Strike One for the Ports?

0

As soon as the strike ended last week at the ports of Los Angeles and Long Beach, experts started tallying up the cost to the economy. There were lost wages, some lost goods and plenty of lost opportunities.

But the real cost – the lasting damage – hasn’t yet been figured and might not be known for years.

That’s because the lasting damage is to the ports’ reputation. When companies’ boards meet over the next months or even years, some might conclude that they’ve seen enough. They might decide that, given the ports’ history of labor problems in recent years, they might shift some operations to other ports. Or, they might choose to keep their operations here but carry out any future expansions elsewhere. Or – the worst outcome – they could out-and-out move.

The strike “creates a sense of doubt about the ports, and creates dependability questions by the larger, and even the smaller, shipping companies,” Ferdinando Guerra, an economist for the Los Angeles County Economic Development Corp., was quoted as saying in the Press-Enterprise in Riverside.

In and of itself, one strike is not a big deterrent to most companies. But it comes in the context of wider labor activism at the port complex. One notable example: The ports’ Clean Truck Program a couple of years ago was transformed from an effort to clean up the air to one in which the truckers could be unionized.

Shipping companies look at that and see one thing: the possibility of more labor unrest and future disruptions.

Actually, they see another thing, too: higher costs. The port complex has gotten the reputation as an expensive place to do business. Other ports in the past advertised their lower costs, taking direct shots at Los Angeles.

The Los Angeles and Long Beach ports have a lot going for them. They are America’s No. 1 and No. 2 ports, respectively, in the value of containerized goods handled. They are natural points for goods shipped from Asia to America and vice versa.

But they’re not the only points. The ports in Oakland; Tacoma and Seattle, Wash.; and Ensenada, Mexico, for example, are eager to take more traffic. And when the widened Panama Canal opens in the next couple of years, the big cargo ships that ply the Pacific Ocean will be able to slip through the canal and go to East Coast and Gulf Coast ports.

I know there’s a counterargument. It holds that those businesses that already have huge warehouses and distribution centers in the Inland Empire aren’t likely to abandon them and build a replacement in Houston or someplace else.

That might be a conclusion that some shippers come to. But there’s a counter-counterargument: We’ve seen plenty of examples where businesses are willing to write off an asset today in order to capture future efficiencies and cost savings.

What’s more, it might make sense for directors to diversify their company’s port operations. They might want to keep their operations in Los Angeles but open a second one on the East Coast or a third one in the Gulf Coast. That way, they could hedge their bets somewhat.

These are the kinds of decisions that shippers will be weighing in the coming months. And the results of those decisions, in turn, will be carried out over years.

That’s why the real cost of the port strike won’t be known for a long time.

Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].

No posts to display