The UAW strike expansion could soon impact consumers. Here’s how

The United Auto Workers’ expansion Friday of its historic strike against the Detroit automakers to 38 General Motors Co. and Stellantis NV parts distribution centers nationwide promises to snarl parts deliveries to customers and dealers.

The strategy appeared to be a strategic one by the UAW to avoid further layoffs at assembly and powertrain plants while still providing another source of leverage and “inflicting difficulties for automakers,” S&P Global Mobility analysts wrote in a note.

“It moves the strike to the consumer by limiting the parts that they can get to fix their cars,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. “There have been a lot of parts that have been in short supply before this, and this is just going to exacerbate that problem.”

Fiorani expects that GM and Stellantis will do “everything they can to keep their dealers and their customers happy,” including staffing parts warehouses with salaried employees — a move that Ford was prepared to employ in the run-up to the strike.

“Dealers will be hurt because they can’t fix vehicles, and that’s a large portion of their income. Consumers are going to be hurt when they can’t get their vehicles fixed,” he said. “It’s going to cause bad blood among consumers, but it depends on where the consumers’ loyalties lie, who they blame, whether it’s the dealer, whether it’s the manufacturer, whether it’s the union.”

Rival Ford Motor Co., meanwhile, was spared similar strike action Friday against its parts operations because of meaningful progress at the bargaining table.

Experts say the silver lining for auto suppliers already affected by work stoppages at three Detroit automaker plants in Michigan, Ohio and Missouri is that the latest move is unlikely to have much effect on production.

“The aftermarket is the tail,” said Sheldon Klein, who represents auto suppliers for law firm Butzel Long. “The production operations is the dog. The impact on the companies is not as great as 38 plants suggests. As long as it doesn’t affect auto assembly, the impact on suppliers is limited at best. Suppliers don’t have to shut down their plants because they are not able to ship replacement headlights.”

Public support for strike

The UAW so far enjoys strong public support for the strike.

A Reuters-Ipsos poll conducted over two days earlier this week found 58% of Americans support the UAW’s strike. That support was durable across party lines: Democrats and Independents supported the strike by wide margins (72% and 63% respectively), but more Republicans also supported it than opposed it (48% to 47%).

The poll indicated a majority of people supported the strike regardless of age, income, race or ethnicity, but Americans between the ages of 18 and 34, people with a household income below $100,000, and Black Americans were the most likely to agree.

The survey of more than 1,000 people was conducted on Sept. 19 and 20 in English. It has a “credibility interval” of 3.8 percentage points.

It’s possible that delays in car repairs due to the strike could chip away at public support: “Along with the specter of ongoing low inventory and some vehicles perhaps being in even shorter supply as a result, the situation also creates potential challenges for dealers and customers, if repair parts become difficult to source,” said Stephanie Brinley, associate director of automotive intelligence at S&P Global Mobility.

“In announcing this move, the UAW said automakers and dealers could ensure customers aren’t hurt, if they avoid ‘price gouging.’ It is unclear how much patience an average consumer will have if they cannot get a vehicle serviced.”

In detailing the new strike targets, UAW President Shawn Fain said the move was aimed at impacting GM and Stellantis’ repair operations. His message to consumers: “The way to fix the frustrating customer experience is for the companies to end price gouging. Invest these record profits into stable jobs and sustainable wages and benefits. It’s that simple.”

What dealers are expecting

Rhett Ricart, owner of Ricart Automotive Group in Columbus, Ohio, isn’t expecting much of an immediate impact. Dealers have been stocking up on parts in anticipation of a strike, he said, and there are alternatives, such as dealers swapping parts with each other or turning to non-factory suppliers. But if the strike lasts beyond a month or two, customers could start to feel the crunch.

“Everybody’s gonna have to pitch in, but I think we’re gonna be in decent shape here for the short (term),” said Ricart, whose group sells both Ford and GM vehicles. “If … you have a recall part that’s on order or a technical service bulletin part on order, that’s going to cause problems with dealers. But what dealers will do, if we need to, we’ll find a way to get people into a loaner car or something like that.”

Scott Kunes, chief operating officer at Kunes Auto and RV Group, said he didn’t anticipate a strike of the parts distribution centers and is expecting a pretty immediate disruption for customers.

“Most people don’t realize that we get deliveries pretty much five days a week from our parts distribution centers. So oftentimes, a vehicle that we’re working on, we may be ordering that part and receiving it overnight or the next morning,” he said. “And if that is shut down, we don’t stock nearly as many parts as people may think, especially if it’s a special order part or a manufacturer-specific part.”

Leading up to the strike, his dealership group — which has 44 stores, including 23 Detroit automaker dealerships, across Wisconsin, Illinois, Minnesota and Iowa — bulked up orders of items like windshield wiper blades and oil filters, but Kunes is more worried about parts needed for repair jobs, especially urgent ones. And he’s concerned that, eventually, supply chains for third-party parts could become constrained if more dealers with GM and Stellantis stores have to look for alternatives to factory parts.

“This is probably the way that the strike was going to have the biggest impact on consumers immediately, to have these parts distribution centers go on strike,” said Kunes. “It is concerning for our business going forward.”

Wall Street reacts

Friday’s news received mixed reactions from Wall Street, where the expanded strike prompted anxiety, but the exclusion of Ford gave rise to hope of at least one settlement being in sight.

“This is an aggressive move that essentially goes at the hearts and lungs of auto operations for GM and Stellantis given the ripple impact/pressure points,” Dan Ives, equity analyst at Wedbush Securities, wrote in a research note Friday.

“The UAW and GM/Stellantis now have crossed the invisible line, and the UAW strike is about to get a lot nastier, which could have a massive impact on GM’s EV plans as well as billions of lost revenue/production depending how long this UAW debacle lasts.”

Following the announcement, shares in the auto companies rallied 1% for GM and Stellantis and 3% for Ford, Garrett Nelson, an equity analyst at CFRA Research noted.

“Investors greeted the news that it is closer to a deal with (Ford) as raising hopes that any agreement could act as a template for deals with GM and (Stellantis). However, the two automakers continue to reject several key demands of the UAW,” he wrote.

“We think the walkout at the parts distribution centers of GM and (Stellantis) could have a debilitating impact on each company’s auto production and repair capabilities, raising the probability that the companies will either make concessions similar to those made by (Ford) or announce countermeasures.

Economic impact

In the first week, the strike has resulted in an economic loss of more than $1.6 billion, according to estimates from East Lansing, Michigan-based consulting firm Anderson Economic Group LLC, which has done business for GM and Ford.

The losses have been concentrated in Michigan, Ohio, Missouri, Kansas, Indiana and Alabama from the walkouts and layoffs. A longer strike, according to the researchers, would spread losses to assembly and supplier plants as well as dealers across the country.

“Because the auto industry is highly integrated across suppliers and assembly plants, shutting down one plant will cause layoffs and shutdowns at other plants,” CEO Patrick Anderson said in a statement. “That includes supplier businesses, especially those that are dependent on a handful of contracts with the OEMs.”

The losses include $107 million in lost direct wages and $511 million in company losses, according to the report. The industry’s economic loss, including at suppliers, is $1.174 billion. Industry consumer and dealer losses represent $470 million. The strike is expected to affect customer selection sooner than in the past, AEG Vice President Tyler Theile said in a statement

“Consumers and dealers are somewhat insulated in a very short strike,” she said. “However, with current inventories hovering around only 55 days, the industry looks different than it did for the last UAW strike. In fact, automakers have only about one-fifth of the inventory they had in 2019.”

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This story was originally published September 22, 2023, 9:50 PM.