Home Business GM Strike Continues, Deepening Pain Felt by Midwest Workers, Firms – The Wall Street Journal

GM Strike Continues, Deepening Pain Felt by Midwest Workers, Firms – The Wall Street Journal

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A worker outside a GM plant in Flint, Mich., on Thursday. UAW workers continue to picket until a labor pact is ratified, putting further pressure on local economies.


Photo:

Jake May/Associated Press

With the strike at

General Motors Co.

stretching into a second month, the impact is intensifying across the Midwest economy, hitting more businesses and auto-parts suppliers reliant on GM’s U.S. factories for work.

The United Auto Workers struck a tentative labor agreement with GM last week, but union leaders decided Thursday to continue picketing until workers approve the deal.

The move likely extends the nationwide walkout, already the company’s longest in decades, through Friday as UAW leaders turn their attention to educating workers on the proposed contract terms and as voting gets under way on whether to ratify the agreement.

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Meanwhile, the financial toll is mounting for both the company and states—like Michigan and Indiana—where GM has a concentration of unionized workers. Economists say the cascading effect of lost wages, production and employment will likely linger even if the strike ends, weighing on regional economies already straining from the tariff dispute with China.

U.S. factory activity overall hit a 10-year low in September after contracting for a second straight month, according to the manufacturing index published by the Institute for Supply Management.

“The trade war has already done a lot of damage, and this is just adding insult to injury,” said Mark Zandi, principal economist at Moody’s Analytics. “This is a double whammy to areas of the country that are already getting hammered.”

The strike has idled more than 30 GM factories across the U.S., suspended work at another two dozen company-owned parts warehouses and distribution centers and led to temporary layoffs of nearly 10,000 GM factory workers not represented by the UAW in the U.S., Canada and Mexico but still affected by the walkout.

GM already has lost the production of more than 300,000 vehicles because of the idled factories, according to research firm IHS Markit, and analysts say the Detroit auto maker will struggle to make it up before the year’s end, likely putting a more than $2 billion dent in second-half earnings.

The Federal Reserve said Thursday that the strike contributed to a drop in factory output overall last month, accounting for a 0.7% decline in production of durable, or long-lasting, goods. That included a steep 4.2% decline in the production of autos.

“The GM strike is likely to weigh on production again in October, but with a tentative deal in place, auto production should rebound in November and December as GM looks to make up for lost output,” said

Gus Faucher,

chief economist at PNC Financial Services Group.

Striking GM workers also are pulling back on spending, having now lost a month’s worth of company paychecks. Many are trying to get by on $275 a week, the strike pay offered by the UAW to provide some financial assistance. That figure is a fraction of their regular pay, which ranges from $630 to $1,200 for a 40-hour week.

For veteran workers earning the top wage, the strike has resulted in more than $4,000 in lost pay, analysts at Bank of America estimate. If GM workers ratify the proposed contract, they would get a hefty signing bonus payout—$11,000 for full-time workers and $4,500 for temporary employees—which would help offset lost wages. But there is no guarantee members will back the deal.

Jason Kirkpatrick, who works at a GM factory in Flint, Mich., but is currently on strike, said his family has held off on big purchases, as well as more minor spending, such as splurging on his daughter’s 14th birthday.

“We can’t make any big decisions right now,” said 46-year-old Mr. Kirkpatrick. “Normally, we would have had a party and brought some kids over, but we just don’t have that extra money right now.” Other workers say missed wages have led to canceled vacations, missed bill payments and delayed purchases.

Auto-parts suppliers reliant on GM for business are also taking a big hit. With no cars coming off assembly lines, many suppliers producing parts and materials for GM vehicles had little recourse but to stop production themselves.

As a result, 120 of GM’s direct suppliers furloughed some 17,000 workers in the U.S. during the strike, according to the Original Equipment Suppliers Association, a trade organization. That count doesn’t include layoffs further down in the supply chain, the association said, and some analysts have estimated that up to 60,000 more jobs have been affected.

The financial repercussions are starting to show up in third-quarter earnings for major parts suppliers. On Thursday,

Faurecia SA,

a French maker of automotive seats and other components, reported the strike had dented third-quarter earnings by about $25.6 million.

In Michigan, where GM has around 18,000 UAW-represented workers, the economic pain is most acute.

Todd Collins, president of UAW Local 724, which represents workers at auto-parts suppliers near GM’s two assembly plants in Lansing, Mich., said 1,600 of his 1,800 members have been temporarily laid off during the strike.

“They’re just equally as affected as GM workers, if not more so,” Mr. Collins said, adding that they generally made less than their counterparts.

A spokeswoman for the Michigan Department of Labor and Economic Opportunity said the agency has received 7,900 new unemployment claims from workers at auto-parts suppliers through Oct. 12 that it attributes to the strike.

Sam Kassab, 65, owns the Chene Trombly market where he sells food and liquor close to GM’s Detroit assembly plant. The strike is costing him between 10% to 15% of his usual business, Mr. Kassab said, with most of that caused by layoffs at the supplier factories nearby.

“Everybody is taking a hit,” Mr. Kassab said.

With thousands of workers missing out on paychecks for more than a month, economists and retailers in Michigan expect to feel the loss of their disposable income through the year’s end.

“Holiday season in Michigan is going to be different this year,” said Patrick Anderson, principal at Anderson Economic Group.

Write to Ben Foldy at Ben.Foldy@wsj.com

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