So far this decade, our industry has been heavily impacted by an endless stream of calamities. When impacted in isolation, dealing with a pandemic, weather disasters, supply- chain disruptions, ICE-to-BEV transition risks, labor-availability issues, rising cost of capital and escalating price inflation can be difficult to navigate. In close combination, these hazards can be catastrophic to a supplier organization – a constant stream of firefighting unanticipated events, as well as known issues such as the upcoming labor contract negotiations with the United Auto Workers (UAW) and Canada’s Unifor trade union.

Since 2020, (Unifor’s last contract negotiation), the industry has had September 2023 circled on the calendar. The gravity of simultaneous expiry of both contracts (within four days of each other) is not lost on anyone. Since the last negotiations, both unions have new leadership driven by well-defined agendas supported by their memberships. Additionally, since the last contract, labor costs have been escalating for non-union employers, ecosystem-changing BEV investments have been rampant and lower investment in the ICE business is apparent. Lots to react to and integrate into future agreements.                                               
        From a membership perspective, the goals of both unions – particularly the UAW – are quite public. Significant wage increases, cost-of-living reinstatement, redefining pensions, reductions in work-week hours, elimination of two-tier wages and organization of EV battery plants. Each a major issue on its own, let alone in one collective-bargaining round.
        How should suppliers prepare for a labor disruption and for what should they prepare? First, similar to the 2019 GM-UAW labor disruption, odds are that one OEM will be targeted by each union versus a wholesale, simultaneous strike against all three. Striking against all three OEMs reduces leverage and quickly siphons strike funds. Additionally, in past labor disruptions we have witnessed targeted strikes for highly profitable vehicle plants or key OEM propulsion plants (engine or transmission). Given the gravity of this year’s negotiations and the perspective of new union leaderships, this likely will be a year of bold labor actions.
        In anticipation of a strike, smart suppliers are making plans. Scheduling overdue training, facility clean-up/preventive maintenance, small construction projects and re-aligning workforces if required. Being wise with capital spend and inventory levels are key as well. In comparison to the past, labor-availability dynamics underscore a careful approach to paring the workforce.

What is the risk of a prolonged labor disruption? Outside of all production ceasing throughout the supply chain, most OEM plant preparations for new launches are suspended as well. Lost revenue by union members, OEMs, suppliers and the communities is quickly felt. While many Tier 1s have been preparing for a labor stoppage, their Tier 2 and 3 suppliers are less equipped to handle a prolonged strike; from a short-term impact perspective, the health of smaller suppliers is critical when the machine again starts production. Inflation, higher capital costs and a loss of revenue are the equivalent of all the moons aligning.

The longer-term impact of an aggressive labor settlement this fall is far-reaching. It is evident that both unions want to regain the positive wage advantage held against non-union facilities in 2019 – and maintain and expand it. Other elements the unions seek, such as COLA, shorter work weeks and the end of two-tier wages, suggest that these agreements will raise wage costs for all players in the ecosystem, not just those with union representation.

Negotiations this fall will be a wild ride and anything but normal. The impact will be felt for years to come throughout the automotive ecosystem.