APL announces layoffs, plans to leave Oakland
I’m currently a customer of APL so I’ve been going back and forth with my contacts at APL and others discussing the big news. For those of you who aren’t aware, NOL (Neptune Orient Lines, APL’s parent company in Singapore) announced labor reductions of 1,000 positions, mostly in North America, and the eventual move of their regional headquarters from Oakland, California to a cheaper location. The official press release can be found here from their website:
NOL said it did not see a recovery from the challenging conditions for quite some time and the potential exists for them to persist for the next few years. The company said the market environment has worsened considerably over the past month and that it anticipated further deterioration in trading conditions going forward. It described the outlook for profitability in 2009 as grim.
Here’s more from Logistics Management:
This news follows an October announcement in which NOL said it planned to reduce capacity on its Asia-Europe and Transpacific lanes by 25 percent and 20 percent, respectively, along with suspending its SSX (Singapore Subcontinent Express) service. NOL said these measures are expected to lower its vessel network costs—and some fixed vessel and charter hire costs—by $200 million in 2009. NOL Group President and CEO Ron Widdows said the measures announced yesterday would lead to a restructuring charge of roughly $33 million in the fourth quarter of this year and deliver positive outcomes in future years.
Here’s more from the Journal of Commerce as well.
Another outcome of the cost-savings measures affects their recently revamped Middle Harbor Terminal in Oakland. Effective December 1st, their terminal will be closed on Mondays and open an hour later (8:00am vs. 7:00am) the remaining four days of the week. Apparently the volumes they have been handling and are predicting for the near future do not justify the cost needed to keep the terminal open five days a week. Already the trucking community is skeptical that the terminal will be able to manage the current volume over a shorter time period, and in four days, then they currently handle.
I think the biggest blow is to the community in Oakland, where APL has been headquartered since the 1970’s. Supposedly 350 workers will lose their jobs in Oakland alone, according to various news reports. APL is currently a major tenant in the 1111 Broadway building in Oakland’s City Center, which I have heard APL had a part in designing the building. California has suffered more than most states during the economic downturn and Oakland has always sort of been in the shadow of neighboring San Francisco, so for the city and community of Oakland to lose what has been a major piece of the landscape for more than 30 years is quite a blow. Still, economics being what they are, NOL obviously felt that now was the time to take action to cut costs for the longer term good of the company.
Update: 11-20-08:
The Oakland Tribune today has a lot more on the pending closing of APL’s regional headquarters in Oakland and says the move will be somewhere out of state (not a surprise). The Mayor’s office is making all the right noise, but I mean, really, what does Oakland have to offer to keep APL around when the decision comes from NOL in Singapore? Can the City of Oakland dictate rent and real estate reductions? Can the City of Oakland magically make taxes and/or other government fees disappear? Can the City of Oakland waive their magic wand and convince all the employees in Oakland to take pay cuts? I don’t think so. This is a business decision by a business with a parent company located in another country who probably could care less what the local municipal government cares about their decision.
The International Herald Tribune quotes analysts that are feeling positive about NOL’s move as they fully expect NOL to post losses over the next two years.
And finally the Journal of Commerce has a very good article today where they discuss the container line industry with Ron Widdows, chief of NOL, and the subsequent laying up of vessels as carriers cut back on capacity in the face of weakening demand.
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