Al Root, senior writer at Barrons, discusses the United Auto Workers strike as the union plans to unionize other automakers.
The United Auto Workers’ six-week strike against Ford, General Motors and Stellantis may be over now that the union has reached tentative agreements with all of Detroit’s Big Three, but the new labor costs faced by automakers in the new collective bargaining agreements could be felt be by consumers in the future.
Although the strike was limited in scope, automakers believed it was due to the UAW closing several large assembly plants. The work stoppage cost the industry billions of dollars, and the Big Three all signed record contracts with the union to restart production lines.
A sign reading “UAW on Strike” posted on a picket line outside General Motors Co.’s Spring Hill Manufacturing plant in Spring Hill, Tennessee, on Oct. 30, 2023. (Kevin Wurm/Bloomberg via Getty Images / Getty Images)
Each of the major U.S. automakers agreed to increase the wages of their union workers by 25% over the life of the four-and-a-half-year contracts, along with cost-of-living adjustments that Consumer Reports says will push workers’ wages up to 33% higher current level.
That’s a big increase in labor costs, but some experts say only time will tell whether the increases will lead to higher vehicle prices in the future. Others say vehicle price increases are inevitable.
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Data from auto inventory and information tracking company Edmunds suggests the strike didn’t last long enough to have a short-term impact on vehicle prices in any particular direction. However, a spokesperson told FOX Business the company’s experts say it’s too early to say how the additional labor costs might affect prices in the long term.
On Sept. 20, 2022, workers assemble engines onto the frames of Ford Motor Co.’s F-150 fuel-powered trucks produced at its truck plant in Dearborn, Michigan. (JEFF KOWALSKY/AFP via Getty Images / Getty Images)
Ford withdrew its full-year forecast last week, citing “uncertainty” over the tentative deal with the UAW. Chief Financial Officer John Lawler told investors during the company’s third-quarter earnings call that the new agreement would add an additional $850 to $900 in labor costs each vehicle manufactured.
These increases will either be reflected in new vehicle prices absorbed by the company, cause automakers to reduce costs in other ways, or be a combination of these three factors.
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“The concessions that automakers have made are already considered significant by automakers themselves, which sets the stage for these costs to be passed on to consumers,” said Alain Nana-Sinkam, co-founder of industry tracking firm Remarkit Automotive CR. “Given that consumers are already pretty stretched when it comes to vehicle affordability, I’m not sure how much of that will end up sticking around.”
Cox Automotive chief economist Jonathan Smoke said in a statement earlier this week that the new UAW contract will have both positive and negative impacts on the economy.
Ford F-150 pickup trucks at a dealership in Colma, California on July 22, 2022. (David Paul Morris/Bloomberg via Getty Images / Getty Images)
“Union contracts with cost of living adjustments contributed to the wage inflation spiral that the economy experienced in the 1970s. And wage increases at UAW plants could increase labor costs in factory towns as all industries compete for workers,” Smoke wrote. “The higher labor costs will also contribute to continued inflation in vehicle prices.”
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He added: “Consumers will bear some of the cost burden over time, but with affordability already a challenge for the market, it will not be easy for car manufacturers to pass on all costs to buyers, and They will have to look for efficiencies in other areas or further limit production to more expensive vehicles that can absorb higher labor costs.”