US auto strike's economic fallout starts to hurt global businesses

Snap-On

20/10/2023 15:01

By Shivansh Tiwary and Raechel Thankam Job
       Oct 20 (Reuters) - Businesses ranging from airlines to
auto parts makers are starting to feel the heat from the
month-long strike by hourly workers at the Detroit Three
automakers, with analysts warning that the financial hit could
increase if the walkout does not end soon.
    With the United Auto Workers (UAW) strike entering its 36th
day and the total economic cost pegged at more than $7 billion,
companies are counting the cost of lost revenue amid an
uncertain economy and persistent inflation.
    "The damage from the strikes will last long after UAW
members return to work," University of Michigan professor Erik
Gordon said.
    Workers will also be careful about how they spend their
money since strike pay is lesser than regular pay, he said.
    U.S. carrier Delta Air Lines  DAL.N  earlier this month
became one of the first big companies to flag a hit after it
said the strike has curtailed a "significant" amount of business
in Detroit.
    Paints and coatings maker PPG Industries  PPG.N  said
earlier this week it had included a profit hit of a "few cents"
per share in its fourth-quarter forecast, while railroader Union
Pacific  UNP.N  said the strike has had a small impact so far.
    Analysts said trucking firms and suppliers that make parts
for the General Motors  GM.N , Ford Motor  F.N  and Stellantis
 STLAM.MI  are among the most exposed to a strike, which has
seen more than 34,000 workers walkout from their daily jobs.
    "Trucking companies deliver a lot of the components that are
assembled into cars. They and their workers will suffer," Gordon
said.
    With major parts suppliers such as Aptiv  APTV.N , Magna
International  MG.TO , Lear  LEA.N , and American Axle  AXL.N 
set to report in the coming weeks, investors will be watching
out for the scale of the financial hit the companies may take.
    "Suppliers are expected to feel the pinch from lower volumes
in fourth quarter, but the pain will not be equally spread,"
BofA Global Research analyst John Murphy said.
    Lear and Magna have a double-digit sales exposure to the
three automakers, while Aptiv has an exposure between 8%-9%,
according to their latest annual filings.
    Earlier this week, consultancy firm Anderson Economic Group
estimated the economic losses related to supplier wages and
earnings of about $2.67 billion through fourth week of the
strike.
    French car parts maker Forvia  FRVIA.PA  on Friday warned of
 possible temporary layoffs after estimating a bigger sales hit
in October from the strike.
    The CEO of Swedish company Autoliv  ALV.N , the world's
largest producer of car airbags and seatbelts, told Reuters it
had seen a very limited impact from the strike, but it could
become a risk the longer it continues.
    "When we have these kind of disturbances...in the global
flows it's not good," its CEO Mikael Bratt said.
    The UAW has waged an unusual campaign of simultaneous
strikes against the Detroit Three automakers, demanding a 40%
wage hike, including a 20% immediate raise, improvements in
benefits, as well as covering EV battery plant workers under
union agreements. 
    An agreement remains elusive so far and shares of automakers
and suppliers have fallen since the strike began on Sept. 15.
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Auto industry stock performance    https://tmsnrt.rs/46Z7Gbw
EXPLAINER-UAW chief ratchets up pressure on Detroit Three as
deal talks drag on     urn:newsml:reuters.com:*:nL4N3BJ4G9
ANALYSIS-Detroit's strikes become an industrial 'Survivor' game 
   urn:newsml:reuters.com:*:nL2N3B828M
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Raechel Thankam Job, Shivansh Tiwary in Bengaluru
and additional reporting by Marie Mannes in Stockholm and Nathan
Gomes in Bengaluru; Editing by Arun Koyyur)
 ((Abhijith.G@thomsonreuters.com | X: https://twitter.com/abhijithg4;
 +91-9019785574;))