Pat Green is nervous. For the past two years, he has been trying to hire talented people to fill Cascade Die Casting Group’s two Grand Rapids plants, which makes aluminum and zinc die-cast parts for the automotive and appliance industries.
“We have a good team now and I don’t want to lose people because it’s been hard to find good people,” Green, the company’s CEO, told the Detroit Free Press on Monday.
That’s why, on the fourth day of a historic strike by the United Auto Workers against the three automakers in Detroit, Green was intensively planning ways to get through the strike without having to lay off workers if the strike widened and dragged on for several weeks. He has good reasons for the planning. On Monday evening, UAW President Shawn Fain announced a new strike deadline for this Friday at noon. If Ford Motor Co., General Motors or Stellantis have not made significant progress toward a settlement with the UAW by that time, Fain will expand the Stand Up Strike to additional plants.
If that happens, Green will first end overtime at the company and then ask volunteers to take time off on a reduced pay schedule. He started thinking about it late last week.
The UAW strike began at 11:59 p.m. Thursday, when nearly 13,000 UAW workers at three Detroit automakers walked out of three plants as part of the first wave of shutdowns until a new collective bargaining agreement is reached. These plants are the Ford Michigan Assembly Plant (final assembly and paint only) in Wayne, the Stellantis Toledo Assembly Complex in Ohio and the GM Wentzville Assembly in Missouri.
If the union and the automakers cannot reach a tentative agreement, the UAW has at some point announced that it plans to strike at more of the three companies’ plants. A broader and longer strike would mean suppliers would be unable to maintain production if the vehicle assembly plants that use their parts are idle. Nobody knows exactly how long suppliers could hold out.
“We’re in better shape than most, but if others in the supply chain fail, we’ll have another crisis on our hands, just like the chip crisis,” Green said, referring to the company’s recent shortage of semiconductor chips has paralyzed industry. “If this extends to five or six weeks there will be real problems in the supply chain. And I could be wrong; it could be shorter.”
The first fallout
The strike has already had some impact. A Michigan components maker, CIE Newcor, warned it may have to lay off 293 employees.
Germany-based supplier ZF said it has already had to lay off some workers at various locations, including in Michigan, said Tony Sapienza, communications chief for ZF North America, Inc.. ZF is supplying components for all vehicles manufactured in the three to date Strike-affected plants will be manufactured, including the hybrid transmission for the Jeep Wrangler 4xe Hybrid, which is manufactured at the Toledo plant.
Sapienza declined to say which ZF facilities were affected or how many people ZF laid off. ZF, which has North American operations in Northville, employs 11,000 people at five manufacturing sites and four technology centers in Michigan.
“The impact was immediate; we had to slow down production in some areas,” Sapienza told the Free Press. “If the strike were to spread or last longer than a week or two, it would be a supply chain crisis. I would be very concerned about Tier 2 and Tier 3 and their ability to remain solvent.”
Sapienza said a larger and longer strike would be “damaging” to his company, but given its size it would be fine.
But “every plant that goes offline creates additional stress in the supply chain, and we really hope that our customers and the UAW take that into account,” Sapienza said.
US Steel announced Monday that it is temporarily suspending Furnace B at the Granite City steel mill in Illinois as a “risk mitigation” response to the UAW strike. The company said it was assessing how many of its 1,450 employees there were affected.
Also keep an eye on Unifor
All of this news comes as Unifor, the UAW’s counterpart in Canada, is also negotiating a new contract with Detroit automakers. His current contract was set to expire on Monday at 11:59 p.m. Unlike the UAW, Unifor is following tradition and has chosen a target company – Ford – to initially negotiate a deal. It would use this agreement as a template for contracts with the other two. In the US, the UAW is negotiating with all three automakers separately but simultaneously.
As of Monday around 4 p.m., Unifor National President Lana Payne said there was still no tentative agreement with Ford.
“As long as we remain at the table, the likelihood of a strike increases with every hour,” Payne said, adding that the union has advised more than 5,600 members at Ford plants in Canada to prepare for all scenarios, including a strike.
If Unifor fails to reach a tentative agreement and strike in solidarity with the UAW, it would be a double blow to suppliers.
“These are not normal times,” Sapienza said. “We’ve had three years of supply chain strain behind us, so we’re already in a fragile position.” We’re definitely keeping an eye on Unifor. … There’s only so much more stress the system can take.”
The layoffs could number in the thousands
The state of the supply chain is delicate. That’s because the company had to recover from the COVID-19 pandemic, which shut down the industry for eight weeks and suppliers then faced a massive shortage of semiconductor chips used in various auto parts. Since the beginning of last year, many suppliers have struggled to recruit 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. The strike is therefore a cause for concern as the supply chain stretches from Tier 1 suppliers – those who supply parts directly to car manufacturers – to the smaller Tier 2 and Tier 3 suppliers – those who Delivering components to the Tier 1 group is intertwined.
“We are monitoring events and reporting to our suppliers and customers,” Petrillo said. “In our view, an escalation of events leading to a prolonged strike, potentially shutting down all Detroit Three (manufacturing) plants, could prove to be the final Jenga block on a supply base that has been stretched to the limit and will be overcome COVID shutdowns, “stop-and-go production” due to chip and parts shortages, while trying to navigate a constrained manufacturing labor market.”
Glenn Stevens, executive director of MICHauto, the group that advocates for the nation’s auto industry, said he has been talking to suppliers for several months and they have all been preparing for a strike scenario for some time.
“Some were much more proactive than others, but no one was flying blind anticipating that there might not be a work stoppage,” Stevens said.
There are about 1,000 suppliers in Michigan, he said, noting that 96 of the top 100 suppliers to the North American automotive market have either their headquarters or a facility in Michigan. So if the strike spreads to other auto manufacturing plants and lasts several weeks, tens of thousands of jobs could be laid off.
“You have the direct employment and multiplier effect of every single automotive job. That’s between six and 10 people per automaker job, so that’s significant,” Stevens said. “This is the largest industry in our economy. It contributes over $300 billion annually to the state of Michigan.”
The possible effects
The larger suppliers are likely better protected from the strike’s impact than the smaller ones, said Laurie Harbor, CEO of Harbor Results, Inc. That’s because they often have other customers in other industries to keep the business running. You can move employees around and change schedules to avoid mass layoffs.
“I spoke to several companies last Friday and most said little to no impact so far,” Harbor said. “Every single program you consider with the (automakers) will not result in massive layoffs, but will come tomorrow or the day after as (UAW’s Fain) closes more plants and we get to a significant product like the (Ford ) F-150 pickup, then there will be more layoffs.
Because F-150 sales volume is so important, if there were a union strike at the plants that build Ford’s best-selling vehicle, there would be thousands of layoffs because there are so many supplier plants and subcontractors, Harbor said.
“The fact that it’s done in this patchy way is actually better for the supplier community,” Harbor said. “But every day and every week there could be more and more layoffs.”
Major auto suppliers are reacting
At major Tier 1 auto supplier Magna International, executives are closely monitoring the situation, said Magna spokesman Dave Niemiec. The company employs approximately 12,450 people in Michigan. Niemiec said it was premature to comment on the specific impact of the strike on the company’s operations.
“However, we have placed great emphasis on emergency planning to proactively respond to temporary disruptions to our operations,” Niemiec said. “When the time comes, we are prepared to temporarily scale back production on the affected programs as efficiently as possible, but are equally prepared to quickly ramp back up when we are ready. In the meantime, we remain confident that the parties will be able to reach amicable agreements and that disruption and potential impact will be minimal.”
Asked about the strike’s impact on Lear, spokesman Brian Corbett said, “We are not commenting on the UAW strike at this time.”
“We have to take action”
Harbor said most suppliers she spoke with were prepared or at least had plans in place in case the strike extended. This also included considering how they could effectively maintain production, make changes to shift scheduling and implement layoff strategies, even offering supplemental compensation to up to 70% of workers’ salaries if they are laid off.
“These are the ones who are financially strong and don’t want to lose their people,” Harbor said. “It’s a daily challenge and you’ll be evaluating everything every day: What’s my prognosis? What can I deliver to my customer? And do a little inventory so when the tenon goes back on I have parts and I’m ready to go.”
At Cascade Die Casting Group, Green said, the company makes parts for the Detroit Three’s SUVs and pickup trucks. For example, parts are manufactured for the Jeep Grand Cherokee, which Stellantis builds at the Mack Avenue assembly plant in Detroit. If the UAW attacks this plant or any of the plants that make the Detroit Three’s heavy-duty pickup trucks, Green must be ready.
“We know we can build inventory for a period of time, but that takes a week or less, so we need to start making plans to ask our employees to take time off almost immediately,” Green said. “We are waiting for one of the plants we supply parts to to close, and we expect the union will close more plants as they turn up the pressure. When that happens, we have to act.”
More: Canada’s Unifor Approaches Detroit 3 Contract Negotiation Deadline: What You Should Know
More: UAW’s Fain: Biden, the White House team is not involved in negotiations with automakers
Contact Jamie L. LaReau: [email protected]. Follow her on Twitter @jlareauan. Read more about General Motors and subscribe to our automotive newsletter. Become a subscriber.