A report from Reuters on Thursday, citing “a source with knowledge of the matter,” suggests that the Biden administration is considering emergency aid to safeguard smaller businesses supplying U.S. automobile manufacturers in the event of a strike by the United Auto Workers (UAW) union.
For several months now, the UAW has been engaged in intense negotiations with Detroit’s Big Three: Stellantis (NYSE:STLA), Ford (NYSE:F), and General Motors (NYSE:GM). Negotiators have offered little hope a deal would be reached on Thursday to avoid a midnight walk-off that would be the UAW's first-ever simultaneous strike against the U.S. carmakers.
The UAW has a plan to carry out a series of strikes at specific U.S. auto plants if they don't reach agreements before the contract expires, rather than a full walkout.
Discussions about aiding suppliers have been ongoing from the moment it became apparent that a strike was possible, but the source emphasized that discussions are still in the early stages and subject to change.
Many smaller American manufacturers supplying parts to the Detroit Three have found themselves in a weakened financial situation due to the strain caused by pandemic-related shutdowns and subsequent semiconductor shortages, which severely impacted vehicle production over the past three years.
The auto parts manufacturing sector, as reported by the Motor Equipment Manufacturers Association trade group, employs 4.8 million individuals, with a significant concentration of these jobs in states like Michigan, Ohio, and other Midwestern regions, as well as in the Canadian province of Ontario.
These smaller suppliers play a crucial role in the supply chains of automakers. Even the absence of a single component, such as a bracket, bolt, or plastic interior part, can disrupt assembly line operations, potentially leading to production halts. Automakers have grappled with supply chain disruptions over the past three years and continue to work towards recovery.
Shares of STLA, GM and F are down 0.82%, 0.35% and 0.43% respectively in afternoon trading Thursday.