The recent United Auto Workers strike against automakers may push vehicle prices higher, according to industry analysts.
The union won significant pay increases, improved benefits and more job security as a result of the 45-day strike. But General Motors, Ford Motor Company and Stellantis are expected to face sharply higher labor costs because of the new contracts, estimated by some analysts at exceeding $1 billion per year, per company.
The companies will likely try to offset their cost increases by raising vehicle prices for consumers, analysts say. How much they’ll be able to do so, though, remains unclear. Motorists have already been dealing with significantly higher prices since the beginning of the pandemic, with the average price of a new vehicle sitting around $48,000 dollars.
“I don’t think consumers will necessarily readily absorb all the price increases,” Jonathan Smoke, chief economist for Cox Automotive, told the Associated Press. “We are bound to see continued growth in discounting, which has just started to recover as supplies improve.”
If the proposed agreements are approved, automakers will raise top assembly plant worker pay by more than 30% to around $42 an hour by the time new contracts end in April of 2028. Less-senior workers and temporary hires will receive much bigger increases.
Ford estimates that the contract will raise labor costs by $850 to $900 per vehicle. All three automakers said they have taken steps to pare costs and become more efficient, having known for months that they would have to begin raising worker pay. But they also face huge capital expenses to develop and build electric vehicles as the world transitions from gasoline to battery power.
“When the dust settles from this UAW debacle, the Detroit auto stalwarts find themselves with a bigger cost profile with competition increasing,” said Dan Ives, an analyst at Wedbush.
UAW members are expected to take part in contract ratification votes over the next several days.
AP Auto Writer Tom Krisher contributed to this report.
Other headlines for Wednesday, Nov. 1, 2023:
- Redford Township is urging its residents to get water filters after water samples from four of 31 homes recently tested for toxic metals showed lead levels exceeded the state’s Action Level of 15 parts per billion.
- Former President Donald Trump is asking a court to prevent Michigan Secretary of State Jocelyn Benson from leaving his name off the 2024 primary ballot.
- Fewer people are wearing seat belts in Michigan, according to a recent study conducted by Michigan State University.
- The Detroit Lions acquired Cleveland Browns receiver and Detroit native Donovan Peoples-Jones on Tuesday, just hours ahead of the NFL trading deadline.
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