GM Strike is Costing $9.3 Million a Day in Lost Wages and Michigan is Feeling It

Matty-Sways

15 GM facilities employing tens of thousands of workers are located in Michigan and the strike is choking its economy.

Michigan’s economy is at greatest risk if the strike stretches on for an extended period of time. This is because 15 GM facilities employing tens of thousands of workers are located in the state. Lost earnings to workers will result in lower spending that effects sales-tax and income-tax revenues for the state. Reports of lost sales from some local businesses near the plants are already coming in.

“The impact to Michigan is noticeable, but it’s largely localized,” said Patrick Anderson, chief executive of Anderson Economic Group, a consulting firm based in East Lansing, Mich. “If the strike continues through this week, it’s going to go outside just auto workers” and cities with big factories.

Michigan relies far more on the automotive industry which accounts for 7% of income, compared with less than 2% nationally. GM has approximately 49,000 salaried and hourly employees in Michigan, with more than 17,000 represented by the UAW. The work stoppage had cost GM hourly workers and others in Michigan a total of about $9.3 million a day in lost wages.

In Flint, Jeanne Bonner, a manager at Latina Restaurant & Pizzeria, near GM’s truck assembly plant there, said business is off 10% to 20% since the strike began.

“It’s affecting everybody,” said Ms. Bonner. “A lot of people’s business is from the shop.”

The strike is beginning to effect GMs suppliers as well, “The suppliers are not going to build the parts and put them on the truck,” Mr. Anderson said.

Supplier Magna International, Inc. of Troy, Mich., which makes everything from seats to powertrains, has instituted temporary layoffs at some operations in the U.S. and Canada. In other cases, workers are getting training or conducting maintenance, said Scott Worden, a spokesman. “We are encouraged to see both sides continuing to work towards an agreement,” he said.

Other GM suppliers such as Kirchhoff Automotive, which has two manufacturing plants and one engineering and sales office in Michigan, are taking a wait-and-see approach. “At the moment, it’s kind of hard to say what’s going to happen,” said Nathalia Abreu, Kirchhoff’s communication and marketing manager for North America.

“If you squint, nothing has happened. No jobs have been added in Michigan since January,” said Charles Ballard, a professor of economics at Michigan State University. “Now you add this additional headwind. It has the potential to put us into job losses.”

“There is some risk of recession in the state or a contraction that hurts state tax revenues,” Moody’s analyst Ted Hampton said in an interview, though he and other economists said the strike probably would have to last at least a month for that to happen.

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