GM strike could hurt unionized auto haulers first

The halt in vehicle production at General Motors [NYSE: GM] plants on Sept. 16 over a labor dispute is expected to have ripple effects throughout the automakers’ supply chain, but experts say the severity of any business interruption will depend on the duration of the strike by the United Auto Workers.

The most immediate casualty could be GM’s two unionized auto haulers: Jack Cooper Transport, Kansas City, Missouri; and Cassens Auto Transport in Edwardsville, Ill.

The International Brotherhood of Teamsters said it would honor the UAW picket lines and refuse to deliver GM vehicles to dealerships during the strike, but dealers should be able to weather the situation in the short term because the automaker has high inventory levels of finished vehicles. 

More than 2,000 Teamster drivers work for Jack Cooper and Cassens, according to Bob Farrell, executive director of the American Trucking Association’s Automobile Carriers Conference. If they stand in solidarity with the UAW, “GM will just go on the market, to their list, and assign the loads to a non-union carrier,” he said.

The Detroit Three automakers traditionally use union carriers as a gesture to the UAW, but are not contractually bound to do so. 

“The old adage that union-built, union-hauled, doesn’t work anymore,” Ferrell told FreightWaves.

Farrell said Jack Cooper, one of the largest over-the-road finished vehicle logistics companies in North America, is more exposed to any shutdown than Cassens because it serves more GM assembly plants. It had $581 million in revenue last year.

GM in recent years has been shifting business to cheaper, non-union carriers, which is one of the reasons that privately held Jack Cooper Holdings filed for bankruptcy protection last month while it reorganizes. An extended loss of business might push Jack Cooper’s creditors to liquidate the company instead.

It’s unclear if the union drivers will only honor the picket line at GM assembly plants while still retrieving vehicles sitting at rail depots and ports, where UAW members are not present. A Teamsters spokesman would not comment about the different locations, only adding that “they won’t be violating picket lines.”

Inventory Cushions Dealers

The Detroit automaker has stockpiled enough inventory to maintain sales levels for the time being, according to a report from Cox Automotive. Cox, a dealer marketing and services conglomerate based in Atlanta, calculates that GM has 77 days supply of cars, trucks and SUVs, well above the industry average and current 61 day supply.

Car inventory is low at 59 days vs. the 53-day industry average, but the inventory of trucks stands at 80 days, with the Chevy Silverado at 93 days supply. Truck inventory tends to be higher than for cars because trucks come in many configurations. Vehicles in short supply are the Chevrolet Tahoe and Suburban, which are made at GM’s plant in Arlington, Texas.

Inventory levels, which are calculated based on what’s on dealer lots, could actually be higher if there are units moving across the country by rail or on the ground at plants that haven’t been trucked out yet.

“Right now, there is inventory on the ground” and in the pipeline, “at various locations, but that will dry up pretty quickly,” Mark Anderson, the CEO of United Road Services said in a phone interview. “The longer the strike goes on, the more of an impact it will have on auto haulers.”

GM is one of United Road Services’ largest customers, but the Romulus, Michigan, company has a diversified business model that partially insulates it from order swings. Unlike most haulers, it is active in all geographies and segments: new, used, off-lease, rental car, dealer transfer auction and specialty car moving new, used, off-lease and speciality cars, such as classic cars and test vehicles. No one customer makes up more than 11% of its revenue.

United has 1,200 company trucks, 1,200 owner-operators and relationships with 4,500 carrier partners across the U.S. and Canada. It hauls more than 4 million vehicles per year, including 3.25 million new vehicles.

What’s At Stake

More than 48,000 hourly workers at 33 plants in nine states went on strike at midnight Monday after talks on a new four-year contract collapsed. GM wants to lower labor costs amidst a sweeping restructuring plan and billions in investments designed to position itself for a future of electrified and automated vehicles. GM is operating at a $13 per hour disadvantage in wage rates compared to international competitors like Honda, Toyota and Volkswagen, according to the Center for Automotive Research (CAR). 

The company said its offer bumps up wages and benefits, and includes $7 billion in investments in areas such as an electric pickup,a battery cell plant, additional new vehicles and propulsion programs. Some vehicles could be produced at idle plants that have no current assignments. But with 1 million units in excess capacity across the country, it isn’t expected to build any new plants.

Workers want higher pay and benefits, especially health care, more job security and less use of temporary workers, noting that GM has been highly profitable in recent years – it had pre-tax earnings of $11.8 billion in 2018 – and that they made a lot of concessions in 2009 to help keep the company afloat during bankruptcy and the Great Recession. 

But GM, Ford Motor Co. [NYSE: F] and Fiat Chrysler Automobiles don’t want to be locked into wage increases that could hurt financially if there is a downturn, preferring instead to offer profit sharing to reward workers during good times. Since 2011, average profit-sharing checks at the Detroit Three have averaged more than $6,600 per worker – equivalent to an extra $3.18 per hour and GM workers received the equivalent of $5.77 per your last year, CAR said.

Sales are still robust, with seasonally adjusted averages hovering around 17 million units for the full year, but that is down 500,000 units from the 2016 peak.

If the strike is over in a week or two, the impact on GM and its business partners will be minimal, according to Moody’s Investor Service and other analysts. So far, suppliers have not been instructed to slow down production, but in a week or two Tier 1 suppliers could likely begin shutting down production lines and smaller suppliers would follow suit, according to a report in Automotive News.

There is a large ecosystem of inbound logistics providers such as Schneider National and Kansas City Southern [NYSE: KSU] railroad that are also watching developments closely, said Foster Finley, co -leader of the  manufacturing and supply chain practice at AlixPartners. KCS hauls auto parts, in addition to finished vehicles, made in Mexico and destined to U.S. manufacturers.

Finley said Class I railroads might be able to discount certain pricing to attract other freight if auto parts volume tails off.

Eric Kulisch, Air Cargo Editor

Eric is the Air Cargo Market Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals from the American Society of Business Publication Editors for government coverage and news analysis, and was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at