Auto worker strike, Trouble for U.S. auto business.

 INFLATION, STRIKES AND ERA OF NON-COMPETITIVENESS

SHORT TERM GAINS, LONG TERM DECLINE IN U.S. AUTOS

This week we saw the beginning of the U.S. auto workers strike, they are demanding 40% pay raises and a 4 day work week. If they really get their desires, they may end with a 3 day work week as the global competition will gladly take the opportunity to take global market share.

In 2022 China produced 27 million units, U.S. 10 million units..Japan 7.8 million units, India 5.4 million, S. Korea 3.7 million. Total global production 85 million units.

Light vehicles domestic sales 2022.

China            23.5 million

U.S.              13.7 million

Japan            14.2 million 

India               3.8 million

Germany        2.6 million

In 1950 the U.S. produced 80% of the worlds vehicles, today around 12%. This number is going to be further challenged as other countries expand their car production.

Chna is of course the biggest producer of Autos now, and growing quickly, domestic sales are exploding and they and they now sell 60 % of the electric vehicles. They have positioned themselves to dominate the electric car batteries and components.

At present, many of the components of U.S. auto production are foreign made, at one time all the components, from switches, electronics, machined parts, tires and upholstery were produced domestically. It was often stated that as the auto industry goes so does the U.S. economy. It could be now estimated that only 25% of auto components are domestically made.

So in fact U.S. cars are today mostly assembled in the U.S. but they are largely produced elsewhere. 

As manufacturers are squeezed by government mandates, government regulations and union demands  they attempt to adjust operations to sustain competitiveness. 

We can expect more of the production of components to be outsourced to wherever it can be produced, without the expense of plant, equipment, inventory and all the hoops to jump though to make this happen. This is economic reality that will not be changed.

The U.S. is now just a small part of a huge global auto business and the growth is mostly in other parts of the world.

The auto worker demands are just the first of what is likely going to be a tend, especially in an election year. The Democrat administration owes its constituents a little payback. We can expect to see the teachers union demand to be compensated for their support and to offset the inflation of this administration. 

This whole affair may end with hyper-inflation and then a further decline in the U.S. economy.