Firms prepare for dockworker talks

By Simon Avery
Associated Press

LOS ANGELES — Businesses nationwide are taking steps to protect the flow of their goods as West Coast longshoremen and shipping and terminal companies enter their most contentious contract negotiations in years.

Longshoreman Mike Ivicevich works at the Port of Los Angeles, which is targeted for modernization into a super-facility that would be able to handle more Asian goods. U.S. trade with Asia is forecast to double in the next decade. Associated Press

"(A labor stoppage) would have a devastating impact on the lives of millions of people because it just travels up and down the supply chain," said Robert Krieger, president of Norman Krieger Inc., a customs broker and freight forwarding firm in Los Angeles.

At issue in the talks is new technology that promises to eliminate some of the best-paying union jobs in the country while helping turn the Los Angeles/Long Beach port complex into a modern super-facility able to feed Americans' growing hunger for cheap Asian goods.

"Our terminals are becoming full," said Joseph Miniace, chief executive of the PMA. "Greater efficiency would increase the flow."

Singapore, one of the world's most modern ports, now handles nearly 18,000 cargo containers per acre each year, he said, compared with 3,000 at Los Angeles/Long Beach, the world's third-largest port behind Singapore and Hong Kong.

The PMA said that upgrading technology could also save up to $1 billion a year.

But such improvements have stalled, partially from union resistance, while Asian and European ports have made significant investments in state-of-the-art equipment.

In Rotterdam, for example, robotic cranes unload cargo. In Singapore, a single operator can control multiple cranes.

ILWU officials said they are not opposed to new technology but want members retrained and jobs kept on site.

"We are willing to discuss how technology works on the docks," said ILWU spokesman Steve Stallone.

Industry insiders say relations between the two sides are volatile, and many businesses are preparing for the worst before the three-year labor contract expires June 30.

The contract talks will be watched closely in Hawai'i, where a similar three-year contract for dockworkers expires in October. The new Hawai'i contract will be based in large part on the West Coast document, said Jeff Hull, a spokesman for Matson Navigation Co.

Ahead of the West Coast contract talks, many firms are arranging alternative transport routes through ports in Western Canada and Mexico, and even through the Panama Canal to ports on the eastern seaboard.

"We are very concerned," said Ilsa Metchek, executive director of the California Fashion Association. "We've alerted everyone and told them, 'consider your routing.' "

Alternative shipping routes, however, offer only limited alternatives. They can be pricey and often can't handle the same size of shipments that come through the combined ports of Los Angeles and Long Beach.

Bruce Berton, an international trade consultant with Stonefield Josephson Inc., said he has advised clients to stockpile an extra four to six weeks of inventory.

Firms that import electronic components from Asia are "renting warehouse space like crazy," so they can feed assemblers in Mexico, where a huge portion of electronic goods sold in the United States is put together, Berton said.

But bringing goods in early can be expensive. And additional transportation and freight diversion costs will cut corporate gross margins on average by at least 5 percent, straining credit lines and pushing some players out of business, Berton said.

Ultimately, many companies are betting the White House would step in to end any port disruption after just a few weeks. But the PMA and the ILWU said the Bush administration has not given any assurances.

Contract talks three years ago were burdened by some of the same modernization issues, but the PMA ultimately gave ground. That seems less likely to occur this time.

The volume of U.S. trade with Asia is forecast to double in the next decade, raising the possibility that the Los Angeles/Long Beach docks could soon run out of room. A massive upgrade project is already well under way.

A $2.4 billion, 20-mile rail corridor has been built to link the ports with the rail yards near downtown Los Angeles. This summer, the first of two mega-terminals will open at the port complex, able to handle six giant container vessels at a time with dozens of new computerized cranes 240 feet tall.

Other improvements must follow to boost productivity and keep the ports competitive, Miniace said.

Among his demands are an updated computer system at the terminals that can communicate directly with customers, members, truckers and rail lines.

The PMA also wants to update the system for tracking the hundreds of thousands of containers that move through the port each year.

ILWU clerks drive pickup trucks through massive container aisles to find cargo. Sometimes the drivers must resort to finding a specific container on foot.

The PMA doesn't deny jobs will be eliminated in the short-term. But greater productivity will create more longshore jobs in seven or eight years, Miniace said.

The union wants guarantees that its 10,500 members covered by the contract will be retrained if necessary. Clerks have already lost jobs to non-unionized computer operators offsite, Stallone said.

The clerk jobs at stake averaged wages of $118,825 in 2001, compared with $80,000 for longshoremen and $158,000 for foremen.

The union said that the PMA is making negotiations more difficult by withholding details of its plans for new technology.

"We cannot get the information we need to prepare for negotiations," Stallone said.

The PMA denies that claim and the matter is now before a Los Angeles judge after the ILWU filed an unfair labor practice complaint.