Globalization of manufacturing makes perfect economic sense in a perfect world. However, the auto industry last week got yet another painful reminder of the vulnerabilities in an imperfect global logistics network when the Felicity Ace — a ship hauling a few thousand Volkswagen Group vehicles across the Atlantic Ocean that were bound for U.S. dealerships — was stopped by a weeklong blaze.
This situation must be frustrating for inventory-starved dealers who had vehicles on the boat, which was filled nearly to its capacity of 4,000. Some of those retailers persuaded car buyers — who are accustomed to instant gratification by showing up at the lot and driving off with their new vehicles — to wait out the lengthy custom-order process. Now those deliveries, and revenues, are pushed off for a few more weeks or even months.
While nobody can reasonably expect the entire global automotive manufacturing system, built on cost-effective specialization, to be completely unwound — that would be economically unfeasible — recent events have shown there is wisdom in regional production of vehicles and their parts. Simply put: The farther products travel, the greater risk of damage or delay, such as from a border blockade.
