Shipments of clothing, auto parts and frozen food risk being gridlocked at U.S. ports from Maine to Texas as about 15,000 dock workers prepare to strike.
The International Longshoremen’s Association is vowing to walk out if a deal isn’t reached before the Dec. 29 expiration of its contract with the U.S. Maritime Alliance, whose members include container-carrier companies. Talks broke down this week after nine months of negotiations.
A strike would be the first at East Coast and Gulf Coast ports since 1977. The fallout may be greatest for the New York and New Jersey area, still reeling from superstorm Sandy, and on automakers such as Bayerische Motoren Werke AG (BMW) with factories in the U.S. Southeast that might struggle to get parts, according to consultant Martin Associates.
“It’s going to be expensive and painful,” said Ed Sands, a logistics specialist at procurement management firm Procurian. “If you consider the East Coast labor picture, Maine to Texas, and the amount of the economy that is tied to the flow of goods in and out of U.S. ports in that geographic range, there’s an enormous amount of potential impact for the U.S. economy.”
Union workers wouldn’t move containerized cargo, including frozen foods, household goods and clothing, ILA President Harold J. Daggett told members in a Dec. 19 letter. Military cargo, mail, bulk items, finished autos and perishable items with a “limited shelf life” would still be handled, he wrote.
Even with the exemptions, a shutdown would have “a huge effect” on the economy, particularly if it lasts beyond mid- to late January, according to K.C. Conway, executive managing director at consultant Colliers International.
“You pile it on at the time that if these guys can’t do something in Washington with the fiscal cliff, it’s a compounding unknown that I think definitely puts us into recession,” Conway said in a telephone interview from Atlanta. The so-called fiscal cliff refers to more than $600 billion in automatic tax increases and spending cuts set for next month.
The union and employers deadlocked in bargaining that has already required one extension and a federal mediator’s intervention. The dispute centers on so-called container royalty fees, or levies on cargo that supplement wages. Employers seek to cap the payouts that the workers say are “untouchable.”
While the union hasn’t changed its stance, ILA’s executive officers met yesterday and reached out to the lawyers for the USMX and the federal mediator expressing willingness to resume talks, Jim McNamara, a spokesman, said by phone. The ILA hasn’t yet received a response from the USMX and no meetings are currently scheduled, he said, boosting the risk of a walkout.
A strike “could have serious consequences for the nation’s economy as well as for ILA members themselves, making it more important than ever that both sides work to reach an agreement and avert any disruption at the ports,” the USMX said in a statement posted yesterday on its website.
A strike would be most damaging to the retail and manufacturing industries, said John Martin, an economist at Martin Associates in Lancaster, Pennsylvania. Those industries generated about 18 percent of U.S. gross domestic product last year.
Automakers such as BMW, which has a plant in Spartanburg, South Carolina, and Kia Motors Corp. (000270), which operates a factory in West Point, Georgia, rely on the ports to import parts, said Sands of King of Prussia, Pennsylvania-based Procurian. They also ship finished vehicles by sea.
“If you run out of parts, at some point that line is going to shut down,” he said in a phone interview.
Exports of finished cars, which typically aren’t shipped in containers, shouldn’t be affected under the terms for the strike outlined in Daggett’s letter, Martin said.
“But who knows? You don’t know until the actual occurrence, until it happens, whether they will honor that or not,” he said.
BMW is “prepared for all eventualities to ensure our business continues uninterrupted,” Kenn Sparks, a spokesman for the Munich-based company’s North American operations, wrote in an e-mail. Representatives for Seoul-based Kia didn’t return phone and e-mail messages seeking comment.
The National Retail Federation, a Washington-based trade group, sent a letter to President Barack Obama on Dec. 20 renewing its call for the use of “all of the options available,” including the Taft-Hartley Act, to prevent a shutdown that would cause delays in consumer-goods imports.
Taft-Hartley empowers leaders to intervene in strikes that create national emergencies. The law was last invoked by President George W. Bush in 2002, after a lockout shuttered West Coast ports for 10 days.
Federal mediators are assisting with the negotiations, Matt Lehrich, a White House spokesman, said by e-mail.
“We continue to monitor the situation closely and urge the parties to continue their work at the negotiating table to get a deal done as quickly as possible,” Lehrich said.
A shutdown would pose an additional hurdle for New York- area companies still restocking goods destroyed by Sandy, said Martin, the economist.
“It certainly is a double whammy,” he said. “This will really exacerbate the problem because any type of supplies that you need” may be unavailable.
The Port Authority of New York & New Jersey is “in regular dialogue” with the affected parties, Executive Director Patrick Foye said in a Dec. 20 interview after testifying at a hearing in Washington about Sandy recovery spending. He declined to comment on whether the agency would ask Obama to intervene.
“The economic impact of a strike to the New York-New Jersey region would be significant,” Foye said.
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