Dockworkers Strike Impacts European Automakers

DETROIT (Reuters) – European automakers are likely to be significantly impacted by the dockworkers strike at U.S. East Coast and Gulf Coast ports due to their reliance on these locations. A prolonged walkout could affect the industry more broadly if suppliers face disruptions, analysts warn.

The International Longshoremen’s Association (ILA), which represents 45,000 port workers, initiated their first large-scale stoppage in nearly 50 years on Tuesday, halting operations that account for about half of the nation’s ocean shipping.

Steve Hughes, CEO of HCS International, noted that ports like Baltimore are crucial for car imports. If the strike extends for weeks, it could escalate into a serious crisis.

In the past year, the affected ports managed vehicle imports worth $37.8 billion, not counting auto parts essential for manufacturing and replacement. Hughes highlighted the mix of European and Asian parts used in American-built cars.

The Motor & Equipment Manufacturers Association urged President Joe Biden to intervene and prompt negotiations between the dockworkers and employers.

A shortage of parts might compel automakers to cut down production, although some manufacturers, like Stellantis, might favor reduced output as they are currently burdened with high vehicle inventories.

Barclays analyst Dan Levy indicated that 70% of auto parts imports to the U.S. pass through these ports, though firms may have built adequate inventory to mitigate impacts. However, if automakers resort to airlifting parts, overall costs could rise, contributing to inflationary pressures, as Hughes warned.

European automakers, heavily reliant on ports like Baltimore for imports and Charleston for exports, stand to be the hardest hit, Levy noted.

BMW is closely monitoring the situation and striving to lessen any adverse effects. Volvo Cars is developing contingency plans, but hasn’t yet felt a significant impact. Volkswagen and Mercedes officials were unavailable for immediate comments.

European imports constituted around half of German automakers’ U.S. sales in recent years; Volvo Car depends even more on these channels. However, the current high inventory levels could cushion them against immediate ramifications unless the strike becomes prolonged.

Volvo Truck has stockpiled parts and explored alternative shipping routes to mitigate disruption, asserting no short-term impact is anticipated.

Interestingly, Detroit automakers might see slight benefits as reduced inventories in the industry could ease pricing pressures. Ford and GM are tracking the situation but remain uncertain about the potential ramifications.

Asian automakers could experience less disruption, with Toyota recently increasing vehicle inventory to navigate this uncertainty. Mazda acknowledged the importance of the ports but affirmed adequate inventory levels for immediate demand. Honda noted some effects from the strike, although no specifics were shared. Hyundai Glovis, Hyundai’s logistics arm, is also monitoring developments and preparing alternative delivery plans.