A District Court ruling
has temporarily halted a West Coast dock "lockout".
Read how this affects your new bike shipment here.
A ruling from U.S. District
Judge William Alsup has halted an organized "lockout"
by the Pacific Maritime Association. Acting under
orders from President Bush, a three person panel and
the San Francisco Judge ruled that the government
had proven the use of the 1947 Taft-Hartley Act was
necessary to stop the lockout's impact on the economy.
Estimates of the impact on the U.S. economy put losses
at "approximately $2 billion per day" according
to MSNBC.com and CNN.com.
Off-loading of seaborne
freight from Asia and other origins to U.S. West Coast
Ports had been stopped for ten days during the labor
dispute. The "lockout", as Union officials
referred to it, prevented dockworkers from unloading
freight from ships. This labor dispute, which began
on September 27, threatened the supply of 2003 bicycles
to the U.S. and, more importantly, Shimano brand components.
Shimano provides approximately 78% of the O.E.M. bike
components used on bikes sold in the U.S. The impact
on the local bicycle industry is already being felt.
At one point over 200 containerized cargo ships were
anchored off the U.S. West coast with no where to
unload their freight.
Valerie Vellandi of Felt
Racing said the strike had "affected their business"
and "slowed things down".
Nearly every bicycle sold
in the United States is reliant to some degree on
imports arriving through West coast ports, with the
majority of bicycles being highly dependant on Asian
sourced components such as Shimano.
In interviews with industry insiders on Friday, September
4th, most companies expressed concern over the effects
the lockout would have on U.S. bicycle supply. Some
insiders, who spoke on the condition they would not
be identified, characterized the situation as "Serious
and getting worse by the day". One buyer told
bikesportmichigan.com, "Even if this thing ends
today there is at least a 30-45 day backlog of freight
in the system, it is a huge mess and will take a while
to untangle."
What this means to local
bike consumers: All bike companies will be affected
to some degree. This will stall the release of new
2003 bicycles and slow the arrival of critical Shimano
components. Shortages and long lead times for new
2003 bicycles are already a certainty, with delays
becoming greater if the lockout cannot be permanently
resolved. The current court order is a temporary one
and may change to an 80-day "cooling-off period"
if each side can't reach an agreement.
Inventory already landed
in the U.S. and on bike shop sales floors and warehouses
has become more valuable. This shut-down comes at
a critical time for the bike industry, just as Spring
'03 inventories are arriving in anticipation of the
busiest months of the bike season in March, April
and May of '03. People who delay their purchase of
a bicycle until later this year or early next year
are likely to have to wait longer, pay higher prices
or may not be able to get a bike until next season.
Some companies, such as
Giant and Specialized, rely heavily on Asian imports.
These would be the hardest hit if the lockout continued.
Almost all companies rely on the Asian supply of Shimano
brand components to build completed units for sale
in the U.S.
In a conversation with
Cannondale CEO Joe Montgomery, he characterized the
situation as "A very serious issue" and
went on to say "It is mind boggling that there
hasn't been a more direct approach from our leadership
in Washington."
Montgomery is Chief Executive
at Cannondale Corporation in Bethel, Pennsylvania.
Cannondale is one of few companies who do all of their
frame production here in the U.S. They do still rely
on parts from Asian suppliers and traditionally brought
through U.S. West Coast Ports.
"We have diverted
some of our shipments through New York and are bringing
others in via air" said Montgomery about Cannondale's
contingencies as the lockout worsens.
Since Cannondale is one
of the major players in the industry and the only
one with 100% U.S. manufactured frames, they are better
positioned to ride out the lockout should it become
protracted.
"The ocean shipments
are usually high cube (cubic volume), low weight shipments
such as complete bicycles or 100 cases of floor pumps."
Says Euro Asia's Dave Lundegard. Euro Asia is a wholesale
distributor that sells mainly high end Shimano and
Campagnolo brand components to bike shops around the
U.S. Lundegard mentioned that his company would not
be substantially affected if the lockout resumed since
many of his shipments are smaller components from
Italy and are brought in via airfreight. "We
won't feel it unless it goes on much longer,"
says Lundegard.
Lundegard added that air
shipments can be as much as 50% more expensive "Depending
on the country of origin, it really depends upon the
size and weight of the shipment and the country of
origin".
The bike industry has been
impacted by similar logistical problems in previous
years, including an earthquake in Kobe, Japan several
years ago that buried supplies of new Shimano XTR
components under tons of rubble. In the past these
issues have been used by manufacturers as reasons
to drive up prices and tighten supply in January,
February and the busy Spring months.
Results of surveys
conducted throughout 2002 on the bikesportmichigan.com
website indicate the average bike shop customer has
very little understanding of the supply chain that
brings a bicycle to a bike shop during the spring.
"It will be the same old thing, we'll tell people,
'There was a dock strike, bike prices are up and the
lead times are longer, you should have bought sooner…'
and their reaction will be, 'What? What does that
have to do with buying a bike now?'" said Bikesport
Manager Mark Trzeciak.
Bikesport Manager Nate Griffith said "People
need to buy their bike now if they want it for next
season. They will get better pricing, better availability
and won't be affected by this strike." Bikesport
owner Tom Demerly said, "My experience is people
will not take this seriously. They believe it is a
sales tactic to get them to buy in the off season;
but this is real- it's on CNN right now. This will
torpedo availability and send prices up as we move
toward Christmas and Spring. People who want a bike
for next year need to move now, within days."
