BUSINESS NEWS
GM strike could spread into the economy
Charisse Jones
USA TODAY
Published 10:16 PM EDT Sep 16, 2019
If the General Motors strike lasts more than a few days, it could impact far more than the carmaker and the thousands of autoworkers who are walking the picket line.
“It could be a surprisingly significant impact,’’ says Harley Shaiken, a professor in U.C. Berkeley’s graduate school of education who specializes in the study of labor.
Striking workers may hold onto their reduced pay a little tighter, meaning that local businesses, from the dry cleaner to the movie theater, could see their profits dip.
“If it turns into a more prolonged strike, which may well happen, well then you’re going to have tens of thousands of workers with less … probably being a lot more careful about what they purchase,” says Erik Gordon, a professor at the University of Michigan’s Ross School of Business who closely follows the auto industry.
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For every job at GM’s eleven U.S. auto assembly plants, it’s estimated six or seven additional jobs are generated or connected to the facility, from people who work for outside suppliers, to employees at local restaurants where autoworkers eat, Shaiken says.
“If you have 4,000 in the plant, you could have 28,000 outside of the plant’’ whose jobs are linked, he says. “That certainly has a regional impact,” he adds, noting, “If the strike goes on probably past two weeks, it could be damaging.’’
Gordon likened the constellation of businesses revolving around the auto industry to a “spider web.”
While assembly plants use some components produced by their own companies, most parts, such as the seats and dashboards, are made by other businesses. “If the strike is more prolonged,” Gordon says, “it’s going to ripple out through this spider web of all of these other companies.’’
Auto manufacturing creates 9.9 million jobs in the U.S., equal to slightly more than 5% of private-sector positions, according to the Alliance of Automobile Manufacturers. The industry has historically been responsible for 3 to 3.5% of the nation’s GDP.
GM reported a financial uptick last year, with net revenue of $147 billion, and $8.1 billion in income.
Car dealers, a key part of the auto ecosystem, may be OK in the short run, but they could struggle if their supply of larger vehicles that are the industry’s top sellers starts to shrink.
“When you drive by a car dealer, you see a huge number of cars sitting there in the display lot, so they won’t be hit right away,” Gordon says. But “as soon as they start running out of SUVs and pick up trucks, they’re in trouble.”
Smaller communities, where car dealerships are often one of the biggest businesses, would bear the brunt of a sales slump. “Small towns would be hurt a lot more than big cities that have other industries employing people,’’ he says.
And if the strike winds on for more than a few weeks, tax revenue could also take a dip.
“It will affect sales tax revenue if people are buying less things,” says Gordon. “When you don’t go to restaurants, when you hold off buying … a new refrigerator, the decrease in sales tax revenue really impacts cities and states who can’t really afford to take the blow.”
