Analysts have indicated that European automakers are likely to be the most affected by the port workers' strike along the U.S. East Coast and Gulf of Mexico. These automakers heavily rely on these ports, and a prolonged strike could disrupt the entire industry. Recently, U.S. port workers initiated a large-scale strike, the first in nearly 50 years, leading to disruptions in about half of the U.S. international sea trade.
The Auto Innovators Alliance is urging the White House to mediate a solution. The organization's CEO highlighted that a prolonged strike would weaken the automotive supply chain and trigger economic and national security repercussions across the U.S., affecting both the industry and consumers. The affected ports handled 34% of the U.S. auto and auto parts trade last year, valued at $135.7 billion.
Steve Hughes, CEO of HCS International, noted that while automakers can survive without car deliveries for a while, a shortage in parts would undoubtedly result in losses. Some automakers might reduce production due to parts shortages, though this might be welcomed by manufacturers like Stellantis (STLA, Financial), which has high inventory levels.
Barclays analyst Dan Levy stated that 70% of U.S. auto parts imports go through the affected ports. Given the strike risk, companies may have built up some inventory. Levy also pointed out that European automakers would be most affected as they largely depend on ports like Baltimore and Charleston for imports and exports.
Automakers such as BMW (BMWYY), Volkswagen (VWAGY), and Volvo are closely monitoring the situation and planning contingencies to minimize impact. While Mercedes has not commented, European imports have accounted for half of German automakers' U.S. sales in recent years. Detroit automakers such as General Motors (GM) and Ford (F) might see reduced pricing pressure due to lower industry inventory. Asian automakers, including Toyota (TM), are also monitoring the labor negotiations.
The strike has severely disrupted goods transportation from Maine to Texas, with analysts warning of daily economic impacts in the billions. President Biden has urged U.S. port employers to improve their offers to achieve a labor deal, noting the record profits of foreign shipping companies during the pandemic. The International Longshoremen's Association (ILA) initiated the strike after failed negotiations with the U.S. Maritime Alliance (USMX), which proposed a 50% wage increase. The union, however, seeks more benefits, including annual hourly wage increases and the cessation of port automation projects.
Former President Trump blamed the strike on inflation, which he attributed to the Biden-Harris administration. The strike is the first significant strike by East Coast and Gulf Coast port workers since 1977 and affects 36 ports, including New York, Baltimore, and Houston. Analysts from JPMorgan estimate the strike could cost the U.S. economy about $5 billion per day.
