
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For Green’s part, if that happens, he’ll start by ending overtime at the company and then he’ll ask for volunteers to take some time off with a reduced pay plan. It’s something he started contemplating late last week.
The UAW’s strike started at 11:59 p.m. Thursday when nearly 13,000 UAW workers across the three Detroit automakers walked out of three plants as part of the first wave of shutdowns until a new labor agreement is reached. Those plants are Ford Michigan Assembly Plant (Final Assembly and Paint only) in Wayne, Stellantis Toledo Assembly Complex in Ohio and GM’s Wentzville Assembly in Missouri.
If the union and the automakers can’t reach a tentative agreement, at some point the UAW has said it plans to strike more plants across the three companies. A broader and prolonged strike would mean parts suppliers couldn’t keep production going if the vehicle assembly plants that use their parts are idled. No one is sure of just how long suppliers could hold out.
See the picket lines: UAW launches a strike, targeting three Detroit automakers
“We’re in better shape than most, but if others in the supply chain go down, we’ve got another crisis on our hands just like the chips crisis,” Green said, referring to a recent shortage of semiconductor chips that crippled the industry. “If this stretches out to five or six weeks, there’s going to be real problems in the supply chain. And I could be wrong; it could be shorter than that.”
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The first fallout
The Biden administration has been preparing to offer emergency economic aid to auto suppliers to mitigate any long-term damage caused by a prolonged strike, according to published reports.
But the strike has already had some impact. A component maker in Michigan, CIE Newcor, warned it may have to lay off 293 people.
German-based supplier ZF said that it has already had to lay off some workers at various sites, including in Michigan, said Tony Sapienza, ZF North America, Inc.’s head of communications. ZF supplies components for all the vehicles made at the three plants targeted so far in the strike, including the hybrid transmission to the Jeep Wrangler 4xe hybrid made at the Toledo facility.
Sapienza declined to say which of ZF’s facilities have been affected or how many people ZF has laid off. ZF, which has North American offices in Northville, employs 11,000 people at five manufacturing sites and four technology centers in Michigan.
“The impact was immediate; we’ve had to slow production in a couple of areas,” Sapienza told the Free Press. “If the strike were to broaden or last anything longer than one or two weeks, that would be a crisis for the supply chain. I’d be really concerned with tier 2 and tier 3 and their ability to stay solvent.”
Sapienza said a bigger and prolonged strike “would hurt” his company, but because of its size, it would be OK.
But “every plant that goes offline creates additional stress in the supply chain, and we really hope our customers and the UAW are taking this into consideration,” Sapienza said.
U.S. Steel said Monday it is temporarily idling furnace B at the Granite City steel plant in Illinois as a “risk mitigation” in response to the UAW strike. The company said it is evaluating how many of its 1,450 employees there will be affected.
Keeping an eye on Unifor, too
All of this news comes as the UAW’s counterpart in Canada, Unifor, is negotiating a new contract with Detroit automakers as well. Its current contract was slated to expire at 11:59 p.m. Monday. But in the early hours Tuesday morning, Unifor said it would keep talking with Ford, after the automaker made a “substantive offer” on a new labor contract as the former deal expired. Unifor is extending negotiations for a 24-hour period.
Unlike the UAW, Unifor is following tradition and has selected a target company — Ford — to negotiate a deal with first. It would use that agreement as a template for contracts with the other two. In the U.S., the UAW is negotiating with all three automakers separately, but simultaneously.
Around 4 p.m. Monday, Unifor National President Lana Payne said there was still no tentative agreement with Ford.
“While we remain at the table the likelihood of a strike increases with each passing hour,” Payne said, adding that the union has advised more than 5,600 members at Ford facilities in Canada to prepare for all scenarios, including a strike.
After Ford’s eleventh-hour “substantive offer,” Unifor said it would negotiate through the night, but members should continue to maintain strike readiness.
If Unifor does not get a tentative agreement and strikes in solidarity with the UAW, that will be a double whammy for parts suppliers.
“These are not normal times,” Sapienza said. “We’re coming off of three years of stress on the supply chain and so we’re already in a fragile state. We’re keeping an eye on Unifor, for sure. … There’s only so much more stress the system can take.”
Layoffs could go into the thousands
The state of the supply chain is delicate. That’s because it has had to recover from the COVID-19 pandemic, which shut down the industry for eight weeks, then suppliers faced a massive shortage of semiconductor chips used in a variety of car parts. Since early last year, many suppliers have struggled to hire and retain workers.
Joe Petrillo, director of business development and advanced engineering at Meridian Lightweight Technologies in Plymouth, said the company is a global supplier of lightweight cast metal parts to many automakers including the Detroit Three. So the strike is a concern because of the interconnection of the supply chain from the tier 1 suppliers — those that supply parts directly to the carmakers — down to the smaller tier 2 and tier 3 suppliers, those who supply components to the tier 1 group.
“We are monitoring the events and checking in with our suppliers and customers,” Petrillo said. “In our view, an escalation of events that leads to a prolonged strike that possibly idles all the Detroit Three (manufacturing) plants, may prove to be the last Jenga block on a supply base that has been stressed to the max, having to overcome COVID shutdowns, ‘stop-and-go production’ due to chip and part shortages, while still trying to work its way through a constrained manufacturing labor market.”
Glenn Stevens, executive director of MICHauto, the group that advocates for the statewide automotive industry, said he has been talking to suppliers for a couple months and they have all been preparing for a strike scenario for some time.
“Some much more proactively than others, but nobody was flying blind anticipating that there might not be a work stoppage,” Stevens said.
There are about 1,000 supplier facilities in Michigan, he said, noting that 96 of the top 100 suppliers to the North American auto market either have their headquarters or a facility in Michigan. So if the strike expands to other automaker plants and lasts into weeks, the job layoffs could reach into tens of thousands.
“You have the direct employment and you have the multiplier affect of each of the automotive jobs and that is between six to 10 people for every one automaker job, so it’s substantial,” Stevens said. “This is the largest industry in our economy. It has an economic contribution of over $300 billion annually to the state of Michigan.
The potential impact
The larger suppliers are likely more protected than the smaller ones from strike fallout, said Laurie Harbour, CEO of Harbour Results, Inc. That’s because they often have other customers from other industries to keep business going. They can move people around and change up schedules to avoid massive layoffs.
“I talked to several companies last Friday and most said little to no impact yet,” Harbour said. “Any one program, which is what you’re looking at with the (automakers), is not going to create massive layoffs but come tomorrow or the next day if (UAW’s Fain) closes more plants and we get to a significant product like the (Ford) F-150 pickup, then you’re going to see more layoffs.”
Because the sales volume of the F-150 is so important, if the union were to strike the plants that build Ford’s big seller, “you’ll see thousands of layoffs because you have so many supplier plants and sub-suppliers,” Harbour said.
“The fact that it’s happening in this spotty fashion is actually better for the supplier community,” Harbour said. “But every day or week that goes by you could see more and more layoffs.”
Big auto suppliers react
At giant tier 1 auto supplier Magna International, leaders are closely monitoring the situation, said Dave Niemiec, Magna spokesman. The company has about 12,450 employees in Michigan. Niemiec said it is premature to comment on any specific impact the strike may have on its operations.
“However, we have focused considerable attention on contingency planning to proactively address any temporary business disruptions to our operations,” Niemiec said. “If that time comes, we are prepared in terms of temporarily scaling back production on affected programs as efficiently as possible, while being equally prepared to ramp up quickly when ready. In the meantime, we remain hopeful that the parties will be able to reach amicable agreements and the disruption and potential impact will be minimal.”
When asked of any impact from the strike on Lear, spokesman Brian Corbett said, “At this time, we’re not commenting on the UAW strike.”
‘We have to take action’
Harbour said most suppliers she’s talked to are prepared or at least forming plans if the strike grows that include considering how to effectively keep producing, make scheduling changes to their shifts and have layoff strategies in place, even offering supplemental pay up to 70% of workers’ salaries if they are laid off.
“Those are the ones who are financially strong and don’t want to lose their people,” Harbour said. “It’s a daily challenge and you’ll evaluate everything every day: What is my forecast? What can I deliver to my customer? And run a little bit of inventory so that when the spigot comes back on, I have parts and ready to go.”
At Cascade Die Casting Group, Green said the company makes parts for the Detroit Three’s SUVs and pickups. For example, it makes parts for the Jeep Grand Cherokee that Stellantis builds at the Mack Avenue Assembly Plant in Detroit. If the UAW strikes that plant or any of the plants that make the Detroit Three’s heavy duty pickups, Green has to be ready.
This article originally appeared on Detroit Free Press: UAW strikes: Auto suppliers warn of closures if more plants involved
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