West Coast port lock-out worries tire importers
The on-going dispute between longshoremen and shipping lines that led to the late-September closing of nearly 30 West Coast ports may have dire consequences for tire companies that import product from Asia.
"It’s a bad, bad deal for us," says Earl Knoper, senior vice president of sales and marketing for Cypress, Calif.-based Toyo Tire (U.S.A.) Corp. "We have dozens of containers sitting on dozens of ships."
"Everything we get comes from Japan and everything from Japan ships to the West Coast," says Richard Smallwood, vice president of sales and marketing for Falken Tire Corp. in Rancho Cucamonga, Calif. "If they don’t get this solved, we won’t get any product."
Falken, which imports tires made by parent company Ohtsu Tire & Rubber Co. Ltd., also has several containers sitting in harbor.
The Pacific Maritime Association ordered the lock-out until the longshoreman’s union agrees to extend a contract that expired in July. (The union represents more than 10,000 workers.) Points of contention include benefits, pensions and cargo-handling technology that the union says will eliminate existing jobs.
Knoper says Toyo’s only other option right now is to re-route shipments through the Panama Canal, but the odds of that happening are slim to none. He and a number of others expect government intervention.
"I think President Bush will enact the Taft-Hartley Act and instruct them back to work," Knoper says. The 55-year-old Taft-Hartley Act grants the federal government the power to obtain an 80-day injunction when a threatened or actual strike "imperils the national health and safety."
Hankook Tire Corp., Yokohama Tire Corp. and China Manufacturers Alliance LLC (CMA) say the lock-out’s impact on their product flow has been minimal. "But if it persists for too long, it’ll affect us," says CMA CEO Jeff Kreitzman.
Valencia, Calif.-based CMA receives foreign-made tires through ports in Long Beach, Calif., and Seattle, Wash.
"If the lock-out continues we will need to review what alternative actions need to be taken," says Jim Quinn, Yokohama director of business operations.
Bridgestone/Firestone Americas Holding Inc. (BFAH) is putting together contingency plans that may include "shipping things in through the East Coast, using different modes of transportation," says BFAH Spokesman Dan MacDonald.
"We haven’t decided on what course to take at this point. We’re still weighing our options." He predicts BFAH "will see a significant impact" if the lock-out continues for three or four weeks.
"This is where having adequate inventory comes into play," says Victor Li, director of marketing for Compton, Calif.-based importer Tireco Inc. "We have sufficient (inventory) for the next couple of months, minimum. But it’s hard to say how long (the lock-out) is going to last."
Maxxis International – U.S.A. already is re-routing shipments for customers into "any Eastern port that has room," including Houston, Texas; New Orleans, La.; and Savannah, Ga., says Greg Rauth, manager for Maxxis’ automotive division. Even if the Pacific Coast ports reopen, supply "is going to be very slow and bogged down."
Del-Nat Tire Corp. also is re-routing merchandise through other ports. "Factory-direct orders are 120-days-plus, when they’re normally 90-days," says Dennis Cates, Del-Nat vice president of marketing. "It’s a major slowdown."
Dan Wire, CEO of Treadways Corp., says his company is evaluating the situation "before making a decision to divert through other ports. It’s going to have a significant impact on us. A significant portion of our Sumitomo brand product comes through West Coast ports."
Nearly $300 billion of imports pass through West Coast ports each year. "If this thing goes on for any length of time, it will paralyze us," says Mike Leverington, marketing manager for Kumho Tire U.S.A. Inc. Kumho already has laid off some part-time warehouse employees.
The lock-out "is a big concern for us," says Nick Hodel, CEO of Northwest Tire Factory LLC, which distributes tires to more than 160 member-dealers in 10 western states.
Northwest Tire Factory’s office and warehouse is located a half-mile down the street from Terminal Six in Portland, Ore. "It doesn’t do you any good to route (containers) somewhere else. If we dump them down south or east, we’d have to double our freight. We just can’t do that."
Playing catch-up when the situation is resolved will be an even bigger problem, according to Hodel. He says it will take a long time to get supply up to speed. "The lost sales are hard to measure."
Phil Wick, president of Prineville, Ore.-based Les Schwab Tire Centers, says the dealership is "all right so far, but if this doesn’t settle soon, we’ll be in trouble. We bring in lots of tires from Japan and Korea."
Les Schwab is the second largest independent tire store chain in North America with more than 240 outlets. It also distributes tires to more than 80 member-dealers.
"We can probably stretch another week. We have many lines we can move around. (But) we’re starting to get nervous," adds Wick.
"I’ve been trying to order tires from manufacturers," says Wade Helmle, operations manager for Tires Warehouse in Fountain Valley, Calif. "I can’t get any tires out of them.
"The containers I have coming directly to me are being redirected to Panama (and other places). I won’t see them for a long, long time. It’s going to hurt our sales and our business."