How an Auto Workers Strike Would Hit Your Wallet — Can Biden Help?
Written by
Dawn Allcot
Edited by
Maria Concepcion
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With less than a month before unionized auto workers’ contracts expire, the United Auto Workers Union and the three unionized automakers — Ford, General Motors and Stellantis, which manufactures vehicles for the Dodge, Ram and Chrysler brands — appear to be stalled in a gridlock, news sources say.
An auto worker strike would stress the finances of auto manufacturers in the U.S., and that turmoil could be passed onto customers in three ways.
Higher New Vehicle Prices
Many new vehicles are still selling at or above the Manufacturers’ Suggested Retail Price (MSRP), but average transaction prices have dropped 2.7% since the beginning of the year and continue falling. New cars are still 26% higher than they were in July 2020. But, Rebecca Rydzewski, research manager at Cox Automotive, recently told Kelley Blue Book, “New-vehicle price inflation has all but disappeared in 2023.”
However, an auto worker strike could shift the balance, driving new vehicle prices up again in anticipation of a strike. Ford, GM, and Stellantis have been building up a backlog of inventory. Kelley Blue Book reported that Ford and Ram have more than a 100-day supply of their bestselling trucks, the F-150 and Ram 1500, respectively. Chevrolet has more than an 80-day supply of Silverados.
But eager to keep inventory in stock in the event of a strike, dealers may hesitate to offer big incentives or price cuts. And once those vehicles are sold, locating these bestselling American-made brands could be harder, further driving prices up due to supply and demand.
Lower Stock Prices
An auto worker strike could impact these publicly traded companies by as much as $11.2 billion in lost profits, Business Insider reported. A strike would likely reduce earnings by as much as $500 million per week, per automaker, Deutsche Bank said in a note reported by BI.
Reduced profits typically lead to unhappy investors, which leads to plummeting stock prices.
Overall Economic Impact
In late July, Evercore ISI analyst Chris McNally told Axios that the odds of a UAW strike are “at least 50%.” If all 150,000 union workers strike, it would have a tremendous economic impact on Detroit and surrounding areas.
The union has a fund of $825 million to pay striking workers $500 per week for roughly 12 weeks. That money will only last for a while and may not be enough for most auto workers to live on. Plus, parts suppliers and their employees nationwide will also be hit if auto production in Detroit stops.
Can Biden Step In?
President Joe Biden issued a statement on Monday, August 14, 2023, asking “all sides to work together to forge a fair agreement.”
The President wrote, “The UAW helped create the American middle class and as we move forward in this transition to new technologies, the UAW deserves a contract that sustains the middle class.”
The union wants pay raises of 40% or more, CNN reported, which would match increases in CEO pay over the last four years. The union has criticized Biden’s push for a transition to electric vehicles but told CNN that it viewed Biden’s statement as “an endorsement of its bargaining position.”
However, multiple news sources say union workers fear that Biden may intervene to stop a strike, which he did in December 2023 to stop a freight rail strike, which would have had dire consequences for the country.
Pointing out that Biden has not intervened in any strike under National Labor Relations Act – and that the rail strike was a unique situation covered by the Railway Labor Act – top Labor Advisor Celeste Drake told CNN, “The president believes that collective bargaining is the best way for workers and employers to reach a mutually beneficial agreement, and he respects the right to strike.”
However, Drake also did not rule out the possibility of Biden taking action to prevent a strike and help the UAW and the Big 3 automakers reach an agreement.
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