Unions agree to make concessions to Horizon

Unions agree to make concessions to Horizon    Leaders of the two unions representing deck and engine room officers say they have agreed to make an offer of “contractual relief” to Horizon Lines.
   A memo to union members signed by Tim Brown and Mike Jewell, presidents of the Masters, Mates and Pilots and Marine Engineers Beneficial Association, respectively, and other union officials say the offer was extended after being “approached on numerous occasions by senior Horizon Lines management seeking contract concessions.”
   Details of the concession were not immediately available, but the memo said it would be “based on Horizon's agreement to protect the future employment of MEBA and MM&P members and to ensure that senior management of Horizon Lines assumes a fair share of the burden.”
   “If an agreement with Horizon is reached, it will take effect on March 1, 2011, and each union will contribute an equal dollar amount in total contractual relief. Shipboard parity on basic wage and overtime rates is expected to remain intact,” the memo stated. It added that the Seafarers International Union, which represents unlicensed seafarers on Horizon ships, “agreed last summer to defer a 4 percent wage increase.”
   A spokesman for Horizon provided a brief statement: “The company previously has stated that it is seeking to refinance its debt in a timely manner and has been in discussions for several months with organized labor to address costs in light of the recent, unprecedented global recession.”

Brown

   The memo from Brown and Jewel said, “There is widespread recognition of the fact that shipboard labor is in no way responsible for the financial hardship that Horizon Lines is currently facing. Contributing factors are the ongoing financial burden of the Puerto Rico antitrust litigation, high financing and debt service costs, the bad economy and the loss of revenue on certain trade routes. Collectively, these factors have created a situation in which it is incumbent upon us to take immediate steps.

Jewell

   “We have now determined that it is imperative that the MM&P and MEBA extend some contractual relief. This is based on recently acquired knowledge of the need for prompt action, knowledge that derives both from public financial statements required by federal law and from the results of a professional confidential audit commissioned by MEBA and MM&P,” the memo said.
   George Pickral, an analyst who follows Horizon for the investment firm Stephens, told American Shipper the concessions might be helpful, “but what we don’t know are all the background details as to why they are doing this.”
   Pickral also said Horizon’s new service from China to the United States, which began up in December, could also benefit the company.
   Horizon is due to release its year end earnings on March 3. When it reported its third quarter results in October, the company said it was “upbeat about the contribution China and Guam (where the military is expanding) will make” in 2011.
   Horizon’s stock closed at $5.12 per share on Friday, down 5.9 percent for the day. It has traded in the past year at $3.53 to $6.09. Back in 2007, it traded for much of the year for more than $30 a share.
   Horizon is one of several shipping companies that were part of an investigation of price-fixing in the Puerto Rico trade that led in 2009 to five executives — three from Horizon and two from Sea Star — being given prison sentences and fines for either being involved in what the U.S. Justice Department described as an antitrust conspiracy involving goods moving between the U.S. mainland and Puerto Rico or obstructing the investigation.
   “The reason the stock is so beaten down is that we are waiting for a DOJ fine,” Pickral said. “And my personal opinion is that if the DOJ was going to issue a fine so large that it would cripple the company or put it out of business, it would have already happened. I think there will be a positive resolution to it, but until it happens, I understand it is not going to get any sort of average or premium valuation.”
   Meanwhile, a U.S. District Court judge in Puerto Rico has given Horizon, Sea Star and Crowley, until March 1 to decide whether they want to go forward with a $52 million settlement of a class action lawsuit brought by shippers who claimed they paid more for moving goods between the mainland and Puerto Rico than they would otherwise would have in 2002-2008 because of alleged unlawful conduct.
   Settling defendants Horizon Lines, Crowley Maritime and Sea Star Line denied the overcharge allegations, but according to the notice announcing the class action settlement last year “agreed to the settlements to avoid the cost and risk of a trial, and so that those allegedly affected can get benefits.” Last April, a fourth Puerto Rico carrier, Trailer Bridge, was dismissed from the lawsuit, but its customers could also seek compensation under the settlement agreement.
   In the class action settlement, shippers had the option of seeking compensation from the $52 million fund or having their freight rates frozen for two years. They also had the option of exclude themselves from the class settlement and retain their right to sue or seek an individual settlement.
   Likewise, if a large number of shippers decided not to participate in the class action suit, the carriers could terminate their respective settlements. The Puerto Rico court said that threshold has been reached and that the carriers wanted more time to decide whether to go forward with the settlement. The court agreed, giving them until March 1 to make a decision. ' Chris Dupin