West Coast port strike risks derailing the economy – auto sector may suffer particularly

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Brian Kingston is president and chief executive officer of the Canadian Vehicle Manufacturers’ Association.

Recent economic indicators are starting to point in the wrong direction, with businesses anticipating slow growth ahead. According to the Bank of Canada’s latest Business Outlook Survey, sales growth will be weak over the next year, investment intentions have declined and concerns with inflation remain elevated.

One of the few bright spots in the survey is an improvement in supply chains allowing companies to work through backlogs, including in the auto industry. But now that bright spot is rapidly fading, with dire economic consequences.

Labour strife at Canada’s largest port threatens supply chain improvements and could send the economy into the ditch. On Canada Day, longshore workers at B.C. ports, including the Port of Vancouver, launched a strike – crippling a key component of the country’s transportation infrastructure network.

For the Canadian auto sector, which is responsible for an estimated 500,000 middle-class jobs, B.C. ports are particularly important. Vancouver is a key transit point for parts and finished vehicles produced and sold in Canada and North America. Last year, 333,734 vehicles were handled by the port, representing nearly a quarter of total Canadian vehicle sales. It also serves as a key transit point for materials needed to build electric vehicle (EV) batteries.

In addition, the port is a critical hub for wheat and canola, fertilizers, minerals, fuels and forest products. It is approximately the same size as Canada’s next five-largest ports combined, handling one-third of goods traded outside North America. Port activities sustain an estimated 115,300 jobs, $7-billion in wages and $11.9-billion in GDP across Canada.

The stoppage is forcing the automotive companies that depend on the port to reroute shipments, adding significant costs and increasing uncertainty at the worst possible time. For Canadians, this means higher vehicle prices and delays just as the sector was rebounding from pandemic-related inventory shortages.

And if the strike continues much longer, auto assemblers may face another wave of plant closures due to a lack of parts. This would be particularly detrimental as the auto sector is one of the key drivers of the Canadian economy. Motor vehicles and parts exports were up 16.2 per cent year over year in April and accounted for one-third of export growth.

Perhaps most concerning is the damage being done to Canada’s reputation on the world stage as a reliable jurisdiction for the production and movement of goods. This job action is on top of recent rail disruptions, bridge blockades and a strike at the Port of Montreal. According to a survey by Canadian Manufacturers & Exporters conducted last year, manufacturers have lost nearly $10.5-billion in sales because of disruptions in the supply chain, and are experiencing nearly $1-billion in increased costs.

Transportation and logistics companies that rearrange supply chains to limit exposure to an increasingly unreliable Canadian network may simply never return. For businesses in the automotive sector that depend on fast and efficient logistics, Canada’s competitiveness for job-creating investment is under question.

This is particularly problematic amid the auto industry’s once-in-a-century transformation to electrification. Canada has attracted more than $25-billion in new auto investment over the past three years, most of which is dedicated to assembling EVs and building a North American battery supply chain. Failing to address increasingly frequent transportation infrastructure disruptions is hurting our ambition to become an EV superpower.

The longer the strike at B.C. ports goes on, the more significant the damage will be to Canada’s fragile economy. Now is the time for the federal government to work with the parties and bring it to an immediate end. Delays are not affordable and not in the best interests of the country or our economy.

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