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Woes grow despite port reopening
Plant closings avoided during port shutdown now expected due to supply disruptions.
October 10, 2002: 9:24 AM EDT
By Chris Isidore, CNN/Money Staff Writer

NEW YORK (CNN/Money) - The economic impact of the West Coast port shutdown continues to expand, even as the work stoppage that choked off U.S.-Asian trade comes to an end.

Companies that move imports and exports through the 29 ports from Seattle to San Diego were waiting anxiously to see when they might be able to get their long-delayed cargo. But continued delays in the supply chain mean some companies that have avoided disruptions so far could see their own operations halted just as dockworkers go back to work.

Trucks jam an entrance at the Port of Los Angeles Wednesday evening. Continued delays mean that the reopening of ports will not end problems for businesses that ship through the ports.  
Trucks jam an entrance at the Port of Los Angeles Wednesday evening. Continued delays mean that the reopening of ports will not end problems for businesses that ship through the ports.

The ports were reopened Wednesday under a federal court order that at least temporarily halted the labor dispute that has closed the ports. Management estimates it will take at least six weeks to work through the backlog of cargo if there is "normal" productivity from unionized dockworkers. But the union vows to follow strict safety rules, which could further delay shipments.

Honda Motor Co. (HMC: Research, Estimates) President Hiroyuki Yoshino told reporters in Japan Thursday that his company would have to shut down operations at three North American assembly plants starting Friday due to lack of parts. The company said it is uncertain when it will be able to restart the plants. But he said he didn't believe the disruptions will cause the No. 5 automobile seller in the U.S. market to miss sales targets.

"Perhaps there will be some sort of small effect [initially]...but we expect to be able to make it up by the end of the fiscal year [in March]," Yoshino said.

The largest plant to shut down during the stoppage was New United Motor Manufacturing Inc., (NUMMI), a joint venture of General Motors Corp. (GM: Research, Estimates) and Toyota Motor Corp. (TM: Research, Estimates) that builds both pickup trucks and cars. The plant, which is the largest importer through the nearby port of Oakland, shut down both its car and truck assembly lines early Oct. 3 due to the parts shortage, although it used air freight to reopen the car line Monday.

It hoped to reopen its truck line as soon as Friday, though it will continue to rely on more expensive air freight as a source of parts for its car line until it sees that the flow of goods can support operations again. The weight and volume of parts needed to build the trucks made air freight impractical for the truck line.

"We're cautiously optimistic," plant spokesman Michael Damer said. "There are 61 of our containers [of parts] on the dock that just need to be hitched up and pulled out. We're not sharing the number [on the cost of air shipments], but it's extremely expensive and not sustainable over the long run."

Boeing Co. (BA: Research, Estimates) also is awaiting parts shipments, including crown and side panels, passenger doors, cargo doors and escape hatches, that are needed to build planes.

Construction of planes at Boeing is proceeding out of sequence due to the lack of parts caused by the West Coast port work stoppage.  
Construction of planes at Boeing is proceeding out of sequence due to the lack of parts caused by the West Coast port work stoppage.

Boeing spokesman Peter Conte said the world's largest aircraft manufacturer has been proceeding with assembly out of normal sequence due to lack of parts, though it does not believe it will have any delays in completing jets affected by the shortages.

"We still will see some disruption even though they are going back to work," he said.

Perishable goods such as fish, meat, fruits and vegetables have been sitting in refrigerated containers for the 10 days of the lockout will have to be examined to see if they're still good, but Peter Friedmann, the executive director of the Agriculture Ocean Transportation Coalition, said that a large percentage of those goods have spoiled and will have to be thrown out.

Even the perishable shipments that still good, generally those that are shipped frozen, likely have missed their deadline to arrive at customers, Friedmann said. The contracts allow the customers to pay a discounted price to the agricultural exporter for the goods once they arrive.

"That price will probably have to be pretty close to zero if they [the exporter] wants to have hopes of getting repeat business in the future," Friedmann said.

Part of the problem with restoring normal operations is that the rest of the transportation system also is out of balance. The railroads have stopped accepting shipments of goods, such as grain, bound for export, and trucking and railroad equipment needed to handle the flow of goods is now out of position after the work stoppage. The California Trucking Association predicts it will see "chaos" as trucks try to get move in and out of the ports to handle the backlog.

The large backlog of containers and other cargo waiting to move over the docks poses a problem for companies that ship through the ports.

"Many of those containers are literally buried," Friedmann said.

Many major retailers responded to the threat of a work stoppage with earlier-than-normal shipments of inventory intended for the key holiday shopping season. For example, home goods retailer Pier 1 Imports Inc. (PIR: Research, Estimates) said Thursday that almost all seasonal goods it needs for the holidays already have been shipped through the ports. But relatively few major retailers are believed to have received all goods shipped through the ports when the stoppage hit late last month.

The impact of any missing inventory is therefore more likely to be felt late in the shopping season rather than early. Clothing retailer Gap Inc. (GPS: Research, Estimates) said Thursday it sees no impact from the shutdown on results for its fiscal third quarter, which runs through the end of the month, but that fourth-quarter earnings are likely to be reduced by 2 to 7 cents a share by the port problems.

Of that downside, it said it expects 2 cents a share in increased transportation costs as it turns to air freight for some shipments, while up to 5 cents a share would be due to profit loss from the lowering prices on late-arriving goods.  Top of page


Reuters contributed to this story




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.