Ripple effect of GM strike sparks US recession fears, Economy News & Top Stories

SOUTHFIELD (Michigan) • Here in the heart of America’s car industry, car parts have nowhere to go.

Eighty-five tractor trailers full of hoods, bumpers and other assorted parts sat, unloaded, in Lansing, Michigan – more evidence of the cost of the General Motors (GM) strike that has shut down most of its North American plants and left 46,000 workers idle.

Soon to enter its fourth week, the strike is rippling across the economy, from parts suppliers in Michigan and Canada to bars, restaurants and other businesses that serve employees who now find themselves tight on cash. The layoffs have added to fears that a weakened manufacturing sector could tip the US economy into recession – potentially playing a role in next year’s election, especially in a swing state like Michigan.

The automaker has already lost more than US$1 billion (S$1.4 billion) in earnings before interest and taxes, according to one analyst estimate. GM’s bigger parts suppliers are losing as much as US$2 million a day by the same measurement. Smaller parts makers across the United States are sending employees home.

In a letter to union members dated last Friday, United Auto Workers vice-president Terry Dittes, who is in charge of talks with GM, said “good progress” has been made in negotiating issues such as healthcare and the treatment of temporary workers.

The parties have moved closer to a deal but two sticking points remain. They are employee pension plans and shortening the length of time required for entry-level workers to earn top hourly pay of US$28, according to people familiar with the matter on Saturday.

The strike comes at a potential inflection point for the economy. New statistics last week showed a sharp fall in US manufacturing last month. The GM strike is not helping. It has chopped US$400 million in direct wages out of the US economy, with half of that loss coming in Michigan, Anderson Economic Group chief executive Patrick Anderson estimated. The US Treasury has lost US$154 million so far just in payroll and income taxes.


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