Businesses Weigh Fallout From Dockworkers Strike
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As day one of the dockworkers strike unfolded Oct. 1, economists were trying to quantify the damage from the supply chain disruption caused by the closure of every major maritime trade gateway from Boston to Houston. The estimates range from $1 billion to $5 billion a day in delayed or lost activity.
The contract between the East and Gulf Coast ports and about 45,000 members of the International Longshoremen’s Association expired Sept. 30, and the workers went on strike Oct. 1. The strike affecting 36 ports is the first by the union since 1977.
“The strike will disrupt production and lead to loss of income for affected workers, with spillovers down the supply chain,” according to Bloomberg Economics’ Anna Wong and Nicole Gorton-Caratelli. “We estimate a hit to GDP of as much as $3 billion per day from forgone spending and production. A weeklong strike could knock 0.3 percentage point off annualized GDP.”
In Washington, Democrats and Republicans alike are struggling to navigate the political impact just five weeks before a close presidential election. On one hand, supporting a union that’s shutting down parts of the economy in a fight for higher wages and job security could alienate voters worried about supply chain disruptions and shortages. On the other, intervening to ease the economic pressure risks losing crucial blue-collar support in the process.
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: https://t.co/aCLng41DBm — NADA (@NADAUpdate) October 2, 2024
So far, President Joe Biden has made no move to invoke his authority to send the union back to work and resume negotiations, despite growing pressure from business groups urging him to act quickly.
“Just one day of paused operations will have devastating consequences on the economy, and hardworking American families will feel the impact of higher prices, empty shelves and lost economic output,” U.S. House Speaker Mike Johnson said on Oct. 1.
For the economy, it’s more of a slow-rolling tremor than a sudden shock. Ships unable to offload cargo, pickup exports or find alternative routes will instead drop anchor and wait it out. Those delays will reduce shipping capacity ahead of the holiday shopping season, forcing spot freight rates higher.
John Wrenn, chief operating officer of MHW Ltd., a Manhasset, N.Y.-based beer, wine and spirits distributor, said he’s worried about getting products delivered across the ocean in time for the holiday season — and in a way that still allows for a profit.
A 40-foot container costs about $4,000 to $5,000 to ship to the U.S. from Europe, but now there are peak-season and strike-related surcharges adding another $1,500 to $2,000. In just a few weeks, the rate has gone up 30% to 40%.
Statement from President Joe Biden on the Negotiations Between USMX and the International Longshoremen’s Association https://t.co/7EEHRvWRr9 — The ILA App (@TheILAmobileApp) October 2, 2024
Bringing merchandise into the U.S. through the West Coast doesn’t look viable yet, and air cargo rates are prohibitively expensive, he said. “It won’t take long for this [to] snowball and really hurt the holiday season,” Wrenn said.
Peanut butter and jelly maker J.M. Smucker Co., based in Ohio, said it relies on imports of finished goods and raw materials from both the East and Gulf coasts. The company has said it plans in place to keep business moving, including making adjustments to its manufacturing plans and evaluating West Coast routes. Still, in the event of an extended strike, the company will need to evaluate supply chain impacts.
A Walmart Inc. spokesman said the company prepares for supply chain disruptions and maintains additional sources of supply.
Costco Wholesale Corp. executives said last week that the strike is expected to affect a chunk of nonfood items that it imports. Nonfood items make up about 25% of Costco’s total business. The company has shipped holiday goods and some products earlier to get ahead of the strike.
While Pringles maker Kellanova says it has not experienced significant impacts to its supply chain, it is developing “contingency plans” to make sure it can still get its products to consumers.
Dockworkers strike in front of an entrance to a container terminal near Boston Harbor on Oct. 1. (Steven Senne/Associated Press)
Conagra Brands, which makes brands like Slim Jim and Duncan Hines, says they’ve been working with suppliers in preparation for the strike “for months,” and expect to be able to get through the strike without significant impact.
With the strike only just starting, automakers and other manufacturers in the U.S. that rely on a regular flow of foreign-made parts and export sales have activated their plan Bs hoping to avoid widespread problems.
Toyota Motor Corp. said it’s monitoring the situation closely and mulling contingency plans to minimize any impact on car buyers and dealers, a spokesman for its U.S. operations said Oct. 1. The carmaker has prepared for a possible strike by building up extra inventory, but the spokesman didn’t specify how much.
A General Motors Co. spokesman said the company has made contingency plans and has also been building inventory of parts. Ford Motor Co. is monitoring the situation closely, according to a spokesman, who said it is too early to speculate on potential impacts.
South Korean automaker Hyundai Motor Co. has a factory in Alabama and relies on ports in Philadelphia and Georgia. “Our logistics affiliate Hyundai Glovis is closely monitoring the labor situation and works on contingencies daily to ensure the steady processing and delivery of Hyundai vehicles,” a company spokesperson said by email.
Airbus SE, the France-based rival of Boeing Co., is aware of the situation and has taken actions to mitigate the potential impact on its operations in Mobile, Ala., a spokesperson said in an email.
Smaller businesses are in the crossfire, too.
A stone’s throw from the Wando Welch container terminal, the largest at South Carolina’s Port of Charleston, Scott Hunter fears a strike might delay shipments of the granite slabs he needs for his elaborate outdoor kitchen and grill arrangements, which come from the Mediterranean region and South America.
For now, the owner of Palmetto Outdoor Kitchens of Mount Pleasant, S.C., thinks there’s enough granite in coastal South Carolina to make do, but a prolonged strike might stress that.
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Another fear is that the strike may lead to huge backups of ships and trucks, which already back up along Long Point Road leading to the terminal. “I don’t know what they’re going to do,” Hunter said.
During his pep talk on Oct. 1 outside the Port of New York and New Jersey, union chief Harold Daggett mentioned plans to take his campaign against port automation global.
He wants to organize dockworkers all over the world to disrupt operations at port terminals owned by companies that are planning to add automated technology, regardless of where.
“And when we finally do get a contract I’m going to go to Portugal with every union in the maritime to take these companies on over automation,” he said. And if automation arrives at ports in Chile, “we’ll shut them down for three weeks around the world.”
Written by Laura Curtis, Deena Shanker and Michael Sasso.
