UAW GM strike proving costly to more than workers, automaker
October 14, 2019
October 14, 2019
DETROIT – Zack Bazzi is not seeing workers from a nearby General Motors plant swing through the gas station where he works on Detroit’s east side since they went on strike nearly a month ago.
Business is “slow,” Bazzi said from behind the counter of the empty Marathon station within a short walk of the massive Detroit-Hamtramck assembly plant. “They come in usually in the morning and lunchtime. Now they’re all on strike.”
“You’re losing customers,” he added, saying the striking workers are holding onto what money they have “to pay their bills.”
As the United Auto Workers strike against the automaker churns through a fourth week , experts say lost wages means less spending. The strike already has cost the state millions of dollars in tax revenue.
Nationally, 49,000 UAW members have walked off their jobs at GM. With nearly 18,000 of those in Michigan, Democratic Gov. Gretchen Whitmer this week raised concerns about the state’s economy as the strike impact spreads to the automobile supply chain.
With all GM employees in Michigan on strike, state withholding taxes are anticipated to be down by $1.5 million to $2 million each week, Michigan Treasury Department spokesman Ron Leix said.
“If the strike lasts more than a couple weeks and employees are not compensated, the total withholding decline – direct, indirect and induced impacts – would be estimated to increase to $3.5-$4.6 million per week,” Leix wrote in an email.
“The hit to the broader Michigan economy could dampen sales tax, but historically these strikes have not caused a noticeable impact in tax collections,” Leix said.
Michigan’s monthly target statewide total for withholding in October is about $800 million.
The state’s economy is not nearly as dependent on the auto industry as it once was, but it’s still a significant sector. Last year, manufacturing jobs accounted for about 14% of Michigan’s employment behind 15.4% in education and health services, and 15% in professional and business services sectors, according to the Bureau of Labor statistics.
Anderson Economic Group, an East Lansing, Michigan-based consulting firm that works with auto dealers and manufacturers, says GM had lost an estimated $660 million in profits through Oct. 6, while employees lost more than $412 million in direct lost wages.
“As long as the strike continues, it will diminish the purchasing power of the striking and laid-off workers in Michigan by millions of dollars per day,” said Charles Ballard, an economics professor at Michigan State University. “That’s the most direct effect, but the indirect effects may ultimately be just as important. With diminished incomes, the affected workers will spend less. That means less money coming into local businesses.”
“The damage to the Michigan economy will continue to grow every day that the strike continues,” Ballard said.
Dan and Vi’s pizza deli, one of the few eateries near the Detroit-Hamtramck plant, says sales have been down, though Wednesday’s noontime crowd snaked around the small shop nearly to the door.
“We’re definitely noticing a difference in sales, but we’re gonna be OK,” said manager Tina Wheeler. “We’ve been in the neighbourhood 56 years. We’re not going anywhere.”
Others are feeling more pain from the strike.
Up to 12,000 salary and hourly employees in the U.S. temporarily have been laid off by more than 100 supply companies due to the work stoppage at GM facilities, according to the Original Equipment Suppliers Association.
Some of those workers may find other opportunities elsewhere due to the nation’s low unemployment rate and shortage of skilled-trades workers.
“Companies may be challenged to ensure laid-off employees return to their previous positions,” said Julie A. Fream, the association’s president and CEO. “Upon conclusion of the strike, this could cause extended disruption in the supply chain as suppliers ramp-up their production.”
Livonia, Michigan-based ZF North America has adjusted production schedules, spokesman Tony Sapienza said. The global supplier is headquartered in Germany and produces safety systems, air bags and transmissions for multiple carmakers.
“There have been some layoffs, but not complete plant shutdowns,” Sapienza said.
The strike is taking place amid an already slowing economy in Michigan, Ballard said.
Michigan gained about 75,000 jobs per year from 2010 to 2016, he said. But that that dropped to about 43,000 jobs per year in 2017 and 2018, and employment has been flat this year.
“I would not say that Michigan is already in recession,” Ballard said. “On the other hand, it doesn’t look like our economy is growing very rapidly, either. It is possible that Michigan was already not far from a recession, even before the strike began.”