Thursday, January 28, 1999

Matson seeking
contract gains

Labor costs have cut into
the company's bottom line

By Russ Lynch


Matson Navigation Co., coming off yet another slow year, needs to win some concessions from its unionized waterfront workers in contract negotiations later this year, says the shipping line's president.

C. Bradley Mulholland yesterday said productivity has slipped on the docks while stevedore earnings have soared. Base wages aren't the problem, he said. Instead, it has been overtime and other extras that have pushed worker earnings way above the wage rates.

Labor costs are a vital part of Matson's bottom line, Mulholland said at Matson's annual briefing for the Hawaii media yesterday.

The separate ILWU contracts on the West Coast and in Hawaii expire July 1.

Mulholland said overall productivity on the West Coast docks has fallen by more than 11 percent since 1996 while the average earnings among ILWU members there have risen 38 percent.

"While this situation has negatively impacted all carriers doing business on the West Coast, it has been especially frustrating for Matson, given the challenges we face with our Hawaii service," he said.

"Even during good times, the double-digit rises in longshore earnings would be troublesome," he said. "However, as we enter what will likely be the ninth consecutive year of virtually no economic growth in Hawaii, these costs are particularly difficult to absorb."

Officials at the International Longshore & Warehouse Union headquarters in San Francisco said Matson was quoting figures that unfairly favor the shipping companies.

ILWU's international president, Brian McWilliams, has said the companies are using a "productivity lie" because they switched last year to counting tonnage rather than the number of containers moved. In a recent column for an ILWU newspaper, McWilliams wrote that because of the Asian economic crisis, many containers are returning there empty and tonnage has dropped, but it takes the same time and manpower to move an empty container as a full one.

Mulholland used West Coast productivity figures from management's bargaining representative, the Pacific Maritime Association. The PMA counts all West Coast cargo, of which Matson's Hawaii shipments make up a small part.

Matson, the main subsidiary of Honolulu-based Alexander & Baldwin Inc., has done a lot to cut costs already and its 1999 performance is expected to be "materially better" than 1998's, he said.

The shipping line has taken two ships out of its West Coast-Hawaii fleet, now running six ships, he said. That will save the company more than $10 million a year. The eight ships in 1998 ran at an average 75 percent capacity, Mulholland said. The six ships this year are running 80-to-90 percent full.

Matson also will put a 2.5 percent rate increase into effect in its Hawaii service Feb. 14, its first increase in two years.

In a series of slides, Mulholland showed just how directly and dramatically the slump in Hawaii's economy has affected Matson. In 1990, Matson hauled close to 180,000 containers in its Hawaii service.

Last year, the number was just over 140,000. The loss of 33,000 container loads at around $2,000 per container means a loss of $66 million in annual revenues, Mulholland said.

Last year Matson carried 74,000 automobiles, down from 142,000 in 1991. At around $650 per car, that means a loss of $44 million in annual revenues, he said.

The company's revenues are therefore down by more than $100 million from the peak 1990-91 period and Mulholland said it is almost impossible to cut that much off costs to make up for the lost business.

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