UAW strike: What are the aims and what does it mean?

Economic losses could reach more than $5 billion during a short strike against car manufacturers Ford, Stellantis and General Motors

A placard installed by the United Auto Workers union outside a Ford plant in Wayne, Michigan. EPA

A strike announced by workers against car manufacturers Ford, Stellantis and General Motors could have resounding effects on the US economy.

About 13,000 employees went on strike on Friday after leaders of the United Auto Workers trade union could not reach an agreement with the "Detroit Three" major car makers over contract demands.

The UAW strike puts at risk the production and distribution of new vehicles, whose impact will quickly affect the US economy.

President Joe Biden voiced his support for UAW and said two White House officials would head to Detroit to participate in negotiations.

"No one wants a strike, but I respect workers' right to use their options under the collective bargaining system. And I understand the workers' frustration," he said in remarks from the White House.

What is the UAW demanding?

At the top of the union's list is better pay for its members. The UAW is asking for a 36 per cent increase in wages, while car makers have offered increases between 17.5 and 20 per cent.

The UAW is also seeking pension benefits for employees and more paid time off. It wants to end the tiered employment system, in which newer workers receive lower pay and fewer benefits.

The union is also looking to protect workers by securing the right to strike against potential plant closures as Detroit shifts to electric vehicles.

How will the UAW strike affect the economy?

Even a short strike could have resounding implications in the US.

A 10-day strike against all three Detroit car makers could lead to an economic loss of $5.6 billion, an August report from the Anderson Economic Group consulting firm showed. This will be felt in wage losses, manufacturing losses and direct economic loss, among others.

The UAW last went on strike in 2019. The action lasted six weeks and involved 48,000 workers at more than 50 plants.

This strike, however, could involve even more workers, car manufacturers and plants.

“If that happens, even a short strike would impact economies throughout Michigan and across the nation,” said Patrick Anerson, AEG's principal and chief executive.

About $2.1 billion of that would be felt by consumers who will not be able to get the necessary repairs or replacement parts for their vehicles.

It would also lead to another major disruption in the supply and distribution of new vehicles – only years after the industry took a hit during the Covid-19 pandemic – leading to higher car prices.

The longer the strike runs, the more it will affect used car prices, as there will be fewer options for new vehicles.