GM, Stellantis dealers and customers face dwindling parts as UAW strike expands

Lithia Motors

23/09/2023 11:00

By Doyinsola Oladipo and Abhirup Roy
       Sept 23 (Reuters) - U.S. auto workers expanded their
strike on Friday with a clear target for distress: dealers who
sell and service GM and Stellantis vehicles. 
    Selling and installing parts is one of the most profitable
parts of the auto business, but it is also one of the most
vulnerable, because the industry relies on just-in-time
shipments. The strategy of choking parts delivery increases
problems for some dealers who say it already had been difficult
to source some components.
    "It's going to become near impossible to get a lot of these
parts," said Richard Fasulo, a diagnostic technician from
Wappinger, New York, who works for a Cadillac franchise dealer
and used car dealers. The broader strike, which targets 38 parts
distribution centers owned by GM and Stellantis, "is going to
have these shops telling their customers 'We don't know when we
can fix your vehicle. It might be indefinitely.'"
    Selling repair parts and service returns is the key to many
dealers' profits, and returns 40% or better gross profit margins
for big auto retail chains such as AutoNation  AN.N  and Lithia
 LAD.N .
    "If your car doesn't work, you're just stuck. It's just
mean, don't you think?" said Howard Drake, a GM dealership owner
based in California, describing the difficult situation for
customers needing repairs. 
    "I thought the punishment would be in the form of adverse
selection for customers with limited choice. I didn't think it
would be my lot stacked up with cars that I can't fix because
they won't man a parts distribution center," he said. 
    National Association of Auto Dealers President and CEO Mike
Stanton said: "Dealers don't want to see anything to limit our
potential to serve customers, so we certainly hope automakers
and the UAW can reach an agreement quickly and amicably."
    The UAW had been expected to expand their strike by shutting
down plants that made the highest-profit vehicles, such as
pickup trucks. But automakers have built up vehicle inventory
and for many dealers problems with repairs will start soon.
    "It's definitely going to impact customers," said Thomas
Morris, 60, who went on strike on Friday at a General Motors
parts distribution center in the suburbs of Philadelphia.
    The center serves GM dealerships from Pennsylvania to Maine,
moving some 30,000 parts for auto repairs each day, workers
said.
    GM said in a statement the company has "contingency plans
for various scenarios" while Stellantis said it was awaiting a
response from UAW to their "competitive offer" on Thursday and
looking forward to a "productive engagement".
    Arthur Wheaton, director of labor studies at Cornell's
School of Industrial and Labor Relations, said the UAW had made
a smart move.
    "I think it is a great strategy going after the distribution
centers," he added. Services are big business, he said. "That's
how they make a lot of their money."
    Brad Sowers, the CEO of Jim Butler Auto Group which owns the
largest Chevrolet dealership in St.Louis, Missouri, said if a
deal is not inked in 60 days he'll be upset, even though he had
the foresight to load up on parts in anticipation of the strike.
    "I just want them to get together and get it done," he said.

 (Reporting by Abhirup Roy in San Francisco and Doyinsola
Oladipo in New York and Jarrett Renshaw in Pennyslvania; editing
by Peter Henderson and Shri Navaratnam)
 ((abhirup.roy@thomsonreuters.com; +1 415 941 8665;
@abhiruproy30;))