It’s happening. Thanks to the West Coast port strikes, Honda (NYSE:HMC) has announced that it will be slowing down its car production. The reason is quite obvious: It gets most of its parts from the West Coast ports and can’t assemble cars without these parts. As a result, it’s going to be slowing down its deliveries.
If this development was a simple one of the corporate announcements, this news would be easy to brush off. However, Honda’s experience highlights the experience of other manufacturers who are dependent on parts imports or parts going through West Coast ports. Every little disruption in a company’s supply chain extends delivery time and might actually kill deals.
This can’t be good for the overall economy. You have to understand that the economy works on a multiplier effect. If there is a slowdown or an increase in one part of the economy, it quickly sends shockwaves to the rest of the economy. A slowdown in Honda car manufacturing may mean layoffs at suppliers. It may mean a slowdown in the regional economies that are dependent on Honda’s economic activities. While I’m not arguing against curtailing the rights of port workers to strike, one thing is clear: Any economic disruption, whether it’s the price of oil, inputs or labor, you have to be prepared for the economic impact.
The good news is that the port issue is fairly local. Just as importantly, the port issue is not expected to last a very long time. Any kind of slowdown in supply chains can be very devastating if they drag on for a long enough period of time. From the looks of it, that’s not the case here. Still, this is a classic case of supply chain disruptions casting a long shadow on the overall American economy. Thankfully, the disruptions from many different factors don’t all appear at once.
