The United Auto Workers Union has reached tentative agreements with the Big Three automakers which could end a six-week strike.
But how will the deals — if they’re ratified by rank-and-file union members — impact car prices in the U.S.?
Ford announced an agreement with the union last week, while Stellantis did the same over the weekend, with GM following Tuesday. Agreements would end the longest U.S. auto strike in 25 years. It is the first time in its history that the UAW staged a simultaneous strike against the nation’s three unionized automakers.
What’s in the UAW tentative agreements?
The UAW, the nation’s largest automobile workers’ union, staged the walkout to push for higher wages and better benefits for its members.
The tentative agreements include 25% pay increases over the next 41⁄2 years, as well as cost-of-living increases that effectively bring the raises to 33% over current pay levels, per Consumer Reports. With cost of living adjustments, the top wage is estimated to rise to over $42 an hour by 2028.
It also eliminates a two-tiered wage scale for newer hires, provides permanent jobs for temp workers and boosts retirement income, including 401(k) contributions.
The production losses have likely cost the automakers billions of dollars. But the damage it’s done to the broader economy carries an even heftier price tag, according to CNN. The first five weeks of the strike has had an economic impact of $9.3 billion, the Anderson Economic Group estimated.
Will new cars cost more after the UAW strike ends?
Those losses along with the pay increases could drive up new car prices.
Executive analyst Karl Brauer at iSeeCars.com told The New York Times it will likely provide a minimal impact on immediate car sales, but it could have bigger impacts long term. “This is going to make cars more expensive,” Brauer told the Times.
Ford executives said that “the UAW contract would add $850 to $900 per vehicle in additional costs,” The Wall Street Journal reported.
But some industry observers say there’s a good chance cars won’t cost more because of the strike.
“The concessions the automakers have made are already being positioned as significant by the automakers themselves, which is setting the stage for those costs to be passed through to consumers,” says Alain Nana-Sinkham, co-founder of Remarkit Automotive, a firm that tracks industry trends, per Consumer Reports. “However, given that consumers are already pretty well tapped out in terms of vehicle affordability, I’m not sure how much of that is going to end up sticking.”
CNN reported that there are several reasons why cars might not be more expensive, including that automakers might cut corners somewhere else to maintain their pre-strike prices.
Also, the Big Three have to stay competitive with nonunion automakers, which keep their car prices in check. And they will need to find ways to build cars more efficiently and figure out how to make money selling electric vehicles, per CNN.