The Sydney Morning Herald 28 Nov 1998 http://www.smh.com.au/news/9811/28/text/features6.html WATERFRONT REFORM Corrigan 1, the rest 0 Date: 28/11/98 A year after the battle for labour reform on the waterfront began, Patrick Stevedores is reaping dividends from its investment in confrontation. HELEN TRINCA looks at how soon others can expect to share in the gains from increased productivity. THE Securities Institute runs two kinds of lunches - the full sit-down service for big-name guests and a minimalist buffet known as a corporate briefing. Chris Corrigan got the latter this week. The Patrick chief executive noted the difference as he opened his address at The Regent but stressed he was quite happy with his feed. Given the strength of Corrigan's share price, some in the audience looked as if they were prepared to give him the star treatment. A year after the bizarre scheme to train an alternative labour force in Dubai was revealed to a bemused public, Corrigan is winning approving nods from the market. At the height of the dispute, when it was known he had fudged his role in Dubai and later as he sent the dogs onto the wharves and his corporate restructuring was revealed, business got a little sniffy about his tough tactics and crash-through approach. But the market loves a winner - and a year after it all began, Corrigan is clearly a winner from the character-testing dispute on the wharves. The wash-up from the reform imbroglio that involved the Federal Government, Patrick and the farmers-backed PCS Pty Ltd in an interlocking scheme to batter, if not bust, the Maritime Union of Australia is this: Corrigan has increased his paper wealth by more than $8million as shares in the Patrick holding company, Lang Corporation, closed last night at $3.48 - $2 higher than at the start of the year. He has cut his permanent labour force and costs in half although he is now using more casuals and is also paying labour hire companies to do some work previously done by full-timers. He has won a contract off his rival P&O which, combined with market growth over the past year, adds about 20per cent to his volume of business. The crane rates at his Melbourne East Swanston dock have improved from an average of 19 boxes an hour to 26. As Paul Houlihan, the PCS director, who helped train an alternative workforce, says: "We didn't win, the Commonwealth didn't achieve what they wanted to achieve [the end of the union closed shop], but Corrigan won big time." Houlihan also says the country won - with "almost unimaginable" change on the docks. But the jury is still out on that one within the shipping industry in the absence of any cuts to stevedoring or export costs so far. However, there are hopes the new system will improve ship turnaround times at terminals if productivity is sustained. Just a few weeks into the new working arrangements - annualised salary and a bonus based on loading and unloading speed - none of Corrigan's figures have been independently tested, but he is using them to good effect as he tries to win market share from P&O Ports, which has been left behind in the race to cut jobs and labour costs. Corrigan is not offering any price cuts - the prize that the Federal Government held out when it asked the public to support job losses on the docks, not just morally but also by putting up the money for the redundancies as guaranteed loans. In fact, some shipping lines are likely to roll over contracts that fall due in the next few months, waiting till P&O has a new enterprise deal in place - say by March - so the stevedoring duopoly can be played off against itself. Thus Corrigan has six months or so during which it seems everyone is happy to see him rewarded for spending an estimated $50million to $60million on security, legal and replacement labour bills to cut his labour force. Patrick's extra contract - the 20per cent growth in business represented by pulling an AAA contract from P&O - was won without any real change in costs and Corrigan argues that the increased cash flow to his company will be sustained because most of his contracts are locked up for one to four years. In response to a written question from the Herald citing industry claims that in fact some Patrick contracts come up before that time, he said the company did not have any contracts maturing in the next six months. Llew Russell, chief executive officer of Liner Shipping Services, says the big conference lines he represents will be looking to "share some of the windfall" eventually, although he stresses that reliability, consistency and sustainability at terminals are even more important than price. Russell says it is still too early to say whether all those things are achievable: "It is obvious that Lang Corporation and Patrick came out quite well and got rewarded, but the big issue is sustainability ... We are very hopeful that there has been long-term reform." Australian stevedoring charges are relatively competitive, although the shipping lines want to see them come down. But the real bonus would be reliability of ship turnaround so that schedules can be streamlined. Corrigan told the Securities Institute that a Singapore operator was considering whether he could cut his fleet from five to four ships and still deliver a weekly service - on the back of improved productivity. He says this is feasible if consistent performance can be achieved at all ports. Saving a ship - or even a voyage - means millions of dollars to the shipping lines, but Russell says such a change is not really possible unless we sort out our internal rail and road transport links. Houlihan argues Corrigan is entitled to a bit of a free run for a while: "Everyone wants to see the charges start falling, but in fairness to Corrigan he did invest a tad of money to achieve that result and in my view he is entitled to recoup a bit of it." The National Farmers' Federation, too, will give the docks time to settle before it starts pressing for lower charges. The Federal Government seems unperturbed. Asked to respond to the issue, the office of the Minister for Transport, John Anderson, faxed a press release issued this week which called on other stevedores to follow the Patrick reform route but did not address the question of charges. Brokers such as ABN-AMRO's Julian Mulcahy who have analysed the Lang Corporation stock have relied largely on the cuts to labour costs, based on numbers cited publicly by Corrigan, and his statements about improved worker productivity and attitude. Two weeks ago, Corrigan told a Sydney dinner his workers had moved 42 boxes an hour, but this week he did not mention the figure and was concentrating on an average rate of 26, although he also claimed workers were getting 30 to 35 boxes an hour on a regular basis. Not only more cautious but a touch more open about the rates, he told the audience that to some extent the Federal Government had "plucked the figure out of the air" when it began pushing for a benchmark of 25 crane moves an hour on the docks. Focusing on crane rates made it easy for the public during the dispute but, as Russell says, they are not the crucial issue in the efficiency of the terminals: that has a lot to do with the whole transport chain, not just unloading. "Crane rates are a bit ridiculous," he says. "You can do 40 moves an hour and still have congestion on the docks because you have not sorted out the logistics of your interface with transport operators." Crane rates are important "but they are only a small indicator of terminal efficiency". Official government figures will not be available until next month - although they are likely to coincide, as the companies provide the information. The cuts to the Patrick labour bill are clearly significant - the permanent full-time staff of about 1,300 has been halved. However, the company is using more casuals than in the past and employs about 200 staff, from managers down to cleaners, through outsourcing arrangements. Lang Corporation is still carrying debt of about $220million, which Corrigan says is a "bit too high" and which he will start cutting back with what he argues is a "dramatically" improved cash flow. The waterfront exercise is believed to have cost him up to $60million. He has cited abnormal losses of $39million for the nine months to June 30 - when he was still in dispute with the MUA - and the full picture of how Lang is travelling will emerge when the company's audited preliminary final report is lodged in the week commencing December 7. But Lang's rising share price - at this stage the really solid proof that his strategy paid off - does not necessarily translate to a loss for the MUA. The union had a very tough week, with its national council meeting in Sydney revealing tensions between the Federal and State layers of leadership. But the union is still standing, having decided to maintain the closed shop at any price. It now has 8,305 members spread across ships as well as the wharves. The dispute increased the power of the Federal office as John Coombs and the ACTU assistant secretary, Greg Combet, were given power to sort out the mother of all disputes. Now the States - or at least NSW under deputy secretary Jim Donovan - want to pull back some control. NSW has always been a militant branch and is re-emerging in that guise as negotiation begins on the P&O agreement. But despite the argie bargie, the union has little choice but to deliver similar redundancies and productivity gains to P&O. Apart from anything else, it is skilled at playing off the duopoly and will resile from handing Patrick a free kick in terms of market dominance versus P&O. Combet gets angry at the idea that because Corrigan and his shareholders are winners, the MUA and its members are losers. "In relation to all of these things - share price and productivity - that is good," he says. "We want the agreement to work. Why is it interpreted that we would consider that to be bad? John Coombs and I made a conscious, deliberate decision to negotiate a settlement. We had the option of continuing to litigate [through the Federal Court conspiracy case against Corrigan and the Federal Government] and the one consequence of that would have been the collapse of Lang Corp. "The alternative was to negotiate a settlement and we obviously committed ourselves to getting Patrick on track and improving productivity. We see no defeat in the share price going up; I see job security in that." The big loss for the union was to agree to 626 redundancies. But in fact the payout was so attractive that another 87 MUA people have taken redundancy. Patrick paid redundancy to all 108 of its supervisors who belonged to the Australian Maritime Officers Union - and re-employed about half of them as a new category of shift managers through an arm of Morgan and Banks. Patrick says that "quite a number of new shift managers" have been employed directly and are in training, but meanwhile "Morgan and Banks are supplying us with suitably qualified personnel on a temporary basis as required". Stevedore productivity is only part of it What happens on the docks is just part of a larger transport system. THE unofficial "go slow" by the maritime union at Port Botany is over, but the terminals are still operating far less efficiently than those in Melbourne. The wharfies were blamed for several weeks for long delays and cargo congestion at the Patrick and P&O terminals as the militant NSW branch of the Maritime Union of Australia resisted changes to manning levels at both companies. While the problems have diminished, it is understood that stevedoring performance is up and down, although terminal users report an overall return to normal. But there are two longer-term problems: there has been little improvement in crane rates at Patrick despite the new agreement; and the rest of the transport chain is still highly inefficient. Truck turnaround times in Sydney are at least double and sometimes three or four times the average rates in Melbourne thanks to the lack of an efficient vehicle booking system, the longer delivery distances in Sydney and the fragmentation and lack of co-ordination of the truck fleet. Sydney has always been a difficult port, with the transport interface problems exacerbated by a militant workforce; the new Patrick deal was resisted by the NSW branch. There was similar resistance at the P&O terminal, where manning changes were introduced. P&O is still to negotiate an agreement with the MUA and at least some of the "go slow" is pre-bargaining jockeying. During the "go slow", truck turnaround times at Port Botany spun out from about one hour to several hours, and truck operators' costs soared by about 30per cent. Now P&O says its truck turnaround times in recent days have been between 48 and 100 minutes. This compares with an average of about 23 minutes in Melbourne - where P&O has been a better performer than Patrick for years. HELEN TRINCA This material is subject to copyright and any unauthorised use, copying or mirroring is prohibited. ************************************************************************* This posting is provided to the individual members of this group without permission from the copyright owner for purposes of criticism, comment, scholarship and research under the "fair use" provisions of the Federal copyright laws and it may not be distributed further without permission of the copyright owner, except for "fair use." 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