Auckland cannot compete with Tauranga unless it joins real world

John Key, wherever he is, must be having a wonderful holiday. Whenever he reads the news from home he finds the port of Auckland making a perfect case for asset sales.

Its main rival, the port of Tauranga, is partially privatised. That port is mostly owned by Bay of Plenty's regional council but a minority of its shares are in private hands, including mine. The Auckland port used to be a public-private partnership too, until 2005 when Mike Lee's regional council paid out the minorities and proudly returned the asset to complete public control.

Mike Lee is probably not having a good holiday.


This long labour dispute is just the latest embarrassment in a sorry record since 2005. The company's return on capital has not been up to the standard private shareholders would expect. It has not been the "cash cow" for public transport that councils hoped it would be. In 2009, it required more capital from them.

Who is to blame? Not the former regional council's portfolio managers. They did their part. They were quite vigorous in sacking successive appointees to the Ports of Auckland board when its performance did not improve. Some of the best-known names in Auckland business were hired and fired.

When those corporate luminaries are asked why they failed they are inclined to mutter, off the record, about "politics", but I don't think they mean politicians are actively meddling.

Left-wing politicians such as Lee and Auckland mayor Len Brown, who has had the worst holiday of all, desperately want to prove that public ownership can succeed on business terms and I doubt they interfere.

When frustrated business directors mutter about "politics" I think they are referring to something much harder to define. It has to do with the absence of any personal risk in public ownership.

The pressures that come to bear on the private sector, from competition and shareholders, simply do not have the same force in the public sector, no matter how much governments try to imitate them by putting assets under boards with businesslike charters.

A union that is bargaining with a publicly owned company does not need a vote as foolish as that taken by the Auckland Council last month, to know the employer answers to a body with divided loyalties.

The union knows that even if the council backed the employers unequivocally, the council members do not have a financial interest at stake. That makes all the difference.

It seems to make all the difference even when the private shareholding is a minority interest. When Port of Auckland Ltd had just 20 per cent of its shares in private hands it had a legal obligation to maximise the return to all shareholders. That obligation could trump any non-commercial pressure from its public owner. Partial privatisation is as effective as full privatisation for the purposes of economic decision-making and partial privatisation lets the public body reap most of the dividends.

The Port of Tauranga has set up competing stevedoring companies on its wharves, Auckland's work is monopolised by a national union. I'm not sure there is much more about this dispute we need to know.

Don't take my word for the results at Tauranga, the latest chief executive of Ports of Auckland Ltd, Tony Gibson, laid them out in the Herald a month ago. He wrote:

"Our annual profit is around half of Tauranga's and productivity lower by about 20 per cent ... Labour utilisation here is about 65 per cent, compared to more than 80 per cent at Port of Tauranga, meaning that for every 40 hours a stevedore is paid they can work as little as 26 ..."

It has taken until this week to become abundantly clear that this dispute is not about pay rates, rosters or any of the issues the Maritime Union can discuss. It is about the culture of the port.

Mr Gibson and his board and executives want to be able to buy wharf labour like they can many other human services - when and where they want it. They want to be able to buy it from a competitive supplier.

The Maritime Union of New Zealand is aggrieved about this because like many unions these days, it has probably become as much like a competitive supplier as it can be, and it is willing to do better.

But there remains one big difference between a competitive company and a trade union. When a company supplying labour cannot come to an agreement with an employer it does not claim an exclusive right to the job and take action to disrupt the employer's business.

Strikes are rare outside the state service these days. Fully privatised operations such as Telecom quickly put their maintenance workers on contract and those I know have prospered in self-employment. Can this ever happen under pure public ownership? The port will provide the answer.