The world's largest mining company, BHP Billiton Limited (ASX: BHP), has put unions around Australia on notice after it axed Teekay, the union-dominated tugboat provider, and replaced it with Queensland-based Rivtow.
BHP holds the right to operate all tugboat services in the lucrative port of Port Hedland and provided Teekay with the gift of being the sole tugboat operator for many years. Port Hedland is the world's largest bulk export port that exported around 60% of Australia's 700 million tonnes of iron ore in 2014.
Despite the slowdown in the mining and resources sectors, in 2014 the tugboat crews decided salaries ranging between $140,000 – $300,000 per year weren't enough, launched industrial action and threatened to walk off the job. The action was supported by the Maritime Union of Australia, The Australian Institute of Marine and Power Engineers, and the Australian Maritime Officers Union.
At the time, Fortescue Metals Group Limited (ASX: FMG) chief executive Nev Power unleashed a stinging rebuke and said, "there is something fundamentally broken with a system that encourages a small group of employees, with pay and conditions that most Australians would envy, to hold an entire country to ransom." The tugboat strike would have crippled Fortescue, which exports all of their iron ore out of Port Hedland.
Sometimes people don't appreciate when they are on a good thing, and unfortunately for Teekay, the industrial action may have been a large part of BHP's decision to switch tugboat services to Rivtow, despite BHP saying otherwise.
According to an article in The Australian Financial Review, BHP said that "Union affiliation was not a consideration in the decision to award the contract to Rivtow" and that "The contract has been awarded following a competitive tender process for BHP Billion's largest tugboat fleet based on safety, capability and cost-effectiveness criteria."
The axing of Teekay is a major warning for militant unions operating in the resources and energy sector and possibly a sign of things to come in the heavily unionised civil construction workforces around Australia.
Earlier this year, the Construction, Forestry, Mining and Energy Union (CFMEU) was ordered to pay civil construction and development company Grocon $3.5 million following an illegal blockade of the Melbourne Emporium construction site in 2012.
With Australia's economic growth slowing down, everyone needs to tow the line to help improve productivity and reduce unnecessary costs. By doing so, more companies will stay afloat which in turn will protect more jobs: a win for all.
