Calming the Seas

OK, everyone, it’s time to calm down, take a few deep breaths, close your eyes for a moment and just chill. Make no mistake, there’s plenty to be agitated about, regardless of which side of the Great Divide you find yourself.

If you’re a shipper, you’re angry with your carriers and concerned about how you’ll satisfy your customers and your management. Your carriers no longer seem to care about you, are not treating you with the respect you deserve, and are taking advantage of their situation. From your perspective, they need to be taken to task for their actions.

If you’re a carrier, you’ve made some serious miscalculations about how large your investment in ships should be. You may even think some of this is the result of information provided by customers who misread their markets. You’ve lost tens — in some cases hundreds — of millions of dollars in an industry that has lost billions. You’ve been forced to take drastic, potentially catastrophic actions to shore up your business to prevent your company from failing.

These actions may save you, but have so infuriated your customers that they are becoming apoplectic with rage. Have you found solutions that may be worse than the problem?

Shippers are looking for avenues to force the hands of their carriers. Where do they turn? To Congress? To the Federal Maritime Commission? To the Department of Justice? Do they file (as some have apparently suggested) class-action lawsuits? Do the laws governing the industry need to be changed? Or is the solution elsewhere?

In response, the carriers don’t seem to be doing themselves any favors by repeating the same mantras:

-- “We’ve lost more than $20 billion.”

-- “Ships on the export leg are weight-restricted and so container-restricted.”

-- “Rates have to go up and stay up.”

The customers all know this, and are — or at least were — sympathetic, but there have been few words from the carrier community that indicate any understanding of the problems the lines’ actions are creating and exacerbating for their customers. You might want to think twice before pouring more gasoline on the fire, or more poison in the water. Don’t forget how much you need these shippers. There is, after all, no way out of this without them.

Pleas for help are apparently being directed to no less august body than the U.S. Senate. This group of 100 powerful elected officials, with virtually no understanding of how our industry functions, took what might have been a predictable action a couple of weeks ago: They simply canceled a scheduled meeting.

Shippers also are seeking help from the FMC, the federal agency charged with regulating our industry. Could be a good idea, if the commission were at full strength — which it’s not, missing one of four commissioners — or if the FMC had any record of taking decisive action in contentious circumstances, especially in short enough order for it to do any good.

Shippers also could try to initiate some kind of punitive action against the carriers, which might be satisfying somehow but would fix little or nothing. Discussing possible action at the Justice Department isn’t worth the words or your time to read them. That also goes for the idea of some kind of class-action lawsuit, which would be a waste of time and more money, except for a few lawyers who would make a few bucks.

Like the carriers, shippers should be cautious. This is not a simple situation requiring some kind of simple solution. Shouting for the removal of carrier antitrust immunity is a perfect example. What do shippers really think will happen if it is taken away? Would it teach the lines a lesson? Would it lead to some drastic change that will eliminate market disruptions? The carriers have already lost this protection in Europe without much of a ripple.

Shippers, take off your blinders and remove your earplugs. There are so many of you and so few of them. Every time you want some monumental change, the carriers resist for a time, work out the consequences long before you do, and adjust without much disruption.

Many shippers won’t much like what comes next, so stop reading if you’re squeamish. This is like the third little pig in his brick house, his brothers devoured because they took the easy outs of straw and sticks. The carriers have a brick house. It may be old and ugly, but it’s strong. You, as shippers, also have strength, but not so much as a group because you each have your own interests. Each of you is important to your carriers, so calm down, take a few deep breaths, close your eyes and when you open them, pick up the phone and start talking again.

If the carriers are as smart as I think (and hope) they are, they’ll be listening.

Barry Horowitz is the principal of CMS Consulting Services. He can be contacted at 503-208-2232, or at barryh@cms-cs.com.
 

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