Swiecki: GM Strike to Have Little Long-term Impact on Steel

“Right now, the strike is unpredictable from hour to hour, so that volatile duration makes it very difficult to estimate the impact. But if the strike only lasts a few weeks, they have enough vehicles in inventory to ride it out,” he said. GM has a two- to three-month supply of its most popular vehicles, SUVs and pickups.

Business the steel mills lose during the strike will be made up afterwards as GM resumes production to replenish their vehicle inventories, he said. “In the end, the amount of steel to be used is likely to be quite similar, it’s just the timing that’s different.”

The strike may shift demand forward or shift it from brand to brand. The longer the strike, the more likely GM is to lose business to competitors. “Loyal customers will wait [to purchase a new car], but the less loyal may jump to other automakers,” Swiecki said. “The strike’s impact needs to be considered industrywide beyond just General Motors because of the ready substitution in the vehicle market.”

The strike’s effect also will vary widely from supplier to supplier, depending on how much they rely on business from GM. “If your steel is used in body panels, that is a very direct impact. It goes to the stamping plant that feeds the assembly plant, and is very specific to one automaker. For lower tier suppliers that have multiple customers, the impact will be proportional to how much their portfolio of business depends on GM,” he said.

“Long term, it’s likely to shake out,” he added. “The real challenge is riding out the short-term demand fluctuation.”