Super friends
Environment / Young Brothers, Inc., a principal shipper of goods between the major islands of Hawai’i for 106 years, is crying foul after Maui Pineapple Co. president Brian Nishida made a surprise announcement that Maui Land and Pineapple Co. has proposed a plan to take over shipping of Young Brothers partial container loads.
The announcement came during a July 3 public testimony meeting at Lihikai Elementary on Maui regarding Young Bros.’ application to the Public Utilities Commission (PUC) to discontinue the shipping of ‘less than container loads’ also called LCLs, due to the potential loss of 23 percent of their Pier 2 dock space at Kahului Harbor in January 2007. The dock space is slated for reassignment to Hawaii Superferry (HSF), exacerbating a situation in which the harbor is already bursting at the seams.
‘ML&P, Maui Pine in particular, has some fundamental strengths to provided options,’ said Nishida. ‘We have refrigerated space and experience in shipping ag. We believe it would be simple for us to consolidate goods once HSF begins service.’
ML&P’s interest in taking over shipping of LCLs may go deeper than a simple good-faith effort to remedy the LCL problem that would be caused if Young Bros. brought an end to shipping partial containers. On May 19, 2004, ML&P made an investment in HSF through $1 million in Series A convertible preferred stock.
In a May 20, 2004, article in the Honolulu Advertiser, ML&P’s president and CEO David Cole spoke in support of ML&P’s investment in the Superferry, saying he ’supports his company’s ambitions for diversified agriculture on Maui by linking our island’s productive farmers with the growing statewide demand for fresh local foods.’
Two weeks after ML&P’s investment in HSF, Kauai-based Grove Farm, Inc. bought out 50 percent of ML&P’s stock in HSF. Cole is a director of Grove Farm and sits on HSF’s board of directors. He is a major ML&P shareholder.
Additionally, Warren T. Haruki, another ML&P director and shareholder, also sits on HSF’s board of directors and is president and CEO of Grove Farm.
The potential loss of Young Bros. LCL shipping and the additional costs of using consolidators to move goods between islands could be damaging to small businesses and farmers statewide. If Young Bros. is granted their application to discontinue LCL shipping, use of consolidators to ship LCLs between islands will be necessary beginning Jan. 7, 2007. The move would most likely increase shipping costs.
Maui cabbage farmer Kenneth Okamura says that the additional cost of consolidating would hurt his ability to remain in business. ‘Our major market and main competitor is in Honolulu. We have been able to stay in business because of our quality,’ Okamura says.
He explains that about 15 percent of his total revenue goes to transportation costs, and his produce prices need to stay basically the same regardless of shipping costs. ‘We cannot pass the costs on to our consumer. In order for farmers to stay in business on outer islands, we need low-cost transportation to Honolulu.’
According to Nishida, ML&P will be asking for a fast-tracking of PUC approval to begin LCL shipping, with a Dec. 3, 2006 approval wrap-up date.
Nishida says that if ‘certain conditions’ were met, ML&P could provide more efficient LCL delivery service via the Superferry at costs comparable to Young Bros. Among the conditions were cost-cutting measures, such as waiving a requirement in HSF’s approved PUC application that drivers accompany their vehicles. ML&P proposes to have one safety officer instead, and they would have delivery drivers at the shipment’s destination. Nishida says that ML&P will also be asking for guaranteed space on every ferry.
HSF spokesman Terry O’Halloran told the Maui News in a July 6 article that Superferry does not agree with ML&P’s plan.
‘We treat our commercial customers and our resident customers equally,’ said O’Halloran. ‘Any commercial customer will need to reserve space on Hawaii Superferry, like everyone else, at our published rates.’
He also said that HSF has no intention of changing their plans of driver-accompanied vehicles.
Interestingly, the Maui Pine president says that even with ML&P providing LCL service, there would still be a negative financial impact on small businesses. ‘Even in the best of scenarios, costs will still be 35 percent above what Young Bros. charges,’ Nishida says. ‘The effect to small business could be catastrophic.’
Glenn Hong, president and CEO of Young Bros., says he is opposed to the re-allocation of the harbor space. ‘Our position has been that no re-allocation of space is acceptable unless Young Bros. receives full replacement acreage,’ he says.
State lawmakers have approved a $10 million appropriation to acquire property from Alexander and Baldwin to make up for the loss of LCL cargo space at Pier 2. There have not been any appropriations for improvements to the land, which is currently home to Hawaiian Cement. The cement operation and silos would have to be relocated before any improvements for additional cargo space could commence, a project that Hong says is at least three to six years away. ‘The reviews have only begun,’ Hong says. ‘Young Bros. will not be ready in 2007.’
In response to a potential cargo crisis and other concerns, Maui County Council chair Riki Hokama introduced a resolution on June 23 calling for the state to postpone the Superferry’s July 1, 2007 start date until an updated Master Plan for Kahului Harbor and an environmental review are provided. The resolution was unanimously approved on July 12 after a two-day Committee of the Whole session.
Joining the echoing sentiments of Hawai’i and Kaua’i counties that Hawaii Superferry’s launch date be delayed, Hokama took matters one step further by proposing a resolution that Maui County join a lawsuit that has been filed against the State Department of Transportation (DOT).
After an executive session, the proposed resolution was passed July 21 by a vote of 8-1.
The suit, filed earlier this year by attorney Isaac Hall on behalf of Maui Tomorrow, Friends of Haleakala National Park and the Kahului Harbor Coalition, maintains that the state’s harbor improvement plans do not take the addition of the Superferry into consideration, and emphasizes the need for an environmental assessment.
At the July 3 meeting, Hall called the state’s actions ‘irrational.’
‘In their application it says it is crucial that they get their application approved by a certain date so they could get their financing,’ he said. ‘What was overlooked was the impact of the Superferry on Young Bros. and small businesses. [The state] had no idea what the impacts would be. [They] sped through the approval process and ignored proper planning.’
Hall added, ‘I found it a bit ingenuous that a major investor would step up and say, ‘We have a solution.’ Not only have they kicked Young Bros. out of 23 percent of their space, now they’re saying, ‘We’ll take over your business too.”
The attorney for Maui Tomorrow has formally asked that the Superferry’s two PUC applications be consolidated and that the docket be re-opened.
Ron Sturtz, president of Maui Tomorrow, says that if case continues after the Aug. 17, 2006, hearing date, it may be beneficial if affected parties from across the state join the suit.
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