With the United Auto Workers (UAW) contract deadline fast approaching, major automakers Ford, General Motors (GM), and Stellantis are teetering on the brink of a massive strike, sending shockwaves through the auto industry. Auto dealerships, ever mindful of the consequences, are gearing up for the potential fallout as production lines hang in the balance.
Kunes Auto Group, a prominent player operating over 40 dealerships in the Midwest, dealing in Ford, GM, and Stellantis vehicles, has been making strategic preparations for the looming strike. COO Scott Kunes shared that they’ve been readying themselves “for a little while now” in anticipation of this critical moment.
Negotiations are currently in progress, and UAW President Shawn Fain has vowed to keep the discussions going around the clock. However, Kunes expressed the need for caution, stating, “we do have to prepare for all three to be striking at the end of this week.”
Dealerships across the nation are taking a page from the lessons learned during the pandemic’s supply shortages. Kunes Auto Group, for one, has been diligently fortifying its vehicle and parts inventories, well aware that any automaker without a contract by the Thursday deadline at 11:59 p.m. will be compelled to halt production, as declared by the UAW.
The potential impact is staggering, with estimates projecting a strike against the Big Three could result in a staggering 100,000 fewer vehicles produced each week—a substantial blow to the industry. Despite the hope of used car prices normalizing after the pandemic, prices have surged in recent weeks.
Kunes noted the unexpected trend, saying, “Typically as we start to enter this season, these winter months, we would see a softer used car market. But we are seeing a pretty strong used car market as dealers prepare for another shortage of inventory because that was really a big thing during the supply chain crisis, is the dealers that were typically heavy new car dealers did have to turn to the used car market in order to keep their shelves full.”
The impact isn’t exclusive to used cars; new car prices are also on the rise. Kunes stated that his group is already witnessing locator services and other dealers asking for prices over the Manufacturer’s Suggested Retail Price (MSRP) for certain models once again.
Despite the easing of supply chain issues that plagued the U.S. auto industry during the COVID-19 pandemic, production levels remain far from pre-pandemic norms. A depletion in inventory could spell disaster for dealerships, communities, and consumers alike.
Kunes emphasized the pivotal role of car sales, saying, “We talk about that a lot — that nothing happens until we sell a car,” pointing out that the sales department is the cornerstone of their entire business. While service and parts departments remain stable, they rely on customers returning after a vehicle purchase. Losing new vehicle sales poses a significant threat.
Reflecting on the 2019 strike against GM, Kunes recalls that the manufacturer struggled to recover in terms of inventory. He attributes Toyota’s ascent over GM as the leading U.S. auto manufacturer partly to that strike.
“A lot of brand loyalty can really get eroded when something like this happens,” Kunes commented. “Not only that, GM estimates that their last strike cost them almost $3 billion. Estimates are showing that this one could be $5 billion every 10 days if all three automakers’ workers strike. So it’s a massive thing not just for car dealers and automakers but for the U.S. economy in general.”
As the clock ticks down, it appears increasingly likely that a strike will indeed occur, given the current strength of both negotiating parties. Automakers are enjoying record profits and unprecedented strength, while the UAW is buoyed by the Teamsters’ successful negotiations with UPS, setting a formidable precedent.
The looming question now, in this high-stakes game of brinkmanship, is, “Which side holds the bigger chip stack?”
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