In a potentially crippling blow to the auto industry, the United Auto Workers (UAW) union has initiated a strike at plants owned by automotive giants General Motors, Ford, and Stellantis. The primary contention? Higher pay. UAW President Shawn Fain has stated that the union is seeking an ambitious 40% pay raise for rank-and-file members over the course of four years.
The strike, affecting a GM plant in Wentzville, Missouri; a Stellantis plant in Toledo, Ohio; and a Ford plant in Wayne, Michigan, has sent ripples throughout the industry. An analysis by the Anderson Economic Group (AEG) predicts that if the strike continues for a full 10 days, it could result in a staggering $5 billion economic loss.
For consumers, the strike carries immediate consequences, potentially leading to increased car prices. The pandemic had already caused car prices to surge by 34%, with the average new car reaching a record-high price of around $51,800 in August. This surge in prices could worsen as the strike threatens to disrupt supply chains.
Certain popular models, including GM’s Tahoe and Yukon SUVs, are already in short supply. If the strike persists, these models may become even harder to find, potentially leading dealers to charge premiums above the sticker price.
“Selection is going to get worse, prices are going to get higher if there is a strike, but it’s going to be focused on the most popular brands and models,” warns Pat Ryan, CEO of CoPilot, an AI-assisted automotive shopping app.
Automakers had been gradually rebuilding their vehicle inventories since the pandemic, but supply remains at only one-fifth of pre-pandemic levels in 2019. This makes the industry vulnerable to production disruptions caused by the strike, according to Tyler Theile, Vice President of AEG.
The impact of the strike won’t spare the used car market either. Prices for both new and used vehicles had just started to decline, albeit slowly. However, the strike could halt or even reverse this trend, making cars more expensive for consumers.
To mitigate the impact on car ownership costs, consumers are advised to explore options for lowering their car insurance premiums. Insurers are closely tied to the automotive market, and higher car prices can lead to increased insurance rates.
The ripple effect of the strike is likely to extend to auto insurance premiums, compounding the challenges faced by consumers. Car insurance rates had already increased by 17% in the first half of 2023, with further increases anticipated by year-end, according to the Insurify survey.
Todd Greenbaum, President and CEO of Input 1, states, “An inventory and parts shortage, and a production halt, could drive up the price of vehicles and the cost of repairs and replacements, directly resulting in rising claims costs that lead to higher premiums customers pay.”
The duration of the strike will play a pivotal role in determining the extent of its impact on insurance premiums. If a resolution is reached within four to six weeks, the changes may be moderate. However, a more prolonged strike or one that affects a larger segment of the industry could lead to a continued increase in used car prices and insurance premiums.
In an environment where gas prices have surged by over 10% in August, adding to inflation concerns, consumers are already feeling the financial strain. Relief at the pump may be on the horizon as producers transition from the costlier summer blend to the more economical winter blend. Additionally, as the U.S. moves out of the peak driving season, gas prices are expected to stabilize.
Amidst these economic challenges, consumers are encouraged to explore avenues for cost savings, including shopping for more affordable auto insurance premiums through platforms like Credible.
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