In the last installment I talked about the UAW strike situation, but let’s talk about the nonsense and long term effects of it all. Shawn Fain is determined to keep pounding on the automaker to get an impossible contract. How far is too far? I don’t know how the UAW knows what the companies can afford to pay, but I think it’s conceivable and likely that this demand has exceeded what they can do. The UAW is upset at what CEO’s are making, but we are talking about millions for that, but this contract would add billions to the bottom line. What does common sense tell you about this situation? Let’s ask a few questions….
Who benefits? Certainly the UAW workers will benefit at some point, but what about everyone else? We should be protesting the extortion that is happening right now. You think the already too high car cost is going to get better? The money to overpay the workers has to come from somewhere, and that would come from car buyers. This will just add to the inflationary trends that are already out there.
Covid changed a lot of things. Among them was the increase in car prices. lack of computer chips, car parts, production created higher car prices. In 2020 if you were lucky enough to find a car, you would pay the price. Dealerships found they could add to the cost since supply and demand said they could. It was thought that the prices would come back down after Covid subsided. They did reduce a little, but not to the levels that they were before Covid. Look at that graph below and you’ll see that average retail prices on a car went from approximately 38k to 47k within a year and as you can see in 2022 it dropped maybe 1000, but still maintains most of the cost increase. Ask yourself what will happen if the cost of UAW labor goes up by 20 to 60%. It doesn’t take a genius to figure that a lot of folks will be priced out of a car soon.
I’m sure there will be disagreement here, but the autoworkers were already overpaid. I understand that they didn’t get much in the way of increases in the last 5 years, but they were making a decent wage at that time. These new wage demands will take the UAW worker to a new bracket. Ahead of many college graduates, more that most medical staff, teachers, and many other jobs with higher qualifications. It’s great for them if they get it, but not great for anyone else. What part of that makes sense to you?
So while UAW workers get more money and benefits, what are some possible effects of this?
The simple take is the cost of making a vehicle goes up, if cost goes up, so follows price. Car prices will go up yet again and parts too. UAW workers will be able to afford a car or their car repair, will you?
Other unions have been watching. I think you will see others doing something similar after the success of this extortion. What you saw with this event is the UAW selectively increased their pickets and put increasing pressure on the automakers. Someone had to come up with something to keep cars being built and once an automaker puts out hard to refuse agreement, the other two must follow. ( and they did)
What’s the result of this? More higher salaries, more cost to products, and of course more inflation of prices. You think it’s bad now, watch the results of what the UAW did over the next 4 years, and it won’t be just with cars. Also watch to see if while some get their big raises others may see some layoffs.