Yards Delay Deliveries
As Ship Orders Sink

‘Pay-to-Play’ Scheme Embroils FedEx, UPS

 

AFTER TRYING FOR months to stave off the impact of the downturn on ship construction, ocean carriers and shipyards are giving in to reality. Shipyards are delaying deliveries on hundreds of large container ships as carriers struggle with burgeoning capacity and plunging demand. Paris-based ship broker and consultant AXS-Alphaliner reported last week 1.8 million TEUs of capacity — about one-third of all ships under construction or on order — will be delivered late. In some cases, carriers and charter owners have persuaded shipyards to delay delivery up to t wo years, AXS-Alphaliner said. Owners have been less successful in getting shipyards to cancel orders outright. As of last week, 170,000 TEUs of contracts had been terminated, including 150,000 TEUs since the market began to tank last October. The deferrals and cancellations already have pushed at least 340,000 TEUs of new ships originally due for delivery this year into subsequent years. There have been no new contracts for container ships since September 2008, the first time no orders have been placed for three consecutive quarters since deals were first recorded in 1965.

A LETTER SENT recently from an array of conservative groups criticizing FedEx over the carrier’s battle with UPS over labor law was filled with that Washington standby of strange political bedfellows. After all, in taking UPS’s side, the groups including the American Conservative Union were taking sides with the Teamsters union and supporting a measure that would make one of the country’s most recognized nonunion companies an easier target for labor organizers. Then FedEx released an earlier letter from the ACU that seemed to make things a lot clearer. The ACU in the letter asked FedEx for more than $2 million in exchange for the group’s backing in the legislative battle with UPS. (See the letter at http://www.joc. com/joc_inc/pdf/FedEx_grassroots_pro- posal_6-30-09.pdf). When FedEx didn’t respond to the offer, Washington-based publication Politico reported the ACU endorsed UPS and its call for Congress to change the way FedEx is covered under federal labor law. The letter, to some a window on the money-drenched workings of lobbying in the nation’s capital, said the ACU would offer “op-eds and articles written by the ACU’s Chairman David Keene and/or other members of the

ACU’s board of directors” in exchange for the donation. UPS denied the backing came for cash. “We’ve not paid or contracted with any signer of that letter for support on this issue,” said spokesman Malcolm Berkley. But UPS, through its charitable foundation, has been giving at least $50,000 a year in recent years to a foundation of Americans for Tax Reform, one of the groups that took its side against FedEx. UPS said it funds groups because it believes in “fostering a dialogue” in the Capitol, and the latest revelations did turn into the talk of the town.

Atlantic, Pacific Rates
on the Rise

OCEAN CARRIERS, ENCOURAGED by an uptick in seasonal cargo after months of recession-driven declines in volume and rates, are announcing a parade of price increases on major U.S. trade lanes. A week after the Transpacific Stabilization Agreement, the discussion group of 14 carriers in the eastbound trans-Pacific, stunned the container shipping world when it advised its 14 members to seek 50 percent increases in just-signed contract rates, Yang Ming said it would implement increases of $400 per 20-foot container, $500 per 40-footer, $563 per 40-foot high-cube and $663 per 45-foot container, effective Aug. 10. “The 2009-10 contracts were negotiated in the midst of a severely depressed economy under tremendous competitive pressure,” Yang Ming said in announcing the hikes. “As a result, the prevailing unsustainable rate level will lead to fewer lines operating at reduced ser-

vice levels. A (general rate increase) at this time is critical to the supply chain sustain-ability and reliability of the trade.” On the trans-Atlantic, South Korea’s Hanjin Shipping and Germany’s Hapag-Lloyd joined the “rate-restoration” effort. Hanjin said it would increase rates on all shipments in both directions by $150 per TEU and $225 per FEU, effective Aug. 15. Hapag-Lloyd’s hikes were steeper: $400 per TEU and $500 per FEU, effective Aug. 1.

Zollars to Hoffa: ‘I Apologize’

WILLIAM D. ZOLLARS, chairman, president and CEO of YRC Worldwide, apologized not once but twice to Teamsters General President James P. Hoffa and union employees. He first said sorry after the Kansas City Business Journal reported Zollars as saying YRC’s nonunion workers probably won’t take further cuts in pay proposed for union workers. “YRC is committed to the principle of ‘equal sac-

rifice’ and will require that our nonunion employees take as much, if not more, cuts in wages and benefits as provided by our union employees,” Zollars wrote in a July 21 letter to Hoffa and YRC employees. The company’s union workers are voting on a proposed 15 percent wage cut and 18-month blackout on pension contributions. Zollars then apologized for a suggestion on the FAQ section of YRC’s Web site that savings from the wage and benefit cuts would be passed on to shippers. “The intent of the cost savings is to provide the companies with sufficient operating cash to survive the worst economic recession in recent history.” Meanwhile, the Teamsters Central States pension plan last week terminated YRC’s participation in its fund. That was good news for the company: If YRC had tried to withdraw from the fund, it could have faced severe penalties. The move won’t affect employee pension benefits accrued before July 9.