Analysts weigh in on potential ripple effects from port strike

The recent port strikes along the U.S. East and Gulf coasts will likely hinder supply chains, cause delays, and hit the auto industry especially hard. The broader economy may only see a slight impact. But, manufacturers and retailers fear a tougher future the longer the strike lasts.

Why it matters: Ports are the lifeline of global trade for many industries. Auto manufacturers rely heavily on seaborne trade for components like engines and transmissions.

• In fact, the ports handle about 70% of all U.S. auto parts imported and processed nearly $38 billion worth of vehicle imports from June 2023 to June 2024. 

• Even a brief disruption can upend the supply chain — analysts estimate that each day of the strike could mean a weeklong backlog of parts.

Flashback: In 2002, a West Coast port closure lasted 11 days before the federal government intervened. The strike took six months to recover from, showing the long-lasting effects of even short disruptions.

Buffering the blow: Many automakers saw this disruption coming. So, they sped up shipments in August and September. This move buys them time, but a strike longer than a few weeks could lead to plant shutdowns and production cuts by Thanksgiving.

• But, European manufacturers are still the most vulnerable, given their dependence on East Coast ports. BMW and Volkswagen, for example, lean heavily on the Port of Baltimore and Southeastern ports for imports and exports. With high inventories, the impact might not be felt at first. But, a prolonged strike would only increase their exposure.

• Detroit automakers like GM and Ford might benefit if inventories tighten — easing the pressure to be hyper-competitive on price. And since they mainly source vehicles from Canada and Mexico by truck and rail, their risk is lower than European brands.

Big picture: According to Goldman Sachs, a 10-day strike could significantly slow payroll growth and possibly trim U.S. GDP growth by 0.2% for Q4 2024. Yet, if the strike lasts more than two weeks, it'll likely cause a sharp pullback in production plans for companies that can’t afford to hold excess inventory.

What they're saying: "The big problem is the uncertainty in this," said Dan Hearsch, Americas leader of the automotive and industrial practice at AlixPartners. "If you think it's going to end in two weeks, you probably just put two weeks of inventory in place. But if you think it's going to last four weeks, well, four weeks is a lot of inventory to hold."

Bottom line: Time will be a defining factor in this issue. If the strike is resolved in the coming days, the impact on consumers may be minimal, as many retailers have already stocked up for the holiday season. But if those days turn into weeks, higher prices and shortages could become more common.

Become an automotive insider in just 5 minutes.

Get the weekly email that delivers transparent insights into the car market.

Join 80,000 others now, it's free:

One of the craziest things about the Car Dealership Guy platform:

Our direct access to literally thousands of dealership and automotive employees.

So naturally, I often hear this question:

“CDG, can you use your network to help me fill an open role at my company?”

Well, now I can.

Building on the success of my free automotive job board, I’m proud to launch CDG Recruiting — a more hands-on, white-glove automotive recruiting service.

Whether you’re looking to fill roles in dealership management, the C-suite, F&I, fixed ops, auto tech, or SaaS, we take the hassle out of hiring by doing the heavy lifting for you.

And here’s the best part:

We vet and screen thousands of candidates, so you don’t have to. And with our placement guarantee, hiring through CDG Recruiting is 100% worry-free.

Our team has decades of experience and has successfully placed over 1,000 roles in the automotive industry.

If you’re ready to find your next rockstar employee, try CDG Recruiting today.