International Longshoremen’s Association delegates to meet next week
On Sept. 30, the International Longshoremen’s Association’s contract expires, and that’s approaching quickly. Negotiations between the union and the United States Maritime Alliance have been stalled since June. It’s been a long silence on any update about a potential strike that remains at the top of many shippers’ minds. In fact, it’s one of the most frequent topics that we, the SONAR team, are asked about. The ILA has called for a delegates meeting on Sept. 4-5 to discuss demands. It is possible those demands will become public thereafter and then we will have some idea on how far apart the parties are. Previous reports of ILA demands have included pay increases that exceed what the International Longshore and Warehouse Union – which represents longshoremen on the West Coast – recently achieved (32% raise over 6 years). In addition, the ILA continues to have demands for banning any incremental automation that could streamline the union workforce, all while highlighting its view that carriers can easily pay up given carriers’ historic profits the past few years.
Outbound Los Angeles rail intermodal volume surged in July and August following record volumes of containerized imports into the region. That volume may stay elevated as some importers avoid the east coast. (Chart: SONAR)
Advice for shippers
C.H. Robinson gives advice to shippers here. It includes planning for added transit time and costs ranging from congestion fees to possible detention and demurrage fees. Shippers planning to divert cargo also need to make arrangements for inland transportation. Such cargo is unlikely to be prioritized for domestic intermodal or truckload without prior planning. Warehousing space may be also needed; recent anecdotes from carriers suggest that much of what is coming into the Southern California ports is being stored nearby which may put warehousing space at a premium.
What will happen at the end of next month?
If no contract is in place and the ILA makes good on its threat to walk off the job on Oct. 1 (or is about to), the U.S. President can request a court order for an 80-day cooling off period under the Taft-Hartley Act. That act basically says unions can be forced back to work if a stoppage constitutes a national emergency. It can be used before or after a work stoppage commences. This is where political gamesmanship comes in a few weeks before the election. Would the President preemptively order an end to the work stoppage to avert a supply chain crisis? Or, would the President instead endeavor to appear pro-labor by allowing a strike to take place, which would give the union more leverage? Sea-Intelligence estimates that a one-day strike would take five days to clear and estimates that a one-week strike in October could cause slowdowns until mid-November. That’s a long time to wait for auto parts, pharmaceuticals and other essential goods.
As west coast imports surge, carriers are sending more empty 53’ containers to the LA region to accommodate transloading of imports from international containers into domestic containers. (Chart: SONAR)
Nestlé CEO change surprises CPG industry
(Image: FWTV)
On Monday’s The Stockout show, Grace Sharkey and I summarized recent shows, discussed the impact of the Canadian rail lockout and gave thoughts on the freight market outlook for the remainder of the year. In addition, they discussed the surprising news last week of the sudden change in Nestlé’s CEO.
In recent years, the outgoing CEO, Mark Schneider, was regarded as one of the best CEOs in the CPG industry. He oversaw the company’s “cut the tail to move the head” strategy that involved acquiring companies with higher growth rates and higher margins while divesting businesses that didn’t share those characteristics. Schneider was reportedly given only 24 hours notice by the board that it was moving on. On the associated analyst conference call, the company touted new CEO Laurent Freixe’s credentials as someone who knows the organization inside and out. In addition, comments focused on organic growth and investing in existing brands, which may mark a departure from Schneider’s more acquisition-heavy approach.
Sharkey gave advice to brokers and carriers when dealing with the major CPG companies, including Nestlé and its peers. Among her suggestions: Be wary of long payment terms embedded in contracts – big CPG companies are known to stretch payment terms out to 60, 90 or even 120 days.
See Monday’s show and the full The Stockout playlist here.For more on this, Reuters had a good article on it here.