There’s no escaping the news about the ongoing United Auto Workers (UAW) strike against the three major U.S. automakers – General Motors, Stellantis (the parent company of Chrysler), and Ford. The 32-day strike is estimated by industry observers to cost the automobile industry over $7 billion. Moreover, with approximately 1.08 million workers in motor vehicle and parts manufacturing in the U.S., labor disruptions at these three automakers will have ripple effects beyond the automobile industry. Depending on the strike’s duration, it could significantly impact the motor vehicle and parts manufacturing supply chain, resulting in layoffs and broader adverse effects on the macroeconomy through personal consumption expenditures.
Plastics Industry’s Consideration of the Ongoing UAW Strike
The automobile industry represents a crucial end market for the plastics industry, with approximately one-third of the 30,000 parts in a car made of plastics. In 2022, the estimated plastics product content in final U.S.-produced automobiles reached a substantial $28 billion. Over the last six months, motor vehicle assemblies of automobiles and light trucks have consistently stayed above 10.4 million units monthly on a seasonally adjusted annual rate. September saw an increase to 10.7 million units from 10.6 million units in August, reflecting a 1.5% monthly increase.
While both motor vehicle assemblies and the Industrial Production Index for motor vehicle and parts manufacturing tend to move in the same direction and showed similar trends as motor vehicle assemblies, the former witnessed a lesser increase in September from August, at 0.3%. Compared to a year earlier, motor vehicle assemblies and the Industrial Production Index witnessed a 5.7% and 7.0% increase, respectively. The impact of the UAW strike on motor vehicle assemblies and motor vehicle and parts manufacturing in the automotive industry for October will become clearer with the release of November’s data.
Placing the Ongoing UAW Strike in Context for the Plastics Industry
Historical data highlights the significant implications of past UAW strikes on industrial production in the automobile sector. In 1998, a 54-day UAW strike involving 152,200 workers resulted in 3,313,000 days of cumulative work stoppage, causing a 13.7% decrease in the industrial production of motor vehicles and parts from June to July, as well as a decline of 2.19 million in motor vehicle assemblies, encompassing both automobiles and trucks. The Industrial Production Index for plastics and rubber products manufacturing showed a 0.5% decrease in June and a 0.3% decrease in July.
More recently, a 39-day strike at General Motors in 2019, involving 46,000 workers and 1,334,000 days of cumulative work stoppage, combined with a 13-day strike at Mack Trucks with 3,500 workers and 28,000 days of cumulative work stoppage, led to a 6.5% decrease in the industrial production of motor vehicles and parts. Furthermore, there was a decrease in motor vehicle assemblies of automobiles and trucks by 964,000 from September to October 2019. The Industrial Production Index of plastics and rubber products manufacturing witnessed a 1.0% decrease in September and a 0.7% decrease in October, compared to the previous months.
Given the inherent noise in monthly data and the potential for labor disruptions in plastics end markets, such as motor vehicle and parts manufacturing, to exhibit simultaneous, delayed, or combined impacts, directly attributing changes in production in plastics and rubber products manufacturing to UAW strikes during specific periods is challenging. Notably, in 1998 and 2019, plastics and rubber products manufacturing saw a 6.1% increase and a 4.0% decrease, respectively, on an annual basis. These variations in outcomes underscore the importance of initial conditions when labor disruptions commence. Strikes can lead to inventory shortages, which may only manifest in later stages of production or distribution. Furthermore, the complete consequences of labor disruptions might not become evident until well after the disruptions have concluded.
The ongoing UAW strike in the automobile sector has significant implications for both the industry itself and its interconnected sectors, including the plastics industry. The complex interplay of labor disputes, production adjustments, and economic repercussions underscores the challenges in evaluating its impact on these industries. Estimating the effect on plastics, however, is not straightforward due to the uncertainty of the strike’s end-date and the extent to which the strike affects the automobile industry’s supply chain. Industry stakeholders must remain vigilant, adapt as needed, and work collaboratively to navigate the ever-changing landscape shaped by labor, production, and economic considerations.
”UAW Strike Enters Day 32, Costing Industry $7.7 Billion,” The Detroit News, October 16, 2023, https://www.detroitnews.com/story/business/autos/2023/10/16/uaw-strike-day-32-economic-firm-says-strike-has-cost-industry-7-7b/71207042007/.
September 2023 preliminary estimates by the U.S. Bureau of Labor Statistics.
It was recently reported that Ford’s total layoffs related to the ongoing UAW strike reached 2,480. “Ford Announces Layoffs in Michigan, Ohio, and Illinois,” Detroit Free Press, October 14, 2023, https://www.freep.com/story/money/cars/ford/2023/10/14/ford-layoffs-michigan-ohio-illinois/71183675007/. It was also reported that more than 3,000 supplier employees have been affected by the UAW strike so far “As auto factories go dark with strike, small suppliers lay off thousands,” The Washington Post, October 5, 2023, https://www.washingtonpost.com/business/2023/10/05/uaw-strike-auto-supplier-layoffs/.
See “Plastics Market Watch on Transportation,” Plastics Industry Association, 2019. https://www.plasticsindustry.org/.
See “Plastics 2023 Size & Impact Report,” Plastics Industry Association, 2023. https://www.plasticsindustry.org/.