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Port of LA Exec: ‘It’s going to be a fight’ to get cargo volume back amid labor negotiations

Gene Seroka, Executive Director Port of LA, joins Yahoo Finance Live to discuss West Coast cargo volume, supply chains, labor contract negotiations, and shipping delays.

Video Transcript

AKIKO FUJITA: Well, Rachelle, let's now turn to a look at how potential rail disruption will hit the US economy. As mentioned, a potential strike could cost more than $2 billion a day. This according to a report from the Association of American Railroads, disrupting last minute orders just in time for operations-- for holiday season peaks. Here with the insight into the logistics impact, we've got Gene Seroka, executive director of the Port of LA with me here in studio. Let's start with that number, Gene. Good to have you in studio, by the way, I should say.

GENE SEROKA: Oh, it's great to be back, Akiko.

AKIKO FUJITA: $2 billion. I mean, that's a pretty significant number. You say that it could be even higher.

GENE SEROKA: Yeah, I think that's probably a soft estimate. Nonetheless, the focus is on trying to get this deal done. The impact of rail across the nation is so great. 28% of all the cargo moving goes on those trains.

AKIKO FUJITA: And what's the impact directly to the port right now? Because you've already been dealing with a bit of a pullback in cargo. We'll get to those negotiations in just a bit. But when you're looking at what's playing out on the rail side, what are you bracing for?

GENE SEROKA: 2/3 of all the cargo that leaves California from the twin ports goes by rail. There's no contingency plan that can make up for that.

AKIKO FUJITA: So significant disruption.

GENE SEROKA: Unbelievably significant. But again, as we've been working through the past months in the negotiations, the highest level in our federal government from the president to US Secretary of Labor, Marty Walsh, and now Congress acting here very soon, I think a strike can be averted, but we cannot dismiss the importance of these items to labor, who've been working so hard throughout the pandemic.

AKIKO FUJITA: Let's talk about what you've been dealing with over at the port. Dockworkers have been working without a contract since July 1. I know every time we've spoken, you've been pretty confident that this can be resolved. Your most recent comments, you said you think a contract could be in place by February. What leads you to that optimism?

GENE SEROKA: That's our next window. It's not going to be done before the end of this year. And please remember, collective bargaining is hard. And in our case, this is a coastwide agreement stretching from the state of Washington down to San Diego, with 29 ports that also have their own unique local contracts. Getting those in line, along with the broader policies and framework, takes a lot of time and effort. But we've got really sophisticated negotiators on both sides.

I think we come out of the holidays. We go into the beginning of the year. Cargo has dropped precipitously because importers, exporters tried to stay away in the unlikely event of disruption.

AKIKO FUJITA: So let's talk about that number, a roughly 25% drop in October in terms of cargo volume. A lot of that has been diverted to the East Coast. We saw in New York, New Jersey, they have been the big beneficiaries on the back of it. Even if this is resolved, there are questions about how much of that you can get back. How do you do it?

GENE SEROKA: Oh, it's going to be a fight. It really is. 25% of the cargo has moved over the last three months. I attribute about 20% of that due to the handwringing of folks that thought there would be labor disruption here, even though both sides, labor and management, put out two jointly signed press releases saying we will not lock out and we won't strike. Yet, the market didn't want to get into the teeth of congestion for a third consecutive year and became very conservative.

I think going forward, I've been crisscrossing the country. I'll be in Chicago tomorrow and New York next week, once again, giving the ground truth to our constituencies and our customers and sharing with them how important it is to come back to the nation's largest gateway.

AKIKO FUJITA: You've always got a good pulse on what's happening in China. We have seen the protests that have been happening. We've seen the uptick in cases. This is a bit different than what played out in the spring because we're talking about a larger region that's being affected, more exports that could potentially be affected. What's the impact to the Port of LA, as you see it?

GENE SEROKA: I don't see a really big impact at this point because the central government and the ports have really focused on their long leg cargo that comes here to Southern California. My friend Yang Jun, who runs the Shanghai Yangshan Deep Seaport, has been working around the clock to do just that now for the better part of 2 and 1/2 years.

But every day we see something that impacts the supply chain, from sub assembly to transportation and manufacturing. And it has to be said that these families have felt pressure all along during these years, whether it's education for their kids, going to work, simply going to the grocery store. So we're really-- our thoughts and prayers are with these folks. But the supply chain seems to be OK. Yet, there are examples, like the iPhone 14s at the plant in Xinjiang, that are not going to move as quickly as we would like coming up on the all-important holiday season.

AKIKO FUJITA: Really quickly, we've hit on a number of issues, whether it's China, the negotiations happening on the rail side, negotiations with the dock workers. There's a lot of people watching at home saying, well, this is kind of a busy time with the holiday season. Obviously, you got a lot of shipments in, in the fall. But what's going to be the impact do you think consumers should be looking out for?

GENE SEROKA: Yeah, I think you're going to have some pretty decent deals out there. There is discounting on inventory to try to push some of that older product out that's been sitting in warehouses for some time. The early take on Black Friday, Cyber Monday looked to be very encouraging. Foot traffic was good. So was click traffic, as well as sales. Now those numbers will mature over the next couple of days and weeks. I like what we're seeing so far. You're going to have options, choice, and availability for the American consumer.

AKIKO FUJITA: But no delay coming from the port.

GENE SEROKA: Not at all. That delay is effectively gone back in August, and we're ramping up to bring more cargo here to LA.

AKIKO FUJITA: OK, I know you're keeping your fingers crossed for the resolution in February. Gene, good to have you on today. Gene Seroka, executive director of the Port of LA joining me here.