US autoworkers strike: when will dealerships run out of cars to sell?

There are plenty of new Jeeps and Ford Broncos for sale at Jay Darling’s dealerships. At least for now.

But the assembly lines that make these models, as well as the Chevrolet Colorado truck, have been idle for almost a fortnight following a strike by the United Auto Workers.

It is the first time that the UAW has simultaneously targeted all three of the carmakers that dominate Detroit — Ford, General Motors and Stellantis — as the union seeks higher pay for workers at a time of record profits for the industry.

As the work stoppage continues, one question looms over dealerships operating in the US: when will they run out of vehicles to sell? 

Darling, who manages 15 locations across Maine, expects inventories of affected vehicles to shrink over the next four to six weeks.

“Eventually, some of these plant closures are going to affect allocations [to dealers] and inventory levels,” said Darling, who stocks the Ford Bronco as well as Stellantis-made Jeeps and GM’s Chevy Colorado.

“I sell all three brands, so I’ll be affected in all three areas,” he added. “That’s probably the most catastrophic part of this, that it’s three at once.”

As pay talks became heated in the weeks before the strike, attention turned to the inventory of vehicles made by the so-called Detroit Three that are still sitting on dealer forecourts.

The measure is crucial for customer retention because most US motorists want to drive their vehicle away on the day they buy rather than waiting for months for a factory order.

This typically means that American showrooms stock higher numbers of cars than in non-US markets. Often, if customers cannot buy the car they want there and then, they will purchase one from a neighbouring dealership and potentially a rival brand.

“People are going to have to go to where there’s inventory,” Darling said. “The people that can produce vehicles will be a winner from [the strike].”

Sometimes carmakers bracing for a strike will pump out a larger-than-normal number of vehicles in the weeks beforehand to prepare for the impending downtime. But this time round, data experts saw little sign of automakers boosting output ahead of the industrial action.

According to data group Cox Automotive, GM has 58 days of supply across all its brands, Ford has 85 days and Stellantis has 107.

“That puts Stellantis in better shape to resist, but it’s all theoretical,” said Philippe Houchois, an auto analyst at Jefferies. 

Inventories of some models are even tighter. Dealers can keep selling the Jeep Wrangler, made by Stellantis, for 74 days without replenishing their stocks, but can go less than half that time before running out of the Chevy Colorado. For the Ford Bronco and Ranger, both made at a striking plant in Wayne, Michigan, there is 40 and 26 days of supply, respectively.

“We’re certainly feeling an impact,” said Matthew Demmer, owner of Jack Demmer Automotive Group, which has a dealership location across the road from the Ford plant in Wayne.

“Michigan Assembly makes two hot products, Bronco and Ranger. Our supply on those two products has pretty well dwindled out at this point,” Demmer added. “We’re still taking orders, we’re still trying to connect clients with something in the system . . . but unfortunately, part of this is the waiting game.”

One potential point of weakness for carmakers is that they are operating with less room for manoeuvre, after a three-year period during which they made record profits from lower sales as pandemic supply shortages boosted prices.

“The industry has enjoyed tightness of supply, which helped pricing,” said Houchois. “It seems this time the industry was willing to go into this strike with less inventory than before because they wanted to influence pricing.”

This, however, is a gamble. The UAW’s strategy of targeting specific plants with limited notice not only prevents the quick depletion of the union’s strike fund. It also causes maximum disruption for carmakers.

After a strike in 2019, GM was able to boost production and make up lost revenue, “essentially limiting the strike impact to about half a month’s worth of sales,” said analyst Tom Narayan at RBC Capital Markets. GM has said that strike cost it $3.6bn.

But the unpredictability of this year’s industrial action means that while the impact on sales could be smaller, the length and scale of the knock-on disruption is harder to forecast.

“Guerrilla warfare can be as painful as full-out war,” said Houchois. “You hit one plant, and end up destructing the whole organisation.”

The carmakers “have more of an incentive to settle, because you have no idea what is going to hit you next”, he added.

However, there are also risks for the UAW. If the strike drags on, customers could turn to marques that are not made by Ford, GM or Stellantis. This in turn threatens the market share of companies that employ UAW members, potentially weakening their job security in the future.

“The worst-case scenario is if the Detroit Three lose share, and [it goes] to . . . Japanese or Korean [rivals],” Houchois said.