A UAW strike against automakers could be almost as costly a threat to economy as a UPS strike, perhaps more so
With less than half the union members as the Teamsters at UPS, if 144,000 UAW members go on strike against the Detroit Three, the economic damage may be more consequential.
If autoworkers represented by the United Auto Workers (UAW) go out on strike against General Motors, Ford and Stellantis—collectively known as the Detroit Three— in September, the impact to the U.S. economy may be almost as much as had the Teamsters gone on strike United Parcel Service (UPS) earlier this month and perhaps, even moreso.
With fewer than half the number of union members involved (42 percent) as compared to the 340,000 Teamsters at UPS, a UAW strike involving 144,000 UAW members against automakers would negatively impact the economy nearly as much as the Teamsters gone out strike at UPS, according to two different analyses.
Two Different Strikes Would Have Impacted Differently
Last week, consulting firm Anderson Economic Group (AEG) estimated that a strike by the UAW could result in a total economic loss of more than $5.6 billion after 10 full days.
By contrast, in July, AEG estimated that a 10-day Teamsters strike at UPS could have potentially cost just over $7 billion, the bulk of losses coming from UPS’ customers who could have incurred losses in excess of $4 billion.
Though the Teamsters reached a tentative agreement at UPS, what makes a potential UPS strike different than the potential UAW strike is that, if the Detroit Three’s plants were to be idled due to a strike, that will likely to cause workers upstream and downstream from the automakers to be idled in a single industry.
On the other hand, were the Teamsters to have struck UPS, while it would have undoubtedly had an impact on UPS, its effects would have been felt by its customers across a wide array of industries.
“In the case of automobile production, there are backward linkages to industries that produce tires, glass for windshields, and steel for automobile frames (among many others),” the Economic Policy Institute wrote in 2019 [Emphasis added.]. “Forward linkages occur when automobile workers (and suppliers’ employees) spend their income in restaurants and retail stores and at the doctor (to name just a few).”
Although the EPI’s analysis involves ‘jobs lost’ as opposed to jobs idled, if one were to calculate that the “number of indirect jobs lost for every 100 direct jobs lost are 744.1 for durable manufacturing and 122.1 for retail trade [866.2 total],” a strike by 144,000 auto workers could negatively impact over 1.2 million workers through either idled jobs (in the case of suppliers), or reduced sales in the case of retail trade.
While neither AEG loss estimate includes “strike pay or assessments for strike pay” or “unemployment benefits,” if the UAW strikes with less than half the members than UPS would have had out on strike, it also has a lot more money in its strike fund than the Teamsters.
“With a strike fund of about $825 million dedicated to paying workers $500 per week, the union could stop work for about 12 weeks,” Evercore ISI analyst Chris McNally told Axios last month.
By contrast, with only $300-$350 million in its national strike fund, if the Teamsters were to have gone on strike at UPS with more than twice the number of workers, it would have drained its resources in a shorter period of time.
The UAW may be in a position to stay out for much longer, thereby increasing the amount of damage to the economy.
More competitors means more consumer choices
Despite the fact that a UAW strike against all three automakers could have a negative impact on the economy, unlike UPS whose only notable competition is FedEx and the United States Postal Service (USPS), auto buyers have many more choices.
For example, although the UAW has had numerous strikes against the Detroit Three throughout its history—the last being a 40-day strike against General Motors in 2019—the Detroit Three are now competing for consumers who have many more options than 30 or 40 years ago.
In 1990, for example, the Japanese share of the U.S. automotive market was 28.1 percent.
By 2022, foreign automakers—many with plants here in the U.S.—comprise a majority of the auto market, with the Detroit Three comprising only 42.67 percent, according to Statista.com1.
This means that, were the UAW to strike the Detroit Three, unlike UPS where customers were relegated to only a few options to have their parcels delivered, American car buyers have a wider choice of options from which to buy their vehicles.
Whether the UAW strikes the Detroit Three remains unknown. However, if it does go on strike, at a minimum, the costs will be nearly as high as if the Teamsters had struck UPS and, for an economy that is just recovering from a pandemic-related recession, that is not a good thing.
Technically, as Chrysler, Dodge, Jeep and Ram (formerly Chrysler) are all owned by Stellantis—a multinational automotive manufacturing corporation formed in 2021 on the basis of a 50–50 cross-border merger between the Italian–American conglomerate Fiat Chrysler Automobiles and the French PSA Group and headquartered in Amsterdam—Stellantis could be considered a ‘foreign automaker.’ Nevertheless, it is still considered part of the Detroit Three.