It's time for corporate America and its unions to choose a path

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Sooner or later it had to happen: both the ports and the airline business in the US are preparing for a showdown with unions. The threat of strikes is in the air, the wrath of employees is being visited on management.

Last week one of America’s largest container terminal operators announced plans to build a new, state-of-the-art terminal in New York, which will feature a degree of automation rarely seen in the US before.

Global Terminals Inc operates four container terminals in North America, one in New York, one in New Jersey and two in Vancouver, and has unveiled plans for its Bayonne, New Jersey facility that will see a 1.7m teu-capacity expansion project featuring 20 driverless cranes in a port that has traditionally been heavily manned.

While automated terminals in container shipping are not new, they are strangely absent from the US (strange because it is a country so in love with new technology), due to the huge power wielded by its docker unions.

There is a history of animosity between dockers and their employers in the US that has at times affected the entire country. A 10-day lockout of dockers on the west coast by their employer, the Pacific Maritime Association – a management group formed from the shipping lines and stevedores which bargains as a block with the local west coast workers’ union, the International Longshore and Warehousing Union – resulted in billions of dollars of costs and reshaped the country’s container trade flows.

That dispute was also over automation. The PMA then accused the ILWU of deliberately slowing operations and ordered the workers to be locked out. Such was the ensuing cargo logjam that George Bush sought an emergency injunction against both to restart operations.

How similar could today’s situation be?

GTI president James Devine told The Loadstar last week that negotiations with the International Longshoreman’s Association, which covers east and Gulf coast dockers, are underway on two levels: firstly over manning levels at the new terminal, and secondly, the existing master contract between US Maritime Alliance, the dockworkers’ employers association, and the ILA expires in September, with a new one due to start on October 1.

The fear, of course, is that a dispute over future automation might disrupt negotiations over the general working contract at a major terminal in the east coast’s largest port.

“Fortunately the east and gulf coasts are the domain of the ILA,” Devine said, “and they are different to deal with than the ILWU. The last major [ILA] work disruption was in 1977, and since then there has been a cooperative effort to reach agreements.”

He described the temperament of the three meetings held between the terminal management and the ILA local on the new terminal as “civil, constructive and professional”, but these words were underpinned by a determination to see automation come to the port. “We have advised the ILA that we are moving in this direction and we are optimistic that we will come up with the appropriate manning levels.”

He added that while the number of dockers driving equipment would inevitably decline, the facility would provide new – if different – employment opportunities, but crucially, he also confirmed that it is GTI’s ambition to introduce automation in its other terminals.

There are warning signs of an imminent conflict. Only the day before the GTI announcement, the ILWU issued a press release reiterating its support of the ILA in its contract negotiations which ended on the following, ominous note: “The ILWU expects a significant struggle over the introduction of fully mechanized and automated cargo handling equipment technology, putting the ILWU and the ILA in lockstep on this issue”.

Meanwhile, pilots at AMR Corp, parent of American Airlines, are going off sick in such high numbers that the carrier has had to reduce its schedule by 1.5% in June. AA is looking for 20% cuts across all its divisions, including management, and has already taken an axe to several high profile jobs, including the capable Dave Brooks, president cargo. Now, it is looking to lay off some 13,000 workers from a total of 88,000, and 1,200 non-unionised workers.

In cargo, it wants to outsource much of its domestic handling capability.

The facts – as presented by AA – suggest that the unions have contributed to the company’s struggle to survive.

It has been in negotiations with the APA for 63 months, with the TWU for 34 months, with the APFA for 42 months. No wonder it wants productivity to go up. It claims its overall labour costs are the highest in the industry, and wants to reduce the labour bill by more than $1.25 billion per year. And it needs to renegotiate its contracts, which it claims, are unsustainable.  It’s not surprising. The airline has lost $10 billion during the last decade.

The unions and AMR are currently in court, where the workers are arguing that US Airways, which wants to take over AA, has offered them better terms. After years of wrangling, the unions are now seeking to replace their bosses.

US Airways, however, is struggling to negotiate with its own unions, and the pair have been in litigation for seven years. It is also worth noting that Delta and United have done far better since their own deep cuts.

The US has been enjoying what some call a fragile, jobless recovery. Unemployment is currently at 8.1% (April), despite there being some 3 million job openings, pointing to a mismatch in skills and opportunities.

Of course, the businesses’ battles with their unions doesn’t necessarily have to be a showdown. The recent history of labour movements does not always involve struggle. Yes, Margaret Thatcher bashed the miners in 1980s Britain, but the three-way accord reached between manufacturers, unions and the German government in response to the recent economic crisis, to introduce state-assisted short hours, has left Europe’s largest economy in an enviably competitive position since.

America has to decide which way it wants to go. But it could be an opportunity to provide a win-win.