Among distributors, manufacturers and dealers of Asian tires and rubber goods, there were two schools of thought about the dock lockout that closed 29 West Coast ports for 11 days.
The first was that the lockout was a disaster. The second was that it wasn't a disaster yet, but promised to be very shortly. And everyone is well aware that a permanent solution to the work stoppage still isn't in sight.
On Oct. 8, President Bush invoked the Taft-Hartley Act to bring a temporary end to the lockout, the first time an American president has used this emergency power in nearly a quarter-century.
Working from the Justice Department's motion, Judge William H. Alsup of the San Francisco federal district court ordered striking longshoremen back to work beginning Oct. 9. Judge Alsup also ordered the dockworkers' union and the port owners to return to the negotiating table Oct. 16. On that day he also will rule on whether to impose the 80-day ``cooling off'' period under Taft-Hartley that would keep the ports open on an emergency basis.
The work stoppage cost U.S. business an estimated $2 billion daily. Meanwhile, port owners warned that although the work stoppage lasted only 11 days, it will take as long as six weeks to clear the backlog of more than 200 freighters to be unloaded at ports stretching from San Diego to Seattle.
For Andy Andonian, chairman of AKH/Discount Tire in Huntington Beach, Calif., the freighters can't be unloaded fast enough.
AKH/Discount Tire depends on Kumho tires from South Korea for a lot of its business, Mr. Andonian explained. ``Right now we have a 30- to 35-percent fill rate, which is a disaster,'' he said Oct. 8, just before Judge Alsup issued his back-to-work order.
``Right now we're just buying what we can from local distributors, but we're going to take a hit on our gross margins, because we can only sell what we've got,'' Mr. Andonian said.
Two other companies that reported major problems stemming from the lockout were two U.S. operations of Japanese tire makers: Toyo Tire (U.S.A.) Corp., of Cypress, Calif., and Rancho Cucamonga, Calif.-based Falken Tire Corp., the U.S. subsidiary of Ohtsu Tire & Rubber Co.
``This is affecting us pretty severely,'' said Earl Knoper, Toyo senior vice president of sales and marketing, in an Oct. 4 interview with Tire Business. ``We've probably got around 40 containers sitting on anchor right now and more on the way. We run on a just-in-time inventory, so we have a pretty quick impact when something like this happens.''
Richard Smallwood, Falken vice president of sales and marketing, said his firm was in much the same predicament, if slightly less dire.
``We're coming up on the winter season, which means it's a little slower for our ultra-high-performance line,'' Mr. Smallwood said. ``If this happened in the spring, it would have been much worse for us.''
Some tire dealers reported lesser problems, such as Tire Guys, the Billings, Mont.-based dealer and retreader chain with 25 Tire Rama stores in the state.
That dealership carries Toyo and Yokohama tires, but Tire Rama stores buy Toyo tires through a distributor. Supplies from Yokohama Tire Corp. as of Oct. 8 had been ``Ok,'' said Tire Guys CEO Chuck Patrick.
``In the next few days, though, we could have some problems,'' he said. ``Also, we do buy casings from Japan, and we have a lot of casings waiting to be unloaded.
``We're just at the point now where the lockout is going to cause some trouble for us.''
The dock impass was definitely a problem for the non-tire auto sector, as symbolized by the forced closure of NUMMI, the General Motors-Toyota joint venture in Oakland, Calif. Toyota, Ford, Nissan and Hyundai were among the auto makers that started to use air freight to ship parts to the U.S.
Freudenberg-NOK G.P., the Plymouth, Mich.-based auto parts maker, also decided to use air freight, according to Richard Allen, CEO of Freudenberg-NOK's auto sector.
``We waited to see if the lockout would end by the weekend,'' Mr. Allen said Oct. 8. ``When it didn't, we took a decision to expedite freight, both through air freight and different ports of entry.'' Vancouver was one of the alternate ports the company used, he added.
Freudenberg-NOK has eight U.S. plants, and some were down to 10 days' production inventory by the weekend of Oct. 5-6, Mr. Allen said, adding that the company freighted in between one and five days' supply at a time, based on specific needs. ``We leapfrogged some products straight from our Asian production facilities by air,'' he said.
Air freight is expensive, but it's still cheaper than closing down a plant, noted David Cole, director for the Center of Automotive Research at Altarum International.
``The auto industry has been impacted, but it's selective,'' Mr. Cole said. ``Everybody gets some parts from Japan, but most of them are high-technology parts that are air-freighted anyway. When you get to engine parts, air freight gets expensive.''
If the labor dispute between dockworkers and port owners isn't resolved soon, it will be a real problem for every aspect of the auto industry, according to Mr. Cole. ``You would rather see them come to a settlement than see the government intervene,'' he told Tire Business Oct. 7. ``It always creates a problem if they have to invoke Taft-Hartley.''
Indeed, if there's no permanent resolution soon, companies such as Toyo and Falken will be faced with very limited options.
``We can't go to Mexican or Canadian ports, because we don't have any customs or transportation arrangements there,'' Toyo's Mr. Knoper said. ``The only alternatives are to suspend shipping from Japan, or to put the tires through the Panama Canal to the East Coast. But going through the Panama Canal adds considerably to costs and a week to the shipping time, and there's no capacity for unloading or transporting the tires from East Coast ports.''
Mr. Smallwood said Falken's options were just as bleak. ``If this doesn't end by next week,'' he said Oct. 4, ``we're going to have to look at our options, and unfortunately, there's only one-the Panama Canal.''