Dealers said new-car inventory remains mostly stable in the second week of the UAW strike. But some are readying for a wider range of vehicles to become unavailable.
September 23, 2023 12:00 AM
C.J. MOORE
The popular Bronco has only been out since 2021. A lapse in its production at Ford’s Michigan Assembly in suburban Detroit could mean problems for dealers.
As the historic UAW strike enters its third week, dealers hope preparation will be enough to cushion the blow and keep service departments humming as the labor unrest hits closer to home with more than three dozen parts facilities being taken offline by the union’s latest tactic.
UAW President Shawn Fain announced on Friday that 38 General Motors and Stellantis parts distribution centers in 20 states that package and ship parts used to repair customers’ vehicles will join the strike. This could negatively impact dealership service departments to repair and maintain vehicles, which can account for at least half of a store’s annual profits.
“All dealerships across the country have got a shop full of customers’ cars that need to be repaired,” said Ben Keating, owner of Keating Auto Group, which includes two GM dealerships and four Chrysler-Dodge-Jeep-Ram stores throughout Texas.
Despite the impact, Keating said the decision to strike at the parts distribution centers is the wrong move.
“If I were the UAW, you’re wanting to try to put pressure on the manufacturers to give in to your demands,” he told Automotive News. “By striking at a parts distribution warehouse, I don’t think that puts pressure on the manufacturers as much as it does the retail customer and not being able to get their vehicle fixed. If they choose to do that, it sounds to me like they are going to become a national villain to the retail customer or the retail public, which I think is not something they want to do.”
Stephanie Brinley, associate director, Automotive Intelligence at S&P Global Mobility, also wonders about how the union’s latest action will play out with the public.
“The UAW leadership believes it has public support,” she said in a statement. “In announcing this move, the UAW said automakers and dealers could ensure customers aren’t hurt if they avoid ‘price gouging.’ It is unclear how much patience an average consumer will have if they cannot get a vehicle serviced.”
Stockpiling inventory, parts
Prior to the strike beginning last week and the Friday, Sept. 22, announcement, some dealers around the country had been stockpiling vehicle inventory and boosting parts supply across the Detroit 3 brands.
Greg Travaline, dealer partner at Dadeland Dodge-Chrysler-Jeep-Ram in Miami, said his dealership bulked up on routine maintenance parts such as brake pads and oil filters.
“Any [maintenance item] labels that were fast-moving — we traditionally had one or two weeks’ supply — we’ve been going three weeks’ on those,” he said.
Fowler Holding Co. President Jonathan Fowler said on Friday, Sept. 22, that he is still assessing how the UAW’s expansion of the strike could impact his Norman, Okla., dealership group’s business.
“I very much expect there will be more communication coming from the manufacturers to the dealers about what this means to us, specifically,” Fowler said.Ahead of the strike, Fowler Holding Co. looked at its top 75 to 150 fastest-moving parts numbers that account for substantial portions of its service business, Fowler said. To stay ahead of the curve, it preemptively increased those inventories by an extra 60 to 90 days, he added.
Dealership executives who spoke with Automotive News last week said they will rely on lessons learned from new-vehicle production lapses the past few years to prime operations for an erasure of recent supply gains should the UAW strike expand to more General Motors, Ford Motor Co. and Stellantis assembly plants.
“The nice thing for dealers is we’ve seen this before, and we kind of already have the playbook,” said Scott Kunes, COO of Kunes Auto Group, of Delavan, Wis.
Guggenheim Securities senior analyst Ronald Jewsikow, in a Wednesday, Sept. 20, email to Automotive News, said at the roughly 20 percent wage increase the automakers have offered the UAW over the next four years, the average transaction price of a new vehicle would need to rise above $55,000 by the end of the next contract period in 2027 “for the entire value chain to maintain profit margins similar to [what they are] today.”
Dadeland’s Travaline said he is paying attention to workers’ demands and to analysts who say those could translate to increased MSRPs of as much as $600 to $1,000 per vehicle that consumers ultimately will pay.
“They’re probably going to try to compress margins for dealers,” Travaline said. “But unfortunately, consumers are going to take the brunt of all this. They’re going to share in the pain with us.”
New inventory stable, for now
Kunes Auto Group in the last month has sought to extend a 60-day supply of new vehicles and a 45-day supply of used vehicles by 30 days. Further south, at Fowler Holding Co. in Oklahoma, contingency planning includes boosting the inventory supply of used vehicles to between 38 and 42 days from the usual 30.
Fowler: “We’re gonna have Gladiators … to get us through a prolonged period of time.”
Because the strike is in its early days, new-vehicle inventory levels remain stable, dealers told Automotive News.
Kunes said there is a “fair amount” of GM, Ford and Stellantis inventory available.
“For those three manufacturers, I think, the most troublesome one would be GM, as they had the least amount of inventory on the ground and some of their more popular models such as the [Chevrolet] Tahoe have very low supply of inventory,” he said.
A lapse in production of the popular sixth-generation Ford Bronco could pose a problem for Ford dealers because those vehicles have only been out since 2021.
“These are already short-supply vehicles; you feel that much quicker,” Ford dealer Richard Bazzy, who owns three Shults Ford locations in the Pittsburgh area, said of the Bronco and Ranger pickup. “I’ll start to feel this in about two to three weeks.”
LaFontaine Automotive Group, of Highland, Mich., began stockpiling vehicle inventory over the past 90 days — “literally taking every unit available from the automakers,” spokesperson Max Muncey told Automotive News on Sept. 15.
Going into the strike, at least one affected automaker, Stellantis, had an oversupply of certain inventory, Fowler Holding’s Fowler said.
“In the short term, we’re gonna have [Jeep] Gladiators,” he said. “That’s something that we will have supply [of] to get us through a prolonged period of time.”
Travaline said his dealership has been sourcing vehicles through third parties.
“Some dealers in the Northeast are trading some cars,” he said. “Chrysler also has the ability to find some cars through virtual inventory.”
David Whiston, an analyst with Morningstar in Chicago, strongly pushed back against the narrative that the strike is a good thing for dealerships because vehicle inventory is too bloated.
According to Whiston, the overall U.S. light-vehicle inventory levels for each of the Detroit 3 on a combined basis at the end of August were 39 percent lower vs. the end of August 2019 — just before the UAW strike against GM that year.
“I’m sure you might find one or two dealers somewhere who will be willing to say they had too much of X company’s inventory,” Whiston told Automotive News. “But I think broadly speaking, no, this is not good because the industry is coming out of a massive supply chain disruption with the pandemic and the chip shortage.”
Implications for used market
How long the UAW strike lasts ultimately will drive the rate at which dealers fall back on used-car sales to get through a potential gap in new-vehicle inventory, dealership executives said.
Ricart: A strike nearing 30 to 45 days will force retailers to sell more next-best used vehicles.
Rhett Ricart, CEO of Ricart Automotive Group, of Columbus, Ohio, said if the strike approaches 30 to 45 days, that will more thoroughly deplete days’ supply of certain new vehicles for franchised dealerships and force them to rely more heavily on selling next-best used inventory.
Fowler Holding’s Fowler said if manufacturers pull incentives on vehicles such as the Gladiator or reduce them as production lapses, that, too, would influence prices.
“If it gets to that point, you could see a shift in Gladiator used-vehicle prices ticking up,” he said. “But that’s not something that I would expect for some time.”
Julie Walker, Jack Walsworth and Gail Kachadourian Howe contributed to this report.
