The General Motors Auto strike heads into week three and Michigan is feeling the effects of the pressure placed on GM by auto workers.
What We Know:
- According to a report by LendingTree and Moody’s Investors Service, Michigan was already the state most likely at risk to fall into a recession prior to the strike. With the strike including 48,000 workers from 55 facilities, Michigan is at the greatest risk of a decline in consumer purchases as well as drops in income and tax revenues.
- Patrick Anderson, CEO of Lansing’s Anderson Economic Group consulting firm says, “Past 10 days, you’re starting to risk Michigan going into a one-state recession, particularly southeast Michigan.” A strike that lasts about a week would create a “fractional drop” on national economic growth this quarter, Anderson said. A work stoppage, however, would take much longer before it could send the U.S. economy into a recession — and that’s not likely.
- The amount of pressure the strike puts on Michigan’s municipal and state bonds depends on “how long GM facilities remain shut and, for local governments, whether income tax revenues constitute a significant revenue source,” according to Moody’s.
- “If the strike drags on for many weeks, they estimate that total state tax withholdings will be reduced by $3.5-$4.6 million per week (or about 1.75%-2.3% of targeted weekly statewide withholding revenue), including estimated effects on other businesses,” Moody’s said.
GM is said to be losing $100 million in revenue per day, but have enough cash, dealers and enough inventory to weather the ongoing storm.