U.S. Auto Workers' Strike Has Left Indian Parts Makers Worried

When the U.S. auto industry sneezes, India's parts makers catch a cold. Such are the supply-chain dynamics of increasingly globalised manufacturing.

The U.S. auto workers had an unprecedented strike on Sept. 15 against three of the legacy Detroit automakers—General Motors Co., Ford Motor Co., and Stellantis NV, which owns Chrysler and Jeep brands—over demands for wage hikes and reduced working hours.

The strikes under the United Auto Workers labour union can cost 3,200 vehicles daily, according to S&P Global Mobility. And if the standoff isn't resolved quickly, it could ripple through the U.S. economy, according to Bloomberg.

The secondhand effect of the strike is already showing among India's auto-component makers, which supply these American heavyweights.

Sona BLW Precision Forgings Ltd., which operates a manufacturing plant less than 100 km from Detroit, rang the alarm bells on the third day of protests itself. "The company supplies to these three OEMs in the United States, directly or indirectly," it had said in an exchange filing on Monday.

"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." it said.

Sona BLW declined to comment when contacted for details on a likely impact, citing a silent period ahead of its second-quarter earnings on Sept. 30. The firm recently invested $1.6 million in its nearby Mexico operations.

The contagion is likely to spread to other original-equipment manufacturers, according to the Automotive Component Manufacturers Association of India. Sona BLW, Sundaram Fasteners Ltd., Bharat Forge Ltd. and Samvardhana Motherson International Ltd., which have sprawling operations in the US, are likely to be impacted the most.

"When it comes to Indian auto component exports, the North American market plays a crucial role," ACMA Director General Vinnie Mehta said in response to emailed queries. "We are closely monitoring the developments in Detroit and remain hopeful that any issues will be resolved in a mutually beneficial manner for both the workers and the industry."

In the last financial year, North America accounted for 32%, or $6.5 billion, of India's auto-component exports, out of which the US alone accounted for 28%. Sona BLW, which is the only Indian OEM so far to have warned of an impact due to the UAW strike, derived 43% of its Rs 2,675-crore revenue from operations in 2022–23, according to an ACMA report on Aug. 7.

However, an analyst of a brokerage firm saw the impact as limited, saying one has to see this from the production angle—whether the Indian auto-part makers are making in the US. In that case, forging companies like Sansera Engineering Ltd. and Bharat Forge are impacted the most.

Most Indian ancillaries export to Europe, and, therefore, the impact of the UAW strike won't be that widespread, he told BQ Prime on the condition of anonymity as he is not authorised to speak to the media.

The U.S. Impact

India's auto-component makers can take cues on how pronounced the impact of the UAW strike will have on their operations and exports.

Ancillaries that supply to GM, Ford and Chrysler have more than $38 billion of revenue at risk if strikes by the UAW expand as threatened, according to Bloomberg. At least 76 publicly traded companies supplied to Detroit's Big Auto in their most-recent reporting period, Bloomberg data showed.

Suppliers are going to feel the pain the most as they haven't recovered fully (from inflation spike and chip shortages), and they are not getting the same returns that they've historically been achieving," Brandon Boyle, a partner at auto consultancy Roland Berger in Detroit, was quoted as saying by Bloomberg.

If the situation escalates, the car companies or their direct suppliers may have to support smaller companies in the supply chain to protect their production plans, Boyle said.

On Wednesday, Suprajit Engineering Ltd.—a maker of halogen bulbs and control cables— said operations at its Mexico plant would also be impacted. 

"The Metamoros plant of Suprajit in Mexico supplies to all these three majors and also to their Tier-I/II suppliers," the company stated in an exchange filing. "This group of customers forms approximately 50% of Metamotors business."

"Unless there is early resolution, operations at Metamoros can be affected to the extent of reductions in volumes by these customers."