News > Economy
Bite of port lockout to be felt soon
Assembly lines could close, retail shelves could be hit if lockout at West Coast ports continues.
September 30, 2002: 6:12 PM EDT
By Chris Isidore, CNN/Money Staff Writer

NEW YORK (CNN/Money) - The labor dispute at West Coast ports has the potential to cause assembly lines to shut down, perishable goods to rot, and hot retail items from clothes to toys to the latest model import automobiles not being available to consumers.

Cargo-laden ships wait in the Los Angeles-Long Beach harbor Monday, unable to unload goods due to a West Coast port lockout.  
Cargo-laden ships wait in the Los Angeles-Long Beach harbor Monday, unable to unload goods due to a West Coast port lockout.

The lockout of unionized dock workers at 29 ports has the potential to choke off trade between the United States and Asia and cost the U.S. economy about $1 billion a day. The Pacific Maritime Association, which represents major shipping lines and port terminal operators at the ports, locked out 10,500 members of the International Longshore and Warehouse Union, charging the union was engaged in a slowdown of work that amounted to a strike with pay, a charge the union denies.

While some companies that depend on the ports being open are hoping that President Bush uses his powers soon to order the two sides back to work for 80 days, the administration had no immediate comment on its plans to deal with the work stoppage.

Manufacturer may take first hit

Manufacturers are generally worse off than retailers, said Robin Lanier, executive director of the West Coast Waterfront Coalition, which represents major importers and exporters. Many manufacturers have a so-called "just-in-time" inventory system that schedules deliveries of needed parts at the plant only hours or days before they are needed.

graphic graphic graphic
A labor dispute shuts down sea ports along the U.S. West Coast. CNN's Casey Wian reports.

Play video
(QuickTime, Real or Windows Media)

"The retailers ship goods more just-in-time than they used to be, but they are nowhere near as just-in-time as manufacturers," she said.

One of the first plants that may be affected is New United Motor Manufacturing Inc., the joint venture of General Motors Corp. and Toyota Motor Corp. that is the largest importer through the port of Oakland, Calif.

The plant that builds all the Toyota Tacoma pickup trucks and many of the Corollas sold in North America, as well as all of the Pontiac Vibes, could see its assembly lines shut down as soon as this week due to the disruption, said NUMMI spokesman Michael Damer.

"[A] just-in-time system assumes you'll be pulling materials constantly," he said. "We did pull more parts as a contingency, but five-to-seven days is the maximum you're going to be able to pull. We think we're good for week, but we're assessing it minute by minute. There is a shortage that could impact us by this week."

Asian-based automakers also face a disruption of imports of new vehicles, as well as a disruption of parts needed by assembly lines many of them now operate in North America. Toyota Motor Corp. spokesman Xavier Dominicis said inventory of new vehicles ranges from only 12 days to about 30 days, depending upon the model.

"Obviously we continue to remain hopeful that the ILWU and PMA will reach an accord, the sooner the better," he said. "If it happens in next couple of days, we'll probably be all right."

Many Christmas items already through ports

Industry executives say that the retail sector appears to be in relatively good shape to weather the disruption, as many retailers moved goods early this year in anticipation of possible labor trouble.

Even without the threat of labor problems, the peak season for shipping goods for the holiday shopping season was expected to end in a few weeks to allow time for goods to reach stores in time for the start of the holiday shopping season in November, said Jon Gold, director of international trade policy for the International Mass Retail Association. Still, he said that for each day of the lockout, it is expected to take about five days to work out the backlog of shipments, so even a week-long labor dispute could start to cause problems.

"In all honestly, it depends on how long it goes," said Gold. "If it's only a couple of days, Christmas will be fine. If it goes on weeks, you could have some trouble."

Many of the key goods that retailers plan to promote in their holiday-season kickoff were likely shipped weeks ago, said Lanier. Still she said there are few retailers who have all their holiday goods through the ports.

"Everyone has something on ships that is important to them," she said. "Something the retailer wanted to offer for sale won't be there, and that's a loss sale and that affects performance."

Lanier said that some high-value retail goods could shift to air in case of a lockout, but for many items it doesn't make economic sense to spend the extra that air shipments cost. And shipping by air could get difficult if the work stoppage drags on.

"The fashion apparel will shift to air because their selling season is only six weeks, and then it goes to markdown. They can't afford to miss one day," said Lanier. "But the price for the plane is going up, and space will evaporate very quickly as the Limited and Gap fill them up."

Agricultural exporters are also in trouble because of the perishable nature of their goods and the lack of alternatives, Lanier said.  Top of page

  More on NEWS
Anheuser-Busch orders 800 hydrogen-powered semi trucks from Tesla rival Nikola
H&M and Zara ditch mohair wool after animal cruelty expose
US and China kick off talks to avoid a trade war
Why GE may need to stop paying its 119-year old dividend
What higher wages means for Domino's and McDonald's
Chipotle hopes quesadillas and milkshakes bring customers back

graphic graphic