The Port Strike Could Destroy Trucking - 9/18/2024

Well, they decided to put it off til Jan. 15th. Guess someone put a bug in their ear that somebody fixin to do sumthin if they continued.
My cousin in Oregon texted me this afternoon that she couldn't order toilet paper from either Costco or Sams Club. Both were out.
I have never figured out the mentality of those that, at the first sign of a terrible situation, be it hurricane or strike, people run out and hoard toilet paper???

 

The funny thing is toilet paper is all locally produced, not in shipping containers.

 

61.5% over the next 6 years. No fully Automation terminal on the East coast over the next 6 years.

 

In a word: headcount.

There are far, far more front line employees than there are executives.


Addendum: comparing the executives at shipping lines to the front line workers at the port is apples to oranges, a more apt comparison would be to compare the income of union execs to that of port workers.

 

That is so common down here before hurricanes that it has become a meme.

Apparently most people aren't smart enough to keep extra packs at home.

 

There is a point of equilibrium where all employees too to bottom could get the same percentage raise. That's probably around 4%. So why has the executive suite been getting a latger percentage increase than the front line workers?

Rough math says that the new contract will increase total wages by $150 million a year. Based on the renumeration fillings, between USMX and the 18 companies they represent, executives and board members received $62 million more in 2023 than in 2022. So more than 1/3 of the rank and file raises could be covered with the money spent on increasing executive compensation.

Now let's look at dividends and buybacks in 2023 - over $12 billion (I got tires of doing math). If the companies took 2% of that they can easily cover the new raises AND the executive raises without negatively impacting profitability.

 

The union wants 70-something percent, good luck getting them to agree to 4%. And why should a percentage raise be flat across the board when different employees don't contribute or detract equally to/from profitability?

Again, headcount. If the union would embrace automation, headcount could be reduced and average wage could be increased without negatively affecting profitability.

The point of a company is to turn a profit, not to serve as a jobs program. They want to keep their stock price high and their dividends high, so it would be counterintuitive to sacrifice both in order to inflate payroll.

The unions are foolish to demand wage increases while ignoring things that contribute to productivity and productivity, like profit sharing, ESOP, embracing automation, and getting rid of unproductive employees.

 

That 70% works out to 11% annualized, and they settled for 8% (rough math) after less than a week on strike. Best reported previous offer was less than 4%. I guarantee you that the union looked at the increase in dividends, stock buybacks, and executive raises in determining their 'asks' and what they were willing to strike for.

You're assuming that upper management/board members are taking actions which resulted in the increase in profits. We have no information to judge either way, but from my experience it's not an either/or. It's everyone working together. A worker has a bright idea and gets that idea in front of management who tweaks it to make it viable enterprise wide. Or vice versa. What we do know is average compensation. Let's say an executive and a front line worker were both making $100,000 in 2000. Using the publicly available data for actual annual increases, in 2024 the front line worker would be making $176,000 while the executive would be making $543,000. That trend line is unsustainable.

A company's purpose is to turn a profit, no doubt about it. Profits are determined by both share price and dividends. As previously mentioned, dividends for these companies have been elevated for the last couple of years. In the same time outstanding debts have gone down and share buybacks have been excessive. All of which is good for stock owners. Among the 18 companies, this strike cut the share price by $300 million. That loss alone would have covered the first two years of pay raises. In terms of profits over the term of the contract the companies would have been better off securing a contract last February, but they did what's worked for them in for the past 20 years- delay, delay, delay until the 11th hour putting the workers up against a wall to make a deal or strike. No one wants a strike, so the unions have made face saving deals. That changed in 2019, but USMX didn't take notice of the increased work stoppages and the resulting contract increases. I bet USMX could have gotten a deal last February for 6% annual raises and an empty promise on automation.

As a last thought, if rather than Alliance of Shipping Companies v Union we defined this as TQL vs O/O I think the esteemed members of TTR would be lining up behind the O/O who refused to work for subpar rates.

 

I think this is a fundamental misunderstanding. Companies first and foremost solve a problem in the market. They do a job and if that job is needed they make money. The money comes secondary. Who has ever decided to start a money company?

 

Ponzi?

Madoff?

Seriously, profit is the main driver of all economic activity. The fundamental misunderstanding is putting the chicken before the egg. Without demand, supply has no purpose (please see Adam Smith et al). If you build it they will come, but only if they have the wherewithal to do so. Increasing wages for the rank and file will ultimately result in more profit for ownership. Channeling the same amount into profits will end up cutting demand as wealth concentration has cut the buying power of the market.