Things are looking up for automakers right now with sales brisk and consumers ready to buy. But another crisis is looming and that’s a car shortage, the timing of which is certainly less than perfect.
It’s due to labor disputes that continue to interrupt work at West Coast ports, where some key parts for Asian-brand automakers arrive. This means cars and supplier parts may not be making it to their destinations on time and slow down factory work. The situation underlines the fact that the car business is global, despite major efforts to localize production. It exposes how vulnerable automakers’ cost-saving, just-in-time inventory delivery systems are to interruption.
Honda said it slowed production beginning this Monday, February 16 at plants in Ohio, Indiana and Canada because of shortages of “several critical parts,” including “electronics, and some larger assemblies such as transmissions” that arrive via West Coast ports.
Those factories build some of Honda’s big sellers, including the Accord, the Civic compact and the CR-V compact SUV, which is the best-selling utility of any kind in the U.S.
Plants in Alabama, Georgia and Mexico aren’t affected, leaving some important models untouched. Those include the Fit subcompact and the HR-V mini SUV coming later this year, both from Mexico. Odyssey van, Pilot and Acura MDX SUVs and the Ridgeline pickup are made in Alabama.
Georgia builds transmissions for the models made in Alabama.
Toyota said it has “adjusted overtime at some manufacturing plants in North America” by cutting some hours, but it has increased production in at least one, the Tacoma pickup factory, “to minimize production disruptions.”
Nissan reports “some impact” on parts shipments, but says it relies heavily enough on local suppliers that it expects “minimal impact” on U.S. operations.
All say they are shipping as many key parts as possible by air, but that’s costly and hurts profits. Car companies are unsure how long the problem could last. “This is a fluid situation due to the uncertainty of the situation at the West Coast ports,” Honda said in a statement.
Dockworkers at seaports along the West Coast are negotiating with the port owners for a new contract to replace the one that expired last June 30. Ill will between the sides has resulted in delays in cargo ships being unloaded. A total shutdown strike could cost the U.S. economy $2 billion a day, the National Retail Federation predicts.
“Employers are deliberately worsening the existing congestion crisis to gain the upper hand at the bargaining table,” Robert McEllrath, president of the International Longshore and Warehouse Union, said earlier this month.
“After three months of union slowdowns, it makes no sense to pay extra for less work,” said Wade Gates, spokesman for the port owners’ association. The reduced pace has “needlessly brought West Coast ports to the brink of gridlock.”
Seaports in Canada, Mexico and along the U.S. Gulf Coast are not impacted by West Coast labor disputes and could provide alternative delivery points, however the water route from Asia would take longer.