30 March 2012

Port Update

The latest twist in this long saga is that the Port will allow the strikers to return to work next week and continue to go through a mediation process for a few more weeks, until the middle of May.

The Union has not made any public commitment to abandon its wish to keep restrictive work practises and the Port has not abandoned the intention to move to the competitive model used by efficient ports.

There are three scenarios for importers to consider:

1. Shipping companies may not be interested in returning to Auckland until they have assurances that their ships will not be delayed by more industrial action. We expect that they will hold off for a while before making firm commitments.

2. The Union may come to its senses under pressure from political supporters and its own members (who have now lost more than one month’s wages) and agree to the conditions offered earlier by the Port. If that happens, the Port’s plans to move to a competitive model may go on hold for a while and normal service could be resumed.

3. On the other hand, the Union could well continue to do what it does best, which is to push ahead with strikes and hope for support from sympathetic politicians (this Government’s inaction is pretty much a given). If that happens, by mid-May we will be precisely where we are now.

Our main concern is that, after four weeks on strike, other ports in New Zealand are coming to their cargo handling limits, as is our sub-standard road and rail infrastructure. We are perilously close to ships bypassing New Zealand altogether.

Within the next week or two, we expect to have more clarity. We will need to keep an eye on which ships will come back to Auckland. The best source for that information is here.

10 March 2012

Port of Auckland - Background

The Maritime Union drove a group of its members to redundancy and appears determined to continue the heroic struggle to preserve work practises that the rest of us left behind in the Seventies. How did it come to this?

The Productivity Commission is conducting an in-depth review of the transport sector. Their report noted, “New Zealand’s transport and storage industry experienced strong productivity growth in the 1990s, but virtually no productivity growth in the 2000s.” That’s the problem with lost decades. They come with hefty bills.

Back in 2005, Ports of Auckland was majority-owned by the Auckland Regional Council. The elected chairman of that body at the time, Mike Lee, justified a decision to buy out the private shareholders by saying, ”The Ports of Auckland will be a prized legacy for future generations and the wealth generated will be vital for funding Auckland’s infrastructure for years to come.”

This is what actually happened: the cost of buying out the 20% then owned by other shareholders was $170 million; that transaction effectively valued the whole company at $850 million; but the book value of the company shown in the Auckland Council transition documents in 2010 was just $394 million.

Even after allowing for inflation and differences in valuation methods, $456 million is an awful lot of money to disappear in just five years. We probably haven’t seen destruction of shareholders’ wealth on this scale since Hugh Fletcher. Mr Lee’s vision of the port as a cash cow to fund local government projects appears to have turned very sour, very quickly.

The Productivity Commission seems to understand only too well where the problem lies: “Publicly-owned organisations are also, in effect, spending other [people's] money [and] are not well placed or sufficiently incentivised to monitor performance of such investments.” The Commission went on to say, “To manage conflicts of interest, elected representatives and council staff should be precluded from being a director of port and airport companies.”

The main issue is that ports are an important part of our infrastructure and we can't afford the risk of having their management overseen by local body politicians and town clerks. The Commission said, "To improve the efficiency of ports, councils should consider increasing the degree of private ownership in them. Councils should evaluate whether they can still achieve important community aims with lower ownership stakes." Perhaps, just perhaps, had Auckland had not made the decision to go for 100% ownership in 2005, we would not now be in this predicament.

The Productivity Commission also understands very well the origins of the archaic work practises that the Union is fighting to retain, and management to overcome: "Many of these work practices stem from past management decisions that were pragmatic and relevant to the working of ports before the advent of widespread containerisation and bulk material handling." In the Seventies, that was.

07 March 2012

Importers Support Port Decision

The Importers Institute supports the decision of Ports of Auckland to outsource stevedoring services. This decision means that about 300 Maritime Union members will be made redundant. Some of them will get jobs with the new contractors, others will move their heavy machinery driving skills to Australian mines and a few will have lots of time to reflect on the consequences of mindless militancy.

This dispute was never about terms and conditions. When the workers demand 2% and the bosses counter by offering 10%, to which the workers respond by going on strike, you could be excused for thinking this was a scene from The Life of Brian. No, the dispute was always about who runs the port. Was it to be management acting for the owners (the City) or the Union?

Importers have already had to bear enormous costs trying to cope with the effects of the strikes. They have had to, at their cost, move containers discharged at other ports around the country. Shipments have been diverted to airfreight. Consumers will ultimately pay for these significant costs, in the form of higher prices.

There will be a period of disruption for several more weeks, until the new contractors are up and running. We expect the Union to try to be as disruptive as possible. Expect to see the 'Occupy Auckland' hippies morph into 'Occupy the Port' protestors. The Maritime Union has not hesitated to deliberately engage in illegal sympathy strikes in Tauranga and Wellington. They cynically forced those ports to go to Court to obtain injunctions before going back to work. All this was taking place as the Union was announcing yet another illegal strike in Christchurch.

This dispute has been prolonged by the absurd requirements for lengthy periods of formal consultations. These requirements are part of the 'good faith' fiction enacted by Margaret Wilson of the last Labour Government. We say it is a fiction, because the Union has never displayed even a trace of good faith. They have lied about the average salaries (over $90,000) and made untrue claims about casualization. They responded to every proposal with a further notice of strike.

The current government does not see the need to amend the industrial legislation that it has inherited from Labour. Except when the victims are Wellington creative types, it seems. In fact, the only Labour excess that they have rectified in the last four years was to reintroduce Sirs and Dames (but not the Privy Council). Not good enough, Mr Key.