The president of the container terminal operator at the Port of Portland, Ore., had just told the maritime audience that he aimed to raise port productivity “immediately.” Jeff Smith then rose from the audience and leaned into a microphone and drew an audible groan when he introduced himself.
“Rest assured,” said Smith, president of International Longshore and Warehouse Union Local 8 in Portland, “we will give you the productivity levels you need to do your business in Portland.”
The audience at The Journal of Commerce’s Trans-Pacific Maritime Conference reacted with applause — and surprise. In years past, such a public endorsement of productivity would have been unimaginable from the ILWU, a militant union known for its “us against them” attitude toward employers.
A day earlier, the International Longshoremen’s Association, the ILWU’s counterpart on the East and Gulf coasts, delivered a similar message. Michael Vigneron, president of the ILA’s New York-New Jersey District Council, said the ILA had a “shared vision for growth” with waterfront employers.
Sidebar: Respectfully Yours.
What’s going on? It’s too early to declare that the recent talk of cooperation signals a new era of labor-management harmony in U.S. ports. But both the ILWU and ILA clearly are trying to reassure shippers and carriers that they understand the role of port labor in competition for cargo. For many shippers and their carriers, the question of whether that rhetoric translates into reality hovers over the looming issues surrounding supply chains in North America that arise from the growing competition for international cargo trade.
That competition is growing more heated as the shipping industry prepares for the opening of the larger locks of the Panama Canal in 2014 and the vastly more important economies of scale that will make for choices with enormous consequences for ports and the workers that handle the freight.
About half the containerized cargo volume moving through West Coast ports is discretionary, meaning its origin or destination is not in the local port area. At some East and Gulf coasts, many of them a couple of hours’ drive of each other, the proportion of discretionary cargo is even higher.
How the ILWU and ILA adjust contract demands and work practices in a recovering economy and an era of larger ships and higher volumes will have a big impact on cargo flows in the years ahead.
And it may mark a clear battle line for organized labor, which has been in clear retreat in industries across the country and now faces stark choices at port terminals. Union leaders may be able to use their leverage over operations for short-term gains, but lose in the long run if an adamant stance against technology and productivity used everywhere else in the world costs ports business and labor unions jobs.
Carriers and terminal executives insist West Coast terminals must increase productivity to handle the 12,000-TEU vessels that are coming soon. ILA productivity will be scrutinized as carriers decide which East Coast ports will be their gateways for 8,000-TEU-plus ships that will arrive in larger numbers after the Panama Canal opens its wider locks.
On the West Coast, the ILWU earned a reputation for tough stances during the confrontations that led to the 2002 lockout that shuttered the nation’s busiest container port complex for 10 days. Cargo interests and waterfront employers will be watching to see whether the ILWU resumes its pre-recession habit of maverick work slowdowns. They’ll also be watching to see whether the expected ascension of Harold Daggett to the ILA’s presidency this year signals a new era of militancy as the ILA and its employers open negotiations to replace a contract that expires Sept. 30, 2012.
The ILA hasn’t called a coastwide strike since 1977, but the East and Gulf Coast union has been showing signs of renewed militancy. Ship operators, terminal operators, drayage operators and cargo interests in New York-New Jersey were infuriated last September when the ILA halted work for two days to protest the shift of breakbulk jobs in Philadelphia to a non-ILA terminal.
Carriers in the New York Shipping Association responded by suing for several million dollars worth of damages, and NYSA President Joseph Curto said he was concerned a “different type of ILA” might be emerging just as ports face increased pressure to improve productivity and control costs.
The recent quiet on the West Coast may be partly due to the recession, which cut into ILWU employment. ILWU man-hours worked dropped from 30.3 million in 2008 to 24.4 million in 2009, then rebounded somewhat in 2010 to 27.6 million, according to the Pacific Maritime Association. No comparable figures are available for the ILA on the East and Gulf coasts, but employers and the union report similar declines before last year’s recovery.
West Coast ports entered the last decade with an 80 percent share of U.S. containerized imports from Asia. That share dropped to 70 percent by 2008 as shippers diversified port gateways in response to years of labor friction highlighted by the 10-day lockout in 2002.
When times were good, there was more than enough cargo to keep ILWU members employed 40 hours per week. Now West Coast dockworkers appear hungrier, and are emphasizing productivity. Ed DeNike, chief operating officer of SSA Marine, said the ILWU is “as cooperative as I ever remember.”
The unions’ attitude will be tested in the next year or two. A key barometer will be automation. During the last decade, employers on both coasts have won the right to introduce labor-saving technology but have been cautious about applying it.
In 2007, APM Terminals opened a Portsmouth, Va., terminal, now operated by Virginia International Terminals, that’s the most automated facility of its kind in the United States. ILA members in Jacksonville, Fla., last year approved a contract for a similarly automated terminal for Hanjin Shipping.
Additional tests for automation are on the horizon on both the East and West coasts, with a recently approved project to redevelop the Middle Harbor terminal in Long Beach and a new terminal adjacent to Global Terminals in Bayonne, N.J., expected to include a high degree of automation.
On the East and Gulf coasts, the ILA’s coastwide master contract with United States Maritime Alliance allows employers to introduce labor-saving technology after six months’ notice. The ILA can negotiate the impact on jobs but cannot block the technology from being introduced. If negotiations deadlock, the issue goes to arbitration, with a decision required within 60 days.
West Coast challenges start on the local level, and if agreement is not reached, proceed to the coast level, where the arbitrator is given seven days to issue a ruling. A decision by the coast arbitrator has the same finality of a ruling from the Supreme Court, PMA President James McKenna said.
The ILWU in 2002 accepted a free flow of electronic information and documentation to marine terminals, a change that reduced clerks’ jobs. The ILWU’s 2008 contract with the Pacific Maritime Association freed employers to introduce technology such as cranes that lift two containers at once and robotic vehicles that move containers from the vessel to the stacks.
The introduction of technology such as optical character readers and cameras at terminal gates and computerized yard management systems at West Coast terminals has improved productivity, McKenna said. Truck gate houses that used to employ 20 marine clerks in manual operations have one-third the clerks now that they are automated, he said.
ILWU President Bob McEllrath cited the 2002 contract as evidence the ILWU has accepted technology, but also as proof the union must be vigilant to ensure that individual employers don’t use the free flow of data to avoid union labor. “We accepted a free flow of information to the terminal, but the information stays here,” he said. “They can’t send it to Arizona to do the work there.”
Information technology reduced work opportunities for marine clerks. Automated cargo-handling equipment and robotics allowed in the 2008 West Coast contract will affect the jobs of general longshoremen who operate machines. West Coast employers have yet to make the costly jump into cargo-handling automation, but the 15 percent increase in cargo last year and projections of solid growth ahead have some terminals planning to automate operations, McKenna said.
Daggett, the ILA’s executive vice president and longtime head of its 1,500-member New Jersey maintenance and repair local, said the union doesn’t want to block progress, but is determined to prevent erosion of its traditional work jurisdiction.
Daggett attracted attention last fall when, angered by carriers’ lack of notice about plans to quit supplying free intermodal chassis to customers, he threatened “war” against any carriers that tried to circumvent ILA jurisdiction over chassis maintenance and repair. Hostilities were averted when chassis lessors Trac and Flexi-van agreed to respect existing ILA jurisdiction over repairs.
The chassis situation is muddled on both coasts. The ILA has a tight lock on chassis maintenance and repair in New York-New Jersey, but non-union labor dominates chassis M&R in South Atlantic and Gulf ports. McEllrath said the ILWU expects to keep the maintenance and repair jobs on the West Coast, even if it means moving longshoremen to off-dock locations where chassis lessors may decide to store the equipment.
Despite the possible frictions over automation and work jurisdiction, ILWU and ILA officers have publicly touted their workers and ports as reliable gateways for cargo.
Talk does not count as an agreement, however, and employers say it will take more than public relations to help ports compete for shippers’ discretionary shipments that hinge largely on the delivered cost of cargo. U.S. ports’ productivity, measured by container lifts per hour and throughput per acre, consistently fall short of the standards established by European and Asian ports.
Employers say productivity improvements will require changes to work rules, including entrenched practices that pay dockworkers for not working.
Recent hearings by the Waterfront Commission of New York Harbor highlighted ILA “customs and practices” that include shop stewards and timekeepers receiving $400,000-plus annual pay and timekeepers on the clock for 27 hours a day, mostly at overtime rates.
According to NYSA statistics, the ILA members in New York-New Jersey last year were paid for about 4 million hours at the straight-time rate, but 5.6 million hours in overtime. The ILWU workers at all West Coast ports, by comparison, were paid 18.7 million hours at the straight-time rate and 8.8 million hours of overtime pay.
The NYSA’s Curto said the hearings didn’t tell the industry anything it didn’t already know. “Certain customs and practices have developed in the port over the years,” he said. “We know there are problems, things we need to address, things we need to correct. But the way to do that is at the bargaining table, and that’s what we intend to do during the upcoming negotiations.”
Curto said although the bargaining issues haven’t been defined for the next ILA negotiations, expected to begin this fall, he’s optimistic the two sides will reach a strike-free agreement both can live with. Vigneron agrees, and said both sides must be ready to give and take. “If you want an agreement badly enough, you’re willing to give something,” he said.
“I can’t predict the future,” Curto said, “but I don’t have a bad feeling about what’s going on.” He said a strike is a sign that negotiators have failed. “I know management doesn’t want to fail, I don’t want to fail, and I’m sure the union doesn’t want to fail.”