European automakers most at risk from US dockworkers strike, analysts say (updated)

Hyundai Glovis

01/10/2024 19:54

(Adds comments by auto trade group and Nissan in paragraphs 1,
4-6 and 25; adds byline, WASHINGTON to dateline)
    By Ben Klayman and David Shepardson
       DETROIT/WASHINGTON, Oct 1 (Reuters) - European
automakers are the most likely to be affected by the dockworkers
strike at U.S. East Coast and Gulf Coast ports because they rely
heavily on those locations, but a longer walkout could prove
"debilitating" to the entire sector, industry officials and
analysts said.
    The dockworkers began their first large-scale stoppage in
nearly 50 years early on Tuesday, halting the flow of about half
the nation's ocean shipping.
    The International Longshoremen's Association union
representing 45,000 port workers had been negotiating with the
United States Maritime Alliance (USMX) employer group for a new
six-year contract.
    A group representing major automakers urged the White House
to broker a resolution.
    "A protracted strike will be debilitating to the auto supply
chain and set off economic and national security ripples across
the country - harming auto communities and consumers," said John
Bozzella, CEO of the Alliance for Automotive Innovation.
    He noted that the ports affected by the strike handled 34%
of all U.S. motor vehicle and parts trade worth $135.7 billion
last year.
    "If (the strike) turns into weeks, it's going to be a
tragedy," said Steve Hughes, CEO of HCS International, which
advises the auto sector on shipping issues. 
    While automakers could survive some time without vehicle
deliveries, a shortage of parts would certainly hurt, Hughes
said.
    "If you look at a GM car, you're going to find all sorts of
European and Asian parts in those cars now," he said.
    The Motor & Equipment Manufacturers Association, a trade
group for auto suppliers, also called on President Joe Biden to
force both sides back to the bargaining table.    
    A shortage of parts could lead some automakers to reduce
vehicle production, although analysts said some may quietly 
welcome that. Stellantis  STLAM.MI , for example, has very high
vehicle inventories.
    Barclays analyst Dan Levy said 70% of auto parts imports
into the U.S. come via the affected ports, although companies
likely built up some inventory since the strike risk had been
visible for a while. If automakers are forced to fly in parts,
that could drive up costs.    
    "All of this is very, very inflationary," Hughes said.
    European automakers, many of which use the ports on strike,
would be the most affected, Levy said in a research note. 
    "The European (automakers) lean 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  BMWG.DE  said it was monitoring the situation closely
and working to minimize any impact, while Volvo Cars
 VOLCARb.ST  said it was devising contingency plans but had not
yet experienced any noticeable impact. Officials with
Volkswagen VOWG_p.DE  and Mercedes MBGn.DE  could not
immediately be reached to comment.
    European imports have accounted for as much as half of the
German automakers' U.S. sales in recent years and Volvo Car is
even more reliant, Levy said. However, with inventories higher
than usual, the companies may have prepared and the strike
impact could be limited barring a long walkout, he said.
    Truckmaker Volvo  VOLVb.ST  said the company stockpiled
parts and looked into rerouting shipments to minimize impact and
doesn't expect any impact in the short term.
    Detroit automakers could actually benefit modestly as
reduced industry inventories could limit pricing pressure, Levy
said. The companies, including General Motors  GM.N  and Ford
 F.N , are more likely affected by the import of parts since
most of their vehicle imports come by truck and rail from Canada
and Mexico, he said.   
    "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 to our
operations and will make adjustments as needed.”  
    The Detroit automaker declined to provide details on how it
uses the ports or the nature of its contingency plans. 
    Ford said it was monitoring the situation, but said it was
too early to speculate on potential impacts. 
    Asian automakers may be less affected, Levy said.
    Toyota  7203.T  built up extra vehicle inventory over the
last couple of weeks to help buy it time and it was watching the
talks closely, Toyota North America Executive Vice President
Jack Hollis said in an interview.
    Mazda  7261.T  said the ports of Baltimore and Jacksonville,
Florida, were important for the Japanese automaker, but its
vehicle inventories were sufficient to meet short-term demand.
Honda  7267.T  said it was affected by the strike, without
providing details, while Nissan  7201.T  said it has implemented
contingency measures to mitigate delays, but declined to provide
details.
    Hyundai  005380.KS  said its logistics affiliate, Hyundai
Glovis, was closely monitoring the talks and working on
alternate plans to ensure delivery of vehicles.

 (Reporting by Ben Klayman in Detroit, David Shepardson in
Washington, Nathan Gomes in Bengaluru and Marie Mannes in
Stockholm; editing by Jonathan Oatis)
 ((benjamin.klayman@thomsonreuters.com; 313-600-2277; Reuters
Messaging: benjamin.klayman.thomsonreuters.com@reuters.net))