Work Stoppage at Ports Impacts US Manufacturers
On Feb. 21, West Coast port employers and their union reached a tentative five-year agreement on a new contract. The pact concludes a nine-month standoff that resulted in significant slowdowns at 29 ports from Los Angeles to Seattle. At press time, members of the International Longshore and Warehouse Union and the Pacific Maritime Association still had to ratify the contract, and details of the agreement had not been released.
Even so, the news was a huge relief for manufacturers, farmers, retailers and other businesses that rely on the smooth flow of goods in and out of the country. By one estimate, the ports handle some $1 trillion in goods annually. Logistics experts predict it could take two to six months before port operations return to normal. (On Feb. 20, some 27 container ships were at anchor outside the ports of LA and Long Beach, CA. On a typical February day last year, no ships were in line.)
For U.S. assembly plants, the slowdown at West Coast ports was a fresh reminder of the fragility of today’s just-in-time global supply chains. Honda was forced to reduce production at plants in Ohio, Indiana and Ontario because shipments of electronics, transmissions and other critical parts were delayed at the ports. Honda had been using air cargo and special truck shipments to receive those parts for more than a month.
Ironically, 80 percent of the parts used in Honda’s North American-built vehicles are domestic. The automaker works with more than 700 suppliers in North America.
Toyota, too, was forced to adjust production due to parts shortages. Rival Subaru did not have to cut production, but it did have to ship in some parts by air—at an extra cost of $60 million per month.
Not that dockworkers in LA much care what happens on assembly lines in Indiana. They have leverage, and they were not afraid to use it. The hourly wage of an experienced longshoreman under the previous contract is $35 per hour.
Alas, the West Coast labor dispute may be a sign of things to come. With the economy humming again—we’ve added nearly 1 million manufacturing jobs since January 2010—labor unions are beginning to reassert themselves, and workers are demanding payback for sacrifices they say helped revive the economy.
At press time, the largest U.S. refinery strike in 35 years had entered its fourth week as workers at 12 refineries, accounting for one-fifth of national production capacity, were walking picket lines. Unionized workers at four parts suppliers for Fiat Chrysler’s assembly plant in Windsor, ON, had voted in favor of striking if necessary. And, the UAW’s contracts with Ford, GM and FCA are set to expire this fall.
We can’t blame workers for wanting to share in the recovery, nor can we fault management for keeping an eye on the bottom line. We wish only for fair and honest negotiations free of acrimony. Let’s hope both sides can work together to keep the economy rolling.