Foley & Lardner LLP partner Ann Marie Uetz offered her insight across several publications on the United Auto Workers strike against Detroit automakers, including The New York Times article, “U.A.W. Strike Strains a Fragile Auto Supply Chain,” The Wall Street Journal article, “Five Clues to Where the UAW Strike Is Headed Next,” the Corporate Counsel articles, “Auto Suppliers Aim to Avoid Legal, Financial Mayhem as UAW Strike Looms,” and “Strike Will Sting Auto Suppliers, but How Much Depends on Fine Print in Contracts," and the articles "UAW strike: How auto supply chain managers can mitigate disruption” in both Supply Chain Dive and CFO Dive and “At the Detroit auto show, worries and hope as UAW prepared to launch strike,” in both Automotive News and Crain’s Detroit Business.
Uetz told The New York Times that if smaller suppliers go more than a few weeks without selling products to customers, some may have to seek bankruptcy protection. “There is definite strain in the supply chain, and you’re going to see some of them suffer as a result of the strike if it lingers for a month or more,” she added.
Uetz summarized concerns surrounding the strike in The Wall Street Journal, noting that, “There is a weakness in the underpart of the supply chain that has people worried.”
“The suppliers to the strike targets will be immediately affected because orders will be canceled and they will not be able to sell those parts, and this in turn will negatively impact their operations and cash flow and likely interrupt supply to other customers, even those that the UAW are not striking,” Uetz told Corporate Counsel.
Uetz explained in Supply Chain Dive and CFO Dive how order cancellations from the affected assembly plants can bottleneck the entire supply chain. Suppliers can continue to build parts regardless of canceled orders, but if the customer refuses to accept deliveries, then suppliers will need to pay to store those parts. Uetz said demand for the parts and materials will decrease or even cease completely as the big three automakers will “likely cancel firm orders for parts and forecasts for future orders in the coming weeks and even months.”
“Suppliers should therefore consider that OEM production shutdowns may accelerate obsolescence for parts that are incorporated into sunsetting vehicle platforms,” Uetz noted. “Suppliers should continue to consider and appropriately manage the output to prevent an oversupply of outdated or soon-to-be outdated parts when OEM production eventually resumes.”
Uetz said in Automotive News and Crain’s Detroit Business that, “the automotive supply chain is incredibly resilient, but a strike lasting more than several weeks will undoubtedly cause some suppliers to seek bankruptcy protection — especially smaller Tier 2 and 3 suppliers who are already battling increased costs and lower profits.”