The biggest danger

The biggest danger

One of the best industry presentations I have heard was given 10 or 12 years ago by one of the most respected and well-liked people in our business, the late George Marshall.

George was not only an exceptional speaker, he was smart and funny and had pretty much seen it all during his years with ocean carriers, both in the U.S. and in his many years in Asia.

His presentation focused on what he considered one of the biggest problems (if not the biggest) our industry faces: the apparent inability of everyone involved -- carriers, shippers, economists, etc. -- to accurately forecast the coming year's level of business activity. George is probably looking down at us right now and knowingly nodding his head.

Not only did no one predict the collapse of civilization as we know it, no one even entered the ballpark to offer an estimate of the size of the problem. A quick review of news reports over the past several weeks tells the tale far better than I could ever do:

-- The carriers in the major global trade lanes (Asia-U.S., Asia-Europe, U.S.-Europe) had reduced capacity by a collective 6.7 percent by early December.

-- Carrier members of the Transpacific Stabilization Agreement have gone to the Federal Maritime Commission to request permission to jointly discuss further capacity reduction.

-- Shippers, while expressing sympathy with their carriers, are positioning themselves for major rate reductions, which will only exacerbate the problem and cause further service reductions.

-- Carriers, including Maersk Line and Evergreen, are reducing staff. APL Ltd. is cutting staff and relocating its U.S. head office to Phoenix.

-- Rates from Asia to the U.S. West Coast are down to $1,300 or less, well below rate levels in place in the early 1990s.

-- Large and increasing numbers of container ships are being laid up, orders for new ships are being delayed or canceled, and no new orders are being placed, which is likely to cause major labor disruptions at Asian shipyards.

-- Rail and truck shipment volume is down in the U.S., where more than 3,000 trucking companies went out of business in 2007, and there is still plenty of capacity.

-- DHL is eliminating more than 10,000 U.S. jobs, and airfreight and passenger numbers are down.

-- Tacoma, Portland and other ports here in the U.S. and abroad are delaying, reducing or canceling infrastructure projects.

-- Expectations are that we may see mergers, bankruptcies or other paths to reductions to the number of ocean carriers this year.

No one knows when we'll reach the bottom of this cycle, but we do know that we're not there yet. As a fundamentally optimistic person, I have every confidence that we will find a way out of this mess, so my greatest concern is that we'll be able to hold things together long enough so that enough of us, both companies and people, will be around to repair the damage.

As an industry, we have had a tendency to overreact to bad news -- and the news now is really bad. But ships must continue to sail, customers must continue to require service, and the people working the jobs must perform these functions. Budgets need tightening, not massive surgery that takes the heart and soul out of programs. Staffs require justification, not wholesale elimination of knowledge and experience that cannot easily be replaced when business improves.

This is the worst economic crisis most of us have experienced, and it will take time to climb out of the hole we're in. But George Marshall had it right when he said we had a collective blind spot when it came to forecasting. He didn't just mean that we were unable to predict the down cycles; he was equally clear that he also recognized our inability to predict when the good times would occur.

As the old saying goes, "the darkest hour is just before dawn," so hang in there, my friends. We are all in this together, and I have every confidence that this experience, while uncomfortable and unpleasant, will leave us stronger and more able to deal with any new, unforeseen future crises.

Barry Horowitz is general manager, container marketing at the Port of Portland, Ore. He can be contacted at 503-944-7426, or at barry.horowitz@portofportland.com.