Anderson Economic Group, LLC
Oct. 9, 2023
Anderson Economic Group, LLC, a Michigan-based economic consultancy, has updated its loss estimates for the “stand up” strike by the UAW against the Detroit Three automakers. The firm estimates a total loss of $5.5 billion through the third full week, which ended at midnight on Oct. 5. This tops the current-century record for losses due to an auto industry strike, which Anderson Economic Group (AEG) estimated at $4 billion for the 2019 UAW strike against GM.
Estimated losses thus far include:
- Direct Wages Lost – $579 million
- Detroit 3 Manufacturer Losses – $2.68 billion
- Supplier Losses – $1.6 billion
- Dealer and Customer Losses – $1.26 billion
These figures do not include plant closures, additional strike targets, or layoffs that took effect on or after Friday, Oct. 6. These will be included in our loss calculations in the fourth and any successive weeks.
Week Three More Costly Than Week Two; Suppliers Again Hit Hard
“The third week was more costly than the last 2 because we saw additional factories shuttered and parts shortages reported at dealerships,” said Patrick Anderson, AEG’s principal and Chief Executive Officer. He also noted that “The stress suppliers are under has become acute, with more than 30% reporting that layoffs have already begun.”
Estimating Economic Losses
To determine the economic impact of a potential UAW strike, AEG estimated losses that include:
- Lost wages to workers, including striking workers and others temporarily laid off or forced to decrease work hours. AEG estimates cover both UAW and non-union auto workers, along with workers employed by impacted suppliers. Estimates were made based on the number of UAW workers in the U.S, average daily wages, and lost health care benefits.
- Lost earnings for the Big Three auto manufacturers. AEG estimates company losses, noting wages that would not be paid to striking workers.
- Supplier losses. Because a strike reduces demand for automotive parts and components, AEG estimates lost supplier wages and earnings.
- Dealer, customer, and other auto industry losses. Automotive dealers and customers needing repairs both experience strike-related losses.
In estimating these aggregate losses, we count strike pay as a loss to the union and a gain to striking employees. Loss estimates do not include unemployment benefits or unemployment taxes; income taxes on wages; any settlement bonuses (which are transfers from shareholders to workers and do not represent U.S. income lost); or any reputational damage to the union or the employer(s).
Corroboration of Estimates to Date
This past week, we have seen OEMs, suppliers, and retailers corroborate the magnitude of AEG’s economic loss estimates thus far. Corroborating data includes:
1. A GM statement declaring they lost $200 million during approximately the first two weeks of the strike. This was accompanied by a new loan facility of $6 billion reported to the SEC on the form 8K required for an “unscheduled material event.” See htps://investor.gm.com/sec-filings
2. The Michigan Retailers Association’s reporting of steep drops in the state’s retail sales for August, with the lowest levels since May 2020. The MRA cited the UAW strike as a factor and said, “Michigan’s small businesses are feeling the squeeze of the UAW strike and the resulting loss of spending power by families impacted.”
3. The vehicle suppliers association, MEMA, polled members and found that “Nearly 30% of surveyed vehicle suppliers have laid off some direct labor employees as a result of the strike;” and “Additional suppliers will initiate layoffs with more than 60% expecting to begin layoffs by mid-October.”
4. There have been additional OEM layoffs, including those in Parma, Ohio and Marion, Indiana due to the strike. htps://www.cnn.com/2023/10/03/business/auto-workers-layoffs-strike-cost/index.html