Tech companies — and chipmakers especially — will also be caught in the crosshairs.
The first place to look is down the supply chain. New cars made today can have as many as 3,000 chips per vehicle, meaning a long battle between major automakers and the UAW union could eventually start to weigh on production and chip suppliers.
Texas Instruments (TXN) and NXP Semiconductors (NXPI) are among the largest auto chip manufacturers in the world, while TSMC (TSM) is the leading contract chip manufacturer. Shares of all three chipmakers moved lower on Friday.
And more chipmakers such as Qualcomm (QCOM) and Micron (MU) could see effects over time too, as both have substantial connected car businesses. Qualcomm has doubled down on its auto business in recent years, while Micron is often discussed as the market leader when it comes to auto memory chips.
The impact on these companies varies based on a few factors, including the length of the strike and each company’s exposure to automakers. The UAW has opted for a “stand up” strike, in which workers walk out at select GM, Ford, and Stellantis plants rather than all at once, in order to prolong the action and the union’s $825 million strike fund.
In 2022, 52% of NXP’s total revenue came from its automotive chips, according to Counterpoint Research, while Texas Instruments derived 25% of its total revenue from the industry, company reports showed. At the same time, TSMC reported that its automotive segment accounted for just 5% of its total revenue.
Diversification is key when it comes to suppliers’ resilience in these circumstances, Anderson Economic Group COO Tyler Theile told Yahoo Finance Live on Thursday (video above). Overall, Theile said, a 10-day UAW strike could have an impact of over $5 billion in the U.S. alone, with broader impacts globally.
The 2019 GM strike that lasted 42 days offers clues as to what might happen.
“In 2019, we saw suppliers that were 90% or more focused on supplying to GM have to shut down and completely lay off all of their workers for a number of days,” Theile said. “If you’re a supplier that’s more diversified among several OEMs, maybe you’re not as impacted as quickly or as strongly.”
There could be far-ranging effects on the economy broadly — but it will have to be a pretty extreme situation to get there.
“In 2019, if you look at the seasonally adjusted data, the strike did push Michigan in the United States into a single-state, single-quarter recession,” Theile said. “So it would take a lot for this to hit, for example, multiple states or the U.S. data and important economic indicators, like GDP, as a whole, but it’s not out of the question if a quite lengthy strike is sustained.”
“Non-union Tesla does not face similar issues which speaks to the complexity both GM and Ford face going up against the EV leader Tesla while trying to satisfy rising union demands,” Wedbush analyst Dan Ives wrote on Sept. 14. “If a strike happens (and is lengthy) then ultimately production and the EV roadmap could be pushed out into 2024 and delays would be on the horizon at this crucial period for GM, Ford, and Stellantis.”
“We believe a strike lasting longer than 4 weeks would be a body blow to the EV ambitions of GM and Ford in 1H24 and delay many aspects of this initial important EV push,” Ives added.