MoneyAuto News

Ambassador bridge protests could cost you money if they persist

Posted at 11:47 PM, Feb 11, 2022
and last updated 2022-02-11 23:47:28-05

DETROIT (WXYZ)  — As attorneys argued for an injunction that would give police the ability to arrest protesters who block the Ambassador Bridge, they told a Canadian judge the blockade was proving to have a “catastrophic impact” economically already. They spoke about an impact on all consumers and the auto industry.

7 Action News reached out to automakers to ask about the economic impact from their perspective.

Ford Motor Company says Friday its plants in Oakville and Windsor are running at reduced capacity. Plus the Ohio Assembly Plant is down as a result of a part shortage associated with this situation.

General Motors tells 7 Action News its CAMI Assembly plant in Canada and Flint Assembly ended 1st shift early. They did not have the parts they needed to build cars.

Stellantis did not share details but said it is making production adjustments due to parts shortages caused by the closure of the bridge.

Economists say it is costing automakers hundreds of millions of dollars.

“Once it gets going beyond a few days it becomes a very very serious problem,” said Professor John Taylor, Associate Professor of Supply Chain Management at Wayne State University’s Mike Ilitch School of Business

Taylor says right now it could be written off as a short one-time event by the auto industry, but if the government does not end it, it could change the auto industry in a way that weakens U.S. automakers globally.

Automakers in Canada or the U.S. could decide to use lower quality or higher cost suppliers in the market to avoid the border.

Companies could decide to have more inventory

“It costs a lot of money to sit on inventory, storage, obsolescence when the model year ends financing the inventory. It can easily have a cost of 15% of the value of the inventory in operating expense,” said Professor Taylor.

If automakers believe this could be a repeat problem, they can minimize costs by making cars that have fewer options than current cars.

“You couldn’t possibly store all that inventory, so you end up offering less options. That is worse for consumers and worse for the position of the North American auto industry.

The cost of storing inventory explains why supply chain issues can lead to inflation and push car prices higher.

“Anything that impedes the flow across that border is basically a tax on the price of goods,” said Professor Taylor.

Taylor says automakers are rapidly impacted because they maintain little inventory to keep costs low. There are other industries that also will be impacted if disruptions continue at the U.S. Canadian border.

Lumber, food, and paper industries in the US also rely on the Ambassador Bridge and would face costs or shortages.