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Home»Automotive»UAW Strike Could Cost the US Economy Over $5 Billion : Automotive Addicts
Automotive

UAW Strike Could Cost the US Economy Over $5 Billion : Automotive Addicts

Mike SmithBy Mike SmithSeptember 17, 2023No Comments4 Mins Read
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The UAW strike, which commenced today, is poised to have far-reaching consequences, extending beyond the immediate disruption faced by automakers akin to GM, Ford, and Stellantis. Its ripple effect is prone to reach tech firms and, notably, chipmakers, as the trendy automobile is increasingly reliant on a fancy web of semiconductor technology.

To grasp the potential fallout, one must first trace the impact down the provision chain. Modern vehicles are equipped with an astonishing array of roughly 3,000 chips per unit, underlining the intricate relationship between major automakers and the UAW union. As this labor dispute unfolds, production bottlenecks and provide chain disruptions could begin to take their toll on chip suppliers.

Key players within the semiconductor industry, including Texas Instruments and NXP Semiconductors, stand on the forefront of auto chip manufacturing. Meanwhile, TSMC, a number one contract chip manufacturer, plays a pivotal role on this ecosystem. In response to the strike news, shares of those chipmakers dipped significantly.

The repercussions are usually not confined to those major players alone. Qualcomm and Micron, each with substantial stakes within the connected automobile sector, may additionally feel the results over time. Qualcomm has strategically bolstered its presence within the auto industry, while Micron is widely thought to be the leader in auto memory chips.

The impact on these firms will hinge on various aspects, including the strike’s duration and the person firms’ exposure to automakers. The UAW has chosen a “stand-up” strike strategy, where employees walk out selectively at GM, Ford, and Stellantis plants reasonably than . This approach goals to lengthen the labor motion and maximize the usage of the union’s considerable $825 million strike fund.

Recent data reveals the extent of those firms’ reliance on the automotive sector. In 2022, NXP derived 52% of its total revenue from automotive chips, while Texas Instruments generated 25% of its revenue from this industry. In contrast, TSMC reported that just 5% of its total revenue got here from the automotive segment.

Diversification proves to be the important thing to resilience in such circumstances. Tyler Theile, COO of Anderson Economic Group, emphasized the importance of suppliers diversifying their customer base. He noted that a 10-day UAW strike could potentially cost the U.S. economy over $5 billion, with global ramifications.

Drawing on the 2019 GM strike, which lasted 42 days, Theile highlighted the impact of supplier concentration. Those primarily serving GM saw their operations grind to a halt, leading to extensive layoffs. In contrast, suppliers with a broader customer base experienced a less immediate and severe impact.

The broader economy could also experience significant effects, although it will require an prolonged strike to trigger more widespread consequences. In 2019, the GM strike pushed Michigan right into a single-state, single-quarter recession, as per seasonally adjusted data. Expanding such an impact to multiple states or the complete U.S. economy, including indicators like GDP, can be a more extreme scenario but not entirely out of the realm of possibility if a protracted strike were sustained.

Nevertheless, amid the turmoil, not all tech firms are destined to suffer down the provision chain in the course of the strike. Tesla appears poised to profit, particularly if the strike endures. As a non-unionized company, Tesla is shielded from similar labor issues. This dynamic underscores the challenges faced by GM and Ford as they contend with the UAW’s demands while competing with Tesla, a frontrunner in electric vehicles.

Analysts like Dan Ives from Wedbush imagine that a protracted strike could significantly impact GM and Ford’s electric vehicle ambitions, potentially pushing production and their EV roadmaps into 2024. Such delays could have substantial consequences for these automakers at a critical juncture within the transition to electric vehicles.

Source: Yahoo Finance

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This Article First Appeared At www.automotiveaddicts.com

Addicts Automotive billion Cost Economy Strike UAW
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