COMMENT: Auto industry will feel the tremors of the air freight bomb scare

By Chris Brook-Carter | 2 November 2010

The UK's Home Secretary Theresa May has announced a review all aspects of air freight security in the UK. The news follows Friday's discovery of a bomb on a US-bound UPS cargo plane at East Midlands airport and a similar bomb on a FedEx plane in Dubai.

It is too early to start hypothesising how this will affect the auto industry; however, consequences seem inevitable.

Now that cars are being built to order, carmakers are increasingly looking to air freight as an important cog in their supply chain strategies. Small quantity and high value components are more likely than any other to move by air freight - it could be high value electronics or a high value option available on a car at relatively low volume.

Many of the electrical/electronic components from Tier 2 suppliers to Tier 1s are scheduled by air because of the high value to weight ratio and physical distance between the two companies.

And as a result of last Friday's scare, the auto industry is facing the prospect of tighter security regulations and with it increased costs, at a time when rising transportation bills are already a major concern.

Although the likes of The British International Freight Association have insisted that the UK's regulations are stringent and meet high safety standards, a number of other dissenting voices can also be heard, claiming that the shipping of air freight remains the weak link in airline safety.

So whilst there have been calming calls to resist a knee-jerk reaction to the latest al-Qaeda threat, the political consequences of doing nothing remain too high. The auto industry should brace itself for disruption and an inflating logistics bill.