Monday, March 30, 2015

Editorial: The West Coast Port Labor Dispute

Image courtesy of Zero Hedge
A few weeks back, I posted an editorial about how the aftermarket parts industry hit a sales slump due to the new generation of drivers and the cars that are important to them. While these factors have made an impact, another more recent situation has created another problem for the aftermarket, as well as the automotive, motorcycle, and cycling industries in general. For anyone that follows the news, you should already be familiar with the recent port congestion situation that created a massive backlog of vessels and containers along the entire West Coast. If you are not familiar with this event, it simply boiled down to the International Longshore and Warehouse Union (ILWU) working without a contract since July of last year. In order to force the Pacific Maritime Association (PMA) to agree to the ILWU's terms, a labor reduction situation occurred, causing massive backups at all of the major ports along the West Coast. The details of the "slow down" are a story for another time though.

Image courtesy of Zero Hedge
Basically every industry was affected by the congestion. If you stepped into a grocery store in the last few months, you will have noticed the price of certain produce had slowly crept up, and exotic fruits and vegetables imported from overseas had gone missing. The cost of clothing and textiles had also crept up as much of what we wear on a daily basis is manufactured overseas these days. But imported goods were not the only things affected by the congestion. Products that we export out of the country to markets overseas were affected by the congestion as well. From what I had heard from others in the cargo industry, farms in the United States were hit hard as produce slated to go overseas ended up sitting at the ports rotting away.

Many automotive manufacturers that bring their products in from overseas were hit quite hard by the slow down. It is not just complete cars that were being held up at the ports though. Parts imported from overseas and needed to complete the manufacturing of certain vehicles were held up as well, creating production delays at factories here in the US. For instance, Honda had to slow down manufacturing by one half simply to ensure that there would be enough parts to use while the needed parts remain stuck at the ports. This slow down of manufacturing took its toll on sales, with many car manufacturers seeing a dip in sales from the same period of time last year. If you are planning to purchase a car at this time, it might not be the best idea as you may not be able to get the exact car you want for a few more months.

With the bicycle industry, it is much the same. Many of the bikes that we purchase are made overseas, especially the moderately priced carbon frame models, many of which are manufactured in Taiwan. While many shops had been able to get their orders in for new bikes and the manufacturers had dutifully shipped the bike frames and components from their factories in Asia, those orders were caught in the fracas that was the port "slow down." As a result, you are likely to see a dwindling supply of bikes at your local bike shop while they wait for their orders to be pulled off the container ships and distributed.

Image courtesy of Zero Hedge
Towards the end of February, a deal had been reached between the ILWU and PMA, meaning port operations had returned to normal. However, due to the massive backlog created by the slow down, industry experts say it could be anywhere between three to six months before port operations truly return to normal. During this period, expect the number of imported cars from Asia available at dealers to continue to be limited. Even if the car you want is manufactured here in the United States, it may not be that easy to get the exact car you want as parts continue to slowly trickle in from the ports. If you had ordered aftermarket parts, expect them to be delayed as a good portion of aftermarket parts imported from overseas remain stuck at the ports. And if you were looking to buy a brand new bike this spring, you may have a longer than normal wait.

This has been a trying time for all industries and the impact on the US economy as a whole is more severe than we may visibly see. With US exports held up and imported goods unavailable on store shelves while backed up in port, the long-term impact is still unclear. And with this regular disagreement between the West Coast labor unions and the shippers recurring just about every time there is a contract up for negotiation, some manufacturers have threatened to re-route how they move their products to other parts of the US or even to other countries in order to avoid delays. This kind of shift could be problematic as the US economy still struggles to gain its confidence in a slow recovery.