US auto strike puts Indian ancillary hubs on the edge

Around a third of India’s automotive component exports is to North America. Thousands of UAW members are engaged in a ‘stand-up strike’ against the US auto majors.

They have staged walkouts from one factory of each of these automakers across the US, and plan to escalate their protests across multiple locations.

However, negotiations are on with the automakers to reach a consensus over workers’ demands for a wage hike.

This is the first time UAW has launched a simultaneous strike against all three automakers, according to the Financial Times. The strikes led to factory shutdowns in Michigan, Ohio, and Missouri.

In FY23, exports to North America accounted for 30% of the Indian auto ancillary sector’s export revenue of $6.5 billion, positioning it as the single largest market for India.

Tier-1 suppliers catering to North America, including Sona Comstar, Sundaram Fasteners, Bharat Forge and Motherson Group, may be hit if the strike continues.

In 2019, UAW’s protests against General Motors saw 49,000 workers walking out of 50 factories in the US. The strike lasted for over 40 days. This time, industry experts expect a faster resolution, as political intervention to bring the talks to a close are likely to have an impact in an election year.

On Monday, the third day of the strike, which began on 15 September , Sona Comstar, a leading supplier of critical electric vehicle components and automotive systems to original equipment manufacturers across the world, informed India’s stock exchanges that it is closely monitoring the situation.

“We would like to inform that UAW went on strike at some of the plants of three OEMs on 15 September, 2023. The Company supplies to these three OEMs in the US, directly or indirectly. We are monitoring the situation closely. There is minimal impact on the sales of the company currently, but there may be higher potential impact if the strike persists for long or extends to other plants,” Sona Comstar said in a statement to the exchanges.

Around 45% of Sona Comstar’s revenues come from the US, or 20% of its export volumes come from the Big Three in North America, excluding Mexico.

“Companies with exposure to the Big Three OEMs among the listed large auto ancillaries include Sona BLW, Sundram Fastners, and to a lesser extent, Samwardhana Motherson International Ltd. One would keenly watch the duration of the strike and whether it spreads to other plants as well,” Jay Kale, senior vice president at Elara Capital, said.

Sundaram Fasteners’ exposure to the three companies in the US is at around 10%, while for Samwardhana Motherson International it is 3-4%, people aware to the matter told Mint.

“North America is very significant market as far as Indian auto components exports are concerned. We are closely monitoring the situation in Detroit as things unfold. We are hopeful that issues will be amicably resolved in mutual interest of the workers as well as the industry,” said Vinnie Mehta, director general, Automotive Components’ Manufacturers’ Association.

The workers’ protest in Detroit reached a critical point on Monday with Ford deciding to temporarily lay off 600 workers even as mediators from the White House intervened to find a resolution between the three automakers and the protesting workers, according to the Financial Times.

Updated: 19 Sep 2023, 01:01 AM IST