If history is any guide, a strike of any significant length in 2023 would be particularly painful for suppliers that count GM, Ford and Stellantis as their major customers.
The 2019 GM strike took a large bite out of earnings for many suppliers and resulted in thousands of their workers being laid off for the duration of the strike.
Lear Corp., for example, reported a 41 percent decline in its fourth-quarter net income in 2019, or about $86 million, which it pinned in large part on the strike against GM, its largest customer. American Axle, meanwhile, estimated that it lost $243 million in sales in 2019 as a result of the strike, while Aptiv said it lost about $200 million in revenue.
But the 2019 strike occurred in a much different economic environment than today. While the new-vehicle market at that time was cooling off from all-time highs earlier in the decade, business was significantly better then than what the industry has been used to lately, as microchip shortages and other supply chain woes cut vehicle production.
The big volumes leading up to the 2019 strike meant many suppliers were in a position to absorb some of their strike-related losses, and they were confident about recouping those lost sales in the following months.
But the immediately ensuing pandemic in early 2020 foiled that plan.
“Fundamentally, the suppliers were in much better shape before the pandemic than they are now, especially as it relates to cash on hand,” said Carla Bailo, an industry consultant and a member of the SAE International Board of Directors.
That’s unlikely to be the case in late 2023, she said.
While many suppliers have finally returned to pre-pandemic revenue levels, profits have generally lagged. Suppliers that operate on a just-in-time delivery system have dealt with a lingering financial squeeze over the past several years as high material costs and less predictable vehicle assembly schedules eroded profit margins.
Suppliers’ finances are delicate at the moment, Robinet said, and companies can ill afford another shock to the system.
“Suppliers make money when they can turn the machine on and run it for five or six days a week at full rate,” Robinet said. “When you keep turning that production knob backward and forward, it’s very difficult to run a business that way.”