The UAW Strike and its Potential Impact on Fleets

Welcome to The Fleet Code, a podcast brought to you by Fleetio, where we dive into the latest industry trends, technologies, and best practices. Today, I want to take some time to look into the United Auto Workers strike. I'm certain that you've heard about it by now, but maybe you're not sure what the latest update is or how it could end up impacting your fleet operations.

We'd like to give you a few quick tips so that you can start preparing your fleet should the strike continue on or spread to even more production facilities. So, let's get into it.

Starting off, I'd like to provide some quick context around who the UAW is and why they're striking. If you're only loosely keeping up with strikes in the world, you might be wondering why a bunch of television writers could have an impact on you as a fleet manager.

But contrary to popular belief, that's the WGA strike. And their strike is the reason that you have to wait even longer for season four of Emily in Paris. Look, I know you're all watching it.

So the UAW is different than the WGA. The UAW or the United Auto Workers Union is based out of Detroit, the Hollywood of automotive manufacturing, and it primarily represents workers in the domestic automotive industry, which makes their relevance to fleet managers a little more obvious.

Current numbers for the UAW show close to 400,000 active members and. Of those 400,000, 150,000 of them are autoworkers and around 13,000 of those were currently on strike as of Friday morning, September 22nd.

Friday at noon, the UAW announced its intentions to extend the profile of their strike. So let's backtrack a little. The UAW is currently performing coordinated work stoppages against three automakers at this time. They call them The Big Three and it's domestic automakers, General Motors, Stellantis, and Ford.

And I know it's only three automakers, but these three manufacturers alone are responsible for 40% of the US market in 2023, and as of Friday at noon, the UAW announced that negotiations with Ford were making progress, but GM and Stellantis were not budging as much as they had hoped. The strike to this point has been limited, but the UAW has now moved to shut down all parts distribution centers at GM and Stellantis.

That covers 38 parts and distribution centers spread across 20 states. So the impact is pretty large at this point. The main goal of this strike is to negotiate a 40 percent wage increase over the length of the contract to match the 40 percent increase that they claim the CEOs of The Big Three have received over the last four years.

And I know what you're thinking – even with inflation, 40 percent sounds like a big ask, however, it's not completely out of the realm of possibility to get this kind of increase. You might recall that in July, UPS workers went on strike and secured a 48 percent wage increase. Then in August, the Allied Pilots Association negotiated a 46 percent increase with American Airlines.

The industry that the UAW supports is a little different and might have a little bit less pull, but their request isn't completely out of the question. However, this isn't a podcast episode about the efficacy of their strike. This is a fleet management podcast. So let's talk about how this could impact you as a fleet manager.

Let's start with this: fleets are good customers to have. And so when the fleet business is impacted, a large part of these manufacturers' business is impacted. And with the latest updates, the impact of fleets becomes a little bit more instant. Many fleets are purchasing parts in bulk and typically cycling out their vehicles every five to seven years.

And the dealerships really put a lot of value on their fleet business. And now that the UAW has extended their strike to all GM and Stellantis parts distribution centers, this could quickly impact those dealerships' ability to perform fleet repairs, which is also the most profitable part of their business.

It's not actually the vehicle sales, it's the repairs that they perform.

And fleets have to keep operating, so it's not like they're just going to stop receiving these repairs. They'll look elsewhere for their parts sourcing or their repairs. And that's also just glossing over the fact that a prolonged production shutdown would impact the new car market, driving up the demand and price for any vehicles that are available.

And so the biggest issue that could end up impacting fleet managers would be if this strike continues long enough that it impacts production and therefore new vehicle supply. So what does it look like for new vehicle supply and OEM parts to be an issue?

We really don't have to go back that far. You might remember the pandemic that happened. Uh, that was a joke. I would hope that most of you remember it and for those that don't, what I would give to live in your world.

But, during the pandemic, new vehicle and parts supply was depleted because of a chip shortage and fleet managers had to get creative in how they kept a fleet of vehicles on the road.

The fleet started looking into aftermarket parts out of necessity rather than preference, and the used car market skyrocketed and you saw major car rental companies beginning to sell their inventory to take advantage of the high demand. However, most of these supply issues have resolved themselves since 2020.

Especially for domestic manufacturers, the domestic brands began seeing strong production and supply recovery about a year ago now. It seemed that vehicle prices were starting to somewhat return to normal, but if we have an impact on production, the high prices could return. While we're taking a look backwards, the fact is that many UAW strikes in the past have been able to reach an agreement before the strike had a major impact on production.

That could still happen for this one, let's be clear. And even if the strike is prolonged, the UAW strike plan is designed to shift strike locations, starting and stopping at locations as required, which could have less of an immediate volume impact.

Just how long can the Big Three hold out? An article by Government Fleet breaks down the production supply for each of the automakers as of the beginning of September.

I'll read off some of the numbers to you, but you can find the full article at the link in the episode description. So Chevrolet currently has 51 days of lead time, GMC has 61 days, Ford has 81, and Dodge has 127 days. And based on the current production supply, GM seems to be the most at risk for a potential strike.

But even other automakers have limited supply for specific models that fleets might utilize. For example, the popular new Ford Maverick has only 18 days of supply prepared. And something else of note, all of these manufacturers, the domestic manufacturers, deal heavily in vehicles that fleets love, primarily pickup trucks and SUVs and To lose production on those could mean lower fleet sales in Q4, which might open the door for car rental companies to start selling some of their inventory again, which would drive up the purchase price across the board.

However, there's also still the chance that UAW and the big three are able to reach an agreement before the production supply is depleted. But as a fleet manager, you have to be thinking about these things as you work through your remaining budget for this year or plan out your purchasing budget for next year.

And you might be wondering if there's anything that you can do to mitigate the impact on your fleet. And again, fortunately we have some recent experience to draw upon when it comes to limited vehicle and parts supply. In fact, many fleet managers have learned that flexibility and adaptability are two pretty important skills to have when it comes to managing assets that just have so many external factors at play when it comes to part sourcing

You should go ahead and run an inventory of what you currently have. And then start thinking six to nine months down the road, especially for parts that can be more vehicle specific and likely to sideline a vehicle for an extended period of time.

For example, if you know that your vehicle's alternators are likely to fail around a hundred thousand miles. Go ahead and map out which of your fleet vehicles are likely to hit that mark in the next several months and have the parts on hand to replace them. You might also have to start sourcing some aftermarket parts where you've historically been loyal to OEM.

This flexibility should hopefully be short lived, but it's better to have a plan and prepare for the worst than to ignore the signs and be caught off guard. If you need to justify the cost of having extra parts on hand, say your leadership team is wondering why you're asking for more for your fleet budget, tell them that the average cost of vehicle downtime comes out to around $750 per day, and the cost to your fleet could be even higher.

So what's more detrimental to your fleet, having a vehicle downed or having a few extra parts on hand that you'll end up using at some point, regardless?

When it comes to preparing for possible vehicle sourcing issues, here are two key actions that you can take as a fleet manager to reduce the risk on your fleet.

If you have the purchasing budget or have vehicles in need of a replacement soon, it might be time to go ahead and take the steps to replace those. Or if you have vehicles that are not quite at the end of their life, but they're getting on up there in years, then you need to take some special care to help extend the life of those vehicles.

Here are three steps that we recommend to all fleet managers who are trying to really get the most out of their aging fleet assets. First, make sure they're up to date on maintenance needs and that you're monitoring their health consistently. The best way to make a vehicle last is to give it the basic care that it needs.

Have a high mileage maintenance plan that is even more aggressive and proactive than it would be for a newer vehicle. And then track your driver's inspections closely. They're the ones who are seeing and driving the vehicle constantly. Uh, by monitoring their pre trips, you could catch something that might not show up based on mileage alone.

Your drivers know which vehicles in the fleet are likely to be problematic, so make sure you're listening to them so you can call an audible and bring the vehicle in for service before the issue becomes larger. Balance out utilization where possible as well. Give the older vehicles the shorter routes, or have them on standby instead as a substitute when another vehicle has to go in for service.

It's like a dog that gets to live out the rest of his life at the dog farm. He's put in a lot of work for you so far, and... Maybe now he can get some special treatment while still having some sheep to chase around.

For more tips on how to care for some of your older fleet assets as well as some metrics that can help you identify these potentially problematic vehicles, I've linked a blog post of ours in the podcast description, but the main takeaway, however, is that as a fleet manager, your job is to be flexible and proactive in the management of your fleet. You've got to keep your ear to the ground to see what could potentially impact you down the road.

And while the UAW could end up reaching an agreement with the Big Three before anything of significance happens, you have to be prepared for any scenario so that you're not caught scrambling without a plan.

That's all that we have for today's episode of The Fleet Code. I have a question for you fleet managers. Are you taking any steps right now to prepare your fleet for a possible reduction in vehicle or parts supply? If so, what are you doing? Send us an email at podcast@fleetio.com or leave a comment on our YouTube channel.

As a reminder, The Fleet Code is brought to you by Fleetio. If you'd like to find a better way to track your fleet's preventive maintenance and help extend the life of all your fleet assets, it doesn't get any better than Fleet o's, fleet management software. You can learn more about Fleetio at fleetio.com that's F L E E T I O dot com.

And if you'd like to learn more about how to prepare your fleet for the potential impacts of this strike as well as some tips around parts management, vehicle, lifecycle management, and more, I've included a few resources in the podcast description. Make sure you subscribe to The Fleet Code on your podcast platform of choice to keep up with the latest tips and tricks for fleet managers.

And if you have a topic that you'd like us to cover. Send us an email at podcast@fleetio.com and let us know, subscribe to our newsletter and follow us at Fleetio on all social media channels for even more fleet management best practices.