Final Thoughts

GM’s New Offer

General Motors, for example, on Thursday – hours ahead of the strike deadline – unveiled a new contract offer.

GM chair and CEO Mary Barra said in a letter to employees that the company was working “with urgency” ahead of the 11:59 p.m. ET deadline. She said the latest offer would give workers 20% wage increases and better benefits.

“Remember: we had a strike in 2019 and nobody won,” Barra added. “Let’s make new history, not repeat the past.”

Analyst Reax

And yet the threat of a strike still looms large over the steel and automotive sectors.

CRU principal analyst Josh Spoores said the UAW was serious about getting “monumental changes” to its national contract. That means a strike “looks likely.”

Bottlenecks created by a “stand up” strike could allow the UAW to inflict maximum pressure with minimal draw on its strike fund, he said.

The UAW is reported to have $825 million in a strike fund that would go toward paying striking workers $500 per week.

“Rotating strikes that come and go … cause a larger disruption than just striking one automaker,” Spoores said.

Wolfe Research Managing Director Timna Tanners agreed.

“The new threat of a rolling strike adds to uncertainty. It also could limit the mills’ ability to taper capacity in response to any one targeted plant,” she said.

Mill Reax

Most steelmakers I contacted about the potential strike did not respond before we went to press on Thursday evening. To be fair, it’s hard to comment on a situation that is still very fluid.

A U.S. Steel spokeswoman said it was hard to predict the impact of a strike on its operations without knowing the scope or duration.

A prolonged strike would obviously have a “vastly different” impact than a short strike. “We have contingency plans in place which can be implemented quickly to seek to mitigate the impact,” she said.

Sources contacted by SMU but not authorized to speak on record noted that the impact of a strike would be felt most immediately by integrated mills in the Great Lakes region. They are the traditional and still the primary suppliers to the automotive industry.

But the longer a strike lasts, the more it would likely be felt by other mills, including domestic electric-arc furnace (EAF) producers and re-rollers with comparatively little direct exposure to the auto industry.

Why? Stampers owned by original equipment manufacturers (OEMs), for example, might be immediately subject to strike actions. Independent stampers, however, might continue as usual and even use any extra time to get caught up on business.

It’s probably a similar scenario at service centers and distributors whose customers might be spread across a wide spectrum of end markets. (I should also note here that many of you tell me that, despite lower sheet prices and the threat of a strike, you continue to grapple with long lead times and delays.)

Could a strike in the US hit steel mills in Canada and Mexico as well? Again, it’s probably a matter of which facilities the UAW might target and how long a strike might last.

If a work stoppage is prolonged, it’s hard to see how it doesn’t impact tightly interwoven automotive supply chains across North America.

It’s probably worth noting here that just as the UAW can strike, so too can automakers decide to lock out workers. But I doubt you’ll see much talk of that if they think a tentative deal is within reach.

You Can’t Play Cards You Don’t Have

The honest answer might be that we simply don’t know what the impact of a strike will be.

UAW president Shawn Fain said in a speech on Facebook Live on Wednesday evening the “stand up” strikes, aimed at individual plants rather than a specific automaker, were designed to cause confusion.

As best as I can tell, there isn’t a common approach to dealing with this situation. It depends on the cards you think you’ll be dealt.

It’s easy to play a good hand. It’s hard to play a bad hand. It’s impossible to play one you don’t have yet.

It might be business as usual until you find out that UAW workers at a plant you supply have been instructed by UAW leadership to “stand up” and walk out.

I wish you all best of luck playing the cards you have when they’re dealt at midnight.