Members of the United Auto Workers (UAW) union recently voted overwhelmingly to authorize a strike against General Motors, Ford, or Stellantis if the ongoing negotiations regarding a new labor contract fails. If your company is a parts supplier for any of these three automobile manufacturers, you should be aware that a UAW strike may lead these manufacturers to attempt to avoid or delay performance under their supplier contracts. A strike could therefore present issues that significantly effect contractual relationships in the automotive industry, including contracts through which your company supplies parts to the automobile manufacturers and contracts with your company’s suppliers.

With the potential of a UAW strike looming, it is essential for automobile parts suppliers to prepare to navigate this situation. If you are a supplier, the most important action that you should take is to ensure you fully understand the contractual rights between your company and both your customers and your suppliers. With a full understanding of how the strike affects your contractual rights, you can position your business to effectively manage the potential implications a UAW strike may have on the industry.

If you supply parts to one of the three Detroit automakers involved in the UAW negotiations – General Motors, Ford or Stellantis – your contract with that company may have provisions that alter each parties’ rights in the event of a strike. These provisions could include, but are not limited to, force majeure clauses, termination clauses, indemnification agreements, and limitation of liability clauses. You should ensure that you understand all rights and obligations under each agreement that you have with these three companies. An analysis of how those rights and obligations could be impacted can help your company analyze its options and the associated risks if the current UAW negotiations result in a strike.

In the same way that the three Detroit Automakers may attempt to leverage provisions of their supplier agreements to cancel, delay, or reduce orders, your company may be entitled to invoke contractual provisions that are contained in your contracts with your suppliers in order to reduce your exposure or prevent losses. You should be aware of your options under each supplier agreement and be prepared to analyze the impact that enforcing those provisions may have on both the immediate and long-term future of your company.

Given the uncertainty surrounding the immediate future of the automotive industry, strategic preparation is critical to ensuring your business is able to navigate this situation. If you have any questions or concerns regarding the impact the impending strikes may have on your contractual rights or obligations, Varnum’s experienced automotive supply chain attorneys are available to assist with contractual analysis and provide tailored guidance and support to protect your interests.