A 10-day UAW strike (United Auto Workers) could result in a loss of $5 billion, affecting nearly every sector of the automotive industry, including dealers.
The total was calculated by the Anderson Economic Group (AEG), a consultancy based in Michigan, which combined the expected losses of UAW members, Stellantis, Ford, General Motors and ancillary businesses such as franchised dealers. The last time the labor union and an automaker failed to form a contract by the deadline was in 2019, during which GM lost $3.6 billion over a period of 40 days. While the firm notes that the effects of previous strikes have had little effect on the retail automotive sector, Tyler Theile, AEG vice president, notes that “with current inventories hovering around only 55 days, the industry looks different than it did during the last UAW strike.”
Since the COVID pandemic, dealers have seen new vehicle inventories fluctuate significantly between brands and models. While car shortages suppressed sales across most segments, the resulting inflated prices supplemented bottlenecked demand, ultimately driving profits up for many retailers. OEMs contributed to this trend by releasing more models for the luxury and premium segments, whose high-income buyers were better positioned to afford price hikes. A UAW strike would likely reinforce some of these trends. But whether dealers can again count on strong pricing to compensate for low sales is less certain.
New vehicle values have shown signs of reversing course as dealers and OEMs look to cure stagnating demand by offering discounts and incentives. Should the UAW strike, prices could skyrocket once more, upending the industry’s efforts to attract customers back to the market. Since production would also be disrupted, retailers may be unable to obtain the luxury and premium models that have, until now, protected profits. In essence, while the car market has so far seen low supply, high demand and high pricing, a UAW strike could create low supply, low demand and even higher pricing. Whatever happens, dealers should not expect to see a similar outcome to the 2019 walkout but rather prepare for the possibility of a complicated future. The deadline for the UAW and Detroit automakers to reach an agreement is September 14.
