Matson’s cuts
stun businesses
The 25 percent reduction
By Peter Wagner
in isle service is expected
to raise costs here
Star-BulletinThe news hit like a sledgehammer.
"It's just another dagger in the heart of Hawaii's economy," said Laurence Vogel, president of Honolulu food importer Y Hata & Co.
Many in Hawaii's business community yesterday were stunned to hear that Matson Navigation Co. plans a 25 percent reduction in West Coast service to Hawaii next month. Effective Aug. 12, the four Matson ship arrivals in Hawaii each week will be cut to three.
The change was announced as a cost-cutting measure in response to the state's weak economy and flagging demand for cargo.
But for Vogel, whose company brings in $50 million worth of hotel and restaurant food a year, fewer ships will make it harder to keep customers happy.
"There is no business that works on a smaller margin than food distribution and this is just another blow," he said.
But Matson, the state's biggest shipping company, said the adjustment is necessary because its vessels are operating at less than 70 percent capacity.
"We're resizing our fleet to support the market," said Bal Dreyfus, Matson vice president and area manager.
Dreyfus noted that Matson, anticipating a growing market in 1990, increased service from three ships a week to four.
"We basically had a fleet that was designed to support a larger market and a growing market," he said.
"But it's neither. It's a shrinking market and we needed to do something."
The plan is to take two of the eight ships currently serving Hawaii -- the Lurline and the Manukai -- out of service and lay off their crews, a total of 55 employees. Dreyfus said the two vessels will be "parked" indefinitely on the West Coast until market demands increase.
But while the less-frequent service won't limit the total volume of goods being shipped, it could raise the cost of doing business in Hawaii, some companies say.
Joe Azzaro, owner of H&W Foods and Palama Meat, said fewer shipments will force him to keep a bigger inventory on hand -- a costly outlay.
"Carrying more inventory in these economic times is an added expense and it's not a good thing," Azzaro said. "This is not helpful to our business, particularly in our business dealing with fresh meat."
Matson, a subsidiary of Alexander & Baldwin Inc., points to a 26 percent decrease in operating profits in the second quarter of this year and a 7 percent drop in container volume.
The company, serving Hawaii for 116 years, blames Hawaii's economy. But if Matson is scaling back, its competitor Sea-Land Service sees opportunity.
"It's entirely possible that more people are going to want to ship with Sea-Land because we're not reducing our level of capacity and our competitor is," said Jack Sutherland, vice president and regional manager.
Sea-Land has no plans to change its current service of two vessels a week from the West Coast.
"I think there's an opportunity for Sea-Land to pick up some additional market share . . . ," Sutherland said.
Meanwhile, Matson also plans a 5 percent increase in tariffs on some goods -- wood products from the Pacific Northwest and selected food products and general merchandise.
The hikes don't amount to an across-the-board general rate increase, Matson says, but that's no comfort for Vogel.
"We're all struggling in this state against very great odds and for Matson to raise their rates is inconsiderate of the big picture," he said. "It's a double-whammy."
