The current auto workers strike is causing a great deal of unease for the current car market. If the strike is resolved soon, the effect on the market is expected to be minimal, but if the strike continues for weeks or months, dealers and consumers may be in a less than desirable situation.
Here’s how the UAW will affect the car market.
Why is the UAW on strike?
The UAW–the United Auto Workers–is on strike against three of the largest car manufacturers in the United States. The strike began when 13,000 workers at GM, Ford, and Stellantis walked out of factories in Michigan, Missouri, and Ohio on September 15. While the UAW represents 150,000 auto workers, they targeted their strike to strategic factories and locations. By focusing on assembly plants as opposed to other factories, such as engine plants, they started the strike where there was minimal disruption. GM, Ford, and Stellantis–the big three–had ramped up production over the summer in anticipation of a strike, so currently there is not a huge disruption.
But that may change as weeks go on and the UAW demands are not met. The workers are demanding the following changes in their upcoming contract negotiations.
A Pay Raise
The union is demanding a 36% wage increase over the next four years. The UAW is asking for the high raise in part because they have not had a cost of living increase in fourteen years. Automakers have countered their request with a 20% increase, but have commented that they will make up for this in other ways, such as lowering other benefits and reducing hiring in the future. The UAW has commented they will settle for anything below a mid-30s percentage increase.
A Reduced Workweek
The UAW proposed a reduction from 40 hours to 32 hours to give workers more of a work-life balance. The manufacturers have repeatedly denied this, countering instead with additional vacation time and possible paternity leave.
The union is requesting a significant increase in retirement benefits. They would like to see a return to traditional pensions, while the automakers are countering with additional 401(k) contributions.
The union has other demands for the companies as well, such as reinstating cost of living adjustments, the elimination of in-progression pay structure (a return to equal pay for equal work), and product commitments that will guarantee jobs for workers.
What will resolve the UAW strike?
Workers feel strongly that they have been taken advantage of while the profits of these companies have skyrocketed. The automakers on the other hand feel like the workers are paid competitive wages and that the strike will only hurt the economy at large. As with any strike, compromise on both sides is the only solution for the situation. Both sides have shown hints of certain concessions but both sides have sticking points that may take a while to resolve.
What’s the current state of the auto market?
Automakers ramped up production in anticipation of the strike, so there is no immediate shortage of cars. In fact studies have shown that dealerships currently feel comfortable with the amount of cars that they have on their lot.
The biggest fear for the immediate market is the psychology of the consumer. If consumers start to panic that they may not be able to get a car in the future they may put a huge demand on the market and drive prices up almost instantaneously. Dealers may also make a similar move. If they fear that they will not keep up on inventory they may drive prices up.
What effect could the strike have on the car market?
Should the strike continue for several weeks, the psychology of consumers and dealers will not be the only issue. Car prices are already at record highs as a result of the pandemic and post-pandemic supply shortages. The price of a new car skyrocketed from $39,919 in 2020 to an average of $48,798 in 2023. Combined with high interest rates, partially due to the Fed’s continued prime rate increases throughout the year, buying a new car is not cheap. A new car loan average interest rate is currently 7.46%.
Consumers with leases may also see the impact as dealers will want to retain their used cars and might be unwilling to extend the lease. Shortages of cars with the big three means that consumers will increase demand on other car manufacturers, causing prices to increase even further.
The used car market may also start to climb significantly if the strike continues. The used car market was extremely hot following the pandemic, but prices have started to normalize again. That could all change if the strike continues and the demand for used cars skyrockets.
The coming days and weeks will reveal more and have an impact on the economy in one way or another. If the demands are not met, more factories will see workers walk out. As certain workers walk out, the automakers are laying off other employees that cannot work without the parts supplied by the other factories. The ripple effect will be felt by all employees and all car consumers.
What should I do if I need a new car right now?
It’s hard to ignore the strike, but it’s important to not panic. Were you already in the market for a new car and still need one? Then go down to the dealership and see what deals are available. The chief operating officer for North America at Stellantis, Mark Stewart, has urged customers to keep buying cars. He has said repeatedly that there are contingency plans should the strike continue. It’s impossible to predict what will happen in the coming weeks, so the biggest thing you can do is try to make an informed decision, and not a decision rooted in panic or emotion.
If the time is right for you to buy a car, shop around with different dealers and look for loans with a number of lenders. There are a record amount of rejections right now, so it’s more important than ever to ensure your credit is good before you apply for a new car loan.
If the time is not right, hold onto your car for a little longer. Take the time to increase your credit score, pay down some debt, and bide your time until you are in a good position to afford a new car.
That’s what is going on with the UAW strike and how it could impact the car market.
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