Full-Speed Ahead

Nov 1, 2023 | Industry

By Jim Henry

New-car dealers are relieved the recent UAW strikes ended before they did any more short-term damage, in terms of reducing sales and inventory of new vehicles and original equipment parts, according to dealer interviews, and financial reporting from auto manufacturers and publicly traded auto retailers.

“It’s good news. It’s definitely good news,” that the strikes were settled, said Ford dealer Rhett Ricart, CEO of Ricart Automotive Group, Columbus, Ohio.

However, Ricart said the proposed settlements still leave dealers with plenty to worry about, both short- and long-term.

That starts with how long it takes auto assembly plants and parts suppliers to restart production and ramp up volume, once UAW members vote to confirm tentative settlements.

“It’s not like turning on a TV set,” Ricart said in a phone interview on October 31. “There’s still some pins and needles on the logistics part of starting back up.”

Auto suppliers estimated it would take about one-and-a-half weeks from go, to restart parts plants after strikes are settled, according to a member survey in October from MEMA, the vehicle suppliers trade association. (The group, formerly known as the Motor & Equipment Manufacturers Association, was restructured and rebranded in January 2023.)

Ann Wilson, MEMA senior vice president, Government Affairs, said in an October 19 phone interview almost 40% of the group’s members who responded to the survey had experienced layoffs connected with the strikes.

During the strikes, Ricart said dealers “hoped and prayed” for a settlement. Ricart participated with Ford Motor Co. executives in a conference call on October 12. In the conference call, Ford bosses complained about the ripple effects of the strike for dealers, suppliers, and communities, not just for Ford.

The day before, UAW President Shawn Fain authorized a strike at Ford’s Kentucky Truck plant in Louisville. The plant makes the F-Series Super Duty, the Ford Expedition, and the Lincoln Navigator. Those full-size trucks have a reputation for being among Ford’s most profitable models.

Ford and the union announced they reached a tentative settlement on October 25, subject to a vote by Ford’s UAW-represented employees. The other domestic automakers followed suit. The union and Stellantis tentatively settled October 28. General Motors tentatively settled October 30.

The strikes began September 15, the first time the UAW struck all three of the Detroit 3 at the same time. The usual practice has been so-called “pattern negotiations,” where the union traditionally chose one target, and then used that contract as a pattern for the others to follow.

Rhetoric was heated on both sides. A strike seemed pretty likely, in the run-up to the previous UAW contract expiring in September. In anticipation, dealers said they stocked up on commonly ordered repair and maintenance parts before the strike began.

“The first thing we did was huddle up with our parts managers,” to tell them to order more parts ahead of the strikes, said New Jersey dealer Peter Lanzavecchia.

Lanzavecchia is president of Burns Buick-GMC in Marlton, N.J., outside Philadelphia. He also owns Burns Hyundai and Genesis of Cherry Hill, both also in Marlton.

Besides stockpiling parts, he said his business had some success during the strikes ordering fast-moving OEM parts on eBay, like oil filters.

“It’s a bizarre world,” he said. “It was about the same price we pay GM. We never really had a crisis on parts, but were we worried about it? Yes!”

Mary Jo Wheeler-Schueller, dealer principal for Wheelers Family Auto Group, based in Marshfield, Wis., said her group also stocked up on parts. The group has five new-car dealerships in Central Wisconsin, all with Buick, Chevrolet and-or GMC franchises.

“We ordered extra parts and battened down the hatches,” before the strikes, she said in a phone interview on November 1.

In addition to those short-term headaches, the proposed Detroit 3 settlements also sharpen some ongoing, long-term issues for dealers.

Heading the list in terms of dealer priorities is new-vehicle affordability, and the related issue of whether automakers will seek to share costs with dealers, to offset higher labor costs.

Costs are bound to go up. According to a UAW statement, the Stellantis deal, for instance, grants 25% in base wage increases through April 2028, and will cumulatively raise the top wage by 33% compounded with an estimated cost-of-living allowance, to over $42 an hour.

The starting wage will increase by 67% including cost-of-living, to over $30 an hour. Temporary workers, the lowest-paid category at Stellantis, will see a raise of more than 165% over the life of the agreement, the union said. Tentative agreements at Ford and GM are on similar lines, according to the union.

Lanzavecchia said dealers are worried about how higher labor costs get paid for.

“We’re concerned if GM tries to pass these costs through to the consumer, it’s going to cost them market share. People are not going to want to pay more,” he said.

Dealers are also watching whether OEMs try to shift some costs their way, he said. “We’re also concerned that when GM tries to offset those increases, whether they’re going to do some cost-sharing with the dealers,” Lanzavecchia said in a phone interview on November 1.

Other aspects of the strikes are also tied up with the transition to electric vehicles and away from internal-combustion engines – another topic that’s never far from the minds of most dealers.

For example, the UAW wants to organize new plants being built to manufacture batteries for electric vehicles. A big concern for the union is that electric vehicles are supposed to be simpler to build, and therefore require less labor.

Like the OEMs, dealers are concerned that the switch to electric vehicles is being paid for years in advance of enough consumer demand to recoup their investment.

During the strikes, some automakers postponed some planned investments in electric vehicles and associated programs.

Wheeler said she’s all in favor of EVs. But she’s worried about the fast-paced, no-turning-back nature of the switch to EVs from internal-combustion engines, and the fact that the changeover is so dependent on government tax incentives for buying an EV.

“You can’t push something on a consumer when they don’t want it, and when the federal government decides what people should buy, there’s a major backlash,” she said.

“I think it’s good, having a product so we can compete. We needed a product that could be a Tesla-killer,” she said. “But to change your whole portfolio over to this new technology and to kiss your bread and butter product goodbye,” is a big risk.

Jim Henry is a New Jersey-based, veteran freelance reporter covering the U.S. auto industry, writing for trade magazines Automotive News and WardsAuto, plus Forbes and others. Concentrations include U.S. light-vehicle sales, dealership Fixed Operations and Finance & Insurance, mergers and acquisitions, publicly traded dealer groups, OEM financial results, and Connected, Autonomous, Shared, Electric Vehicles. He is also the former department manager, corporate strategy and market research for Mercedes-Benz USA, and a former president of the International Motor Press Association.

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