On September 15, 2023, the United Auto Workers (UAW) initiated a strike for better wages and improved benefits. The rising cost of living is one reason for the strike. Additionally, while workers' wages have remained relatively stagnant over the past decade, profits for the three largest vehicle manufacturers in Detroit have soared. From 2013 to 2022, these automakers saw profits grow 92%¹.
While the UAW's demands are understandable, everyday consumers may worry about the impact the strike will have on car prices—and they have good cause for concern. A shortage of supply may mean a spike in automobile costs, in both the new and used car markets. We explain who may be impacted below.
What You Need to Know About the UAW Strike
The Detroit Three, or D3, refers to General Motors, Ford, and Stellantis. Between the three of them, these automakers account for 40% of the United States car market².
The UAW represents the interests of auto workers employed by the D3. Exactly what are they asking for? As of mid-October 2023, the negotiations focused on three main points:
- Higher wages: Salaries haven't kept up with inflation. The UAW first requested a 40% raise, which they then dropped to 36%.
- Cost-of-living adjustments: In the past, auto workers benefited from regular cost-of-living adjustments to their wages. However, this policy ended in 2009. They want to reinstate it in the future.
- Benefits for new workers: A tiered system of employment currently means new workers don't get the same benefits as long-time workers, such as pension benefits. The UAW wants to eliminate this tiered system, ensuring equitable benefits for all workers.
The negotiations on these terms have resulted in a lot of back and forth. For example, the companies countered the request for a pay raise with a proposed 20% increase. The companies' argument is that meeting UAW's terms will hinder their ability to invest in “big picture growth” and innovation.
How the UAW Strike May Impact the Car Market
Even though tentative deals with the three automakers were reached in mid-October, the strike has already resulted in economic losses of $9.3 billion². If the tentative agreement isn't finalized, and the strike continues, shortages that impact car prices may result.
As of mid-October 2023, the UAW strikes haven't yet impacted retail prices. However, experts suggest that the car market will be impacted if the tentative agreements fail, which would extend the strikes deeper into the fourth quarter of 2023³.
The D3 anticipated the strike and stocked up on inventory beforehand. However, that inventory won't last forever and will be harder to replenish given the six-week break in manufacturing. As dealerships start to feel the pinch, they won't have enough cars to meet consumer demand. Some suggest this could mean price hikes of 20% or more for new cars from the affected manufacturers⁴.
The outlook is brighter for used cars, though not ideal. Estimates suggest that the wholesale value of used cars will still be down at the end of 2023, compared to the previous year, which was impacted by pandemic-related pricing surges. As a result, prices may basically stay where they are⁵.
Used car dealerships looking to protect their business during this time can ramp up their automotive merchandising to focus on strategies that shift business to other parts of their operation and prioritize inventory acquisition from manufacturers not affected by strike activity.
Sources:
- Hersh, A. (12 September 2023). UAW-automakers Negotiations Pit Falling Wages Against Skyrocketing CEO Pay. Working Economics Blog. Retrieved October 27, 2023, from https://www.epi.org/blog/uaw-automakers-negotiations/
- Hoskins, P. (26 October 2023). UAW strike: Ford and Union Agree Record Pay Rise in Tentative Deal. BBC News. Retrieved October 27, 2023, from https://www.bbc.com/news/business-67224476
- Betterton, R. (16 October 2023). Will the Automotive Industry Strike Impact Car Prices? Yahoo! Finance. Retrieved October 27, 2023, from https://finance.yahoo.com/news/automotive-industry-strike-impact-car-153252922.html
- Cerullo, M. (28 September 2023). United Auto Workers Strike Could Drive Up New and Used Car Prices, Cause Parts Shortage. CBS News. Retrieved October 27, 2023, from https://www.cbsnews.com/news/autoworkers-strike-could-drive-up-new-and-used-car-prices-cause-parts-shortage/
- Hunda, T. (16 October 2023). The Two Ways The UAW Strike Could Affect Car Prices, Per An Industry Expert. The Autopian. Retrieved October 27, 2023, from https://www.theautopian.com/the-two-ways-the-uaw-strike-could-affect-car-prices-per-an-industry-expert/
