I shook my head in pity when I looked at the Port of Long Beach over the last couple of years. Poor thing, I thought. It sure is getting hurt by its bigger neighbor, the Port of Los Angeles.
But last week, I started thinking exactly the opposite. The L.A. port is helping the Long Beach port. In fact, thanks to L.A.’s missteps, Long Beach might be able to sail right past Los Angeles and become the nation’s No. 1 port.
The reason I went full astern, nautically speaking, is because of recent events.
Notably, a couple of weeks ago, the Port of Los Angeles boosted to $205,000 the payments it can give to the well-connected lobbying firm headed by former Congressman Richard Gephardt to push for a change in federal law. That change would allow the L.A. port to do what it most wants: upend the longstanding system that relies on independent and contract truck drivers (the ones who pick up and deliver cargo containers at the port) and replace it with a system in which drivers would be employees of big companies. That way, the employee drivers could be unionized by the Teamsters. The Teamsters, by the way, helped Mayor Antonio Villaraigosa, a former union organizer, craft the employee-driver rule.
And if the drivers become unionized, it will raise costs for trucking firms by 50 percent, according to one trucking group. Such an increase would amount to about $100 per shipping container.
Now, consider the other big event at the port complex. The Port of Long Beach last week settled a lawsuit with the American Trucking Association. The issues had to do with safety and procedural matters with the trucks that serve the port, but the point is that Long Beach sent a signal that it is willing to work with its customers – a signal that wasn’t lost on them.
“It’s a very smart thing,” said Mike Fox of Fox Transportation, a trucking firm that serves both ports. Long Beach’s decision to settle, in essence, tells shipping lines and truckers that it intends to be the low-cost provider, he added.
So you’ve got Los Angeles sending the signal that it wants to be the high-cost provider and Long Beach sending the signal it wants to be the low-cost provider. So it stands to reason that ships, looking to cut costs wherever they can, will bypass Los Angeles and sail into to Long Beach as sure as you would drive past a filling station to get to the one next door that’s selling gas for 50 cents a gallon less.
In other words, the two ports are diverging in the eyes of the customers. That’s a change. Up to now, shippers thought of the two ports as pretty much the same. And the fear used to be that if Los Angeles scared off customers, they may bypass the South Bay altogether and dock in another city. Instead, that other city could be Long Beach.
So long as Long Beach effectively markets itself as the low-cost alternative – and doesn’t do anything to mess up its price advantage – it could come out ahead. In fact, if it captures 10 percent of the containers going through Los Angeles, Long Beach could capture L.A.’s title as America’s biggest port.
There’s irony here, of course. That which you think will hurt you may, in fact, help you.