Auto Strike Takes Toll on Illinois Suppliers

Strategic Insights -

A two-week summer vacation starts today for more than 900 workers at Borg-Warner Automotive Inc.'s transmission components plant in Bellwood, but for some, the break may be extended into temporary layoffs next month due to the United Auto Workers' (UAW) strike against General Motors Corp. The walkout is costing BorgWarner $4.5 million per week, affecting dozens of Illinois auto suppliers, including Des Plaines-based Littelfuse Inc. and Waukegan-based Cherry Corp. Alexander Paris, president of Chicago's Barrington Research Associates Inc., predicts earnings disappointments, particularly in August when volume production traditionally increases.

Key Takeaways:

  • Borg-Warner's transmission components plant in Bellwood will start a two-week summer vacation for over 900 workers, with some potentially facing temporary layoffs in August due to the UAW strike against General Motors Corp.
  • The strike is costing Borg-Warner $4.5 million per week, affecting dozens of Illinois auto suppliers, including Des Plaines-based Littelfuse Inc. and Waukegan-based Cherry Corp.
  • Local auto parts suppliers have diversified their business to reduce dependence on the auto industry's boom-and-bust cycles, with someseeing potential to win new business if General Motors prevails in the strike.
  • Airtex Products Inc. in Downstate Fairfield supplies water pumps to Ford but has been less successful in cracking GM, which accounts for 5% of its sales.
  • Borg-Warner laid off 40 of 400 workers at a plant in southwest suburban Frankfort, and if the GM strike isn't settled by July 13, 200 workers in Bellwood are likely to be put on temporary layoff.
  • Family-owned Elgin Industries Inc. in Elgin, with 200 employees, supplies piston pins and push rods to GM but has avoided layoffs by eliminating overtime and shifting production.
  • ADA Metal Products Inc.'s sales have been reduced from over three-fourths to less than half of its original total as the company turns out metal stampings for the computer, plumbing, and power tool industries.

Statistics:

  • Over 140,000 workers are idled due to the UAW strike against General Motors Corp. in North America.
  • The strike is costing Borg-Warner $4.5 million per week.
  • GM represented 11% of Cherry's $452 million in sales last year.
  • LGMR (Borg-Warner's parent company) had $1.77 billion in revenues last year, with 17% coming from GM.
  • GM contributed $8 million ($4.5 million x 2) in lost revenue to LGMR if the strike continues beyond mid-July.
  • Airtex Products Inc. supplies engine core plugs to GM from plants in Schaumburg and Canada, with $42 million in annual sales.
  • ADA Metal Products Inc.'s sales have been reduced from over three-fourths to less than half of its original total.

Sources:

  • Alexander Paris, president of Chicago's Barrington Research Associates Inc.
  • Philip Haag, president of Mercury Products
  • Wallace Hopp, a Northwestern University professor of industrial engineering
  • John F. Fiedler, Chairman and CEO of Borg-Warner
  • John Skok, president of Elgin Industries Inc.
  • Byron Barkules, general manager and part-owner of ADA Metal Products Inc.
  • "UAW Strikers Target GM Parts Plants Nationwide" by Bloomberg News, not found in the text.
  • "General Motors to Breach Contract with Suppliers" by Chicago Tribune Staff Reporter, June 22, not found in the text.