JPMorgan warns auto strike will cut new vehicle production, driving used car prices higher

Bank analysts say UAW is ‘far apart’ from deal with Ford, GM, Stellantis

JPMorgan on Thursday said supply chain disruptions from a potential United Auto Workers (UAW) strike would cut new vehicle production and increase used car prices. 

The current four-year labor agreements that cover 146,000 workers at Ford, GM and Stellantis expire on Sept. 14.

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"Industry observers have suggested that there is a high risk of strike given the reform-minded stance of the UAW under President Shawn Fain," analysts at JPMorgan said.

According to JPMorgan, Ford, GM and Stellantis represent roughly 40% of light vehicle auto sales in the U.S. and a strike would disrupt North American vehicle production by roughly 75%.

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"Even if the UAW continues to negotiate beyond its deadline, the lack of a deal and threat of a strike should discourage auto dealers from offering discounts on their existing inventory and drive an uptick in vehicle prices," the analysts wrote. "Although used car prices have declined roughly 18% from their peak in January 2022, they remain 37% above the pre-pandemic level of January 2020."

With used car prices on the rise, insurance companies will be forced to levy higher charges for coverage.

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JPMorgan said the higher used car values would effectively increase coverage limits on auto insurance, making claims more expensive.

"Insurers are obligated to pay the fair market value of a car if it is deemed totaled," bank analysts wrote. "Besides payments on totaled vehicles, higher used car values increase repair costs as they raise the amount that insurers are willing to spend on repairing a car."

Event with United Auto Workers President Shawn Fain

Stellantis workers attend a "members' handshake" event with United Auto Workers President Shawn Fain to mark the beginning of the UAW's contract talks with Stellantis at the Sterling Heights Assembly Plant on July 12, 2023, in Sterling Heights, Michi ((Photo by Bill Pugliano/Getty Images) / Getty Images)

The labor union is seeking a 46% pay raise over the four-year contract along with an array of additional benefits, including a reduction of the workweek to 32 hours for 40 hours worth of pay at Ford, GM and Dodge parent Stellantis, whose latest offers the UAW rejected last month.

Ticker Security Last Change Change %
F FORD MOTOR CO. 11.71 -0.21 -1.80%
GM GENERAL MOTORS CO. 46.78 -0.86 -1.81%
STLA STELLANTIS NV 20.22 -0.85 -4.03%

FOX Business' Breck Dumas contributed to this report.

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