Car sales have stalled, shrinking traffic through the Port of Hueneme and changing the calculus for shippers and distributors with operations in Ventura County.
Auto industry suppliers are gearing up for a surge in production when factories reopen, even as they look for space to store vehicles and keep workers at a safe distance.
With showrooms shut down, “you closed the front end of the supply chain … yet you had thousands and thousands of vehicles already in queue, already en route to Hueneme with a choked supply chain,” said Port CEO Kristin Decas.
Some online and in-person sales have resumed, but several of the port’s largest customers are expecting cargo to fall by 90 percent over the next two months. While initially the port and its shippers scrambled to find space at nearby businesses and college campuses, they are now expecting steep declines in production as consumer spending on autos is forecast to remain low.
“The real dilemma now is not finding a place to store the cars, it’s where are the cars,” Decas said. “The production is getting shut down. It’s almost like you’re getting hit both ways.”
With around 55 percent of its revenue coming from higher-margin auto shipments, the port has forecast $2.7 million in lost revenue for the year.
Coming off eight years of record sales, it doesn’t anticipate layoffs or furloughs among its 40 port employees. But shipping and distribution partners report severe cuts to staff as they wait for car sales and production to normalize.
Kia and Hyundai cars continued to come through the port, straining storage capacity, said Frank Cerrito, general manager for Glovis Hueneme. With around 180 employees, the company is currently running at around 40 percent output to enable distancing among its workers.
Once they’re received from the port, the cars go through three structures where they’re outfitted with accessories, labeled and undergo inspections before they’re washed and loaded for rail delivery.
As it plans for an eventual reopening, the company has had to find ways to increase its production capacity while maintaining the new safety precautions.
“Once we get away from this, our customers are still going to want us to have full production,” or more to meet new wholesale objectives. That means planning to take its usual 500 cars processed per day up to 700 or more, including potentially adding a second shift to enable its car wash to process the additional load.
“We’re going to creatively find areas in our buildings where we can still have the space for the people and still have extra production,” Cerritos said. “Once this ends, we’re trying to work out plans to get our folks back to work as soon as possible.”
Similar efforts are taking place aboard ships and at terminals, including regular sanitizing of decks and quarters, said Jordan Spritzer, head of marketing and communications for Wallenius Wilhelmsen Solutions, which has significant operations at Port Hueneme.
“What’s going on in the Port of Hueneme is not too dissimilar to what’s going on in the rest of the world,” Spritzer said. “When all this happened and in turn the economic reverberations that came out of it, production was disrupted and demand was disrupted.”
With production picking back up in some regions, “there is some optimism that volumes will be returning both on the ocean side and the land-based side,” he added, but in the meantime, maritime shippers have modified schedules and cut back labor across the board.
Forecasts from automotive industry partners range from six months to multi-year return to full recovery, Decas said. Another primary revenue driver, fruit commodities, have remained static.
The trade supports more than 2,500 jobs for longshoremen and other contractors at the port.
Statewide, exports fell 12.7 percent in March compared to the prior year, while imports dropped 7.5 percent to $28.8 billion, according to a report by Beacon Economics.
“The steep decline in exports was hardly unanticipated in a month when economies worldwide were being shut down in an effort to contain the spread of the COVID-19 virus,” said Jock O’Connell, Beacon Economics’ international trade adviser. “Demand and supply curves both began to slope down precipitously in March.”
While April figures will likely decrease further, the Beacon team expects a return to relatively normal conditions beginning in the third quarter of 2020, as containment measures begin to make a difference in the spread of COVID-19. Should case numbers worsen as parts of the economy “reopen,” though, industrial production could become even more constrained, the report added.
“Even in the best of times, world trade depends on efficient transportation systems. At present, however, the state’s major seaports are reporting significant reductions in vessel calls, while international flights have been sharply curtailed at the state’s principal airports,” Beacon wrote. “In short, the business of transporting goods from here to there is facing hurdles unprecedented in peacetime.”
• Contact Marissa Nall at [email protected]