Port workers back after brief but tense strike

East and Gulf Coast port workers will be returning to work this morning after reaching a tentative agreement Thursday night, ending a short strike that disrupted shipments of vehicles and countless other goods.

Driving the news: Members of the International Longshoreman’s Association (ILA), the union representing port workers, and the United States Maritime Alliance (USMX), the management group representing carriers and employers, reached a deal after three days of striking.

• The agreement would boost hourly wages by an extra $4 every year for the duration of the six-year contract, amounting to a total pay increase of 62% by 2031 (based on current top wages of $39 per hour).

• This deal is a compromise for both sides. USMX offered a $3-per-hour increase on Monday in response to the ILA’s request for $5. Both sides agreed yesterday to extend the current contract to mid-January to allow more time for negotiation on other demands.

• This means employees will work through the next three and a half months under their present pay but must still ratify the finalized contract in January. Some issues raised by the union remain unresolved by the tentative deal, such as automation displacing jobs.

Zooming out: The effects of a prolonged strike could have been devastating for the car industry, although domestic brands are better shielded from port shutdowns than foreign automakers like BMW and Volkswagen. This week’s dispute was brief, but it still can’t be said whether manufacturers will escape unscathed.

• East and Gulf Coast ports receive roughly 70% of all auto parts shipped to the U.S. and handled almost $38 billion worth of vehicle imports between June 2023 and June 2024.

• Previous port strikes were also short-lived but came with long-term consequences. A walkout shutting down West Coast ports in 2002 ended after just 11 days but caused major backups lasting six months.

• Each day ports were closed this week cost the economy between $3.7 billion and $5 billion according to JPMorgan and created a weeklong backlog of important car parts based on analyst estimates.

Zooming in: While even a short strike can come with big consequences for automakers, dealers and car buyers may be more sheltered from the impacts of this week’s shutdown.

• Automakers have been importing extra inventory ever since the likelihood of a strike became clear in August. Many shipments were also rerouted to West Coast ports throughout this week. These efforts may have sidestepped most delivery interruptions.

• Short-term financial impacts from strikes are often absorbed by companies (to a degree) before they reach consumers, even during long-term shutdowns. For instance, the weeks-long United Auto Workers (UAW) strike last year had little effect on dealers and car buyers, despite costing Detroit manufacturers billions in revenue.

• Long-term impacts, however, are more difficult to perceive. Union contracts can drive up labor expenses for businesses, which are incentivized to pass those costs onto consumers to keep profits level and shareholders happy. In this case, it’s possible that increased shipping costs will cause car prices to rise, especially among import brands.

• And yet this isn’t always the case. Average transaction prices for new vehicles have declined (slowly) since the 2023 UAW strike across most of the Detroit-Three brands, despite automakers warning that meeting union wage demands would make cars more expensive.

Bottom line: A brief strike was a good outcome for all parties involved, although the final agreement is still in the works. While the short duration limits the effects on the car market, automakers, dealers and buyers could still see some consequences: the coming months will dictate the extent of the damage and which group deals with the fallout.

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