4:00pm Wednesday | Chock today’s item up to the global economy saying “Sorry, Charlie,” to more than 200 local workers at a seafood processing facility on Terminal Island.
Believe it or not, the cause of these impending job losses can be traced back more than two years ago.
Back in 2006, the seafood industry was booming, with just the U.S. portion representing $33 billion in business. Analysts at the time said the industry was as healthy as it had ever been. At the same time, however, the easy credit market that had led to the housing bubble also created a favorable market for seafood companies to borrow money. This financial liquidity led to a consolidation of the industry through a number of acquisitions and mergers. But, in this case, the large public corporations were beat out by large privately-owned firms.
By 2007, only one publicly-traded corporation, Del Monte Foods–which stepped full-foot into the seafood market with the 2002 purchase of StarKist Seafood Co.–was still in the top 25 North American seafood companies.
The San Francisco-based Del Monte decided in 2008 that StarKist and its mascot Charlie Tuna were not a good fit for a firm more associated with packaged fruits and vegetables.
“The divestiture of our seafood business, including StarKist, is a significant step in the realignment of our portfolio toward higher margin, higher growth businesses,” said Del Monte Chairman and CEO Rick Wolford at the time. “[It] will immediately help improve our margin structure, eliminate a source of earnings volatility and reduce our debt leverage.”
Del Monte sold the StarKist brand and other seafood-related interests to South Korean-firm Dongwon Industries for about $360 million in October 2008.
Part of the deal included the sale of a large seafood processing facility on Terminal Island located just over the Long Beach border in the Port of Los Angeles.
Also under the terms of the deal, Del Monte continued to operate the Terminal Island plant under a two-year operating agreement where Del Monte would provide various operational services, such as warehousing, distribution, transportation, sales, IT and administration to the purchased business.
Now this agreement has run out, according to Del Monte, leading to the closure.
As the operator of the plant, Del Monte has notified the state that just over 220 local workers at the facility will be laid off between July 30 and Sept. 26.
The notice, required under law, also states that the plant will be shuttered, not relocated.
Councilmember Gerrie Schipske first posted the news of the Del Monte notice on her blog.
While Dongwon Industries has made no public statements on the Terminal Island closure and StarKist also did not return our call, the seafood firm and its parent have been clear in public statements about the reason behind other similar workforce reductions in their companies.
Dongwon subsidiary StarKist has cited “increased global competitive pressures” for these reductions.
In a May 13, 2010 statement announcing between 600-800 job cuts over six months at a StarKist facility in American Samoa (also purchased from Del Monte in 2008), StarKist President and CEO Don Binotto laid the blame for job reductions clearly at the feet of his firm’s competitors.
“Our competitors have been using a model that moves the labor-intensive fish-cleaning process to low-wage countries,” Binotto said. “We have vigorously resisted this model, but it has become difficult to compete with wages nearly ten times those of Thailand and elsewhere, especially when combined with rising utility and shipping costs and the decreased value of duty protection.”
The minimum daily wage in Thailand, set by law, ranges between $0.59 per hour and $0.80 an hour, depending on where in the country one works. The minimum wage in American Samoa for cannery and fisheries work is currently $4.76 an hour, but raises on May 25 to $5.26 an hour. The current minimum wage in California is $8 an hour.
Since 2008 when Dongwon took over StarKist, employment at the American Samoa facility has fallen from a high of 3,000 to about 1,200 workers after the most recently announced cuts are implemented.
As tough as this is for those working on Samoa, in Southern California Dongwon will have, as of Sept. 26, one-upped themselves: since purchasing the Terminal Island facility in 2008 employment there will have fallen to zero. Quite a track record.