Economic impact of UAW strike ballons
October 13, 2019 12:00 AM UPDATED 16 HOURS AGO
Economic impact of UAW strike balloons
GM CEO Mary Barra met privately with union leaders last week.
DETROIT — Damage from the UAW’s nearly monthlong strike against General Motors goes far beyond the plants that have been surrounded by picket lines, and recovery after it ends could take significant time for the dealerships, suppliers and other employers that depend on GM. Some small businesses have warned they’re in danger of failing from the lost revenue.
By the end of last week, some 150,000 workers either had been laid off or had their pay reduced as the walkout “ballooned in scope,” Anderson Economic Group said. The Michigan consulting firm’s figure includes 75,000 supplier employees and 25,000 GM salaried workers. But it doesn’t account for restaurants and shops in factory towns that are seeing sales slump as GM workers adjust to living on just $250 a week in strike pay.
Dealers had to tell irritated customers that some repairs couldn’t be done because parts weren’t available. They were also running out of loaner vehicles to help those customers get around while they waited.
Although most dealerships still had plenty of vehicles on their lots to sell, some said fixed operations profits were being strained. Even if the strike were to end quickly, stores could start to miss out on monthly bonuses tied to vehicle or parts sales, and deliveries might not return to normal until after the busy year-end shopping season begins next month.
“We feel like we are collateral damage that neither GM or UAW cares about,” Jay Frye, director of fixed operations at Young Automotive Group in Layton, Utah, told Automotive News. “The sad thing is that at the end of the day, GM and UAW will eventually come to an agreement and will be able to go forward better than before — but the dealer body will have paid a substantial price in profits, employee earnings and customer perception.”
As union members continued picketing around the clock, UAW and automaker leaders exchanged public barbs last week in the form of terse statements and videos accusing each other of stalling negotiations. The UAW claimed GM was using the media to spread “half-truths.”
GM CEO Mary Barra waded into negotiations for the first time last week, summoning UAW President Gary Jones, the union’s top GM negotiator and other officials for a private meeting aimed at speeding up discussions.
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“The strike has been hard on you, your families, our communities, the Company, our suppliers and dealers,” GM said in a statement. “We have advised the Union that it’s critical that we get back to producing quality vehicles for our customers.”
UAW Path Forward2019 UAW-Detroit 3 negotiations: The Detroit 3 and UAW labor talks are underway, and Automotive News will follow every turn. From healthcare to wages, temporary workers to job security, we will keep readers informed until the last local votes.
Warranty work stymied
Many retailers were struggling to keep repair parts in stock, although some continued to service customers by obtaining parts from other dealerships.
Rick Ford, CEO of RFJ Auto Partners, said getting GM-branded parts — needed to complete warranty work on vehicles his dealerships have sold — had been a problem for weeks. RFJ Auto Partners has two large GM stores: Dave Smith Motors, with Chevrolet, Buick and GMC franchises in Kellogg, Idaho, and Vernon Auto Group, with all four GM brands in Vernon, Texas.
Ford said his company last week tried to order nine cases of 12 ACDelco oil filters but could only get nine filters total.
“The parts hold is our single biggest issue,” Ford told Automotive News.
About 15 vehicles were waiting at the service department of Fairway Chevrolet in Hazle Township, Pa., with no parts delivery estimate.
“We have a lot of big jobs here that need parts,” said Jim Corazza, dealer principal at Fairway Motors. “You can send the order in, but nothing happens. So these cars are all just sitting here.”
Fairway Chevrolet leaned on Fairway Motors’ Subaru store and Enterprise rental cars to expand its loaner fleet. The dealership’s usual fleet of 10 loaner vehicles had been “depleted” because of the strike, Corazza said. The store needed at least 10 additional loaners.
Casa de Cadillac in Sherman Oaks, Calif., had about 60 outstanding repair orders.
“Those are [repair orders] we can’t close and pay on,” said Howard Drake, dealer principal of Casa Automotive Group. “If it’s a trim piece or something, the customer is still driving around the car. Anything safety related, we have beefed up our loaner fleet pretty significantly for both Cadillac and Buick-GMC.”
Most customers with loaner vehicles hadn’t complained, dealers said. But others who had been waiting for more minor repairs became impatient.
“It’s hard for a customer to understand that because UAW is on strike, they can’t drive their $75,000 Silverado,” Frye said.
GM has a parts incentive program that dealerships rely on for profit. GM temporarily adjusted the program but was still reducing rebates to stores that didn’t meet loyalty metrics, Frye said.
“Most dealership staff relies on commissions generated from gross profits for their personal earnings,” Frye said. “Since costs are higher and margins are lower due to the strike effect, lower paycheck amounts are being earned by these folks, and the longer the strike goes, the lower their pay will be.”
Casa Automotive’s GM stores typically buy GM parts, but Drake advised his service departments to put the customer first. That means they had to buy from other parts providers.
“I’m going anywhere and everywhere,” Drake said. “Wherever I’ve got to go to buy a part — Amazon or some parts distributor — that’s where we’re going to go.”
Workers have been laid off at suppliers including Adient, Cooper-Standard, American Axle & Manufacturing, Lear Corp., Magna, ZF North American, Busche Performance Products, Android Industries and others.
Phoenix Transit & Logistics, a trucking company in Dearborn, Mich., laid off almost its entire staff, owner Wael Tlaib told The New York Times. Tlaib said he pulled from his personal savings to keep the company running and was afraid he could lose the business as early as this week, the newspaper reported.
A manager at a Michigan supplier that has laid off more than half of its work force because of the strike told Automotive News that Anderson Economic Group’s estimate of 75,000 supplier layoffs as of last week might be understated. The vast majority of the supplier’s business is from GM.
The strike has created “a stain on the economy that no one will be able to clean up,” said the person, who asked not to be identified. “Any sales that would have been generated during those four weeks has been severely compromised. We will survive, although we will have a serious stain on the year’s performance.”
For suppliers that are highly dependent on GM, one-twelfth of the year has been wiped out, the person added. “That would take what might have been a good or a very good year and blow it up. The trickle-down effect of this is massive.”
Melissa Burden contributed to this report.