COVID mandate protests in Canada are starting to affect U.S. automakers
RACHEL MARTIN, HOST:
So the busiest border crossing between the U.S. and Canada is blockaded by semitrucks, which presents another challenge for the Biden administration. Here's White House spokesperson Jen Psaki.
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JEN PSAKI: The Ambassador Bridge is Canada's busiest link to the United States and accounts for about 25% of trade between the two countries. And so the blockade poses a risk to supply chains for the auto industry because the bridge is a key conduit for motor vehicles, components and parts. And delays risk disrupting auto production.
MARTIN: The White House says it's in contact with customs teams on both sides of the border to divert some of the traffic. It's also talking to automakers to figure out how the blockade is affecting them. The auto industry has already been hit by supply chain issues because of the pandemic, so the border blockade adds insult to injury.
Michelle Krebs is executive analyst at Cox Automotive, and she joins us from Troy, Mich. Hey, Michelle.
MICHELLE KREBS: Good morning.
MARTIN: So first COVID, now this. If we thought as consumers that it was hard to buy a car before, then is it about to get a whole lot tougher?
KREBS: I think it depends on how long this lasts. But clearly, this could not have happened at a worse time. We have very little - anybody who's been shopping for a car knows that the - there's no inventory on dealership lots, and now with any kind of production disruption makes that even worse.
MARTIN: And that initial lack of cars on those lots - I mean, it has to do with the ongoing issue of chip shortages, right?
KREBS: That's right. I mean, it was very severe last year. We think it's starting to improve. But there have been - there are still production cuts taking place because of a lack of computer chips and now the lack of parts that can't cross the border.
MARTIN: Right. So Ford says it's looking at flying some parts to a plant in Windsor, Ontario, which is on the other side of the bridge from Detroit. Is that what we're likely to see - flying parts where they need to get to?
KREBS: We are seeing a little bit of that, and we see that on occasion when things happen. General Motors has a plant near Toronto. It apparently is flying parts in, too. But that's not practical on a long-term basis. It's expensive. It's - you can't do a lot of big parts. And the other thing that's complicating this is plants run on a just-in-time inventory basis, so they don't keep a lot of parts in the plants.
MARTIN: So why? I mean - so this just-in-time model seems to make the industry really vulnerable when things - these externalities happen that it doesn't have any control over.
KREBS: Well, except when it's running well, it saves costs. It saves room in plants. And it is much more efficient. It was developed in Japan. Toyota has used it. But it is vulnerable to these kind of hiccups, as we saw with the chip shortage and as we are seeing with the trucker blockade.
MARTIN: So the pandemic pointed out these issues with supply chains, as we have talked about. Now we've got this blockade happening as a result of the demonstrations in Canada. Are there larger lessons that the industry can take from these issues that have happened that have really created these follow-on effects that have been devastating?
KREBS: Well, I think definitely they learned from the chip shortage that there are certain components, especially those that come from far away to - that maybe a stockpile of them would not be a bad idea. Toyota did that early in the game, although now it's in a position where it's very low on them. But, you know, something like this truck blockade - that came out of nowhere. And I don't know how they could possibly plan for that.
MARTIN: Have you talked to anyone in the auto industry in Canada about how it's affecting them and any plants that might be on the border?
KREBS: Oh, well, we are hearing definitely it's affecting plants there. In the city of Windsor, which is right across the from the Ambassador Bridge, it's having a tremendous economic effect. I watched the press conference with the mayor and some business executives. Thirty-five percent of the jobs there are related to the auto industry. So the impact is very significant there.
MARTIN: Michelle Krebs, executive analyst at Cox Automotive, thank you.
KREBS: Thank you.
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