C.H. Robinson to purchase Phoenix International

Press release

--(BUSINESS WIRE)--Sep. 25, 2012-- C.H. Robinson Worldwide, Inc. ("C.H. Robinson") (Nasdaq: CHRW), today announced that it has reached a stock purchase agreement to acquire Phoenix International, Inc. ("Phoenix") for $571.5 million in cash and approximately $63.5 million in newly-issued C.H. Robinson stock. The agreement is subject to certain customary closing conditions, including regulatory approval. Closing of the acquisition is expected to occur in the fourth quarter of 2012. C.H. Robinson will use existing cash and plans to enter into a revolving credit facility with major banks to finance the cash portion of the purchase price. The acquisition is expected to be modestly accretive in the first year.

Phoenix is a privately-held international freight forwarder. In its most recently completed fiscal year, as of June 30, 2012, Phoenix generated gross revenues of approximately $807 million, net revenues of approximately $161 million and adjusted operating income of approximately $48 million.

Phoenix primarily provides international freight forwarding services, including ocean, air, and customs brokerage, currently serving approximately 15,000 customers globally. Phoenix has approximately 2,000 employees, located in 76 offices in 15 countries. The company is headquartered in Chicago, Illinois. 

click here for link

ILA Agrees to 90 day extention of contract

This from the FMCS web-site

Release Date: 9/20/2012

WASHINGTON, D.C. — "I am pleased to announce that at the close of today’s productive negotiation session, in which progress was made on several important subjects, the parties have agreed to extend the collective bargaining agreement due to expire on September 30, 2012 for a ninety (90) day period, i.e. through December 29, 2012. In taking this significant step, the parties emphasized that they are doing so “for the good of the country” to avoid any interruption in interstate commerce.

"This extension will provide the parties an opportunity to focus on the outstanding core issues in a deliberate manner apart from the pressure of an immediate deadline. The negotiations on the Master Agreement will be conducted during the same time frame as negotiations for local agreements. The negotiations will continue under the auspices of the FMCS. Due to the sensitive nature of these high profile negotiations, we will have no further comment on the schedule for the negotiations, their location, or the substance of what takes place during those negotiations."

click here for link

ILA contract talks to resume Sept. 19, 2012

According to the Baltimore Sun, contract talks between the ILA and USMX (representatives of
the carriers and terminals) will resume today, at a hotel in New Jersey.

It had been reported the locations of the talks would be undisclosed...but, admittedly there are
a lot of hotels in New Jersey.

These negotiations are being mediated by the Federal Mediation and Coalition Services.

The ILA union contract expires Sept. 30th, and the Union membership has already
authorized a strike.

From The Baltimore Sun

The maritime alliance says dockworkers are driving up shipping costs by taking advantage of liberal overtime rules. It says longshoreman are well compensated, making an average of $124,000 annually in wages and benefits, with management paying 97 percent of the cost of their health care plan.
The union says its members do dangerous work, often in adverse weather, and must be protected and retrained as the industry changes.

click here for link to article

Racketeers on the New York/ New Jersey Waterfront

 I don't think I need to add any comments to this.....it kind of says it all.

From The Journal of Commerce

 

Administrative law judge upholds Waterfront Commission ruling

An administrative law judge has upheld the Waterfront Commission of New York Harbor’s decision to revoke a Ports America hiring agent’s license to work in the Port of New York and New Jersey because of association with racketeers.

The Waterfront Commission revoked the license of Pasquale Pontoriero, who was accused of associating with the late Tino Fiumara, a Genovese mob capo, and Stephen DePiro, a Genovese soldier.

Fiumara died in September of 2010; DePiro is serving a federal prison sentence and awaiting trial on federal racketeering charges involving the extortion of ILA members in the port.

Update ILA contract talks

The contract talks between the ILA and USMX are to restart this week, with a mediator.

The locations of the talks are being kept secret.  I presume the day to day outcome of the
talks will only be available from either the ILA, USMX, or the mediator.  I don't really know
what has been agreed.

The USMX web-site,  should post updates on the ILA negotiations, when available.

click here for the link.

So far, nothing has been posted.

Suggested Changes on the Waterfront

The negotiations with the ILA are to start again next week.   This time with an arbitrator from
FMCS.  From their web-site

Release Date: 9/6/2012

Upon the request of the Federal Mediation and Conciliation Service (FMCS), the parties have agreed to resume negotiations under our auspices during the week of September 17, 2012.  Due to the sensitivity of this high profile dispute and consistent with the Agency’s longstanding practice, we will not disclose either the location of the meeting or the content of the substantive negotiations that will take place.

I trust they will address many of the issues raised in the Waterfront Commission report of
March 2012.   It's a lengthy report, but appears to spell out the real problems with the
ILA Union at the ports of NY/NJ.

Of course, this is only one of the ports represented by the ILA, although it is the biggest, and
NJ is where the union is headquartered.

The report has some real gems, such as

Mr. Daggett emphatically testified that shop stewards are entitled to their six-figure
salaries.107 He claimed that shop stewards work twenty-four hours a day and help ensure that
there are “no labor problems” in the Port.108 Mr. Daggett testified that $400,000 “[is] not a lot of
money today,”109 a comment that would appear to be out of touch with reality.

In fact, in my opinion, the report is so damaging I don't know why the government hasn't taken
some action and closed down the ILA.   I guess everyone was waiting for the next round of
contract negotiations.  I don't know.   Of course it's difficult to tackle these problems,
and because the union is contracted by a "collective" and not one company, it's even more
difficult.

Here are the suggestions put forward in the report.   They are very valid, and I trust whomever
from the FMCS is handling the negotiations will read this report, and attempt to put these
changes in to place.

Based on the foregoing, the Commission recommends the following changes by the
shipping industry:

   “Ship time “or “terminal time” payments that go to a single person, whether or not the
person is actually working, should be eliminated. The implementation of a shift system,
rather than a continuous operation system, for all dockworkers would be a highly
advantageous change for Port efficiency.

    “Prime” positions – inflated salaries for little or no work should be eliminated.

     Desirable positions should be fairly distributed based upon sonority and merit. Training
for those positions should be fair and based upon objective criteria that will reduce –
rather than increase – the lack of diversity in the Port.

    Secret ballot elections should be held for shop stewards positions. These positions should
be for a fixed term of years with a clearly delineated process for recall and removal.

    Shop stewards should be assigned the same responsibilities and be paid the salary as their
co-workers. While time off should be given for the purpose of conducting union business,
any additional compensation for such work should be paid by the union under strict rules.

   All elected shop stewards should be trained as to the provisions in the applicable
collective bargaining agreements and their responsibilities in enforcing them.


 Check-in of checkers and longshoreworkers by the timekeeper should be done in a
manner that capable of being audited, which takes advantage of technology and does not
highly compensate favored individuals for little or no work.

Click here for link to complete report.  It is worthy reading.

Carriers continue to collude

It's difficult for carriers to give up the long held practice of colluding on rates.   In the past
it was legal, but no longer.

From The Journal of Commerce

Antitrust investigation also includes car carriers

CSAV said it and some of its employees have received subpoenas from U.S. government authorities and the Competition Office of Canada in connection with an investigation under antitrust law that includes it and a group of car carriers.

Although the Chilean carrier did not identify the car carriers that are also being investigated, they may be among the 10 Japanese, South Korean and Norwegian shipping lines being investigated by the Japan Fair Trade Commission.

CSAV said it notified the Chilean Securities and Insurance Supervisor of the investigation and that its management “has dedicated itself to gather information.” It said its board of directors has instructed the company management to provide maximum cooperation in connection with the investigation.

“The investigation seeks to inquire into the existence of antitrust law violations related to cooperation agreements on prices and allocation of clients between car carriers,” CSAV said.

Additional charges if there is a strike.

From The Journal of Commerce

Surcharges will take effect if ports shut down in labor dispute

Several container ship lines have announced congestion surcharges that will take effect if East or Gulf Coast ports are closed in connection with the International Longshoremen’s Association contract expiration.

The carriers are required to provide 30-day notice of the surcharges, which will be rescinded if the ports stay open. Among the announced surcharges:

-Maersk, for all shipments to from the U.S. and Canada: $800 per 20-foot container, $1,000 per standard 40-footer, $1,125 per 40-foot high-cube, and $1,266 per 45-foot container.
-Cosco, for shipments between Asia and from the U.S. and Canada: $800 per 20-foot container, $1,000 per standard 40-footer, $1,125 per 40-foot high-cube, and $1,266 per 45-foot container.
-NYK Line, for shipments to the U.S. from Asia, the Indian subcontinent and Australia: $1,000 per container.
-Hanjin, for shipments to and from U.S. and Canadian ports, $800 per 20-footer, $1,000 for other sizes.

I don't really know how they can justify these as "congestion surcharges", because no one knows
for sure what ports will be congested.  I really think these should be filed under "strike surcharge",
but of course there could be lots of service contracts which would be exempted from a strike
surcharge, although that would have been pretty foolish on the part of the carriers.

The other thing I would point out...notice how all these charges are "per container", which is
standard in the industry, EXCEPT for the ILA charges.   (see my previous post)
Idiots.

How the ILA gets paid

Contract negotiations between the ILA (union for the longshoremen...and they are mostly men),
and the representatives for the ocean carriers resume next week, thought it would be
interesting to look into their current contract.

The ILA load and discharge vessels, and move the containers around the terminals, at U.S. East and
Gulf Coast ports.

I don't know if there are any ships worked by the ILA which are not containerized, or ro/ro
(roll on-roll off cargo).  I doubt it.
But yet, the union has not conceded to change their pricing based on containerization.  They
still use an outdated method of charging some of their charges based on weight....and not just
weight, but the commodity.  This is used to fund what is called the "Container Royalty Fund".
I don't know the entire history of this fund, but most likely it came into being when
ships went from bulk to containers.

The calculation using weight and commodity  is a throw back to the truck tariffs, which
disappeared around 1980 as trucking was deregulated.  In fact, when the ILA comes to
your office to audit this report, they drag in an old trucking classification book.

If you want to know more about this, I found a bit of the history at ftc/gov.  Click here for the link.

The basis for the calculations is so convoluted and complicated that many carriers hire outside
companies (I think they are old retired ILA guys...but don't quote me on that), to file their reports.
It's something which is very difficult to capture from the computer system.
 Here's what is says in the master contract regarding Container Royalty Payments

.RULE 10 – CONTAINER ROYALTY PAYMENTS
The two Container Royalty payments, effective in 1960 and 1977
respectively, shall be continued and shall be used exclusively for
supplemental cash payments to employees covered by the
Management agreements, and for no other purpose. The remaining
royalty payment effective in 1971, also shall be continued and shall
be used for fringe benefit purposes only, other than supplemental
cash benefits, which purposes are to be determined locally on a portby-
port basis. The Container Royalty payments shall be payable only
once in the continental United States. They shall be paid in that ILA
port where the container is first handled by ILA longshore labor, at
longshore rates. Containers originating at a foreign port which are
transshipped at a United States port for ultimate destination to another
foreign port (“foreign-sea-to-foreign-sea containers”) are exempt
from the payment of container royalties. Container Royalty payments
shall be asserted against all containers moving across the continental
United States by rail or truck in the foreign-to-foreign
“LANDBRIDGE” system.

This is in addition to the hourly wage paid to the employees, which ain't small
change.

Here is the link to the Master Contract of the ILA which was signed in 2009.   Click here.http://www.ilaunion.org/pdf/MasterContractAndMemorandumOfSettlement.pdf

I'll be posting about it and other things about the ILA over the coming days.

ILA and the Mafia

The ILA has a long history of association with organized crime.   It seems everyone has just
accepted this is the way it is, because they certainly have not cleaned it up, although every once
in a while The Waterfront Commission does something to justify their existence.

This was posted on their web-site.   Click here for the link.

Longshoreman Indicted for Multiple Counts of Perjury Suspended by Commission
August 1, 2012
           The Commission voted to temporarily suspend Dominick Dinapoli's registration as a longshoreman pending an administrative hearing on charges based upon his five count indictment for perjury. Dinapoli has been charged with testifying falsely in a Commission investigation regarding Port personnel associating with an organized crime figure and another career offender. The notice of hearing, approved today by the Commission, charges that Dinapoli violated the Waterfront Commission Act by associating with career offenders, convicted racketeers, and members or associates of organized crime groups, including Mario Gallo (an associate of the Bonanno and Lucchese crime Families), Samuel Santiago (a member or associate of the Latin Kings), and five other career offenders.
           The criminal case is being prosecuted by the Manhattan District Attorney's Office.

A big part of the problem with the contract negotiations which will resume shortly, is too many people
are concerned if they cause the union problems, they will be wearing cement shoes in the river.

This is not to be taken lightly.   I know of  people who were threatened by the ILA.  They gave in.

The negotiations really should be moved out of the NY/NJ area.

           
           

ILA and the Waterfront Commission

Below is part of the letter from USMX (who is negotiating with the ILA).  Apparently the ILA
thinks (or maybe it's true) that all they have to do is threaten to strike and they will get what they want.

What I don't understand is the comment in the second paragraph about the Waterfront Commission
of New York and New Jersey.  What's this all about?   The contract covers all of the US East/Gulf
ports.   Is the Waterfront Commission still influenced by the mafia?   

When we met during the week of August 20th, USMX presented the issues that we believed
were critical to successfully reaching an agreement. Those issues all center around inefficiencies
that have crept into our operations over the years. I’m referring to archaic work rules and
manning practices, and the system of guarantees and overtime pay practices that result in
millions of dollars being paid for time not worked. These inefficiencies are causing many of our
ports to become prohibitively expensive, harming our competitive ability and threatening the
long term viability of our operations. USMX was hopeful that we would receive the same
consideration from the ILA as we had given it on its critical issues. Instead, our presentations
were simply rejected without any consideration, and when management objected to this lack of
consideration, the ILA responded with a threat to strike.

Many of these issues are the same ones cited in a recent report compiled by the Waterfront
Commission of New York and New Jersey. I’m somewhat at a loss to understand why the ILA
would appear to be willing to have an outside agency attempt to force a solution on the parties,
rather than have the parties address the issues in the collective bargaining arena, at the
bargaining table, where they properly belong.

click here for link to complete letter

ILA Wages

The ILA goes back to the bargaining table next week.

The United States Maritime Alliance is the group negotiating with the ILA.  This is a group which
represents the carriers, who pay the ILA.   I don't really know of another industry where the
negotiations are not directly between the employer and the employee, so if you know of an
example, post a comment.   It would really seem more logical to have the ILA paid by the
terminal, and the terminal would charge the carrier for the total cost to work a ship.  But,
that's just silly me talking.

Anyway, the carriers have always given in to the ILA in the past, because, after all it's a big
group and it's difficult for a few carriers to convince all, that they need to take a hardline
position and let the ILA strike.  After all, it would really cause a lot of problems for everyone,
and cost a lot of money.   However, times are tough, and maybe now the carriers will
at least ban together, let them strike, and then pass on the additional costs of diverting cargo to the importers
and shippers.

If I had a contract with a carrier, I would certainly be looking at the "strike clause".

Below is from the web-site of the USMX  (United States Maritime Alliance).
As it is said "nice work if you can get it".   I guess these folks do!

Longshore workers are among the best paid union workers in U.S.

Longshore workers have a superior wage and benefits package that places them among the best paid union workers in the country. ILA members on the East and Gulf Coasts earn an average of $124,138 annually in wages and benefits. In wages alone, they make $50 an hour, more than double the average hourly wage of about $23 earned by all union workers in the United States, according to the U.S. Department of Labor’s Bureau of Labor Statistics.
ILA members also have one of the best healthcare plans in the nation, paying no premiums for family medical, dental and vision coverage and only minimal co-pays.  

click here for link to web-site

What's Up?

Or, as the kids say "wasup?".   Meaning, what is new and different?

In the shipping industry, it's not so much what is new, as everything is staying the same.

Carriers keep saying, "OK, it's going to get better", and it does a little, and then  falls back.

I don't know how long they can hold on, but I have been surprised many carriers haven't been forced
to sell out or close down by now.   I think there are still a lot of investors with money, and with
no other options for a good return, are willing to wait it out with shipping.

And shipping does have very, very, long business cycles.  This is the reason only the ones
with "deep pockets" really last through the decades.  

I guess the biggest news recently is the ILA  (International Longshoremen Association),
which is the union which controls the docks on the East Coast of the U.S., has a new
contract coming up for renewal.  They are now negotiating, and talks recently broke down.

It will be really interesting to see if the carriers have the guts to hold the line.  In the past they
 never did, as they didn't really have any other options to move their cargo.   The ILA has a lot
of power, and even blocked ports in Canada from handling ships which tried to divert..

But now everyone is hurting for money, and the U.S. ports are the most expensive in the world.
That's because the union has not allowed new efficiencies, which would allow reduction in staff.

I don't know if it's still true, but it wasn't that long ago that there was still a union position for "water boy"...
someone who took water to the working longshoremen.   Crazy, huh?

The other item of interest is the price of oil.  It topped $100 the first of the year when everyone thought
the economies were improving (and hedge funds were trading in oil), but then it dropped,  and
then came back up.  It's in the 90's now.  It should really be lower, but there is too much manipulation
in the market.

So, that's wassup.

Hope ya'll  (that is U.S. Southern talk for "you all") are doing well.