UAW strike gains hopeful signs, just in time for economists

Many in Michigan feel like the end of the UAW strike at the Detroit Three finally could be within sight. Maybe, just maybe Thanksgiving will be celebrated at home, not around some barrel burning wood on the picket line.

Just days ago, no one really knew when the work stoppages would end or how much more pain would be spread throughout economy. We still don't. But a tentative agreement between the UAW and Ford Motor Co., which was announced Wednesday, triggered the first collective economic sigh of relief since the strike began Sept. 15. And Saturday, we got another sign of hope when the UAW announced a tentative deal with Stellantis.

On Monday morning, the Free Press reported that General Motors and the UAW finally reached a tentative deal after tense moments over the weekend. No details were released early in the day.

It was touch-and-go just a week earlier.

University of Michigan economist Don Grimes said Friday that early last week economists there were preparing for the U-M's 71st annual economic forecast conference on Nov. 16 and Nov. 17.

Just one day before the UAW's unexpected Ford news, the economists decided that all the uncertainty surrounding the strike gave them little choice but to base their economic model on the possibility that the strike could run through the end of November.

"Our darkest fear was if they didn't settle before Thanksgiving, this wouldn't get settled until January," Grimes said. "We were pretty scared that this thing could spiral out of control."

After Wednesday's news of the tentative agreement at Ford, it was back to the drawing board. Grimes laughed, calling the extra work for a revised economic forecasting model a "small price to pay."

"This is a major relief to the economy," Grimes said.

Many families, small business owners and others similarly had to step back in recent weeks and try to gauge how long the strike could last. Would those on strike or layoff face no choice but to cut back on holiday spending? Would others need to delay big purchases, fearing that they risked going on strike or getting laid off in the weeks ahead? Every move was clouded by uncertainty.

On Saturday afternoon, a day after I first talked with Grimes, buzz began building that another tentative agreement was around the corner. According to multiple sources Saturday afternoon, the Free Press reported, the UAW and Stellantis had a tentative agreement.

Later Saturday night, the UAW announced that tentative agreement. It was the 44th day of the co-called Stand Up Strike. Stellantis workers are to return to their jobs while the agreement goes through the ratification process, which includes the UAW National Stellantis Council coming to Detroit on Thursday to vote on whether to send the agreement to the membership.

GM, after intense negotiations was rumored to be close to a tentative agreement, but still didn't have a deal Saturday night. Worse yet, the UAW turned up the heat at GM by staging another surprise walkout late Saturday at the big GM factory in Spring Hill, Tennessee.

As of last Wednesday, more than 45,000 UAW autoworkers were on strike at 46 factories and facilities across the country run by General Motors Co., Ford and Stellantis, which owns the Jeep, Ram, Chrysler, Dodge and Fiat brands. The UAW didn't take every plant on strike; it just hit select, key moneymakers.

On Saturday night, about 17,400 UAW workers at GM, including 3,200 hourly UAW workers at Spring Hill, went on strike.

The ripple effect associated with the strike at GM facilities was estimated to have spread to 5,500 other workers who were either laid off at GM or outside auto suppliers, due to cuts in production at factories on strike.

While GM expressed disappointment with the Spring Hill strike action, the company said Saturday that its "goal remains to reach an agreement as quickly as possible.”

The developments at Ford and later Stellantis still give many reason to be optimistic that an end to the strikes and shutdowns is near.

If no tentative deal had popped into place for another two or three weeks, though, the job losses would have kept increasing in Michigan and elsewhere.

"We sort of dodged a bullet," Grimes said Friday.

More:Is strike pay taxable? What it will mean for UAW strikers and others at tax time.

More:GM, UAW reach tentative deal after weeks of contract negotiations

More jobs would be lost, as the strike continued

The longer the strike at all three automakers went on, the more likely it was that even more auto suppliers in the complex manufacturing process would need to lay off workers or shut down operations.

And there was the added threat that the UAW could close more auto factories at Ford and Stellantis as part of its highly untraditional strike in which UAW President Shawn Fain, using Facebook Live, would call on union members to walk out on a moment's notice.

"Fortunately, they got to the edge of the cliff and everybody said, 'Nah, let's take this deal,'" Grimes said of the Ford tentative agreement.

The UAW National Ford Council was to review the Ford proposal Sunday. Regional meetings will be held to brief UAW locals representing Ford workers about the agreement. And 57,000 UAW members at Ford — those on strike and those who continued to work at plants that weren't shut down — will be able to vote on the deal in the days ahead.

Many analysts expect that members will ratify the UAW-Ford agreement that includes an 11% immediate wage increase upon ratification. The wage hike will total 25% over a 4½-year contract, plus cost-of-living adjustments and other gains.

On Sunday, only GM was left waiting to get a tentative agreement in place. The UAW kept tensions high with its addition of the Spring Hill walkout, but some experts remained hopeful that GM would reach a deal relatively soon, especially since UAW members at Ford and Stellantis offered to immediately return to work once those tentative agreements were announced.

Grimes said Sunday that he's still generating the impact of the auto strike on the economic outlook. He expects he'll add the work stoppage at Spring Hill into the mix, given its importance to GM production. The engine plant in Spring Hill supplies factories that build several of GM's most popular and profitable vehicles.

Even so, Grimes said, the economic impact of Spring Hill going out on strike could be "fairly minimal."

"We don't anticipate any impact on suppliers to Spring Hill," Grimes said. And if the strike is short at Spring Hill, he said, workers there will use strike pay and their "savings to sustain their spending at current levels until a settlement is reached, expecting their income loss to be very short."

Grimes said he doesn't see how a tentative agreement at GM could differ significantly from the Ford and Stellantis deals that are likely going to be sent soon to union members for a vote. He speculated that the Spring Hill walkout was part of the union's calculated strategy to prove its willingness to get the best deal.

"It might be just a little bit of a show for GM's UAW members, maybe to help ensure that the workers approve the contract," Grimes said.

"Once one settles, they all basically line up," Grimes said Friday.

Back on the job

While many expect some delays when it comes to resuming production, severe disruptions in the supply chain aren't likely as normal auto production resumes.

"I expect to see minimal issues with factories getting back up to speed as few factories were impacted for the entire duration," said Jonathan Smoke, chief economist for Cox Automotive.

"We should not see a repeat of the issues that disrupted the industry following the COVID shutdowns in 2020."

Marick Masters, a business professor at Wayne State University and an expert on labor negotiations, said restarting the factories should not pose a problem. Some auto suppliers could face more difficulties, as they often supply each of the Detroit Three.

Masters said Sunday that the expansion of strike activity at GM over the weekend is consistent with the union's strategy of ramping up pressure to expedite "progress" in negotiations.

"Fain's dramatic moves in calling strikes are the essence of this new Stand Up Strike strategy," Masters said.  

Just days before the Spring Hill walkout, the UAW called another strike at 10 a.m. Oct. 24 at GM's factory in Arlington, Texas, which makes the high-profit Chevrolet Tahoe and Suburban, the Cadillac Escalade and the GMC Yukon. The union ordered about 5,000 members at the Texas plant to walk out and join its Stand Up Strike.

Yet Masters said pressure remained on both sides to get a deal at GM soon. Masters said the UAW likely wants a tentative agreement with GM before the ratification voting begins at Ford and Stellantis. At the same time, the UAW sees a pattern agreement at GM — similar to the tentative deals now at Ford and Stellantis — as a must, he said.

"GM and the UAW appear to be close to a deal, and should be able to find a path to agreement in the near future," Masters said Sunday.

The sooner the strike is settled, the more quickly the economic recovery will begin, he said, noting that a speedy rebound is likely if the strike doesn't drag out longer than expected.

He noted: "If we can recover so quickly from the tumult of the pandemic, we can surely emerge rapidly from this strike."

The nation's gross domestic product — the value of goods and services produced in the U.S. — grew a robust 4.9% in the third quarter, benefiting from strong consumer spending. But Masters noted that high interest rates and a slowdown in investments in electric vehicles could put a damper on the auto industry.

And there were growing concerns Friday about oil price spikes ahead as Israel’s military moved to expand war activity in Gaza.

"Regardless of the strike and the cost of the labor agreements, the Big Three face enormous structural challenges," Masters said.

Economic cost of the unusual strike was steep

The extent of the UAW strike already came at a deep cost to workers, the Detroit Three and the economy.

At this point, economists do not see the auto strike contributing to a U.S. recession, but the economic loss was significant for workers, the Detroit Three and the overall economy.

East Lansing-based Anderson Economic Group put a wide-sweeping $9.3 billion estimate on the economic losses after five weeks of UAW strike activity, ending at midnight Oct. 19, against the Detroit Three.

Patrick L. Anderson, CEO of the consulting firm, said the cost of the strike was close to double that of the 40-day strike against GM in 2019. Some of that reflects higher inflation in recent years but the pain, he said, has been deep among auto suppliers.

"The UAW's strategy was successful in causing a great deal of losses among manufacturers and suppliers," Anderson said, "while minimizing the number of their own workers on strike."

"This is an entire new chapter in strike tactics and labor negotiations that was written in real time by Shawn Fain in Detroit in 2023."

He said auto companies in many ways were "caught flat-footed by a new strategy and a ramping up of the rhetoric."

Estimated lost wages of striking workers and those laid off at auto manufacturers due to the strike were nearly a half billion dollars, according to the Anderson Group's estimates. The figures will be higher when a new estimate through midnight Oct. 26 is announced Monday.

No doubt about it, the shock and awe of the 2023 UAW strike in the auto industry — where the president of the United States even joined the picket line — will remain long after the two sides close a deal.

But hopefully, we're getting closer to the day when all of Michigan isn't on economic edge.

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor.