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Shopper Alert! Will Labor Strike at L.A. Ports Mean Bare Shelves?

The labor strike at the ports in Los Angeles and Long Beach, Calif., the two biggest ports in the US, probably won't keep toys and TVs off the shelves for the holiday season, but it is likely to affect white sales and other annual post-Christmas mega-bargains if it is not resolved soon.

Besides hitting retailers, many analysts say, the six-day-old strike is beginning to disrupt the just-in-time supply chains of US manufacturers, as container ships that should offload in L.A. are stuck in the ports or moored offshore with no one to unpack goods ultimately destined to travel by truck or rail to inland factories and plants.

Because of the strike's potential to damage the economy, calls are becoming more urgent for a resolution of the labor dispute between the International Longshore and Warehouse Union (Local 63 Office Clerical) and some of the world's biggest shipping lines and terminal operators, who have operations at the two ports. The ports account for at least 40 percent of total imported containerized cargo for the United States.

"This cannot continue," Los Angeles Mayor Antonio Villaraigosa said Monday in a stiff missive to both sides. "With thousands of members of other ILWU locals now honoring the picket lines," the strike is "costing our local economy billions of dollars," he wrote to the union. "The cost is too great to continue down this failed path," said Mr. Villaraigosa, who is asking for 'round-the-clock mediation.

Experience shows that the effects of such a strike can be long-lasting. It took retailers about six months to recover from a 10-day lockout of longshoremen at several West Coast ports in 2002, Jonathan Gold, vice president of supply chain and customs policy for the National Retail Foundation, told The Sun newspaper in San Bernardino, Calif.

"This shutdown of the ports doesn't just impact the retail industry," Mr. Gold is quoted as saying. "You've got manufacturers who are operating just-in-time supply chains, and you've got exports that aren't moving because the ports are shut down. We need it to end now because it's going to take some time to clear through the backups."

Ten of 14 cargo-container terminals at the two ports are shut down. (Los Angeles is No. 1 in container traffic and Long Beach is ranked second, according to industry data.) As of Monday, nine ships are in dock unattended, 11 more are moored offshore, and at least three have been diverted to other ports. Others inbound from Asia are biding their time.

At issue is a set of contracts that expired in June 2010. Union members say managers at many terminal companies have been clandestinely shifting jobs to lower-wage workers in other states and countries. The companies deny the allegations. The companies, for their part, want the new contracts to expressly rule out the requirement that jobs be provided or retained even if there is no work to perform – a pro-union practice known as featherbedding.

As the strike ripples down the logistic/supply chain, southern California truckers are among those starting to feel the pinch.

"With no goods to move, these drivers are literally sitting idle and getting no paychecks. After awhile, that begins to make a dent in the Christmas retail stores here, which aren't benefitting from [the truckers'] purchases," says Alex Cherin, executive director of the Harbor Trucking Association, which represents about 8,000 port drivers.

The strike began Nov. 27, when one of the smallest units of ILWU – with 800 members – walked off the job at the largest terminal operator at the Port of Los Angeles, APM Terminals Pacific Ltd. It expanded the next day when members of other unions chose not to cross picket lines. The strike has crippled the ports because of support from ILWU dockworkers, which has 50,000 members on the West Coast, Hawaii, and Canada.

Mr. Cherin has written to Mario Cordero, a member of the Long Beach Board of Harbor Commission, asking him to help end the impasse.

"As of today, the gates at most of the terminals in the San Pedro Bay Port complex are closed – preventing these 8,000 drivers from picking up containers and being compensated for their work. In turn, the warehousing and processing workers that stand downstream in the supply chain are being equally impacted," says the letter sent Dec. 4. "In short, this closure continues to have a devastating impact on all facets of the maritime industry."

The strike is affecting only terminals where the ILWU has contract disputes. Cruise ships, for instance, may still dock.

The ports have their own reasons for wanting the strike to be resolved. "We need to get a resolution to this because of the possible economic damage, not just because these goods aren't delivered in time, but that all the workers down the line from here are affected," says Phillip Sanfield, spokesman for the Port of Los Angeles. "And the unreliability of a port is an issue affecting where shippers want to bring their goods in the future."

While disruptions at ports will stall deliveries, causing chaos and uncertainty for those moving and marketing inventories of jeans, jackets, and electronics for thousands of stores, some analysts caution against overestimating the overall dollar cost of a strike such as this one. It is wrong to assume that delayed or diverted cargo must be written off as if it will never be delivered, says Jock O'Connell, an international trade economist. The two ports do more than $300 billion in business a year.

Contact World Economy

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