The “Catastrophic Shutdown Of America’s Supply Chain” Begins

shippingTyler Durden: One week ago, when previewing what may be the first lockout of the West Coast Ports since 2002, we cited the Retail Industry Leaders Association who, realizing that failure to reach an agreement between the dockworker union and their bosses, the Pacific Maritime Association representing port management would lead to devastating consequences for the US retail industry, had several very damning soundbites:

  • “a work slowdown during contract negotiations over the past seven months has already created logistic nightmares for American exporters, manufacturers and retailers dependent on an efficient supply chain. A complete shutdown would be catastrophic, with hundreds of thousands of jobs at risk if America’s supply chain grinds to a halt.”
  • “A west coast port shutdown would be an economic disaster.”
  • “A shutdown would not only impact the hundreds of thousands of jobs working directly in America’s transportation supply chain, but the reality is the entire economy would be impacted as exports sit on docks and imports sit in the harbor waiting for manufacturers to build products and retailers to stock shelves.”

And the punchline: “The slowdown is already making life difficult, but a shutdown could derail the economy completely.”

Just so readers have a sense of what is at stake, this is what the average dockworker makes: $147,000 a year in salary, plus $35,000 a year in employer-paid health care and an annual pension of $80,000 (according to an association press release). It is the overtime compensation to the total shown here, which grosses to over a quarter of a million dollars, that dockworkers are negotiating to raise or else the key US supply-chains gets it.

Incidentally, the demands of the dockworker union and their leverage is precisely the reason for the dramatic discrepancy we showed in the following chart:

 

In any case, as of last night, the choking of the US supply-chain has officially begin, when as the LA Times reported last night, “West Coast ports — including the nation’s busiest in Los Angeles and Long Beach — will partially shut down for four days as shipping companies plan to dramatically slash dock work amid an increasingly contentious labor dispute.”

More:

Terminal operators and shipping lines said that they would stop the unloading of ships Thursday, Saturday, Sunday and Monday, because they don’t want to pay overtime to workers who, they allege, have deliberately slowed operations to the point of causing a massive bottleneck. Thursday is Lincoln’s Birthday and Monday is Presidents Day, which are holidays for the workers.

Slowing down work “amounts to a strike with pay, and we will reduce the extent to which we pay premium rates for such a strike,” said Wade Gates, spokesman for the Pacific Maritime Assn., the employer group representing the shipping companies. The local union in Los Angeles and Long Beach has denied using slowdown tactics.

Accoring to the LA Times, it is not clear if the partial shutdown foreshadows a total closure of the ports. Fears of a lockout of dockworkers, who have been without a contract since July, have risen in the last week and the two sides haven’t held talks since Friday. SF Gate was far more clear on what the dockworker action means: “West Coast ports to shut down 4 days amid labor dispute.”

Work delays and stoppages over the past three months have caused mounting problems for Bay Area importers and small-business owners, who say they are losing money as trucks line up daily outside the Port of Oakland waiting for container ships anchored in San Francisco Bay to unload.

The shutting down of port operations is ironic because it’ll make the situation worse, said union officials who claimed the association canceled a negotiating session Wednesday and has not been available since last Friday.

“This is an effort by the employers to put economic pressure on our members and to gain leverage in contract talks,” said Robert McEllrath, president of the longshore and warehouse union. “The union is standing by ready to negotiate, as we have been for the past several days.”

Regardless of who is at fault for the (partial) shut down, one can’t blame dockworkers for doing what Greece is actively doing at the same time in its own negotiations with Europe: maximizing its leverage.

Pages: 1 2 3 4

Leave a Reply

Your email address will not be published. Required fields are marked *