It’s not a strike yet at the 29 docks stretching from Los Angeles to Tacoma, Washington, and depending on whom you talk to, it’s not even an intentional slowdown. Whatever it is, the labor dispute between dockworkers and the port owners is a major drag for any entrepreneur whose business depends on exporting and importing.
The situation, which has left 33 cargo ships stuck outside the Los Angeles and Long Beach ports and 55 more unattended in their berths there, has also attracted the attention of U.S. Labor Secretary Thomas Perez, who is currently holding talks in San Francisco Tuesday with dockworkers, represented by the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). The latter group represents the businesses that own the ports and the shipping vessels delivering cargo.
The 20,000 dockworkers represented by ILWU, and the PMA have failed to arrive at a labor contract since July, when a previous employment agreement expired. At issue currently are arbitration rights over disputes, health care benefits, wages, and pension benefits, among other things.
But resolution can’t come fast enough for companies such as East West Manufacturing, based in Atlanta. The 500-employee company is a contract manufacturer of electrical components, HVAC systems, refrigeration, and other appliances. It also provides logistics for its end customers, which means it ships products from the ports directly to the customers' own warehouses or stores in North America and Europe.
“The congestion really has gotten bad in the last six weeks,” says Jeff Sweeney, executive vice president and co-founder of East West.
East West produces in four factories it owns in Vietnam and China, as well 75 other factories it works with on a contract basis. About 40 percent of Sweeney’s product arrives via the Los Angeles and Long Beach ports, and in order to get around the bottleneck, Sweeney has had to shift from rail to truck, which cuts transportation time down to a couple days from a week or more. It also raises the cost of shipping significantly, however. Although Sweeney declined to say how much more his costs rose by trucking his product, he said he’s had to swallow the increase for the time being.
In addition to shifting modes of transportation, he’s also tried to plan further ahead, getting orders to his manufacturers in Asia with a longer lead time. “If one link in the supply chain is slow, you have to accelerate it, or make it up, in other areas,” Sweeney says.
What’s harder to make up for, he adds, is the lack of information coming from the ports in question. That creates problems for the logistics arm of East West’s operation, whose goal is making sure his customers know where their products are, and when they are slated for delivery.
The ports crisis is expected to cost the economy big time if it escalates into a strike. The Western ports combined contributed 12.5 percent of Gross Domestic Product (GDP), and a strike or shutdown could cost the economy as much as $2 billion a day, according to recent analysis from Bloomberg. A 10-day strike out West in 2002 reportedly cost the economy about $10 billion.
At the time, then president George W. Bush invoked the Taft-Hartley Act of 1947, which allows the president to temporarily override a strike if it poses a threat to national health and safety, to force the ports open. Whether President Obama might invoke the same authority, should a strike or lockout occur, remains to be seen.
Reached by phone, Craig Merrilees, a spokesman for the ILWU said he was unable to comment, as required by a federal mediator. Wade Gates, a representative from PMA said he was similarly unable to comment. "¨"¨Still, for East West, resolution of the dispute is critical.
“I’d like to see a speedy conclusion to this, and a durable and lasting agreement so we don’t run into this again,” Sweeney says.