UAW strike poses potential risk for steel industry: sources

The United Auto Workers (UAW) struck at three of the Big Three automakers' assembly plants just after midnight on Friday September 15, sending 12,700 workers to the picket lines and threatening to expand the strike to additional factories

UAW members struck at a Ford factory in Wayne, Michigan; a General Motors plant in Wentzville, Missouri; and a Stellantis Jeep factory in Toledo, Ohio. The union’s labor contract with each automaker expired at 11:59pm on Thursday September 14.

The sooner the strike is resolved, the better for the auto industry, the steel industry and the general economy, according to Arthur Wheaton, director of labor studies at Cornell University’s School of Industrial and Labor Relations in Buffalo.

“If they can’t make progress quickly, it will have a significant impact on the steel industry,” Wheaton said. “If the stamping plants go down, it will have a huge impact. The steel mills won’t be sending the plants all those rolls of steel coil.”

Everybody in the steel industry will be impacted if this strike drags on [for] more than a couple of weeks.

Said a steel industry source: “Everybody in the steel industry will be impacted if this strike drags on [for] more than a couple of weeks. The strategy of the union is to inflict the maximum pain to the automakers with the least damage to the workers.”

But some steel industry observers think concerns might be overblown.

“It may already be priced in” to the cost of hot-rolled coil, a Gulf Coast trader said.

Said a distributor: “The HRC price had been trending down in anticipation for weeks. I think it will go down more, depending on how long the strike lasts. But as soon as it is resolved, there will be an immediate pop in prices – I think [a major automotive mill] might try to establish an $800-per-short-ton HRC base as soon as the strike is resolved.”

The distributor cautioned that Ford, GM and Stellantis do not represent the whole auto industry. “It’s not the Big Three. It is just the Detroit Three. Customers can buy cars from any company. So I don’t think the impact on the steel industry will be devastating.”

The steel industry source lauded UAW International president Shawn Fain for his approach to the strike. “His message to the auto business is that he can think strategically like you, [and] you’ve met your match,” the source said.

The union’s strategy of keeping strike locations secret allows it to inflict considerable pain, according to Wheaton.

“It creates a chaos in the system and disrupts the supply chain, which relies on just-in-time delivery,” he said.

Striking at only a few factories is also less costly for the UAW’s strike fund, Wheaton added.

Marick Masters, professor of management at the Ilitch School of Business at Wayne State University in Detroit, agreed that the union’s strategy is designed to bolster its bargaining power.

“I think it shows the companies the union’s commitment to inflict pain as much as necessary to get them to come to the table with an offer acceptable to the rank and file,” Masters said.

The message to automakers: “If an offer is not forthcoming in the near future, we will see escalation in strike activity. It will be ratcheted up if necessary until all 145,000 workers are called out on strike,” he said.

Despite some progress in negotiations, the gap between the sides remains wide, according to Masters.

“Clearly, the parties are going to have to move closer to the other side, and it remains to seen how far the union has to go to reach agreement.”

Initially, the UAW sought a 46% increase in wages to catch up with compensation gains made by the automakers’ chief executive officers over the life of the last contract.

Automakers eventually offered to raise employee pay by 20% after their initial offers were quickly rejected by the union. The union’s reported counteroffer was a 36% increase in wages.

There has been progress on the union’s demand that a tiered wage system be jettisoned.

The UAW had sought to reduce the duration for which new hires would receive lower pay from eight years to 90 days. The automakers countered with an offer of four years.

There are factors in favor of reaching an agreement, according to Masters.

“No doubt, the companies are willing to give workers a substantial increase in compensation, including base pay, lump sum payments and inflation protection payments,” Masters said.

The companies also have some flexibility in offering the workers a bigger portion of profit sharing and an opportunity for bonuses at the end of the year, he added.

The UAW and the automakers face significant risks if the strike drags on, according to Masters.

A strike beyond a few weeks is likely to “bring pressure from the White House to bring them together,” he said, with the automakers and the UAW more reliant on the government than before.

“The companies know they need the government to help them to get to electrification. The union wants to make sure the administration’s support for electrification is slanted to union workers,” Masters said. He added that the sides may be open to help from the government in working toward an agreement.

Rijuta Dey Bera in New York contributed to this report.

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