Carmakers with production facilities in the US, including leading Japanese brands, are having to resort to air charter services, among other measures, as continued congestion at the country's West Coast ports following labour disputes has threatened the supply of inbound parts. With no end to the dispute in sight and backlogs of two months predicted, production lead times are being affected.
A protracted labour dispute between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) over renewal of contracts for port workers at the ports of LA and Long Beach, has been going on for seven months now. By October last year the dispute had led to a backlog of cargo. It shows no sign of being resolved, despite the participation of the Federal Mediation and Conciliation Service. Disruption has spread to affect ports including Tacoma, Seattle and Oakland, among others.
The ports were closed this weekend and no cargo was unloaded, though work began again on Monday. There are further plans for closure on four days this week and into next week.
Furthermore, the port of Oakland released a statement this week in which it said that clearing the backlog would now take two months even if an agreement was reached.
The situation has been exacerbated by the greater demands at the ports in terms of volume, time and complexity of unloading bigger ships and a shortage of rail capacity to handle the higher volumes within certain times. Added to this there are terminal gate turn-time problems and gaps in port chassis provisioning, as well as a shortage of truck drivers.
All this has led to delays in the handling of containers. The PMA said last weekend that vessel loading and unloading operations would be temporarily suspended, with yard, rail and gate operations affected. The PMA has also made accusations of deliberate union slowdowns, though these have been strenuously denied by the ILWU. Regardless, port activity has been dramatically affected.
For OEMs with tight lead times the delays have now begun to hit production and carmakers are resorting to costly air charter services to bring the parts in, as well as making other provisions such as modifications to working times.
“Due to delays in the processing of overseas parts at the West Coast ports, we have adjusted overtime at some plants in North America as needed,” a spokesperson for Toyota told Automotive Logistics. “In an effort to minimise production disruptions we are expediting shipments by air, a standard method we use as needed. On the other hand, at this point, we have not seen a significant impact on our vehicle import/export operations caused by this port situation. We will continue to monitor the situation.”
Nissan declined to comment on the situation, though Reuters reported that it had switched to air freight for some components in December last year.
The Reuters report also confirmed that Subaru is now facing an extra 7 billion yen ($60m) per month in costs due to air freight, which has risen in price since the crises at the ports began.
The disruption is not limited to parts being brought in from overseas. Between half and two-thirds of the automotive parts that come from outside the US are brought in from Canada and Mexico. Of that volume, 44% come through the ports of LA and Long Beach. Tacoma, and to a lesser extent Seattle and Oakland account for another 10%.