Last week the International Longshoremen’s Association, the union representing some 45,000 dockworkers from across the US East Coast, returned to work after a brief but pretentious strike. The union workers were seeking two key concessions from their employers: higher wages and job protections against automation. A tentative deal on the former was reached on Thursday of last week, ending a two-day work stoppage. While the interruption was short, the strike highlighted a global supply chain still healing from the disruptions of the COVID-19 pandemic and ill-prepared to weather another major shock.
The tentative deal extended the longshoremen’s master contract through January 15th of next year when negotiations will resume on areas of remaining disagreement. Concessions to higher wages would increase compensation for dockworkers by $5 per hour per year for the next six years. Still unresolved is the issue of automation as dockworkers fret over the possibility of job losses with the coming adoption of more sophisticated robotics and AI-derived innovations in logistics.
Worries over the possibility of lengthy negotiations last week had the business world and many economists holding their collective breath while anxious consumers in some areas of the East Coast took to panic buying in anticipation of a return to scarcity of the pandemic era. The effect would have indeed been widespread had the strike gone on for any length of time. East Coast ports from Boston to New Orleans take in and ship out an enormous amount of goods from food stuffs and electronics to medical equipment and automotive components.
As we all experienced during the pandemic, in our highly interconnected, globalized world even temporary disruptions in the supply chain can have cascading effects on our economy that ripple outward and reverberate long into the future. The automotive industry was especially troubled at the prospect of a prolonged shutdown at East Coast ports. Per Reuters, the CEO of trade group the Alliance for Automotive Innovation one John Bozzella noted that 35 percent of US vehicles and parts trade move through those ports to the tune of $135 billion dollars annually. Carmakers had already begun stockpiling supplies and redirecting shopping to the West Coast in anticipation of protracted negotiations.
Not all carmakers would feel the brunt of a renewed strike equally. European automotive manufacturers like Mercedes-Benz and BMW would bear the brunt of a cessation in shipping as their US operations rely heavily on materials shipped from Europe, almost guaranteeing production pauses and work stoppages. US carmakers would have an easier time weathering the effects of such a strike as many of their parts suppliers are located in Mexico and Canada and therefore move materials by truck or train. Asian carmakers like Toyota and Hyundai would fall somewhere in the middle as their parts and materials are shipped in from both coasts.
A renewed strike, especially one that lasted weeks to months, would have a devastating downstream impact on domestic car consumers. In a market currently stultified by high interest rates, a constriction in supply would drive prices ever higher for both new and used cars and create more drag for an already slow car market. Any future strike risks counteract possible progress the car market might make over the next six months following recent interest rate cuts.