Auto strike could shave billions off U.S. GDP if it continues: Investment strategist David Dietze
An ongoing strike by U.S. auto workers will impact Canada’s auto industry due to large-scale integration, but experts say it will take time for Canadian consumers to feel the effects of the labour action.
Last week, the United Auto Workers expanded their strike, with 5,600 more workers across 38 General Motors and Stellantis parts distribution facilities joining the 13,000 who started striking on Sept. 14 at Big Three assembly plants.
Andrew Foran, an economist at TD Bank, said in an interview with BNNBloomberg.ca that so far, the UAW strike has affected four different assembly production sites in Missouri, Ohio and Michigan that typically produce mid-size pickup and SUV models. Those vehicles are commonly in high supply in the month of September, meaning consumer effects from that supply chain disruption will be delayed, he explained.
“It would likely require a fair amount of time before these strikes actually impacted Canadian consumers and U.S. consumers,” he said.
The typical lag between production and when a vehicle arrives at the dealership is about one to two months, according to Foran.
“If you tag that on top of the days of supply that these companies have for these models right now, it will likely take several weeks (of) strike action in order to actually impact the consumer looking to buy those models down the line,” Foran said.
Foran cautioned that the picture could change if UAW updates its strike action. The union intends to announce on Friday morning how it plans to expand the strike as negotiations with the companies drag on.
DEALERS PREPARED IN ADVANCE
Huw Williams, director of public affairs for the Canadian Automobile Dealers Association, said in an interview with BNNBloomberg.ca that there is a “highly integrated auto sector in Canada” and what happens in the U.S. impacts dealers as well as manufacturing in Canada.
According to Williams, dealers in Canada were aware the strike was coming and took action to “boost inventory” as much as possible. Dealears are monitoring the situation to see how it could impact supplies of vehicles and parts, he added.
“It's early days in the labour situation in the U.S. in terms of the extent of the strike, and also the length of the strike,” Williams said on Tuesday.
“Dealers, I would say, have not felt the strike yet but are cautiously guarded about the potential for it to have greater impact going forward as the strike spreads and as it lengthens.”
PRICE INCREASES POSSIBLE
If the U.S. strike continues at its current intensity for the next several weeks, Foran said its likely consumers will see “forward price action,” meaning wholesale buyers would see supply declines for the “foreseeable future” and likely would raise prices on those models.
“Looking at the broader aggregate market, it would likely take several weeks for that to happen and it would only impact the models that are being impacted,” Foran said.
Based on the current form of the strike, Foran said increased prices would only be affected for “about six to eight consumer vehicle models.”
“They're typically midsize pickup trucks and SUV models, and none of them are in the top 10 best-selling models in Canada or the U.S.,” Foran said, adding that this was an intentional feature of UAW’s strategy.
“They didn't want to go after the best-selling models for the first action of the strike,” he said.
If UAW expands its strike action, that would impact a wider group of vehicle models, he said.
‘PINCH POINTS’ STILL EMERGING
Williams said it is difficult to determine exactly when consumers will be impacted by the strike, as it has “not expanded to a point where we can really tell where those pinch points would be felt.”
Anxiety levels among dealers are higher than when the strike began, he added.
“There's been some good news. Unifor settled with Ford here in Canada, so there are some good news sides of the equation,” Williams said.
“But again, the integrated nature of things makes it difficult.”
Over the past three years, Williams noted that consumers have faced lower inventory levels at dealerships.
“Since the beginning of the pandemic, inventory levels have reached beyond historic lows, really quite remarkable inventory lows,” he said. “Customers have switched their buying pattern to adjust from that.”