The forthcoming potential strike by nearly 150,000 United Auto Workers (UAW) at General Motors (GM), Ford, and the Stellantis group could inflict more than a metaphorical dent to the automotive industry’s bonnet. The Michigan-based consulting firm, Anderson Economic Group, foresees an economic loss exceeding $5 billion in a mere 10 days if the strike materializes.

UAW President Shawn Fain has been trudging the battlefield, solidifying support, and charting the course for the upcoming procedural strike authorization. Scheduled to take place next week, the vote would empower union leaders to strike if deemed necessary. Historical precedence suggests a high possibility of the proposal passing with an overwhelming majority. Should it succeed, it could lead to a marked elevation in wage hikes compared to the past four years.

The stakes are high. Should all the eligible workers join the strike, the weekly strike pay could eat away around $75 million from their fund. This translates to an $825 million war chest theoretically lasting for about 11 weeks, given that healthcare costs like temporary COBRA plans aren’t accounted for.

The UAW, under the guidance of Fain, perceives these negotiations as the union’s ‘defining moment.’ Fain has resorted to bold words and attention-grabbing theatrics, making it crystal clear that he isn’t here for a win-win negotiation or to make concessions.

Feeding the undercurrents of potential tension, massive labor costs loom over the automaker’s businesses. The assembled proposals by UAW could heap additional $80 billion as labor costs for each of the major US automakers. Additionally, the automotive industry’s already tinier inventory levels compared to four years ago enhance the threat to automakers.

The industry’s revival post-Covid supply chain breakdowns further compounds the scenario. Patrick Anderson, AEG’s CEO, warns that the impact on automakers would be felt much sooner than in the past given the tight rope the industry finds itself now.

To put things in perspective, a 40-day strike against GM in 2019 saw a drop in vehicle production by 300,000 units and a resulting $3.6 billion cut in earnings.

The strike could also pose to bring everyday operations of the companies involved to a grinding halt. In fact, experts speculate that if a strike were to be declared against all three automakers, the production losses and consequential economic implications could mount rapidly.

For instance, S&P Global Mobility anticipates up to 1.5 million units in lost production in the event of a 10-week long strike. Specialists like Deutsche Bank predict weekly losses for each affected automaker ranging between $400-$500 million. Meanwhile, the Oracle of Omaha himself, Warren Buffett, has reduced Berkshire Hathaway’s stake in General Motors, tacitly acknowledging the turbulence that may lie ahead for the automotive industry.

However, UAW’s aggressive stance could be a shot in the arm for organized labor and the fledgling UAW. They are tasked with emerging from the blowback of a federal corruption probe that landed multiple top leaders in prison for bribery, embezzlement, and more. However, the union’s persistence could spell doom for auto companies and their investors.

Bearing in mind the high possibility of a strike, the coming days may alter the landscape of US auto manufacturers and labor unions. With significantly higher stakes and the entire auto industry watching in bated breath, this could indeed turn out to be UAW’s ‘defining moment.’