Jay Darling’s dealership has a large selection of new Jeeps and Ford Mustangs for sale. At least until now.
But the assembly lines that make those models, as well as the Chevrolet Colorado truck, have been idle for nearly two weeks following a UAW strike.
It’s the first time the UAW has simultaneously targeted Detroit’s Big Three automakers – Ford, General Motors and Stellantis – as the union seeks to raise worker wages amid record profits in the industry.
As shutdowns continue, dealers operating in the U.S. face a question: When will they sell out of vehicles?
Darling, who manages 15 locations in Maine, expects inventory of affected vehicles to dwindle over the next four to six weeks.
“Ultimately, the closure of some of these plants will impact distribution and inventory levels (to dealers),” said Darling, who stocks Ford Mustangs as well as Stellantis-made Jeeps and General Motors’ Chevrolet Colorado.
“I sell all three brands, so I’m affected in all three areas,” he added. “That’s probably the most devastating part of this thing, because it’s three at once.”
As wage negotiations heat up in the weeks leading up to the strike, attention has turned to the inventory of vehicles built by the so-called Detroit Three that remain on dealership forecourts.
This measure is critical to customer retention, as most U.S. drivers want to drive their vehicles the same day they buy them rather than wait months to receive factory orders.
This generally means there are more cars in stock in U.S. showrooms than in non-U.S. markets. Often, if customers can’t buy the car they want there, they buy one from a neighboring dealer and possibly a competing brand.
“People are going to have to go where the inventory is,” Darling said. “Whoever can produce the vehicles will be the winner (of the strike).”
Automakers preparing to strike sometimes produce more vehicles than normal weeks in advance to prepare for the coming shutdown. But this time, data experts see few signs of carmakers ramping up production ahead of strike action.
According to Cox Automotive data, the lead time for all GM brands is 58 days, with Ford at 85 days and Stellantis at 107 days.
“This makes Stellantis better able to resist, but that’s all theoretical,” said Philippe Houchois, an automotive analyst at Jefferies.
Inventories of some models are even tighter. Dealers can continue selling Jeep Wranglers built by Stellantis for 74 days without replenishing inventory, but can sell out the Chevrolet Colorado in less than half that time. The Ford Bronco and Ranger are both built at a high-profile factory in Wayne, Michigan, and are available for 40 and 26 days respectively.
“We’re definitely feeling the impact,” said Matthew Demmer, owner of Jack Demmer Automotive Group, which has a dealership across the street from the Ford plant in Wayne.
“Michigan Assembly makes two popular products: the Bronco and the Ranger. Our supply of both products has been significantly reduced right now,” Demer added. “We’re still taking orders, we’re still trying to connect customers to some of the things in the system… but unfortunately, the waiting game is part of it.”
A potential weakness for automakers is that they have less operating room for maneuver, after three years of record profits from falling sales as pandemic supply shortages pushed up prices.
“The industry is in tight supply, which is helping pricing,” Hujos said. “It appears the industry is willing to go into this strike with less inventory than before this time because they want to influence pricing.”
However, this is a gamble. The UAW’s strategy of targeting specific plants with limited notice not only prevented the union’s strike fund from being quickly depleted. This also creates maximum disruption for automakers.
Tom Narayan, an analyst at RBC Capital Markets, said that after the 2019 strike, GM was able to increase production and make up for lost revenue, “basically limiting the impact of the strike to about half a month sales”. General Motors said the strike caused $3.6 billion in losses.
But the unpredictability of strike action this year means that while the impact on sales may be smaller, the duration and scale of the knock-on damage is harder to predict.
“Guerrilla warfare can be just as painful as total war,” Hujois said. “You hit a plant and you end up destroying the entire organization.”
He added that automakers “have more incentive to solve it because you don’t know what’s going to happen next.”
However, the UAW also faces risks. If the strike continues, customers may switch to brands not made by Ford, General Motors or Stellantis. This in turn threatens the market share of companies that employ UAW members, potentially undermining their future job security.
“The worst-case scenario is if the Detroit Three lose market share and (the situation would be)… a Japanese or Korean (competitor),” Houchois said.
Svlook
