DETROIT (Reuters) – European automakers are likely affected by strikes by dockworkers at U.S. East Coast and Gulf Coast ports because they rely heavily on those sites, but a longer strike could impact the industry more broadly if suppliers suffer, analysts said.
Dockworkers began their first large-scale strike in nearly 50 years early Tuesday, halting the flow of about half the country’s shipping.
The International Longshoremen’s Union, which represents 45,000 dock workers, has been negotiating with the United States Maritime Alliance (USMX) employer group for a new six-year contract.
“The East Coast brings in a lot of cars, especially the Port of Baltimore,” said Steve Hughes, CEO of HCS International, which advises the auto industry on shipping issues. He added, “If (the strike) turns into weeks, it will be a tragedy.”
In the past 12 months, the striking ports handled $37.8 billion worth of car imports, Hughes said. He said that this does not include auto parts used in the vehicle industry and the spare parts market.
“If you look at a General Motors vehicle, you’ll find all kinds of European and Asian parts in those cars now,” Hughes said.
The Association of Automotive and Equipment Manufacturers, a trade group for auto suppliers, called on President Joe Biden and his administration to force the two sides back to the negotiating table.
The spare parts shortage may prompt some automakers to cut vehicle production, although analysts said some may quietly welcome it. For example, Stellantis (NYSE:) has very high vehicle inventories.
Dan Levy, an analyst at Barclays, said 70% of auto parts imports into the United States come through the affected ports, although companies likely have built up some inventory because the risk of a strike has been clear for a while. If automakers are forced to fly in parts, that could push up costs.
“This is all very inflationary,” Hughes said.
European automakers, many of which are using ports to strike, will be hardest hit, Levy said in a research note.
“European (automakers) rely heavily on Baltimore for imports and southeastern ports (i.e. Charleston) for exports, as most of their U.S. production exposure is in this region,” he said.
BMW (ETR:) said it is closely monitoring the situation and working to minimize any impact, while Volvo (OTC:) said it is making contingency plans but has not seen any noticeable impact yet. It was not immediately possible to contact officials at Volkswagen (ETR:) and Mercedes for comment.
European imports have accounted for up to half of German automakers’ U.S. sales in recent years, and Volvo Cars has become more dependent on that, Levy said. However, he said that with inventories higher than usual, companies may have braced and the impact of the strike may be limited unless the strike is prolonged.
Truck maker Volvo said the company has stockpiled parts and considered rerouting shipments to minimize the impact and does not expect any impact in the short term.
Detroit automakers could actually benefit modestly because lower industry inventories may limit pricing pressures, Levy said. He said companies, including General Motors (NYSE:) and Ford (NYSE:), are likely to be affected by importing parts because most of their vehicle imports come by truck and rail from Canada and Mexico.
“We are carefully monitoring the situation and have contingency plans in place,” GM said in a statement. “We will continue to work to mitigate any significant impact on our operations and will make adjustments as needed.”
The Detroit automaker declined to provide details about how it uses the ports or the nature of its emergency plans.
Ford said it is monitoring the situation, but said it is too early to predict potential impacts.
Levy said Asian automakers may be less affected.
Toyota The company has built up additional vehicle inventory over the past two weeks to help buy time, and was monitoring the talks closely, Jack Hollis, executive vice president of Toyota North America, said in an interview.
Mazda said the ports of Baltimore and Jacksonville, Florida, are important for the Japanese automaker, but its vehicle inventories are sufficient to meet demand in the short term. Honda The New York Stock Exchange (NYSE:) said it was affected by the strike, without providing details.
Hyundai (OTC:) said its logistics subsidiary, Hyundai Glovis, is closely monitoring the talks and is working on alternative plans to ensure delivery of the vehicles.
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