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Posted: September 6, 2021

A report on the meeting between AMO and Rand Logistics

Paul Doell

Capt. Willie Barrere
Executive Vice President

John Clemons
Great Lakes Vice President

We met August 31 at the new headquarters of Rand Logistics LLC - the former base of Great Lakes bulk cargo carrier American Steamship Co. - in Williamsville, New York, a Buffalo suburb near the Canadian border. That this longtime ASC space had become occupied territory under Rand Logistics was confirmed in a February 17, 2021 press release noting that Rand "is headquartered in Williamsville, N.Y."

In this meeting, Rand Logistics was represented by Rand Chief Executive Officer and immediate past ASC President Dave Foster, current ASC President Kevin McMonagle and Rand-ASC Human Resources Director Craig Samuda.

We discussed several increasingly important matters at considerable length: Rand's belief that AMO engineers and mates in the ASC fleet can be displaced from their jobs and assigned elsewhere in the Rand structure, where they must endure wage cuts and substandard benefits to generate money to cover the massive Rand debt these AMO members had no hand in creating; the harmful impact of the embarrassing, unnecessary bareboat charter of five ASC vessels to Rand's Grand River Navigation Co.; the otherworldly notion that Rand Logistics, American Steamship Co. and Grand River are freestanding units operating independently of each other; important quality of labor and life and health and safety issues; and the clear legal and regulatory differences between U.S. Coast Guard-licensed merchant marine officers and all-purpose unlicensed vessel crews.

Rand's debt

AMO noted immediately that Rand Logistics has compiled an abysmal financial record and - as confirmed by Securities and Exchange Commission documents - has filed for bankruptcy protection several times since at least 2012. Rand is in fact well accustomed to loss - $982,000 in 2016, for example, and a third-quarter 2017 loss of $615,000.

By contrast, American Steamship Co. has operated profitably on the Great Lakes since 1904, doing consistently well - a $46.1 million profit in 2019, for example. ASC has done better in some shipping seasons than in others, but this can be said of every profitable and efficient Great Lakes fleet. ASC has always been a moneymaker.

Foster pointed out that ASC has experienced debt in its time, and that debt is both routine and unavoidable in any business. But the difference here is that, unlike Rand Logistics, ASC has managed its debt well, often with the help of American Maritime Officers, while Rand has increased its debt load substantially.

In this context, Foster asked AMO to speculate on why the Chicago-based GATX Corp. had sold ASC to Rand in the first place. We alluded to comments from GATX in early comments in a G-Captain news feature. For the record, G-Captain quoted GATX President and Chief Executive Officer Brian Kenney: "As a leading operator of self-unloading vessels on the Great Lakes, ASC has been a strong contributor for GATX since 1973. This sale allows GATX to focus on our core franchises in global railcar and aircraft spare engine leasing."

On May 14, 2020, Rand Logistics completed its acquisition of American Steamship Co. for $260 million in private equity funding. On May 14, 2020, Rand signed on with Ally Bank of Utah for $370 million in new loans and other "financial arrangements."

This was no coincidence.

To secure this new Rand Logistics debt, ASC put nine of its vessels on the block as collateral, with the potential of adding two ships to this list if necessary. Upon default - the established Rand Logistics pattern - these vessels would be sold at auction.

The bareboat charter

This threat to American Steamship Co. and to AMO jobs thickened from there with this year's bareboat charter of five small-to-mid-sized ASC vessels - the American Mariner, American Courage, H. Lee White, Sam Laud and John J. Boland - to Grand River Navigation Co., which itself has grappled with bankruptcy.

This was no coincidence.

This murky bareboat charter developed essentially in secrecy. Despite what President Doell had been told last February in a phone call from ASC, the company did not seek charter proposals from all other Great Lakes-St. Lawrence Seaway bulk cargo companies.

In a February 17 letter to President Doell, ASC said it had "reached an agreement in principle to bareboat charter its Class II and Class III vessels to another carrier." This letter did not identify Grand River Navigation Co. as the chosen one. Subsequent letters to AMO on February 26 and March 6 made no reference to Grand River.

AMO later learned reliably that, during the February 23-24 pre-season ASC senior officers' conference, Rand Logistics disclosed via a slide presentation that it intended to bareboat charter the five vessels to Grand River Navigation Co.

Once in place by mid-March, the bareboat charter cost 40 AMO engineers and mates their jobs on the five vessels. These highly skilled, experienced and dedicated but displaced AMO members were told by ASC to apply directly to Grand River for continued employment on the five vessels - with wage cuts averaging $31,000 a year and vague summaries of retirement and health care benefits available from Grand River - which has a collective bargaining agreement with the International Organization of Masters, Mates and Pilots.

Only five individuals complied with this ASC directive, surrendering their AMO membership and all that goes with it. The remaining 35 have since held fast to honor and principle, and AMO has been able to place these heroic vessel officers to jobs elsewhere.

In our meeting, the Rand representatives denied that there was anything inappropriate or devious about the bareboat charter - an argument in defensive harmony with arguments posed by ASC in earlier letters to AMO.

ASC had insisted that the charter was not subject to the "sales and transfer" provision of the AMO-ASC collective bargaining agreement - despite having transferred the five vessels to Grand River - because ASC had maintained both ownership and management of the tonnage. This ASC position was at conspicuous odds with the U.S. Coast Guard's fitout report identification of Grand River as the operating manager of the five ships.

It is understood Lakes-wide that this bareboat charter deal has not worked well for Rand Logistics. Operation of the five vessels under Grand River Navigation has been marred thus far by several documented incidents reflecting widespread incompetence, by Grand River's inability to recruit and retain qualified vessel officers (to the point of posting a want ad seeking a First Class Pilot, "no experience necessary"), by manipulation of officer and crew complement data to meet the Coast Guard's COI requirements, by severe health and safety violations confirmed by the Coast Guard, by substandard meals that could cause or aggravate illness (meals the Rand Logistics executive team would never accept for themselves), and by miserably deficient officer and crew accommodations.

If Foster and his management underlings are at all troubled by this public relations disaster or by the potential for major casualties under the bareboat charter, they provided no hint of it during our meeting.

Nevertheless, the bareboat beat goes on. Foster said the arrangement with Grand River Navigation Co. "is for the long term."

It is evident at this point that Rand Logistics ordered this bareboat charter long before it was actually in place - possibly as early as May 14, 2020. The fix was in well ahead of the shift of the American Mariner, American Courage, H. Lee White, Sam Laud and John J. Boland to Grand River Navigation.

The 'independence' myth

In an undated "good day" circular distributed to unknown recipients earlier this year, Rand Logistics announced the company's business and leadership structure resulting from Rand's acquisition of American Steamship Co. in May 2020.

"Rand Logistics Inc. and American Steamship Co. will continue to operate as independent entities," said this circular, which was signed by Dave Foster as "Chief Executive Officer, Rand Logistics."

This notice advised as well that ASC "will continue to operate its fleet with the primary focus on providing the high level of service that its customers anticipate and value," while Rand Logistics "will continue to seek opportunities to grow its business and renew its asset base."

Some clarification and interpretation are necessary here. ASC has for many years provided "the high level of service that its customers anticipate and value" only with the practical help of its longtime contractual partner, American Maritime Officers, and the only "opportunities" Rand Logistics seeks are often cruel ways to meet its large and growing debt obligations.

In this circular, Foster said Rand's intent is to pursue "organizational streamlining and restructuring" in ways that suggest anything but independence for ASC. Foster said he "will continue as the Chief Executive Officer of American Steamship." Foster was president of ASC until Rand Logistics acquired this fleet in May 2020.

Where does Grand River Navigation fit in this "streamlining and restructuring"? It surfaces in what Foster referred to as a "top-to-bottom strategic review" that ended with Dave Foster alone at the top and everyone else at every level in Rand Logistics, American Steamship Co. and Grand River Navigation Co. looking up from the bottom for direction.

These "independent entities" are in fact one company, with Rand Logistics CEO Dave Foster at the helm - the ultimate, absolute authority over all matters.

This important point was made clear long before the Rand structural circular made its rounds. A Rand press release on May 14, 2020 - Acquisition Day - included specific references to "the combined company's diverse fleet," "our combined 24-vessel fleet," and "fleet synergies."

In this press release, Foster himself referred to Rand Logistics, American Steamship Co. and Grand River Navigation Co. as "a truly unique company," "the combined company" and "one of the premier transportation companies in North America" - with each characterization in the singular, not the plural.

At one point on this specific topic, Foster appeared startled when he was asked: "Given your exclusive and unrestrained power in Rand Logistics, can you revoke the bareboat charter unilaterally and bring the five vessels back to ASC and to AMO contract?"

After a long pause, Foster replied: "I don't know!" He said he would have to consult with legal counsel. Rand, ASC and Grand River rely theoretically on different attorneys, but lawyers always tender legal and practical advice to their clients - and, in this specific case, Dave Foster is the only client who matters.

The food and nutrition issue

When we brought up the inseparable issues of food, nutrition and health on the six ASC "thousand footers" operating outside of the bareboat charter, we cited specific complaints lodged with us by AMO engineers and mates - grim accounts of spoiled fruit, shortages of eggs, milk and meat, officers bringing their own groceries aboard at their own expense and families sending prepared meals to AMO members via the Great Lakes mail boat - the Rand contingent provided what appeared to be an honest, attentive response.

The problems, they said, were the food vendors and "supply chain" disruptions, not the cost of the meals. They explained what Rand Logistics was doing to correct these deficiencies and inefficiencies.

We reminded them that inadequate meals aboard vessels where AMO members live during the nearly yearlong shipping season could result in poor health, putting strain on the all-important AMO Medical Plan each year, forcing increased employer contributions to this Plan, and adding to the individual stress arising from having to concentrate on the job while hungry.

We presented this as a moral issue centered on universal human need, a crisis that inspired widespread discontent among the AMO engineers and mates working the six "thousand footers."

The additional mates

The conversation shifted to the employer's requests for additional mates as provided for in the AMO-ASC collective bargaining agreement. These extra mates are paid 3rd mate wages, but they are expected to do AB work as well without additional compensation.

AMO understands the need to meet COI requirements and keep the vessels operating, but we object to the inappropriate burden placed on these AMO mates because Rand-ASC cannot - or will not - recruit qualified unlicensed deck personnel.

In this context, AMO made the applicable professional distinctions between officers and crews more than clear.

Agreement on long-term 'thousand footer' work

The bareboat charter controversies and the apparent stalemate at this point notwithstanding, AMO and Rand agreed easily on the need for a long-term collective bargaining agreement covering the fleet's six "thousand footers" - assuming, of course, that these vessels are not sold off to help satisfy Rand's $370 million debt to Ally Bank of Utah.

The interests expressed in our meeting were mutual - Rand needs the licensed seagoing professionals only AMO can provide for the "footers," and AMO must protect the interests of the engineers and mates our union represents aboard these large vessels.

The parties agreed to begin negotiations once current contract commitments are met elsewhere. A target time was set for late October 2021. AMO members in the fleet will elect representatives from within their ranks to join AMO officials and representatives at the bargaining table and to participate openly at every turn.

Meanwhile, AMO has grievances arising from the bareboat charter and other matters moving - albeit slowly - through procedure, and other legal strategies are underway. AMO members will be advised of all developments as they occur.

A footnote: AMO members who have occasion to visit the corporate office in Williamsville, New York, will notice that the sign outside the building says "American Steamship Company." This indicates only that Rand Logistics has not yet gotten around to replacing the sign. This specific angle was not discussed in our meeting, but the writing on the bulkhead suggests we have it right.