WASHINGTON DC – Michigan’s auto industry has been in the crosshairs of disruption in the global supply chain since the start of the pandemic. On Tuesday, December 7, Senator Gary Peters led a congressional subcommittee looking for solutions.
The audience, aptly named âUncharted Waters: Challenges Posed by Ocean Shipping Supply Chainsâ brought together professionals representing surface transportation, maritime, freight and ports.
In his opening remarks, Peters (D-Bloomfield Township) highlighted Michigan not only as a victim of supply chain disruption, but as a potential cure. He proposed the St. Lawrence Seaway between the United States and Canada as a possible solution, calling it underutilized.
âAs we explore solutions to strengthen our shipping and supply chains, we need to make sure we look to the Great Lakes – I would say the best coast in our country – to help fill in the gaps where possible. Said Peters.
The St. Lawrence Seaway, built in 1959, was a $ 1 billion project connecting Michigan and Canada with high economic expectations for international trade.
In recent months, the port has not experienced any delays or supply chain disruptions as seen elsewhere, according to the Chamber of Maritime Commerce. However, it doesn’t move as much as its west coast counterparts.
From March to October, 28.5 million metric tonnes of cargo passed through the Seaway. This would equate to roughly 1.6 million Twenty Foot Equivalent Units (TEUs), a unit of volume used by larger ports. This spring, the Port of Los Angeles broke a new record by moving more than one million TEUs of cargo in just one month.
Unprecedented amounts of freight around the world have increased manufacturers’ lead times and higher shipping prices.
Challenges are mounting against Michigan auto parts company Coastal Automotive, CEO Paul Doyle said.
When his overseas supplier contract expires next year, Doyle expects prices to rise 20% to accommodate increased logistics planning. The same increase in expenses can be said of its labor cost and material cost.
Delivery times for materials to make the company’s main product, specialized foam for head impact safety, have been reduced from 12 weeks to 29 weeks. And the costs of shipping containers have gone from $ 3,000 to $ 27,000, Doyle said.
The learning curve for making the technological shift to electric vehicles will be steep without the profits fueling its investments in innovation, Doyle said.
âProfit is the gas in our reservoir to fund our future to fund innovation,â he said. âWe’ve been General Motors Supplier of the Year three times, but due to our cash flow and reduced profits, I suspect we’re two years behind in product innovation. “
All of these factors worsen in a year as the Dutch company tries to recover from lost revenue. In April 2020, sales fell from $ 5 million per month to $ 500,000 per month, Doyle said.
Michigan workers weathered the storm of not only a health pandemic but also a semiconductor shortage, a labor shortage, the Suez Canal blockage, demands for trucking and rising material costs and wages.
Doyle said he remains optimistic about the future, but his message on behalf of the Motor & Equipment Manufacturers Association is urgent.
âThere are 900,000 MEMA team members affected and every day I look 200 of them in the eye,â he said. “All they want is the opportunity to do meaningful work and make their family’s dreams come true.”
Senators asked leaders of trade associations and private companies what they think the role of government should be in addressing the backlog in the supply chain.
âIt’s about politics and how we make sure that we provide companies like yours and others with the ability to have US-based supply networks,â said Peters.
Related: Infrastructure bill would send more than $ 10 billion to Michigan
Throughout the subcommittee hearing, the federal infrastructure bill received praise – there has been a 41% reduction in containers on hold for more than nine days since early November , according to the Department of Transportation.
But trade leaders have warned against putting the federal government in the middle of a complex system.
John Butler, president and CEO of the World Shipping Council, said the shipping industry was receiving mixed messages from the government. On the one hand, Butler said, the Biden administration has given orders to send empty containers on outgoing ships to clear ports. The bill says otherwise.
âThere is no quick fix to this,â Butler said. “But it is possible to make the situation worse.”
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