When protests forced the shutdown of the Ambassador Bridge last week in Canada, the event cost the automotive industry millions and left everyone wondering who will cover the cost of this crisis.
Direct industry losses amounted to $300 million. The auto industry suffered a $155 million hit and there were $145 million in lost direct wages due to plant shutdowns, according consulting firm Anderson Economic Group LLC.
The bridge, situated between Detroit and Windsor, reopened Sunday after a six-day shutdown, but experts predict the impacts will linger for months along with the threat of future closures. Canada's Prime Minister Justin Trudeau invoked emergency powers Monday to stop citizen protests over excessive COVID-19 measures.
"Within hours of the trade disruption at the Ambassador and Blue Water bridges, we observed shortages and then slowdowns at assembly plants," Patrick Anderson, CEO of Anderson Economic Group, said in a news release. "Only some of that lost production can be made up given the tightness of the auto industry's supply chain right now, so these are real losses to the men and women working in this industry."
The latest event is another force majeure to hit the industry during a period of unprecedented supply chain disruption, say legal experts, who say force majeure — an unforeseeable circumstance preventing a contract from being filled — is the likely defense for suppliers unable to move parts across the bridge.
Contract disputes between automakers and suppliers are becoming all too common with supply disruptions in the last two years.
Some suppliers flew parts back and forth during the Ambassador Bridge closure, but air freight can cost 10 times more than moving parts on trucks. The measures kept assembly lines running but OEMs and suppliers will eventually have to sort out who pays the bill.
Recently supply chain disruptions have exposed cracks in the supply chain and have given companies have a better idea how to handle them, said Michael Brady, co-chair of the automotive industry group at Warner Norcross + Judd, told Automotive News.
"It's a different cause, but the same type of interruption in the supply chain," Brady said. "Whether it's the bridge getting shut down or the ports being jammed, it all results in parts not getting to customers in time. I think if this would have happened pre-COVID, you would have seen a much worse reaction from everybody in the supply chain. Everybody knows how to deal with these things better."
Who bears the cost will come down to supplier-customer relationships and contract terms. Brady advises automakers take a wait-and-see approach while making they understand their contractual rights.