West Coast Port Showdown Leads to an Automotive Slowdown
By now, most of us are aware that there is a little dispute going on at the major ports along the west coast. Stevedores and longshoremen unions — or the laborers who work the docks, if you will — are engaged in talks with the ports themselves in an attempt to hammer out some issues, and the resulting slowdown is beginning to manifest itself in a number of ways.
While huge container ships remained parked offshore or near major cities in preparation for offloading, the labor shutdown is driving up costs and starting to hit many businesses where it hurts the most: the bottom line. One of the industries that is taking the brunt of the dispute, as their imports are having significant trouble making their way to stateside dealerships and factories is automobiles. Among the hardest hit are Japanese companies – particularly Honda, as Autoblog reports — which has been forced to slow down U.S. production until laborers at the 29 shut-down ports return to work.
To get into specifics, Honda is experiencing part shortages in its factories dotting the Midwest, leading to slowed output for a few of its models, as well as some Acura units. This could end up becoming a huge issue for Honda if things at the docks are not resolved soon, as models like the Civic and Accord — two of its huge sellers — might end up being in short supply if their components don’t reach factories.
USA Today reports that even though the port slowdowns are causing massive problems, businesses are still able to use port cities in neighboring countries like Mexico and Canada. That solution still brings up a logistical mess, and the amount of available ports is in short supply. With four or five major cities along the U.S. western coast, Canada only has one: Vancouver.
What this could mean in the end for the auto industry is a shortage of products on dealership lots due to slowed output. Automakers are figuring out workarounds for the time being, including shipping to ports along the U.S. Gulf coast, shipping components via air freight, and increasing overtime hours for factory workers. But none of those solutions can be sustained in the long-term, and are simply quick-fixes until the situation at the ports is sorted out.
“At this time, we do not have a sufficient supply of several critical parts to keep the production lines running smoothly and efficiently,” the company said in a statement, as reported by the Wall Street Journal. “These parts include a small number of critical parts such as electronics, and some larger assemblies such as transmissions.”
Nissan, Toyota, and Subaru have also released similar statements, stoking fears that the production slowdown could stunt vehicle stocks in preparation for the busy spring and summer sales season, one that’s primed to be big for many car companies.
While it’s an ugly situation for auto companies, things could get interesting from the consumer’s perspective as well. It’s possible that slowed output — which isn’t able to keep up with steady demand from U.S. drivers who are in the midst of an economic expansion — could result in higher prices. Add on to that the fact that gasoline is cheaper than it has been for some time, and fans of Asian cars may be in for a summer rife with product shortages and expensive vehicles.
Domestic companies, on the other hand, may be able to capitalize in a large way if the ports don’t open back up soon. Ford, GM, and others could seize the opportunity, if Japanese companies are forced to bump prices for a short time on their products, to undercut the competition even further to spike their own sales. This, of course, depends on whether or not labor unions and their employers can come to an agreement. As of right now, it’s completely unclear as to when that might happen.
It’s not just the auto industry that is suffering in the fallout of the port slowdown, and since it’s causing huge shockwaves across the economy at large, legislators and business leaders who don’t normally step in are being forced to shift their weight around. Due to the huge implications for the entire country, it’s unlikely the slowdown will continue on for a prolonged period. Even so, there’s already been plenty of damage done in lost revenues and production slowdowns.