It has been almost four years since the last United Auto Workers strike, a significant event when nearly 50,000 General Motors employees went on strike for six weeks. Presently, there’s another impasse on the horizon, one that could have a broader scope and potentially last longer. Let’s find out with Insurecar.Info now!
The Current UAW Contract Situation
The current contract between the UAW and major automakers like Ford, General Motors, and Stellantis is set to expire on September 14. The UAW has put forth a range of demands, including a substantial 40% wage increase over the next four years and a reduced 32-hour work week. While Ford, GM, and Stellantis have made counteroffers, UAW President Shawn Fain described all three as inadequate during an online broadcast.
The Likelihood of a Strike
According to Ambrose Conroy, an expert in auto supply chains and founder of Seraph Consulting, a strike now seems highly probable. He states, “There is almost a certainty that a strike will occur at this point.” The key questions are which Original Equipment Manufacturers (OEMs) will be affected, and whether it will be a targeted tactical strike to prolong the UAW strike fund.
Conroy suggests that the UAW’s strike fund, amounting to $825 million, could last approximately 90 days. However, if the UAW opts for a “tactical” approach, only shutting down crucial factories, such as those responsible for engine and transmission production, the strike could endure for a much longer period.
The Impact on the Automotive Industry
This potential strike comes at a crucial juncture when manufacturers are just beginning to regain momentum in terms of dealer inventory and production. While some supply-chain issues persist, used-car prices are stabilizing, and new-car incentives are re-emerging.
Alex Yurchenko, Senior Vice President and Chief Data Science Officer at industry analyst Black Book, notes, “With increased inventory, we are seeing an increase in incentives: 5.2 percent of MSRP in August.” This is still below pre-pandemic levels (around 10.5 percent of MSRP) but significantly higher than the previous year (approximately 2.5 percent of MSRP).
Stellantis and Ford have not provided specific details about their dealer inventories or whether they have actively stocked up in anticipation of a potential strike. On the other hand, GM’s Director of Finance and Sales Communications, David Caldwell, stated that GM’s U.S. inventory remains “consistent,” with only a marginal 4% increase compared to the first quarter.
Caldwell points out that the comparison is based on an historically low level due to recent supply-chain disruptions. This year, conditions have improved, leading to higher production and better availability for customers compared to the past few years.
Parts Shortages and Their Impact
While current inventory levels might mitigate the impact of a strike on new-vehicle sales, shortages of crucial parts could become a more pressing issue. A report from the Detroit Free Press in August suggests that Ford is considering staffing its parts depots with salaried workers, a plan set in motion as early as July.
The Future of Incentives
The UAW has refrained from commenting on the likelihood or scope of a strike. Nevertheless, Ambrose Conroy from Seraph Consulting believes that the effects on buyers could be felt almost immediately.
“Incentives will disappear very soon after a strike is called, so consumers looking for a deal should buy now. Choices will become limited as automakers will again focus production on the highest-profit vehicles they can make, and the on-hand inventory will likely sell quickly,” he said.
Should the strike endure beyond 30 days, it is highly likely that used-car prices will see a significant rise, creating potential challenges for buyers in the market. In essence, be prepared for a potential surge in secondhand car prices if the strike persists.