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If autoworkers strike, business up and down the supply chain will be affected

STEVE INSKEEP, HOST:

The Detroit Three automakers are locked in a contract dispute with workers and a strike deadline is Thursday, a minute before midnight. If the industry should shut down even for a brief period, it means huge losses for the automakers. But what happens to businesses up and down the supply chain, the auto parts industry? Jeff Rightmer is following that part of the story. He's a professor of global supply chain at Wayne State University in Detroit. Welcome.

JEFF RIGHTMER: Thank you.

INSKEEP: I guess we should mention, this is your business. A car that is made by a Detroit company may be built in several countries all over the world. Isn't that right?

RIGHTMER: That is correct. All the way from - I'm thinking that I just bought a Ford that was built in Hermosillo, Mexico. And you have parts suppliers that are down in Mexico, so it is truly a global industry.

INSKEEP: OK, so do you anticipate a strike that would disrupt that entire network this week?

RIGHTMER: Beginning of the week, yes. But then I have seen these negotiations go 24 hours, and you come up with an agreement at the end of the week. I still think they will strike, one of the Detroit Three.

INSKEEP: One of the Detroit Three. You don't think that they will all end up on the same page?

RIGHTMER: No. Normally, you want to be the first one to get the deal done, and then that's kind of the pattern for the rest of the industry. And the UAW has kind of thrown that out the window this year.

INSKEEP: Well, let's talk through the implications of that then. Let's say that at least one company faces a strike at the end of the week. What does that mean for all of the other companies that serve GM or Ford or Stellantis or are dependent on them in some way?

RIGHTMER: The Tier 1s - or the top-level suppliers - they'll probably have taken measures already - cut discretionary spending, for example. But the longer it goes on, they could start running into furloughs and things like that. What it really hits are the lower-level suppliers, the twos, the threes. They're typically much smaller, maybe even family run, and the margins are razor thin. So a disruption really throws them into a turmoil. And you could see, possibly, some of them just close up shop and liquidate.

INSKEEP: I'm now curious if these Big Three companies share suppliers to the extent where a strike against one of the Big Three might disrupt business and supplies to the other two?

RIGHTMER: Yes, they do. I was working on my dissertation in 2007 and 2008. Chrysler at that point had to declare their Top 100 suppliers. Ninety percent of those suppliers served at least one of the other two Detroit Three, and then 80% probably throughout the supply chain for all of the automakers, transplants included.

INSKEEP: What does the GM strike in 2019, I believe, tell us about the potential damage this time?

RIGHTMER: I believe it cost GM about $1 billion. And what was interesting about that was they didn't strike every GM plant, they struck a transmission plant. And that shut down the whole company, which could be a possible tactic this time.

INSKEEP: We've just got a few seconds left. But does the potential and very real transition to electric vehicles complicate things even further if there's a strike?

RIGHTMER: Yes. Yes, exactly. You don't have as many parts in an electric vehicle.

INSKEEP: Oh.

RIGHTMER: And you need less workers.

INSKEEP: OK, so that might be part of what the tension is here between the GM workers - or rather all the Big Three automakers' workers and the companies themselves.

RIGHTMER: Yes, that's correct.

INSKEEP: Jeff Rightmer is a professor of global supply chain at Wayne State University in Detroit. Thank you.

RIGHTMER: Thank you. Appreciate it. Transcript provided by NPR, Copyright NPR.

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