All at Bay on the Western Front

LOS ANGELES — As locked-out dock workers picketed, chanted and shook signs bearing slogans like "Fight Terrorism, not American Jobs," the scene at West Coast ports Monday was equally chaotic, but eerily silent.<br><br>Behind locked terminal...

LOS ANGELES — As locked-out dock workers picketed, chanted and shook signs bearing slogans like “Fight Terrorism, not American Jobs,” the scene at West Coast ports Monday was equally chaotic, but eerily silent.

This story first appeared in the October 1, 2002 issue of WWD.  Subscribe Today.

Behind locked terminal gates, roughly 60 cargo ships sat at berth in various stages of unloading. In the waters beyond, motorboats idled in a seaward “picket,” a friendly suggestion to tug boat operators, members of the sympathetic International Boatman’s Union, to refrain from moving empty ships out of their berths.

Most large retailers and vendors, bracing all summer for this scenario, gritted their teeth, hoping the few weeks’ head start they have on fall and holiday goods will carry them through until the showdown ends, or the Bush administration invokes the Taft-Hartley Act. The act calls for work to resume under a mandatory 90-day cooling off period.

At press time Monday, members from the Pacific Maritime Association, representing shippers, and the International Longshore and Warehouse Union were meeting in San Francisco to try to pick up the unravelled thread of negotiations.

At a news conference there Monday, ILWU president James Spinosa said the union was eager to return to work and to the negotiating table.

According to PMA, Federal mediators have invited both parties to attend a session in Washington, D.C. on Thursday. PMA has accepted. The ILWU did not return a call at press time.

The PMA resolved late Sunday night to lock out the union’s 10,500 members until the ILWU signs a contract extension, which prevents the union from striking or engaging in work slowdowns. The current contract expired July 1, but the parties have been negotiating since May 13 to try to resolve the thorny issue of port automation.

The 29 West Coast ports handle about $1 billion a day in goods. Imports surged 30 percent at the ports of Long Beach-Los Angeles last month, as companies created labor bottlenecks by bringing deliveries in early.

Even if work resumes today — which many observers consider wishful thinking — the industry expects to absorb millions in losses. Order cancellations, penalties, trucking surcharges associated with port-side waits, and a $700-per-container fee increase levied on West Coast deliveries by steamship companies are part and parcel of the titanic headache. Observers expect the trouble to drag on several more days, but predicted the Bush administration will invoke Taft-Hartley before week’s end.

Most industry players said they’re locked into strategies they chose months ago. Air freight, astronomically priced, is currently running a 10-day backlog, according to freight forwarders.

Rerouting “isn’t really an option,” according to Carol Sanger, vice president of corporate affairs for Federated Department Stores. “Most of the alternative ports are at capacity. It’s not a question of being able to turn the wheel and go someplace else.”

Peter McGrath, senior vice president of sourcing and development for J.C. Penney, spent Monday morning phoning his lobbyist and faxing congress.

“A fair number of us got caught with a percentage of our final holiday goods coming through the ports,” McGrath noted. While the majority of Penney’s holiday goods are safely salted away in its distribution center, key reorders of seasonally sensitive sweaters, outerwear and boots “are of the highest concern” and will be shipped by air, McGrath said.

The company has frozen deliveries of less perishable styles at Asian ports.

“We’re going to hang back for a few days to see how the union, the PMA and the government react to each other,” he said. “We need to look pretty carefully at the tea leaves to figure out what the next steps are going to be.”

Federated has all of its October merchandise and half of its November goods in, according to Sanger. The remainder is in transit, or sitting on ships, but with the cushion of time, Sanger said the company is confident port problems “will have a relatively modest impact.”

As part of its contingency plans, Wal-Mart has spent the past months hustling its containers off the ports as soon as they arrive, according to a spokesman.

“Our goal was to get the containers from the port to distribution as quickly as we could so there was no build-up,” he said, adding that strategy, plus some shifting of goods to the East Coast and gulf ports, means the retailer is “in good shape for the near term.”

Levi Strauss stopped shipping through West Coast ports in June, according to a spokesman. Instead, the company brought goods made in Asia, mostly tops, through Miami and other East Coast ports. Bottoms, produced in Latin America and the Caribbean, come up by trucks or through Miami.

Sears, monitoring labor negotiations for five months, used airfreight and some Mexican ports to bring goods in this summer, a spokeswoman said.

Bob Zane, senior vice president of production for Liz Claiborne Inc., said the company has been more conservative in its production planning.

“As long as the current situation is relatively short-lived, there should be little or no effect upon our shipping,” he said. “We have developed contingency plans such as using alternative ports or air freight for longer-term problems, but hope that they will not have to be implemented.”

Despite calm talk from the industry’s publicly traded players, analysts worried about pressures on retail margins and stocks, which sank Monday.

“Without intervention from the Bush administration, I think you’ll see a very tight Christmas,” said Eric Beder, retail analyst with Ladenburg Thalmann. “Considering where we are in the economy right now, it’s a major negative. We’ve already started to see that effect on retail stocks. And it will affect retail valuation until it’s solved.”