Impacts of the UAW strike could send the economy and car prices spiraling – The Average Joe


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    Impacts of the UAW strike could send the economy and car prices spiraling


    September 11, 2023

    Unions are about to slam the brakes on the auto industry with another potential unprecedented strike. Nearly 150K workers from the United Auto Workers (UAW) are prepared to walk out on the “Big Three” (General Motors, Ford, and Chrysler) by Sept. 15 if agreements aren’t reached, and such a scenario could wreak havoc on the economy.

    Damage forecast: With the auto industry making up ~3% of the US GDP, a strike that could ripple across the entire US economy and drain car inventory (yet again) — potentially disrupting the ”North American vehicle production by roughly 75%” (Reuters).

    • A mere 10-day strike could shave $5.6B from US GDP and send manufacturing states like Michigan into recession.
    • In the case of a two-week strike, analysts expect vehicle prices to rise less than 2% – with international brands potentially benefiting.

    With the Big Three having 58 days of inventory, Cox Automotive’s senior economist says a strike that lasts a few weeks won’t “have noticeable impact in the [auto] marketplace” — but a few months could lead to another 2021 nightmare (BBG). And in the worst-case scenario, UAW has an $825M strike fund, which could sustain auto workers for about two months.

    Three’s a crowd…

    1/ What unions want: UAW president Shawn Fain is pushing for a 40%+ pay hike over four years, seeing a proposed 10% raise from the automakers as an insult, per the NYT. Also on the wish list: restored pensions, 32-hour workweeks and more involvement in the EV transition.

    2/ What automakers (don’t) want: The Big Three are worried that meeting union demands could drive costs up $80B over four years, per Bloomberg — warning that meeting all demands could slow EV roadmaps, delay new model releases and further fall behind competitors (Tesla 👀) in the EV race.

    3/ What the government wants: The Biden Administration is investing hundreds of billions heavily into the EV sector, but the UAW’s demands are colliding with those plans — with the union demanding that workers get a portion of those subsidies.

    Forward-looking: 82% of investors are expecting a strike, with the majority anticipating a 20-40% wage increase, per a Morgan Stanley survey (Reuters). The Anderson Economy Group thinks rising costs could be passed to consumers via price increases — making the Big Three less competitive and further pressuring consumers looking to upgrade their wheels.

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