When United Auto Workers (UAW) union members began walking off the job in September 2023, it sent shockwaves throughout the automotive industry and economy. 

The UAW is a BIG union, representing about 145,000 workers for Big Three automakers – Ford, GM, and Stellantis, which owns car brands including Chrysler, Dodge, and Jeep. When the strike began, roughly 13,000 workers walked off at three plants, one from each automaker. If a deal isn’t reached, the strike will expand to more plants

This is far from the first UAW strike, but the first time the union has struck against all three automotive manufacturers simultaneously. It’s an unprecedented move for the auto industry, but historical data can help determine how the supply chain and economy may react. 

In 2019, workers left their jobs at GM for 40 days. Although the strike lasted six weeks, the damage stretched beyond the new car market, sending aluminum and copper prices sliding about 5%. 

The work stoppage rippled throughout the supply chain as demand for materials like copper, aluminum, and steel slowed. According to data from Arizona-based mining company Freeport-McMoRan, roughly 12% of global copper usage is in the transportation sector. Losing even a portion of demand creates gaps throughout the copper industry. 

The UAW strike is one example of how shaky the supply chain is when conditions rapidly change. But what could longer strikes do to metal prices, demand, and the supply chain? 

How Do Worker Strikes Impact the Supply Chain? 

When strikes happen, there aren’t many immediate impacts on the supply chain. If anything, the supply chain shows resilience, even extra strength, in the days leading up to the strike, as trucks scramble to move finished products from the facility before shutting down. 

Once the strike begins, manufacturing and shipping are suspended. Initial impacts are minimal, but the situation deteriorates as time wears on. 

Fewer Products, More Shortages 

With workers on the picket line, it immediately impacts the number of finished products available. 

If consumer demand remains high and supply slumps, buyers down the supply chain pay more. The problem isn’t relieved once manufacturing begins, either. As we’ve seen in other industries, it takes time to ramp up production, keeping prices for goods and services high for a while. 

Less production also drives down demand for raw materials like copper, aluminum, and steel, potentially creating gaps in the supply chain. Argus Media reported that the UAW walkout could reduce aluminum consumption by 134,300 short tons per month – copper use would shrink by 13,800 short tons monthly. 

It seems like doom and gloom, but a sudden demand gap can open doors for other industries to thrive. If auto manufacturers aren’t buying as much copper, companies in construction, electronics, and medical instruments can move in and purchase more materials. The risk, though, is higher long-term demand and prices once the strike ends. 

Once workers return to the factory, companies often encounter a second problem: reestablishing supply chains and getting up to speed. Although it would be nice to flip a switch and immediately start cranking out new items, production delays take time to remedy. Suppliers must bring in raw materials, workers shake off the rust, and logistics must be on point. It’s not impossible, just tedious and time-consuming. 

Higher Prices Across the Board 

Market pricing becomes more erratic when supply chain disruptions occur. 

When strikes occur, nothing new gets made. The resulting constraints throw supply and demand out of balance, raising prices. Though not directly tied to a work stoppage, tightened supply and high demand caused copper prices to spike in March 2022 to nearly $5 a pound in trading. Once supply caught up, though, prices stabilized within a few months to less than $4 per pound. 

The same applies to vehicles, auto parts, and other goods. As the supply of new cars and manufacturer-produced parts gets tighter, distributors and other sellers will increase prices to adjust. Changes won’t happen in the first few days of a work stoppage because stock is available to keep distributors going for several weeks. 

The Supply Chain Get Smacked 

If you’ve ever rolled a snowball down a hill, the following analogy makes sense. 

Snowballs start small, but gain momentum and collect more snow as they roll down the hill. Eventually, what started as a small ball became a massive snow boulder. 

The same can be said for any work stoppage. It may only affect one industry at first, but soon the entire economy is caught in the crossfire. When major buyers of a material, component, or product face a strike, they immediately stop buying to reduce losses and shore up finances. 

Unfortunately, when buyers stop buying, manufacturers and suppliers feel the pain. As facilities shut down, their need for materials and products dries up, hurting sales for their suppliers. In the early days of the UAW strike, steel mills immediately started idling operations and laying off workers. 

Idling prevents the suppliers from going under, but it comes at a cost. Smaller companies that rely on large buyers will quickly face severe operating issues; medium and large suppliers with more varied customer bases will struggle. 

These same companies must quickly recover once the strike ends, including immediately reestablishing supply chains with their buyers. 

Other Industries and Initiatives Feel the Pain 

Strikes impact the economy in several ways. 

During the 2019 UAW strike, the shutdown stretched far beyond GM. The company could not ship vehicles, parts, or accessories to distributors and dealerships, leaving consumers scrambling. Companies tied to the manufacturer suffered thousands of layoffs and millions of dollars in lost profits. 

GM reported losing about $2 billion in profits during the strike, and the Anderson Economic Group estimated total economic losses of $4.2 billion. The shutdown also sent the state of Michigan into a one-quarter recession. 

Meanwhile, consumers paid higher prices for new GM vehicles and used cars and faced repair delays because of part backlogs. Local economies were also hit because GM workers weren’t collecting regular checks and spending as usual. 

No matter the industry, work stoppages extend beyond the targeted company. In the end, strikes impact the target company, its suppliers, other manufacturers, buyers, and consumers, forcing everyone to adapt. 

What Can We Expect from the UAW Strike? 

Unfortunately, there isn’t a crystal ball to answer our questions, but past data is a good indicator of the future. 

There likely won’t be much impact on the copper supply chain, despite the amount of copper electric vehicles (EVs) consume, but prices could dip if the strike lasts long enough. Conversely, a price drop and sudden increase in copper availability may open the door for industries like construction and renewable energy to swoop in and buy more material. 

As manufacturers cut production, suppliers scramble to find other buyers or idle their facilities, leading to layoffs. Buyers and consumers further down the chain will eventually struggle to find parts and finished goods, leading to higher prices and delays for everything from new vehicles to OEM parts. 

Once the strike ends, the process of getting back up and running begins. Workers need to shake off their metaphorical rust, supply chains and logistics must be re-established, and products shipped. Ramping up production could take days, weeks, or months to return to normal. 

Outside industries also feel the brunt of the strike, as everything from restaurants and grocery stores to car dealerships and steel mills slow production, lose sales, and contend with smaller profits. Even a strike as short as 10 days can cause billions of dollars in economic losses

Strikes are generally a last-ditch effort for change when all else fails. No matter how it shakes out, the country has its eyes on Detroit and is bracing for what could be a lengthy deliberation process.

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