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September 30 2019

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78 The Journal of Commerce | September 30 2019 www.joc.com Trading Places Peter Tirschwell THE MONTHS-LONG DISPUTE between APM Terminals and Los Angeles dockworkers revealed deeply en- trenched and diametrically opposed views on automation, boding poorly for peace along the US West Coast when the current contract comes up for renewal in 2022. Although the International Longshore and Warehouse Union (ILWU) agreed in 2008 to allow terminals to automate, activist union members sought to pressure the Port of Los Angeles to deny a permit to install hybrid electrical equipment that would recharge batteries used to power automated operations. What normally would have been a routine construction permit for the Pier 400 facility became a six-month campaign that escalated to the LA mayor's office and alerted terminals, carriers, and other stakeholders to two new realities. The first is the willingness of the union to under- mine the letter of a signed collective bargaining agreement through political activism; the second is the possibility that the union would seek in the next negotiation to roll back terminals' right to automate. Those realities dispelled any optimism tied to a rare contract extension agreed to by the union in 2017. For several reasons, among them that by 2022 employers will have paid the union some $800 million in incremental benefits in return for the right to automate, employers are disinclined to re-open the question of automation. And due to factors such as consolidation among ocean carriers, they may be better able to achieve the consensus needed to take a harder line against union demands, should they desire. That is why, although the current agree- ment doesn't expire until July of 2022, close observers of labor-man- agement relations at West Coast ports already see the potential for conflict, reviving memories of the 10-day lockout in 2002, widespread job actions in 2008, and six months of continuous disruption in late 2014 and early 2015. "Our biggest concern is that we're headed for a lockout. Or we're headed for a strike. I don't know what the resolution is, but from an outsider's perspective, both sides seem pretty dug in," Weston LaBar, chief executive of the Harbor Trucking Association, told The Journal of Commerce. The ILWU and its employers, rep- resented by the Pacific Maritime Asso- ciation (PMA) declined to comment, but the issue could heat up well before 2022. Two terminals in the LA-Long Beach complex — TraPac and Long Beach Container Terminal — have in- stalled automated container handling equipment. APM's Pier 400 will be the third. At least one other terminal has plans to automate, sources say, and others in Southern California are at least exploring the idea as a way to drive down costs. Those plans are part- ly driven by the need to comply with a 2030 mandate under the Clean Air Action Plan to install zero-emission equipment at an estimated total cost of $2.6 billion to $4.3 billion. "The Clean Air Action Plan changed the game in the sense that those terminals have to figure out how to electrify, and in many cases it's now cheaper for them to electrify with automation than it is for them to electrify with [human- operated] equipment," LaBar said. West Coast terminal operators, many of which are controlled by ocean carriers, have traditionally giv- en in to dockworkers' demands due to the excessive costs associated with any disruption. The 2002 lock- out, for example, was estimated to have cost the maritime industry $1.2 billion, not including the additional costs to importers and exporters. Due to carrier consolidation over the past four years that cut in half the number of major container lines, some believe employers may be more unified in the next round of contract negotiations. That said, the APM agreement, which called for the re-training of longshore mechanics to maintain and repair the automated equipment that APM will deploy at Pier 400, could set a precedent for other terminals seeking to find common ground with the longshoremen. In the 2022 negoti- ations, West Coast dockworkers could follow the lead of ILA on the East Coast, which agreed to deliver higher levels of productivity in return for lim- its on terminal automation. Terminals long frustrated by low productivity — well below 30 moves per hour — at West Coast ports could conceivably consider such an approach. For West Coast ports, which have steadily lost market share to ports in Canada and the US East and Gulf coasts, in large part due to earlier bouts of labor disruption, any further labor action could serve to accelerate the loss. In the first half of this year, the LA–Long Beach port complex handled 46.6 percent of all US imports from Asia, compared to the same period in 2005, when 54.7 percent of such cargo moved through Southern California, according to data from PIERS, a sister company of The Journal of Commerce within IHS Markit. "It's all about competitiveness. We have to be all rowing in the same direction to address the deep market share erosion that has plagued us for 17 years," Gene Seroka, executive di- rector of the Port of Los Angeles, told The Journal of Commerce. "We have to become the gateway of choice for the cargo owner and liner companies, and that means everyone solving the equation of supply chain optimization and effectiveness." JOC email: peter.tirschwell@ihsmarkit.com twitter: @petertirschwell Disturbing the peace "It's all about competitiveness. We have to be all rowing in the same direction."

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