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.