Potential UAW strike could cut production, push up vehicle prices, analysts say

Lithia Motors

11/09/2023 17:12

By Priyamvada C
       Sept 11 (Reuters) - A prolonged coordinated strike by
the United Auto Workers (UAW) union against the Detroit Three
automakers could cut production by thousands, potentially
pushing up vehicle prices and exacerbating supply-chain
disruptions, analysts said.
    The auto industry is on edge as the current four-year
contracts between the UAW and General Motors  GM.N , Ford Motor
Co  F.N  and Stellantis  STLAM.MI  for hourly U.S. workers
expire on midnight Sept. 14, after which the union's chief has
warned of a possible coordinated strike.
        New vehicle prices may rise by less than 2% if the
strike lasts about two weeks, according to automotive consulting
firm J.D. Power.
    "Everyone's going to see higher prices regardless of the
company you buy from if it (strike) continues for more than two
weeks," said Tyson Jominy, vice president, data and analytics at
J.D. Power. 
        He added that companies such as Toyota, Honda and
Volkswagen may also benefit if the domestic brands quickly run
out of inventory to sell.
    Jominy said the used car market, which quickly follows the
underlying trends of the new market, may see a greater impact on
prices if there are fewer substitutes for buying a vehicle.
    CFRA analyst Garrett Nelson said strikes at all three
automakers would cut North American auto production by 150,000
units per week, resulting in higher vehicle prices as
inventories deplete.
    That would mean an end to the trend of cooling vehicle
prices in recent months, at a time when inflation continues to
pinch U.S. consumers. 
        
  
        "Even if the UAW continues to negotiate beyond its
deadline, the lack of a deal and threat of a strike should
discourage auto dealers from offering discounts on their
existing inventory and drive an uptick in vehicle prices," J.P.
Morgan insurance analyst Jimmy Bhullar said.
    Deutsche Bank previously estimated that a strike would hit
earnings at each affected automaker by about $400 million to
$500 million per week of production.
    GM and Ford are also in the midst of a multi-billion dollar
EV transition and brokerage Wedbush estimates adoption of some
major UAW proposals to result in an increase in the price of
electric vehicles rolling out over the next 12 to 18 months.
    "(Ford CEO Jim) Farley and (GM CEO Mary) Barra both face
some tough decisions ahead and find themselves with the back
against the wall," Wedbush analyst Dan Ives wrote in a note.
    The resulting disruptions from any strikes are also likely
to benefit EV leader Tesla  TSLA.O , industry experts said. Some
dealers are also expected to gain from shortages of vehicles.
    "The big thing to keep in mind (is) that (the) UAW strike
could help stabilize our margins, which is quite nice," U.S.
auto retailer Lithia Motors'  LAD.N  CEO Bryan DeBoer said
during a July analyst call.
    Another large dealer, AutoNation  AN.N , previously said it
had built up inventories from domestic manufacturers, which
should provide some cushion.
    However, UAW president Shawn Fain rejected the idea that
worker wages were responsible for auto prices going up in the
last few years.
    In a video released on Thursday titled "Here's what the Big
Three and the corporate media's NOT telling you about car
prices," Fain said "corporate greed" was responsible for rising
car prices.
    "In the last four years, the average price of a new car is
up 30%, meanwhile auto worker wages have risen a meager 6%,"
Fain said.

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Average vehicle transaction prices in August 2022 vs 2023    https://tmsnrt.rs/3Z9tu1w
EXPLAINER-Auto industry on tenterhooks ahead of potential UAW
strike against 'Detroit Three'     urn:newsml:reuters.com:*:nL4N3AN24H
UAW ready to negotiate around the clock as strike deadline nears
    urn:newsml:reuters.com:*:nL1N3AN15B
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Priyamvada C, Nathan Gomes, Abhijith Ganapavaram
in Bengaluru; Editing by Anil D'Silva)
 ((Priyamvada.C@thomsonreuters.com https://twitter.com/priyamouli1812?lang=en;))