Potential Strike in US Auto Plants Could Affect Mexico

A potential strike at major US auto plants could have far reaching impacts on Mexico´s automotive industry, particularly in the northern region of the country, warns Jaime Guerra Pérez, Executive Vice President of Nearshoring and Competitive Development, national executive of CANACINTRA. As Mexico´s leading exporter of auto parts, Coahuila would be among the most affected states, according to Guerra.

“Coahuila is the number two exporter in Mexico, but it holds the top spot in auto parts, which are primarily destined for the US. If the vehicle assembly plants in that country were to halt production, it would undoubtedly have severe repercussions for the state,” says Guerra.

The United Auto Workers (UAW), which represents workers of General Motors, Ford and Stellantis, is engaging in talks with the three automakers regarding wage adjustments. Should the talks fail, UAW members could go on strike. A recent study conducted by Anderson Economic Group (AEG) highlighted the staggering economic costs that would be incurred in the US alone if a strike were to occur. According to the report a 10-day strike at the plants of Ford Motor, General Motors and Stellantis would result in a significant US$5 billion loss.

Guerra emphasized the precarious nature of the automotive industry’s “just-in-time” system, which relies on minimal inventory and timely production. If production were to cease in US plants, the supply chain would grind to a halt for the same duration. However, Guerra adds that the Southeast Region of Coahuila has an advantage in exporting to other countries besides the US. 

Guerra urged for improvements in labor relations, while emphasizing the negative impact a strike would have on the entire automotive sector in North America. 

With just a few days remaining before the 143,000 members of UAW vote on authorizing a strike, negotiations between the UAW and the three major manufacturers remain ongoing. The current collective agreement is set to expire on Sep. 14, and the lack of progress in negotiations has raised concerns of a potential strike.

Among the UAW´s demands are a phased 46% wage increase and the inclusion of workers from future battery production plants in the union. The Anderson Economic Group study estimates that such a strike would result in wage losses of US$ 859 million for UAW-affiliated workers, while the cost for the companies involved would amount to US$ 989 million. The remaining losses, totaling US$ 5 billion, would be borne by workers and businesses dependent on the three major manufacturers.

Patrick Anderson, CEO, AEG, highlighted the repercussions of a previous strike in 2019 when 48,000 General Motors workers walked off the job. Michigan, home to many GM production plants, experienced a quarter-long recession as a result of the disruption.

As the deadline for negotiations approaches, stakeholders across North America hold their breath, hoping for a resolution to avoid the economic downturn and widespread repercussions that a potential strike would trigger in the automotive industry.