Supply chain issues hamper auto industry, but Sen. Gary Peters sees Michigan as part of the solution

WASHINGTON D.C. – Michigan’s automotive industry has been in the crosshairs of the global supply chain disruption since the beginning of the pandemic. On Tuesday, Dec. 7 Sen. Gary Peters led a congressional subcommittee looking for solutions.

The hearing, aptly named “Uncharted Waters: Challenges Posed by Ocean Shipping Supply Chains” brought together professionals representing surface transportation, maritime, freight and ports.

In his opening remarks Peters (D-Bloomfield Township) put a spotlight on Michigan not only as a victim of the supply chain disruption but as a potential remedy. He offered the St. Lawrence Seaway between the U.S. and Canada as a possible solution, calling it underutilized.

“As we explore solutions to strengthen our shipping and supply chains, we must be sure to look to the Great Lakes – I would say our nation’s best coast – to help fill in the gaps when possible,” Peters said.

The St. Lawrence Seaway, built in 1959, was a $1 billion project linking Michigan and Canada with high economic expectations for international trade.

In recent months the port has not seen delays or supply chain disruption as recorded elsewhere, according to the Chamber of Marine Commerce. However, it’s not moving nearly as much as its West Coast counter parts.

From March to October, 28.5 million metric tons of cargo moved through the Seaway. This would equal roughly 1.6 million twenty-foot equivalent units (TEU), a unit of volume used by larger ports. This spring, the Port of Los Angeles broke a new record of moving more than 1 million TEUs of cargo in just one month.

Unprecedented amounts of cargo globally have increased lead times from manufactures and higher shipping prices.

The challenges are stacking up against Michigan-based automotive parts company, Coastal Automotive, CEO Paul Doyle said.

When his overseas supplier contract expires next year, Doyle expects prices will rise 20% to account for increased logistical planning. The same rise in expenditures can be said of his labor cost and his material cost.

Lead times on materials to make the company’s main product, specialized foam for head impact safety, have gone from 12 weeks to 29 weeks. And shipping container costs have risen from $3,000 to $27,000, Doyle said.

The learning curve to make the technological shift into electric vehicles will be steep without profit fueling its innovation investments, Doyle said.

“The profit is the gas in our tank to fund our future to fund innovation,” he said. “We’ve been a three-time Supplier of the Year to General Motors but by virtue of our reduced cash and profit I suspect that we are two years behind in our product innovation.”

All these factors are compounding during a year when the Holland company is trying to recover from lost revenue. In April 2020, sales dropped from $5 million per month to $500,000 per month, Doyle said.

Michigan workers have weathered the storm of not only a health pandemic but a semiconductor shortage, labor shortage, Suez Canal blockage, trucking demands and increased material and wage costs.

“There’s 900,000 MEMA team members affected and every day I get to look 200 of them in the eye,” he said. “All they want is the opportunity to do meaningful work and provide for the dreams of their family.”

Senators questioned leaders of trade associations and private businesses on what they thought the role of government should be to fix the supply chain backlog.

“It’s about policy and how we make sure that we’re providing companies like yours and others the ability to have supply networks that are based in the United States,” Peters said.

Throughout the subcommittee hearing there was praise for the federal infrastructure bill – there has been a 41% reduction in containers sitting for more than nine days since the beginning of November, according to the Transportation Trades Department.

But trade leaders warned against putting the federal government in the middle of the complex system.

John Butler, President and CEO of the World Shipping Council, said the shipping industry is getting mixed messages from the government. On one hand, Butler said, the Biden administration has given direction to send empty containers on outbound ships to clear ports. Proposed legislation says the opposite.