EB-5 Risk Alert: “Business volume is down” says American Logistics

As we continue to monitor conditions at American Logistics International Regional Center, we find that the situation appears to be deteriorating. It is unclear whether this is a cyclical business downturn or something more serious, possibly connected to a worsening relationship between American Logistics management and employees.

  • Slow business: As we reported in our last newsletter, there has been a drastic cutback in the truck driver workforce at American Logistics. This trend seems to be confirmed by the company’s own internal communications. A March 18, 2013 memo that company management distributed to employees states that “business volume is down” and “We, like many other transportation companies working at the Port, are doing everything that we can to survive…”
  • Misguided spending: Last month, we reported on the potential labor dispute between truck drivers and management at American Logistics.  We now believe that American Logistics may be incurring substantial costs to oppose its employees’ efforts to form a union. The company appears to have retained the services of a “labor relations consultant.” Drivers report the presence of the consultant at American Logistics’ Carson facility since at least Wednesday, March 13, 2013. Such consultants, generally brought on by company management to oppose employees’ efforts to improve working conditions, can be extremely expensive. “A 2006 article on the U.S. labor consulting industry by Prof. John Logan revealed that consultants at one leading firm are paid $180-250 per hour plus expenses. He also notes that even small campaigns to oppose organizing efforts can cost tens of thousands of dollars, while large campaigns cost millions of dollars. In addition to consuming significant company resources, in our experience, labor consultants can prolong a labor dispute. As we previously reported, a lengthy labor dispute could be harmful to American Logistics, which may pose serious risks for EB-5 stakeholders.
  • Yet another government investigation: In addition to spending company resources to prevent its drivers from organizing, American Logistics is now subject to a second investigation by the National Labor Relations Board. On April 1, 2013, an American Logistics driver filed a second unfair labor practices charge with the Board by.  The charge alleges that the company engaged in unlawful retaliation.

These recent developments raise important questions for EB-5 stakeholders:

  • Is American Logistics management communicating to EB-5 investors stakeholders the same message regarding low business volume that it shared with its employees?
  • Is hiring a costly labor consultant wasting financial resources that could instead be used to create additional jobs?
  • What impact would a prolonged labor dispute have on American Logistics’ ability to create or maintain a sufficient number of jobs to satisfy requirements for EB-5 investors?

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