Over the past few years, delays and port shutdowns, sometimes caused by the International Longshore and Warehouse Union and sometimes by outside forces, have given Oakland a reputation as being one of the most unreliable ports on the West Coast.
Work stoppages by longshoremen and gate congestion following a consolidation of three marine terminals at the Port of Oakland got so out of hand in July that Devine Intermodal, a Northern California trucking company, imposed a $100 surcharge for each trip one of its drivers made to the harbor.
Richard Coyle, Devine’s president, admits that asking exporters and importers to pay a premium to ship through Oakland isn’t a good way to increase business for the port, but it’s a matter of survival for his company and its drivers.
Oakland is a major gateway for agricultural exports from California’s Central Valley, and the logistics model is based on each driver making two round trips a day between the valley and the port. In July, however, drivers were lucky to get one round trip a day, Coyle said.
Changing Oakland’s reputation and making it the preferred port on the coast is the mission of newly appointed Executive Director Chris Lytle. Unlike New York-New Jersey, which is suffering its own summer nightmare, Oakland doesn’t have the population base that demands cargo flow over its docks, so even a minor loss of business is magnified. When he took over in late July after 18 months as the Port of Long Beach’s top executive, Lytle said diversion of even one container is too much for Oakland. “We don’t have any cargo that we can lose,” he said.
July was one of Oakland’s worst months in recent history. The back-to-back coastwide holidays of July 4 and 5, when the ILWU commemorates the 1934 Bloody Thursday general strike in San Francisco that led to the founding of the union, are an annual event. This year, however, Oakland wasn’t able to dig out from the traditional cargo backlog because of a series of events throughout the month.
ILWU pensioners picketed one day to protest slow processing of medical claims, and fellow dockworkers honored the pickets, closing the port for one shift. Consolidation of the APL and Total Terminals Inc. facilities into the SSA Marine terminal led to another work stoppage and more work slowdowns. The ILWU is still upset that it lost some maintenance and repair work to the International Association of Machinists in the consolidation.
The situation got so bad that industry trade groups arranged conference calls with port staff, terminal operators, trucking companies and freight forwarders to talk openly about cargo diversions and to beg the port staff for relief. Truckers and shippers groups also addressed a harbor commission meeting in late July and warned of long-term harm to the port if Oakland doesn’t regain fluidity in its operations.
Other ports would gladly accept the business of the dozen or so retailers, direct importers and agricultural exporters that are diverting cargo now or plan to if conditions don’t improve immediately, the port staff and commissioners were told.
Port stakeholders blame Oakland’s problems on four entities: the ILWU, previous port authority leadership, the terminal operators and the city administration.
Oakland labor has a split personality; ILWU leadership in Oakland is considered among the most militant on the coast, but its rank and file are known for high productivity. Ed DeNike, chief operating officer at terminal operating company SSA, said his Oakland terminal outperforms every other SSA terminal. “It’s a very good work force — the best on the coast — but the politics of the union leadership trumps what should be happening on the docks,” he said.
Truckers who call the port daily say most of their problems in recent weeks stem from one-day strikes and ongoing work slowdowns by ILWU locals. Coyle wonders if the union realizes how these actions are affecting the future of the port, and of ILWU jobs. “I don’t know that it resonates with the ILWU, but if business moves out of the port, jobs move out as well,” Coyle said.
When importers and exporters change their supply chains to avoid Oakland, those decisions can have implications far into the future, said Peter Friedmann, executive director of the Agriculture Transportation Coalition.
Friedmann cited the case of candy makers in Japan who were unable to import California almonds in 2002 when the entire West Coast was shut down during waterfront contract negotiations. When the June 30 contract expiration date passed, the union launched work slowdowns, and employers responded with a 10-day lockout at all West Coast ports.
Although California almonds are especially high quality, candy makers in Japan switched their sourcing to Turkey, and some of that business never returned to California, Friedmann said. “Once the candy makers changed their supply chains, it was hard to change them back,” he said.
California rice exporters face a similar risk today. Contracts for rice moving to Asia contain a clause specifying the due date for delivery, Friedmann noted. If that deadline is missed, the importer can refuse to take the entire shipment. It often happens in such cases that the importer will accept the shipment only if the California rice exporter agrees to turn over the shipment for pennies on the dollar, he said.
The ILWU says many undercurrents contribute to Oakland’s gate congestion, cargo delays and diversions. “Disruptions by the ILWU are not the problem,” said Mike Villeggiante, president of ILWU Local 10.
Villeggiante said the harbor trucking model nationwide is a broken system because trucking companies pay the owner-operators by the load rather than by the hour. Drivers suffer a loss of income, and, because marine terminal operators don’t incur a cost if there is gate congestion, “the terminals don’t care if the drivers sit in long lines,” he said. “Waiting in line has nothing to do with labor.”
He also blamed the port authority for approving the consolidation of the adjacent APL and TTI terminals into the SSA operation, saying the port is losing revenue and the consolidated operation has reduced entrance gates from three to one. Funneling the truck traffic into a single gate has resulted in terminal congestion, he said.
DeNike disputed that analysis, saying the congestion occurred because the terminal wasn’t immediately able to take possession of the 120-acre facility that had been the TTI terminal, so the consolidated 350-acre terminal was missing one-third of its cargo-handling space. Lytle agreed, saying the problem was resolved in late July and congestion was dissipating quickly.
Fewer but larger and more efficient terminals are the best hope for Oakland’s future, Lytle said. Five terminal operators relinquished their facilities in recent years because they couldn’t make money with the container volumes they generated. The economies of scale inherent in large marine terminals handling today’s mega-ships, combined with more efficient cargo-handling operations, will benefit all port stakeholders, including truckers and cargo interests, he said.
Lytle, who worked for much of his career in operations at steamship companies, said he would meet with Oakland’s terminal operators, shipping lines, shippers, truckers and customs brokers on implementing techniques such as block-stowage of cargo. “It is time to work seriously on new models of delivering containers into and out of the terminals,” he said.
Lytle also intends to meet with the port’s tenants and its shipper and carrier customers to listen to their concerns and develop an action plan.
The Pacific Merchant Shipping Association, which represents shipping lines and terminal operators, said that until now Oakland has been much less visible than other West Coast ports in the offices of its members. “Historically, we have not had a strong relationship with the Port of Oakland,” PMSA President John McLaurin said. Regular communication is necessary so carriers can update the port on their vessel deployment plans, and the port can inform the carriers of its terminal development plans.
When he was executive director in Long Beach, Lytle spent a good deal of time attempting to improve relations between the port and the city administration. The Northern California maritime community wants him to devote the same effort with Oakland Mayor Jean Quan.
Quan infuriated the maritime industry in late 2011 after the Occupy Oakland movement shut down the port. She said afterward she was not sure the city could prevent future port closures if the Occupy protesters returned.
Lytle met with Quan during his first week at the port. “Mayor Quan definitely understands the importance of the port to the economy,” he said. “Clearly, when the Occupy movement hit the port, lessons were learned. We won’t see a similar result if it happens again.”