Long Beach, L.A. Ports Face Crisis in Labor Dispute

The long-festering labor ruckus that has hampered steamship lines and trucking companies around the nation’s busiest harbor complex for more than a week is on the verge of reaching a boiling point, with the future of the Southern California shipping industry in doubt and the reputations of the Los Angeles and Long Beach ports on the line.

More Los Angeles-area jobs are tied to the trade at the twin harbors than to the Hollywood film business, and the ports have been the steadiest source of income for the region during California’s financial comeback, economists say.

“Shipping isn’t glitzy, but it is significant,” said Jack Kyser, chief economist for the Los Angeles Economic Development Corp.

Now, what had been an unassailable engine of rejuvenation for beleaguered Southern California, and the strongest symbol of the country’s trade with Asia, is at risk. In the high-rise offices of the international shipping companies, amid the stacks of cargo containers at port terminals, in rail yards and truck pits and warehouses, there is talk that the way Los Angeles’ ports do business is changing.

Some terminal operators are talking up the possible benefits of long-term changes, such as keeping their gates open for longer hours. But trucking company officials are conceding that costs will rise no matter how the current labor squabble shakes out. And steamship lines are threatening to divert their freight containers to other West Coast ports to avoid the persistent labor troubles at Los Angeles’ port.

“There are a lot of jobs at stake,” said Distribution Services Ltd. Transportation President Phil Clarke. “If our costs go up, people will start to look for alternatives. If that means they look elsewhere, we all lose in Southern California. There’s a lot of nervousness.”

Even before the labor slowdown brought commerce to a virtual standstill last week, unrest had been brewing among the estimated 6,500 independent truck drivers who haul cargo containers to and from the ports. The drivers owned their own trucks, were paid by the delivery and were considered independent contractors--responsible for their own repair and fuel costs.

Since Donald L. Allen, a former insurance agent, attempted to organized the independents under the umbrella of his new leasing company, with the blessing of a heretofore unsuccessful union, the industry has been in a panic, and thousands of drivers have stayed off the job. Allen pledged to hire the independent drivers as employees of his unionized Transport Maritime Assn. and pay them $25 an hour, plus benefits, instead of a per-delivery rate. The drivers, who have claimed that port operations are too inefficient to allow them to make enough pickups to earn a living, flocked to the new company.

Allen initially planned to lease out his new employees to trucking companies--the firms hired by stores and other customers to pick up containers and deliver them to a warehouse or other site--at a charge of $69 per hour. But recently, he has threatened to abandon that idea and instead would operate as a rival trucking company, placing him in direct competition with the firms that so far have refused to lease his employees.

Compounding the confusion is the fact that the estimated 4,200 once-independent drivers hired by Allen also have joined a union, Local 9400 of the Communication Workers of America. The drivers have been trying to unionize since the industry was deregulated in the early 1980s, and attempted to align with the Teamsters and other organizations, but had failed.

Thousands of truck drivers are waiting to be called out to make pickups by Allen, and have held demonstrations in front of terminals at both ports to woo still-independent drivers to join the union. At the Evergreen America terminal at the Los Angeles port Tuesday, about 500 drivers shuffled in thick lines back and forth in front of the gate, parting only to allow truck traffic through.

Carrying union placards and chanting “Si, se puede!” (“Yes, we can!” a frequent battle cry from labor leader Cesar Chavez), the truck drivers paraded outside the terminal gates for most of the day.

If Allen’s vision is realized, he would control perhaps two-thirds of the truck drivers who service the harbor area. The cost of hauling a cargo container would at least double, say trucking company officials who could potentially be Allen’s competitors. If Allen’s effort fails, however, some trucking companies expect at least a moderate rate increase anyway, to appease drivers who return to work as independent contractors. That rate hike eventually would be passed on to the consumer goods--pineapples, backpacks, even cars--arriving by the boatload daily.

“This has got to be a concern to every American consumer,” said Gene Pentimonti, president of the American Trucking Assn.’s intermodal division.

No matter how the issue is resolved, steamship lines and trucking companies concede that the port’s labor troubles are unlikely to disappear. What was already a cut-throat market for the independent drivers, who have had to pay higher diesel fuel costs in recent months, is expected to become even tighter.

At both ports, about 50% of the cargo containers coming in by ship are trucked locally and consumed in the vast Southern California market. The other half is sent to inland markets--from the East Coast to the mid-West. Those containers must be transported from the docks to rail lines. For now, an estimated 40% of inland-bound containers from the Long Beach port, and more from the Los Angeles port, are driven by truck to rail terminals in Carson and other sites.

While the Long Beach port offers on-dock rail systems at five of its seven terminals, multimillion-dollar construction projects are under way at both ports to add such rail systems to the remaining terminals, which would cut out the need for trucks to haul containers to the train yards. At a new terminal planned for American President Lines, for example, the on-dock rail system expected to open next year will slash by up to 500,000 the number of containers that would have been hauled by truck, said Jay Winter, president of the Steamship Assn. of Southern California.

Winter noted that the shippers have been able to move their freight fairly smoothly--although at a higher cost--with substantially fewer drivers this week.

Officials at some steamship lines contend that there are simply too many truck drivers servicing the harbors, and predict that if Allen’s plan falls through, thousands of drivers will be unable to find work.

But others say the steamship lines and terminal operators need to adjust their operations to make the port run more efficiently.

At the Hanjin Shipping Agency terminal at the Long Beach port, the company offers extended gate hours four nights per week to allow more pickups and to reduce street congestion. But Paul Laign, who runs the company’s North American operations, said few truckers had taken advantage of the extended hours until the labor slowdown. Other shippers have resisted keeping their terminals open longer because they say their contracts with the dockworkers’ powerful union, the International Longshoremens’ and Warehousemens’ Union, prevents it.

Laign said, “At some point, they are going to come under a microscope. The ports really have not been involved. They’ve left this up to the tenants and the truckers. They haven’t taken a real active stance.” Port officials have said they consider the spat a labor-management issue and will not intervene.

The labor feud has already prompted one firm, Hyundai American, to reroute a container ship to one of the harbor complex’s chief competitors, the Seattle port. Other shippers have diverted much of their export freight to the Oakland harbor.

“It could be very damaging,” Kyser said of the Allen operation. “I think you’d see people diverting ships because it’s too expensive to run through Los Angeles. The winner would be the Pacific Northwest.”