With only days left for Ford, General Motors and Stellantis to reach new contract agreements with the United Auto Workers or face a potential strike, auto dealerships are bracing themselves for the impacts of what will happen if the productions lines stop rolling.
Kunes Auto Group, which operates more than 40 dealerships in the Midwest, including Ford, GM and Stellantis stores, has been preparing for a strike "for a little while now," according to COO Scott Kunes.
Negotiations are ongoing, and UAW President Shawn Fain has vowed to keep them open around the clock, but Kunes said "we do have to prepare for all three to be striking at the end of this week."
Kunes told FOX Business dealerships learned a lot from the supply shortages that occurred during the pandemic. His group has been working to shore up both vehicle and parts inventories in case manufacturers shut down, which the UAW says will happen to any automaker that does not have a contract in place by the deadline of 11:59 p.m. Thursday.
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Estimates show a strike against all the Big Three would result in 100,000 fewer vehicles each week, which Kunes called "a substantial amount." He said used car prices, which soared during the pandemic, had begun to normalize, but prices have risen significantly in recent weeks.
"Typically as we start to enter this season, these winter months, we would see a softer used car market," Kunes said. "But we are seeing a pretty strong used car market as dealers prepare for another shortage of inventory because that was really a big thing during the supply chain crisis, is the dealers that were typically heavy new car dealers did have to turn to the used car market in order to keep their shelves full."
New car prices are rising, too. Kunes said his group is already seeing locator services and other dealers asking over MSRP for certain models again.
Although the supply chain issues that plagued the U.S. auto industry due to COVID-19 have eased in the past few years, Kunes said production still is not close to what the industry saw pre-pandemic. If inventory dries up, it can be devastating to dealerships' operations, their communities and the consumer.
"We talk about that a lot — that nothing happens until we sell a car," Kunes said, noting that dealerships "rely heavily on the sales departments."
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He explained that dealerships have fixed operations in terms of their service and parts departments, but those are sustained by customers returning after a purchase. "So really, the cornerstone of the whole business is selling that new vehicle, and so losing that is a scary proposition," he said.
Kunes recalls the 2019 strike against GM well, and says the manufacturer has never really been able to catch up and recover when it comes to inventory. He largely attributes that strike to Toyota overtaking GM as the leading auto manufacturer in the U.S. a few years ago.
"A lot of brand loyalty can really get eroded when something like this happens," Kunes said. "Not only that, GM estimates that their last strike cost them almost $3 billion. Estimates are showing that this one could be $5 billion every 10 days if all three automakers' [workers] strike. So it's a massive thing not just for car dealers and automakers, but for the U.S. economy in general."
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Kunes says at this point, it appears a strike is likely to happen, because both sides are negotiating from positions of power right now. The automakers have seen record profits and are stronger than they have ever been, while the UAW is likely looking at the Teamster's success in negotiations with UPS as setting a pretty substantial precedent.
"What's interesting and what's a little scary is that with both parties being in a position of power," he said, the question is, "which one has the bigger chip stack?"
