ILA-USMX: Time for Shippers to Worry (Again)

Happy holidays? Not for shippers. Last summer they sweated the possibility of a peak-season strike by the International Longshoremen's Association. Now they're facing the real threat of an ILA work stoppage at year-end.

Eight months after opening negotiations, the ILA and United States Maritime Alliance remain far apart on a Maine-to-Texas contract to replace a 90-day extension that expires on Dec. 29.

The ILA and USMX seemed to be making progress after a federal mediator joined the talks in September. The mediator persuaded the two sides to resume bargaining and halt their public bickering. Rumors suggested progress was slight, but publicly the two sides stayed quiet.

Radio silence was broken last week when ILA President Harold Daggett issued a statement accusing USMX of trying to pit ports against each other, and declaring the ILA would not accept caps on workers’ year-end checks from carriers' tonnage-based container royalties.

USMX Chairman/CEO James Capo called Daggett’s statement “yet another indication that ILA leaders view bargaining as a one-way street that leads only in their direction” and said the union leadership was being intransigent.

What prompted Dagggett’s salvo? From all appearances, it was aimed at reinforcing support for the ILA’s negotiating position among members outside New York-New Jersey, where employers want to chip away at decades-old work rules and practices that raise costs and cut productivity.

Those practices are concentrated in New York-New Jersey, where contract provisions require excess staffing and allow extensive overtime and 24/7 pay for some workers, including a few whose annual pay tops $400,000.

Similar provisions don’t exist elsewhere along the coast, where other issues dominate.

That’s why Daggett’s statement emphasized coastwide issues such as container royalty payments (which are highest in Savannah and Charleston), eight-hour work guarantees that apply to all ports, and requirements in South Atlantic local contracts for seven-man lashing gangs that employers say are unnecessarily large.

Make no mistake, however. New York-New Jersey remains the focus of this year’s contract negotiations. Issues in other ports are difficult, but union and management officials say they could be solved quickly.

New York-New Jersey is a bigger challenge. After years of looking the other way, the container carriers that dominate USMX appear determined to take steps to rein in costs at the largest East Coast port.

Change won’t come easily. New York is the ILA’s home. Daggett came up through the union’s ranks in the port. To him, those guys collecting hundreds of hours a year in overtime aren’t numbers on a spreadsheet. They’re longtime friends.

Daggett sincerely believes the ILA has been too accommodating in past negotiations, and automation threatens the ILA's future. Since his combative acceptance speech after becoming union president last year, he has pledged a new deal for the dockworkers’ union.

This, coupled with the industry’s financial strains, has made for difficult negotiations. It’s no secret that management officials find Daggett difficult to deal with. They don’t have the comfortable relationship with him that they had with predecessors John Bowers and Richard Hughes, who negotiated strike-free deals with a minimum of hubbub.

Daggett’s style is more in the tradition of the late Teddy Gleason, the longtime ILA president who led the union through the industry’s adjustment to containerization before his retirement in 1987.

Gleason was smart, tough, bull-headed, and unpredictable – and effective. He ran rings around employers while securing a string of fat contracts with container royalties, guaranteed annual income and hefty wage increases from the 1960s to the early 1980s.

That was a different era, however. Neither the union nor employers were as unified as they are now. In Gleason’s day, the ILA was a loose confederation of locals that often went their own way. He negotiated with a disjointed collection of local stevedores, carriers with conflicting goals, and an industry still adjusting to containerization.

Carriers' finances are still shaky . But much has changed during the last 30 years. Supply chains are tighter and more global. The shipping industry has become more concentrated and sophisticated, with a better understanding of its costs – most of which now are fixed instead of variable, as they were in the breakbulk era.

Daggett complained that carriers in USMX “invest in building new ships at nearly $200 million each, but don’t put a dime on the table in negotiations to compensate ILA members who helped them accumulate their riches.”

Carriers would point out that they paid $211 million last year in per-ton container royalties that provided union members with year-end checks averaging $15,500 apiece. They also say their investment in large ships is necessary to provide the economies of scale they need to compete.

Increased vessel size is a key reason carriers finally seem determined to address practices, especially in New York-New Jersey, that they've accepted for years. Carriers also know they can’t extend New York’s intermodal reach farther into the Midwest unless they can put a rein on port costs.

So far, the carriers have hung tough in negotiations. Will their newfound resolve continue? That’s the big question as  negotiations come down to the wire next month. Daggett is rallying his ILA troops, a process that will continue when the union’s 200-member wage scale committee gathers for a scheduled three-day session next month.

The wage scale committee’s last meeting, in late August, also was scheduled for three days but broke up within minutes after Daggett refused to discuss management’s proposals on work rules and pay practices.

Everyone hopes that with a federal mediator on hand, next month’s session will be more productive.

Shippers certainly hope so. For now, all they can do is update their contingency plans and watch, wait and worry. They have reason to worry.

Contact Joseph Bonney at jbonney@joc.com and follow him at twitter.com/josephbonney

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