The Econ-versation: General Motors strike

Silvia Buonocore, Senior Writer

Early on Sept. 16, around 48,000 General Motors (GM) factory workers began a United Auto Workers (UAW) strike against GM. The strike extends across the entire nation, posing a threat of large magnitude to GM.

A tariff is a tax on an import to promote the consumption of goods produced within a country. In this case, the steel tariff made steel more costly for GM, which resulted in a large loss of money. The combination of tariffs on steel and low sales caused GM to announce 14,000 expected job cuts and five factory closures, each costing the company $6 billion and $1 billion, respectively.

More recently, the UAW has been advocating for improved health care coverage, increased wages, and better job security from GM. Collective bargaining — the negotiation of wages and other working conditions between the employee and the employers — is currently difficult because of risky variables, such as the trade war with China and the potential future impacts of tariffs on automobile parts. However, the unemployment rate is currently low, meaning there is less availability of skilled workers. These factors strengthen the UAW strike and leave GM with few alternatives.

The strike is expected to decrease manufacturing output, which has the potential to affect areas where factories are located by causing lowering income, tax revenue and consumer spending. The length of the strike will reveal its true impact, as a longer strike will have more damaging impacts on the economy than a shorter strike.

Dips in production resulting from a strike lasting a matter of days can quickly be recovered. However, a strike lasting weeks could have more detrimental effects that may even creep up the supply chain, the web of resources and inputs that are needed to create a finished product.

If the strike continues for a long period of time, GM sales could be affected further because there are other automobile companies for consumers to choose from.

This information appeared first on The Wall Street Journal.

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