GENCO chief warns of high labor costs if Dems win

A strong showing by Democrats in national elections next month would likely mean quick passage of pro-union legislation and higher costs for the logistics industry, warned Herb Shear, chairman and chief executive of Pittsburgh-based GENCO Supply Chain Solutions.

The U.S. House of Representatives passed the Employee Free Choice Act in 2007 to replace the requirement that companies hold secret ballots to determine worker interest in organizing a union, and instead allow workers to create a union by collecting signatures from a majority of workers. Workers may still participate in an election if they choose, but in most cases the signatures would allow them to unionize. A filibuster killed the card-check bill in the Senate.

Under the bill, if half of the workers plus one sign union cards the union is automatically recognized as their bargaining representative. Another provision states that if a collective bargaining agreement isn't in place within 60 days of recognition then a federal arbitrator will impose the first two-year contract on the parties.

If the Democrats sweep the White House, House and Senate that legislation is likely to pass within the first 100 days, Shear said during a panel discussion at the Council of Supply Chain Management Professionals annual meeting in Denver.

Sen. Barack Obama favors the card-check legislation, but Sen. John McCain would veto it as president, he predicted.

The card-check system would make it easier to unionize and drive up transportation and warehousing costs to levels not seen since the era of trucking regulation ended 30 years ago, Shear said.

I think the impacts to this country will be devastating he said. So I'm hoping there will be 44 Republican senators that will continue to filibust that kind of legislation.

Polls show that Democrats are doing well in several states with Republican seats and could take control of the Senate.

Shear also cautioned that volatile transportation prices are making it more difficult for shippers and third-party logistics providers to make long-term plans.

Inventory carrying costs have risen in the past 90 days while fuel costs have dropped more than one-third since early this summer. The supply of short-term commercial paper used by businesses to finance day-to-day operations has shriveled up with the credit crisis and led to higher interest rates, which in turn has increased inventory costs. As fuel prices soared to record levels in the past year many companies began to consider new logistics strategies, including locating distribution centers closer to customers and using more intermodal rail. The decision was easier then because interest rates were stable.

But when you don't know the trade-offs between the variables it's hard to say what's my strategy for the next three years, Shear explained after the session.