UAW Strike Will be Devastating for U.S. Car Industry

As the deadline for the United Auto Workers' (UAW) announced strike creeps closer without the union having reached a deal with manufacturers, experts warn that the impact of the workers' action could be devastating for the U.S. car industry.

The strike was authorized by the UAW after the expiration of their current contract with the "Big Three" American car makers—General Motors, Ford, and Stellantis—expires at 11:59 p.m. on September 14.

Unionists want the three manufacturers to commit to new contracts that would include pay increases of 40 percent over four years, and limits on part-time workers and forced overtime.

Unless a deal agreeing to the union's demand for pay and benefit increases is reached before the September 15 deadline, UAW President Shawn Fain said that workers are prepared to strike.

Each car maker has a separate contract with workers, so it's possible that at least one could avoid facing work stoppages. But experts believe it's likely that a potential strike would involve all three companies.

"The union has shown a willingness to strike all three Detroit-based automakers if necessary, which would make it unusual in its size," Tyson Jominy, Vice President of Data & Analytics at J.D.Power, told Newsweek.

"A UAW strike would likely halt production of all domestic vehicles, though the strike could target one or two automakers while continuing production at the others," Karl Brauer, Executive Analyst of iSeeCars, told Newsweek.

"The strike looks very likely, and the real impact will be based on how long it lasts. A few days will have minimal impact on new car supply, while a few weeks or longer could drastically reduce the supply of new models at dealerships."

What Would Be The Impact on the U.S. Car Industry?

"The industry has just started to recover from the twin disruptions of COVID-19 and the supply chain, with inventories of new cars starting to build at dealerships," Jominy said.

"This means that dealers are starting to negotiate with consumers again, making markups above MSRP [manufacturer's suggested retail price] a thing of the past," he added.

The UAW strike could potentially disrupt this progress, reducing the numbers of new vehicles produced in the country.

"GM, Ford, and Stellantis assembly plants produced about 2.9 million vehicles this year in the U.S. between January and July 2023," Cristina Benton, Director of Market and Industry Analysis at the Chicago-based Anderson Economic Group, told Newsweek.

"These three OEMs [original equipment manufacturers] produced over 360,000 cars in July alone in their U.S. assembly plants, and represented about 50 percent of all vehicles produced in the U.S. during January and July of this year," she added.

"While a UAW strike will significantly impact car production, the union's strategy is uncertain. Regardless, it is likely a significant number of vehicles, many in popular consumer segments, will not be produced during the strike."

According to Benton, consumers would see "little impact" in the event of a very short strike, "as most dealerships have available cars on the lot to meet consumer demand."

The impact would be worse if the strike lasted longer, she said. "Auto inventories are lower than they were in 2019, and if the strike lasts longer and dealership inventories deplete, the strike will affect consumers much sooner," Benton added.

"This is particularly true for high-demand pickup trucks and SUV vehicles," she continued. "In recent months, new-vehicle prices have been decreasing as inventory has improved and manufacturer incentives have increased. A longer strike could put pressure on new and used vehicle prices if vehicle availability is limited or reduced for certain cars."

Would A Strike Impact Car Prices?

Experts are split on how a potential UAW strike could impact the price of new and second-hand cars.

According to Brauer, the rise in new car prices over the past four years was due to restricted production caused by supply chain issues—a problem that could be exacerbated by a UAW strike.

"A UAW strike would cause restricted new car production for a different reason, but the effect would be the same—increased prices due to a lack of new vehicle supply," he said.

A strike, said Brauer, "would primarily impact domestic vehicle production, but some buyers who intended to buy a domestic vehicle will switch to import brands." He added that this will likely "drive up demand and prices on those models, meaning a UAW strike would increase pricing on all models to some extent."

Jominy agrees, saying that "consumers of all brands will potentially see higher prices if the strike persists longer than a few weeks."

While transaction prices have been falling recently, monthly payments are still up dramatically since before the pandemic. Monthly payments on new cars were $726/mo in August, according to Jominy—up more than $150 since pre-COVID-19.

"The Detroit companies will quickly cut incentives and dealers will stop negotiating," Jominy said. "With over a third of the industry that are domestic sales showing higher prices, other dealers across the industry will charge more as consumers shift over to their showrooms. Therefore, no consumer will be immune from the impact of a strike that runs for more than a few weeks."

The price increase would also extend to used vehicles, with many of the dynamics experienced during the supply chain crisis likely re-emerging if the strike lasts longer than a few weeks, Jominy said.

"Consumers who can't get a new vehicle at the right price or with the right features will demand more used vehicles, increasing the price, while at the same time fewer consumers will trade in their existing vehicles, which will crimp supply of used vehicles, further increasing prices. This is a microcosm of what was experienced during the supply chain crisis."

On the other hand, the team of experts at Cox Automotive—the world's largest automotive service organization—is not expecting "any near term, notable impact on vehicle pricing or inventory for either new or used vehicles if there is a work stoppage by the UAW beginning September 14."

Mark Schirmer, Director of Corporate Communications for Cox Automative, told Newsweek that this is because "most of the key domestic brands have well-above-average days' supply right now, particularly Stellantis, a likely initial target."

In the short term, Schirmer said, the strike would not impact a majority of the market. "The Detroit 3—GM, Ford and Stellantis—only account for about 40 perncent of total U.S. sales in a given month," he said.

"As for used vehicles, the market already is in a relatively tight-supply situation – and a UAW action won't directly impact used-vehicle prices in the near or short term," he added. "New vehicles don't typically begin entering the used-vehicle market for three to five years."

While the duration of the potential UAW strike seems to be the determining factor on how severe the consequences of the workers' action could be on the industry, Jominy said that how long the strike would last "is the real unknown."