Analysts note that the UAW contracts recently ratified with GM and a few days later with Ford and Stellantis are unlikely to affect the Big Three’s car prices going forward, despite robust pay raises for unionized workers.
The analysts, quoted by CNN, pointed out several reasons why the significant pay raises will probably not even make a ripple in the MSRPs customers encounter when buying a GM or other vehicle.
The pay hikes for UAW workers amount to roughly 11 percent up front and 30 percent or higher over the life of the contract. The contract win for the UAW came after the 46-day Stand Up Strike, starting in September and aimed at all three of the big Detroit automakers simultaneously.
However, large as the gains are, they are unlikely to move the needle on car prices, with Edmunds analyst Ivan Drury noting “for the consumers, the labor cost doesn’t mean a lot.” Labor costs are less than a tenth of the expenses incurred in making a car, with electronic components, raw materials, and finished third-party parts accounting for 93 percent of the cost to the vehicle manufacturers.
Additionally, economic pressures between union and non-union automakers run both ways. The UAW’s success in its negotiations with the Big Three led multiple non-unionized car companies to boost wages. Subaru, Nissan, Volkswagen, Toyota, Honda, and Hyundai are increasing worker pay significantly in their U.S. assembly plants.
However, the presence of non-union competitors also acts as a brake on the Big Three’s ability to raise car prices, the analysts also note. Together, GM and its cross-town rivals account for less than 50 percent of vehicle sales in the U.S. currently. Given that auto buyers could simply defect to a competitor, Cox Automotive analyst Michelle Krebs says “the automakers will have difficulty passing those costs on to consumers.”
Further factors limiting the impact of wages – already a relatively small expense – on car prices include the fact dealerships sell vehicles, setting the price well above wholesale, and that car prices are already highly elevated because of intense demand.
The automakers themselves will also not be pushed back into the red by the boosted wages, analysts say. The additional cost per vehicle from increased worker pay will be roughly $200 per year. With Ford currently earning an average $3,000 per vehicle after expenses and the other Big Three making similar amounts, the extra wages will cut into profits by only about 6.6 percent annually.
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Comments
Yeah, I read this elsewhere. But don’t buy it.
Ditto. Anymore any study you see anywhere is pure propaganda, paid for by someone with an agenda who is looking to fudge the numbers.
Ultimately, what the UAW makes is irrelevant for car prices. The universal, can’t be broken law of supply and demand dictates prices. What the UAW contract negotiates is if those cars are built locally or overseas.
If we’re talking bitter truth, car prices will increase because of the UAW increases. As wages for bolt turners increase, engineers start demanding more, as do Walmart shelve stockers, truck drivers and construction workers. In the end stagflation takes over and the UAW workers real buying power has never increased to begin with
The only person who doesn’t get the wage increase???? Grandma on a fixed income. Unions really are not pro worker as much as they are anti grandma. I would 200% wish I had not gotten my 23% wage increase since Covid and everything costs half what it does today. My grandparents would be in a much better position as well as their pension and SS increases are in the single digits for that same span.
GM just announced 10 billion in stock buy backs and dividend payments to its stock holders. The labor contract will add 1.7billion. GM stock went up 10% and guess who owns the most of that? Merry Berry GM ceo of course. Stock buybacks and dividend payments are the majority of Cara going up. Oil companies did this as well….reason for gas going up. Your the one who fell for the propaganda. Car prices went up at least 30% since 2019 but the big 3 wages only went up 6%. Explain this 😑
2% interest rates-explained
Despite increase in MSRP monthly payments were low, till about 2 years ago and the rates went up. Right now GM financial is offering low interest rates and are eating it on the financing end.
FYI, GM profits are down once adjusted for inflation. The prior decade was way more profitable.
For anyone who doesn’t believe that this contract will not cause price increases, then I have a great property deal for you in the Everglades.
Agree, if this were a true known fact, don’t you think the automakers would have voluntarily raised wages before now to avoid a strike that cost them billions of dollars?? Think about it, would you risk billions of dollars of lost revenue if you could voluntarily increase wages that won’t affect your product price? I don’t think so. That’s why I don’t buy the study results.
Suuuuuuure. Brought to you by the same folks that were saying “2 weeks to stop the spread” and that we would have “transitory inflation”.
ClosEr to:
Brought to you by thE samE pEoplE that havE us ovEr $32 TRILLION in dEbt.
That would be trump that did that
Robert, you are brainwashed. Enjoy your bidum economy.
Back in 1990 GM sent all the hourly workers to Paid Educational Leave (PEL) school for a week. The instructors were professors from MI colleges, part of the school broke down the cost of a new car. It was stated that labor costs were hourly workers were 7%, salary workers including executives amounted to 13%, a total of 20%. The additional costs were from parts, materials ( the largest cost), utilities to operate the plants etc. of course scary Mary’s salary is a huge part, $27M plus stock options. The union contract is minor compared to everything else. They also didn’t say anything about what the union gave up back in 2009 when GM filed bankruptcy, things like defined pension after 30 years service.
none of these idiots bashing the facts have been brainwashed. More likely they are braindead. The real reality is they are jealous the UAW guys got a descent and deserved raise.
YEA, WHO BULLSH…N WHO?!!!
That is so good to hear and such a relief. Now that Edmunds ‘knows’ that the 30% wage increases won’t increase prices, maybe the US Central Committee should order all companies to give us all 30% raises, since we all now know based on this article sourced from Edmunds/CNN, that it won’t increase prices at all.
When you spread that 30% out over the life of the contract, 5 years, it really ain’t that much. You only read what GM and the rest of them speak in blown up numbers. They forget to tell the general public the details, just the headlines.
Hmmm, and for some reason I thought that spreading the 30% over the life of the contract amounted to 30%. After reading the article though, I know they won’t raise prices, so I am comforted.
So “analysts”, none of which have ever actually worked for an OEM, project no increase in prices to offset labor increases. Laughably naive.
Having worked closely with the Finance Staff for many years in product and corporate planning (plus engineering) at GM and other OEM’s, I can tell you with complete confidence their isn’t a single element of cost (or increase in cost) that isn’t accounted for in the price of a vehicle…plus a profit margin on top of that. It’s all accounted for right down to every screw and nut in the BOM and even the number of seconds it takes an operator to install a part. If there s one thing at gm that runs like a relentlessly well oiled machine, it’s The Finance Staff.
Whether you agree with the labor agreement or not, the statement that there will be no effect on prices is simply not true.
lol suuuurrree
We won’t see that price increase in 2023 on 2024MY vehicles but you can sure bet an increase is coming to cover these costs. Even if it’s buried in deflation
According to CNBC, “GM expects new labor contracts with the UAW and Canadian union Unifor to increase its costs by $9.3 billion and add approximately $575 in costs per vehicle during the terms of the deals.”
So 30% wage increases is only going to increase the price of a new vehicle 1.5%? Why did they go up 30% since 2019? Oh that’s right the billions GM bought back in its own stock and dividend payments to shareholders. I believe it was 8 billion in the last 4 years and announced it plans to buy back another 10 billion today and increase dividend by 33%…oh and merry berry gm ceo owns the most stock by a single human so she just got some mad cash
Yes and biden got 83 million votes -LOL
Oompa loompa small hands lost…I hope you seek therapy soon.
and his 83 million voters all now realize ol potato head was a big mistake.
Who pays you to write this drivel? Russians?
Stating that the wage increases at non-unionized manufacturers will serve as a brake for the big three doesn’t make sense to me.
Wouldn’t the argument be that now that more manufacturers are paying higher wages, they too can increase their costs. And in doing so, so will the big three. The tide raises all ships.
Sorry, but LMAO at THAT BULLSCHLOCKA!
GM announced today it plans on spending 10 billion in stock buybacks and increase its dividend by 33% to its stock holders. The labor agreement cost 1.5billion more…can you guess which one will drive car prices higher? Oh and merry berry owns the most GM stock so she benefits mad from this.
Often hidden amongst the financial details, other language changes in a union contract can be detrimental to the company’s operations. Who knows what additional rights these companies may have given away in this deal. Often these changes can add additional cost that show up over time.
And vice versa, GM might very well have waived high wage hikes in the face of workers with a line in the contract that is worded in a complicated way but states they have a right to close all US factories and move overseas for any reason whatsoever.
More likely they put in big concessions on down the road hiring, and agreements to replace much the workforce with robots.
This is exactly what kind of information we get, after legalizing Marijuana in Michigan. Phffffffft …. Ere. lol
GM today says it plans to buy back up to $10 billion US of its own shares, while also boosting its dividend by 33 per cent. Is that the UAW’s fault too?
Puts the lie to the GM claiming that it couldn’t afford to pay UAW workers more, on top of the moral bankruptcy of their senior executives getting 40% increases in their compensation…do as I say…
You beat me to it! The big increase in car prices and several other things is big companies are buying billions of there own stock back and charging more for there products. Oil companies did this hard in the last 4 years
Figures don’t lie, but liars figure.
More lies anybody that has any brains can see that’s not gonna make them stay the same plus on top of that they’re going to need less employees in the future and they know it for these so-called EVs and so they’re going to work themselves and contract themselves out of a job and they can thank biden and GM will work at taking Joe more jobs overseas doing the same thing that the steel workers did the late great USA country that is in its death throws obviously
The union got what they wanted however in the end the auto industry will face bankruptcy due Biden’s mandate to build EVs. 3000 dealers signed a letter requesting the EV mandate be lifted. Consumers don’t want them, cannot afford them and dealers can’t move them. The automakers are cutting back EV production and battery production as their losses mount. Bottom line layoffs are coming followed by bankruptcy. Wake up America, our infrastructure and transportation sector cannot survive running on batteries. Anybody who thinks it can lacks common sense and is delusional as Biden.
Ok but 2024 Tahoes are $2,100 more than 2023 with zero changes
Id call it Horseshot, but that would be giving Horseshot a bad name:)
The only reason why that MIGHT be true, is because automakers already raised prices during the negotiation. But the fact is the UAW is decreasing and competition is increasing from non-uaw shops is simply because people especially in the lower end of the market aren’t going to pay the extra 2k for a trax. That is why KiA is popular and GM can’t make low-cost vehicles in the US. IF the union wants to increase it’s size, it needs to lower it’s wages or increase the use of robotics to help undercut the market, but they aren’t that smart.
Prices won’t go up because they have been robbing us all along
You get it
I’m in the auto parts business. My cost on A/C Delco & Motorcraft parts jumped 10-20% a couple weeks after the strike started.
Manufacturers will get that increase one way or another.
Sure and I have a bridge I’d like to sell you! I guess the auto mfgs are part of the Federal Reserve and they’ll just print more dollars to pay for the raises? LOL!🤣🤣🤣🤣🤣
In other economic news, the Brooklyn Bridge is now on sale at an incredibly low price.
On another note…when was the last time you’ve seen car prices go down? Every new model tends to be a few hundred more than the outgoing one.
The UAW costs will just get rolled up into everything else the manufacturer deems necessary to make their margins and justify the next model.
Gm says the UAW deal overall cost will be 9.3 billion, yeah im sure they will just out of the goodness of their hearts just pay it and not raise anything.
It’s obvious the people who say prices will not increase because of the new contract have never owned a business and or lack common sense. When your business expense goes up you have to offset it by generating more revenue or cutting other expenses I.e. lay-offs. Just look at today’s economy. Why have prices gone up across every industry? Because their business expenses have gone up so they pass their increases on to the consumer. GM is no different Common sense people.
They gave them a raise to make vehicles we don’t won’t and can’t afforded. I buy Toyota products only. These domestic vehicles are made from cheap parts and poor labor work. SMH. The Japanese said Americans are fat and lazy. I see why now.
Big win for Michigan but boston has to close nice job
If Labor costs make such little impact why don’t they build all there vehicles domestically? Id it a coincidence cheaper models are made in different countries where they can pay people less? Ivan Drury is a goof
Wont raise prices of cars.
You got that right, who wants shishcabobs for dinner…?
New cars are 20,000 over priced.
New trucks are 30,000 over priced.
Who is all in for shishcabobs on the grill….? Come one come all, just say I…..🕺⚡ TCB FOREVER
Today they are saying only $500 increase
Frank i read that too, i think they mean 500 increases on their end to produce the same vehicle, but it will be passed down one way or another.