15 November 2023

The ramifications of the US Auto Strike



By Jim Thompson

Hats off to Shawn Fain, President of the United Auto Workers, and his team on a very successful striking strategy amongst the Big 3 US automakers. It remains to be seen if they won the battle only to lose the war--the longevity, or, if you prefer, sustainability of the Big 3 will be determined down the road.

In the short term, though, this likely means higher labor costs in the pulp and paper industry. It's no secret that Mr. Fain & Co pulled out some very high wage increases (plus other goodies) in their negotiations. These will translate to other industries including ours.

For basic pulp and paper manufacturing (read: not converting, box making or printing) this will not do too much to the cost structure of operators because operators are a small component of costs already. Where it will hit is maintenance, our industry's biggest labor component.

This will be something for the analysts' comunity to watch. I see paper companies responding in three possible ways to high maintenance labor costs:

1. Pay it
2. Use more contractors
3. Defer maintenance

2 and 3 are bad ideas. A better idea would be (4) focus more energy on managing maintenance correctly.

Especially watch out for number 2, it is the laziest and poorest way to manage the mills.

Announcement: Paperitalo's United States Paper Mill Directory 2024 For Wall Street is now available on Amazon. Please visit https://www.amazon.com/dp/B0C79SSBXK

Note: Neither I or anyone on the Paperitalo staff own any individual pulp and paper stocks.

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