Potential Rail and Trucking Strikes Could Further Impact Supply Chains

Recently, the business media has raised the alert for the dual threat of rail union and truck driver strikes. Needless to say, such events could further impact an already stressed supply chain across nearly every industry, ours included. While it appears that the Biden administration delayed the crisis with the establishment of an emergency board tasked with preventing a rail strike, Wheels Donlen continues to monitor the situation. The new deadline is September 16^th.

What we know at this point in time:

• Rail dwell times at ports are currently four times higher than at the beginning of 2022.
• For the US, more than $31B in trade is on vessels or landlocked on the coasts. The same problem exists in congested European ports, where strikes have been paused until August 24th. The result has been a sharp rise in shipping rates over 2019, and consideration of diverting ships from the East and West coasts to the Gulf.
• Over 60% of containers at ports are destined for rail and the freight backlogs have resulted in port land capacity being nearly maxed out.
• Rail worker staffing problems pre-date COVID and are a result of budget and staffing cuts. Workers, who have not seen a raise in three years, strongly support striking with a 99 percent authorization in a recent vote. Worker/management tensions peaked during the pandemic.
• Urged on by US importers, the Biden administration established a Presidential Emergency Board (PEB) to assist in reaching a contract settlement.
• The government has issued an executive order delaying a rail union strike, impacting 115K rail workers. The current union contracts for the five class one railroads expired in 2020. If Congress doesn’t act, rail employees will be free to strike on September 16^th.
• Trucking strikes: In California, the AB5 labor law is triggering potential owner-operator strikes. Blocking all trucks from entering the Oakland port, owner-operators are protesting the California law that reclassifies independent contractors as employees. According to the California Trucking Association, “Gasoline has been poured on the fire that is our ongoing supply chain crisis.”

Comments from OEMs:

• The OEMs believe that the federal government will intervene to prevent strikes impacting supply chain. However, the manufacturers do have “strike teams” in place to face that contingency.
• The US OEM supply is at 75% of peak production which leaves some shipping capacity.
• All manufacturers use a variety of ports. They also produce the majority of their vehicles within North America.
• For crucial components, OEMs are using air freight to ensure supplies.
• Manufacturers are working around the clock with railroad and transportation partners to ensure continued deliveries. 

Wheels Donlen is continuously monitoring this impending situation and realize that you may have already felt the impact of these conditions through delayed deliveries for vehicles or parts. We will be providing industry developments as we have them and assure you that we are proactively watching the emerging events.