Sept 23 (Reuters) – U.S. auto workers expanded their strike on Friday with an obvious target of distress: dealers who sell and service General Motors and Stellantis vehicles.
Selling and installing parts is one of the most profitable parts of the auto business, but it is also one of the most vulnerable, because the industry relies on just-in-time shipments. The strategy of throttling parts delivery is adding to the problems for some dealers, who say some components were already difficult to obtain.
“It’s going to be nearly impossible to get a lot of these parts,” said Richard Fasulo, a diagnostic technician from Wappinger, New York, who works for a Cadillac franchise and used-car dealer. The broader strike, targeting 38 parts distribution centers owned by General Motors and Stellantis, “will have these stores saying to their customers: We don’t know when we can fix your car. It could be indefinitely.”
Selling parts and service revenue is key to many dealers’ profits, generating gross profit margins of 40% or better for large auto retail chains like AutoNation (AN.N) and Lithia (LAD.N).
“If your car doesn’t start, you’re stuck. That’s just mean, don’t you think?” said Howard Drake, a California-based GM dealership owner, describing the difficult situation for customers needing repairs. “I thought the penalty would be in the form of negative selection for customers with limited options. I didn’t think this would be my lot, stacked with cars I couldn’t fix because they didn’t want to run a parts distribution center,” he said.
“Dealers don’t want to see anything that limits our ability to serve customers, so we certainly hope automakers and the UAW can reach an agreement quickly and amicably,” said Mike Stanton, president and CEO of the National Automobile Dealers Association.
The UAW was expected to expand its strike by closing plants that produce the highest-profit vehicles, such as pickup trucks. But automakers have built up inventory of vehicles and for many dealers the problems with repairs will soon begin.
“It will definitely affect customers,” said Thomas Morris, 60, who went on strike Friday at a General Motors parts distribution center in suburban Philadelphia.
The center serves GM dealers from Pennsylvania to Maine, transporting about 30,000 auto repair parts every day, workers said.
GM said in a statement that the company has “contingency plans for various scenarios” while Stellantis said it was awaiting a response from the UAW on its “competitive bid” on Thursday and looked forward to a “productive engagement.”
The UAW made a smart move, said Arthur Wheaton, director of labor studies at Cornell’s School of Industrial and Labor Relations.
“I think going after distribution centers is a great strategy,” he added. Services are big business, he said. “That’s how they make a lot of their money.”
Brad Sawyers, CEO of Jim Butler Auto Group, which owns the largest Chevrolet dealership in St. Louis, Missouri, said that if the deal was not signed within 60 days he would be upset, although he had the foresight to buy parts in anticipation of the strike.
“I just want them to come together and get it done,” he said.
(Reporting by Abhirup Roy in San Francisco, Doynsola Oladipo in New York and Garrett Renshaw in Pennsylvania – Prepared by Muhammad for the Arabic Bulletin) Editing by Peter Henderson and Shri Navaratnam
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