The skyrocketing cost of cars and trucks — which has played a major role in fueling the 40-year high inflation rate in United States was just beginning to level off before truckers blocked the Ambassador Bridge and with it the most efficient way to transport auto parts between Canada and the US
Without access to key components, auto manufacturers were forced to shut down some of their plants and some factories remain closed or are operating at reduced capacity.
Toyota delayed production at its plants in West Virginia, Alabama and Kentucky, affecting its output of its best-selling RAV4 vehicle, the company said Friday, adding the disruptions could continue through the weekend.
Ford said that two of its Ontario-based factories are running at reduced capacity and an Ohio plant had to shut down. General Motors said it resumed production at its Michigan factory on Friday after canceling two shifts on Thursday.
The situation could get worse if the blockade doesn’t end soon, according to the American Automotive Policy Council, Equipment Manufacturers Association and Original Equipment Suppliers Association.
“The US automakers and suppliers are doing everything possible to maximize production with what they have, working to keep lines running and shifts scheduled to minimize the impact on American autoworkers, but the situation has already led to reduced production and may spread the longer the disruptions persist,” the groups said in a statement.
Production cuts and delays are bad news for the already meager US inventory of cars and trucks of roughly one million vehicles, down from more than 3 million in a normal year, according to J.D. Power.
Insufficient supply caused the price of used cars and trucks to increase by a stunning 40.5% in the year ending in January 2022, while the price of new vehicles grew by 12.2%, according to a Labor Department report released Thursday.
Those are some of the biggest price jumps of any product or service included in the report, which found that overall consumer prices increased by 7.5% annually, the fastest rate since February 1982.
The blockade could upend the trend. The Ambassador Bridge carries 25% of Canada’s trade with the US, with more than 8,000 trucks crossing the bridge on a typical day.
Workers in the Michigan auto industry alone may have lost up to US$51 million in wages this week due to production slowdowns, a number that would climb dramatically if the blockade continues, according to an analysis from the Anderson Economic Group.
“We are at an economic crisis at this moment because of this illegal blockade,” Michigan Governor. Gretchen Whitmer told CNN.
Experts say that the impact of the protests isn’t comparable to the semiconductor shortage, which forced automakers to cut production dramatically because they couldn’t get their hands on computer chips. This time around, manufacturers are working out other ways to get their hands on auto parts, such as air transport.
A Canadian judge on Friday ordered the protestors to end the blockade, though it remained unclear just how and when their trucks would be removed.
The protestors, dubbed the “Freedom Convoy,” have been blocking the bridge for five days in addition to disrupting another key US-Canada border crossing near Alberta. On Friday, they agreed to open one lane of traffic on the Ambassador Bridge for vehicles entering Canada but continued to block vehicles going into the US.
Ontario Premier Doug Ford declared a state of emergency on Friday afternoon that will allow the Canadian province to fine protesters blocking the bridge up to US$100,000 and sentence them to up to a year in jail.
Canadian business groups have warned that if the government doesn't crack down on the protests, US companies could view the nation as an unreliable trading partner.
The US Chamber of Commerce, National Association of Manufacturers and Business Roundtable, three of the largest business lobbying groups in the US, called on the Canadian government to intervene on Thursday night to prevent “production cuts, shift reductions, and temporary plant closures”
“The North American economy relies on our ability to work closely together, including our manufacturing sectors,” the groups said in a statement. “We need to apply the same spirit of cooperation to tackle this problem.”
US President Joe Biden this week urged Canadian Prime Minister Justin Trudeau to end the crisis and offered American support, though Trudeau has insisted on working with local leaders rather than have the Canadian government step in.
Canada implemented a COVID-19 vaccine mandate for foreigners entering the country on January 15, this year, while the US enacted its own border mandate on January 22.
The rule drew criticism from some US business groups, which said that it would further exacerbate supply chain disruptions stemming from a shortage of truck drivers and chassis.
Anne Reinke, President and CEO of the Transportation Intermediaries Association, said that the cross-border mandate has made it far more difficult to find truckers willing to haul goods between the United States and Canada, driving up transportation prices.
“By itself, the vaccine mandate would be bearable, but now along with all the other headwinds, it’s becoming a real huge challenge,” she said. “Ultimately, there’s a ripple effect on the consumer.”
