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Industry Plays Catch-Up As Ports Reopen

10/14/2002 02:00:00 AM Eastern

While the CE industry is relieved that the 10-day West Coast port shutdown ended last week, as the courts agreed with Justice Department lawyers to reopen the 29 ports under the Taft-Hartley Act, the work stoppage will still have a ripple effect on consumer electronics supplies.

Judge William Alsup of the U.S. District Court in San Francisco issued an order opening the ports from Oct. 9 to Oct. 11, when the court was expected to order an 80-day cooling-off period that would allow time for negotiations. That would also enable at least some of the CE products earmarked for

retailers to reach their shelves prior to the holiday season. The 10-day shut down also cut off vital parts to U.S. and Mexican factories, which slowed assembly of HDTVs, among other products.

Prior to the reopening, CEA urged the White House to act and released a study estimating that 70 percent of imported consumer technology products enter the U.S. through West Coast ports. In terms of dollar sales, 56 percent of all consumer technology products sold through the U.S. enters through ports on the West Coast. CEA claimed that $22 billion in CE sales was in jeopardy.

Manufacturers said the current results of the shut down vary from manufacturer to manufacturer and category to category, and they are dealing with the situation in a variety of ways.

Rick Clancy, senior VP/communications for Sony Electronics, said while the company has U.S. and Mexican manufacturing plants that are up and running, "some plants making certain types of products need components from Asia. We can airship these components and some smaller-sized finished goods, but at a higher cost."

Dave Arland, Thomson's government and public relations director, said prior to the dock openings that his company was being affected in finished CE goods and raw materials. "We have 400 containers stopped. It is a big deal for television, DVD, accessories and blank video tape for Technicolor [tape duplication division]. Our fourth quarter is on the water."

He said that with today's supply chains being so tight, with little in inventory and shipments sometimes going direct from the dock to retailers, the docks would take a while to catch up even after they open. "It's estimated that for every day the ports are shut down it will take two days to catch up."

In a prepared statement just prior to the court ruling opening the ports, Harry Elias, JVC Company of America executive VP/COO, said his company suffered little from the shutdown, but feared that if the shutdown had stretched on another week, "some effect" would be seen.

On the retail side, the Wall Street Journal reported during the first week of the lockout that Sears has been preparing for five months and taking inventory earlier than usual, shipping some products by air and diverting shipments to Mexico and other ports.

Dan Wewer, retail analyst for CIBC World Markets warned prior to the settlement that CE retailers would have taken a major hit if the shutdown had stretched beyond two weeks. In a research note, he also suggested that four of the biggest specialty chains, Best Buy, Circuit City, Radio Shack and Tweeter, have taken steps to guarantee supply, such as working with key suppliers to airship critical big ticket items, if necessary.

But as the lockout approached a week Bill Trawick, president & executive director of the NATM Buying Corp., told TWICE his members had not seen any problems. He added that the slowdown of retail sales actually worked to the industry's favor in this situation. "Last year there were 30 to 40 percent increases in many categories going into the holiday season, and retailers stocked early in anticipation of shortages. But those spikes have leveled off." —Additional reporting by Alan Wolf.