Automotive Engineering - September 2023 - 6

SUPPLIER EYE
Moons aligning
S
o 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 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
Michael Robinet
Executive Director,
Consulting,
S&P Global Mobility
SAE Foundation
Trustee
michael.robinet
@spglobal.com
It is evident
that both
unions want
to regain the
positive wage
advantage held
against nonunion
facilities
in 2019.
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(s); 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
UAW workers assemble a Jeep Grand Cherokee 4xe in
2023 at Stellantis' Detroit Assembly Complex-Jefferson.
6 September 2023
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 throughout
the automotive ecosystem for years.
AUTOMOTIVE ENGINEERING
STELLANTIS
Automotive Engineering - September 2023

Table of Contents for the Digital Edition of Automotive Engineering - September 2023
