A series of bitter waterfront labor disputes is wreaking havoc with the movement of cargo at the ports of L.A. and Long Beach, costing shipping lines millions of dollars and casting a shadow over the port complex’s future.
Maverick members of the International Longshoremen’s and Warehousemen’s Union angered by changes in their new contract that reduce the income of many of the highest-paid dock workers have engaged in a series of work slowdowns and stoppages at the ports’ container terminals.
Industry officials say the tactics have reduced productivity in container operations by as much as 30 percent.
While the slowdowns are affecting seaports up and down the West Coast, they are taking an especially heavy toll at the ports of L.A. and Long Beach where marine terminals already are congested as a result of an explosion of trade with Asia.
The work slowdowns have led to significantly increased labor costs for shipping companies, which have been forced to hire extra crews to load and unload their vessels. Fuel costs also have skyrocketed, as ocean carriers race their ships across the Pacific in order to make up for lost time at L.A. or Long Beach.
“Some of the companies are experiencing millions of dollars in losses due to the drop in productivity,” said Joe Miniace, president of the Pacific Maritime Association, which represents the shipping lines that employ the roughly 8,000 West Coast dock workers.
Trucking companies also have reported losses, as trucks wait in line for hours to pick up and deliver cargo. The slowdowns have caused nail-biting unease among importers and exporters for whom a missed connection can easily cost thousands of dollars.
ILWU officials did not return phone calls from the Business Journal. The union is notoriously media shy, particularly when it comes to labor disputes.
The slowdowns stem from lingering rancor over the union’s hotly contested three-year contract with the PMA, which was signed in September.
While the contract guarantees double-digit pay raises for most longshoremen, it also forbids lucrative side agreements that many highly skilled crane operators and marine clerks in Los Angeles and Long Beach formerly had with waterfront employers.
Under those pacts, longshoremen used to earn an extra $10,000 a year or more by agreeing to work steadily for a single maritime terminal. Shipping lines were willing to pay the higher rates to guarantee productivity in their cargo operations.
In an effort to boost union solidarity, the ILWU leadership pushed a provision in its new contract limiting such deals. Now, all dock workers must apply for rotating employment out of the ILWU’s hiring hall rather than striking individual agreements with marine terminals.
Although the contract was approved by a majority of ILWU locals up and down the West Coast, the new provisions have driven a wedge between the union’s leadership in San Francisco and the powerful Southern California locals, three of which have stopped paying their dues to the international.
The shipping lines are caught in the middle of that internecine battle.
“The issue is whether the locals or the international is in charge,” said the PMA’s Miniace. “But who pays the price? The shipping companies.”
One of the carriers paying a heavy price is Matson Navigation Co.
“It slows down the production on ships, which means the ships leave L.A. late, which puts them late at their destination,” said Bal Dreyfus, Matson’s vice president and area manager.
Earlier this month, Matson saw its longshore crews walk off the job for more than four hours. As a result, the company’s ship reached its destination in Hawaii 12 hours late. Dreyfus refused to say how much that work stoppage cost Matson.
But according to the PMA’s Miniace, racing a huge container ship from California to Hawaii can cost an additional $18,000 in fuel alone. Hiring an extra longshore labor crew can cost between $20,000 and $30,000 more.
So far, the shipping companies have been willing to swallow those costs in order to keep their ships on schedule. That has minimized the effect the slowdowns have had on importers and exporters.
“We have been able to offset the impact with additional money spent on increasing our labor force,” said Robert D. Kleist, corporate advisor to Evergreen America Corp. “We have been able to keep our ships relatively on schedule.”
Evergreen’s costs increase by as much as one-third each time the longshoremen stage a slowdown, Kleist said.
“Sooner or later, the importer and exporter will feel the brunt of it,” he said.
Industry officials said the mounting costs and headaches could lead some shippers and ocean carriers to consider alternatives to Southern California.
One quarter of the nation’s container cargo is handled by the ports of Los Angeles and Long Beach. But in recent months, a number of East Coast ports, including New York, Savannah and Baltimore, have cut cargo rates and launched a major marketing campaign in an effort to lure new traffic from Asia via the Suez Canal.
The East Coast ports also boast that they are free of the labor problems plaguing the West Coast.
“As the West Coast gets more and more congested, the East Coast will open up and become more attractive,” said Karsten Lemke, vice president of the West Coast region for Zim American Israeli Shipping Co. Inc.
Port of Long Beach officials are not concerned about the potential diversion of cargo from California to the East Coast, according to spokeswoman Yvonne Avila. She cited long-term lease arrangements that many carriers have established with both Long Beach and Los Angeles.
Said Al Fierstine, director of marketing at the Port of Los Angeles: “We’re not overly concerned at this point. But we would like to see these issues resolved so we can get on with business.”
But according to Evergreen’s Kliest, the entire shipping industry is taking a closer look at the Suez option.
“A good number of carriers are giving more credibility to Suez recently than they have for a long time,” he said. “If the same situation continues, then it could become a problem.”
The PMA is currently negotiating with the ILWU, urging the union’s leadership to crack down on its maverick locals, according to Miniace.
And while he declined to predict when the West Coast’s labor problems might draw to a close, he did say there was “a light at the end of the tunnel.
“We’re all getting on track,” Miniace said. “We have to understand that we’re in the same boat. We are all stakeholders in this business.”