Piloting the port.

Larry Keller takes over management of the Port of Los Angeles at a time when a breakdown in rail service is creating chaotic pileups of holiday-season merchandise

Larry Keller, who for nearly a year was acting executive director of the Port of Los Angeles, is no longer acting - not since Mayor Richard Riordan appointed him to take over the job of leading the nation's second-largest seaport on a permanent basis.

The appointment was not a huge surprise in L.A. trade circles. A long-time executive with the Danish shipping line Maersk Inc., Keller has been a front-runner for the job since April 1996, when he was hired as the port's chief operating officer. He had been leading the port on an interim basis since former Executive Director Ezunial Burts left in January to head the L.A. Area Chamber of Commerce.

Since then, Keller has won respect for guiding the port through an unusually busy period, which included a 15-week-old pilot strike, challenges to the LAXT coal terminal, as well as the opening of the new terminal for American President Lines at Pier 300.

But Keller has even greater challenges before him. The port is suffering from a severe traffic jam, as are all West Coast ports, due to the breakdown of the Union Pacific railroad system. Union Pacific's efforts to integrate the recently acquired Southern Pacific rail operations have been slow and problem-filled, resulting in containers piling up at the L.A. port's marine terminals. Shipments are as much as five weeks behind schedule.

Question: How bad is congestion at the port?

Answer: It's very bad, for three reasons. First, there has been a huge bulge in the market this year, in terms of the amount of cargo. The economy has turned around. There's a lot more confidence. The merchandisers believe we're going to have a busy buying season, and they've responded accordingly.

The second thing is the meltdown of the Union Pacific railroad. It started in Texas with the chemical manufacturers, then it hit the coal sector, and now it's hit the intermodal sector big time. That means boxes that ought to be out on the railroads are sitting at the terminals.

And the third thing is, we just don't have enough labor. The employers and the ILWU have gotten together and hired 2,000 new people who will be coming on at a rate of 150 a week. But still, by the time they become fully productive, it's too late to really help right now.

Q: In the short term, is there anything the port can do to grease the wheels?

A: There's not much we can do. We have tried as best as possible to assist our customers in identifying surplus sites or remote delivery sites. But the expansion is such that every time we do it, it catches up with us and we're back where we started.

Q: Are you concerned that shippers will begin avoiding L.A. and other West Coast ports to escape the gridlock?

A: We're concerned. Cargo flows where it moves easiest, best and most inexpensively. I think in the short term there's going to be some pain; up and down the West Coast we're already seeing that.

On the East Coast, local cargo could probably be handled. But once you start pushing intermodal cargo, the East Coast does not have the big terminals, they don't have the rail connections and they don't have the cars any more than we do. We've got the capacity, we've got the infrastructure. I really think that we fix it here or it doesn't get fixed at all.

Q: Is there a light at the end of the tunnel?

A: Traditionally, the holiday goods push ends at about the first week of January. That's when the ships slow down and you begin to catch up. Union Pacific says they should have their problems under control by the end of January. And this new labor will finally reach a critical mass by about then. That's going to be a better time. Unfortunately, it's not now.

Q: A few months back you went to China to talk with officials from China Ocean Shipping Co., whose plans to move into a new space at the Port of Long Beach have been derailed. Do you still have your eyes on them?

A: Yes we do. We're building Pier 400 now. We want a partner who is going to be long term with high-growth potential - who is going to be one of the main players. Cosco is obviously one of those players.

Q: How fierce is the competition with Long Beach?

A: At Maersk, when I was a customer at Long Beach, it looked very adversarial. I had heard that people at the Port of Long Beach didn't like people at the Port of L.A. very much. But then you come up with an issue like the Alameda Corridor, and suddenly everyone becomes very businesslike. I think (the competition) is a little overblown.

On the other hand, when it comes down to landing a major customer, I think we're very competitive. The stakes are large. There are only so many players and they're either here or they're there. If you miss, you've missed a customer for 25 or 30 years. So it's very important.

Q: Long Beach has a reputation for being a more streamlined, entrepreneurial port than L.A., which is said to be unwieldy and bureaucratic. Is that a fair characterization?

A: Both cities, because of their structures, have different ways of looking at their ports. Long Beach in the past has been able to move very quickly because they don't require City Council approval of their leases and all that.

But I think the last year and a half has seen a big change. I've visited personally with most of the city councilpeople and I think they realize the importance of the port. After the meltdown of the defense industry and the recession, trade became very high profile and I think there is an appreciation of that. Our issues move quite quickly now.

Q: The Port of L.A.'s growth over the past decade has been directly linked to the strong economic growth in Asia. Now those economies are in a state of turmoil. Isn't it dangerous to have all the eggs in one basket?

A: Maybe we've always had the eggs in one basket. Thirty years ago, that basket was Europe. Now, people talk about the Age of Asia, and I think that's still upon us. A tremendous amount of wealth has been created in Asia and that creates a demand for our goods. There's a continuing upward ratcheting - despite the recent problems there.

At the same time, we are tapping into growth markets in Mexico, Central and South America.

Q: But is that good for Southern California? Doesn't cargo from those regions naturally flow to the East and Gulf coasts?

A: It traditionally has, But there's quite a nice market between the west coasts of Mexico and Central and South America and here - not only for direct consumption but also for trans-shipment of goods to the Asian markets. We've seen quite an uptick in that trade.

The change in shipping has brought on larger and larger ships. What we've been seeing over the last few years is that the direct calls that formerly went from Asia to the west coast of South America have dropped off. Instead, they're sending the big ships to Southern California and smaller ships are taking the merchandise to South America.

Q: How did you get into the shipping business?

A: Accidentally. I was working in the grocery industry in college. Then I was drafted and went into the Vietnam War. When I came back, I went back to the grocery industry but found that the future really wasn't there. Some friends knew some people in the shipping business. After four years in the Navy, I thought the last thing I wanted to see was a ship again.

But shipping is one of those things that bites and it bites hard. You really get to enjoy the international outreach. My family has lived all over the country. I've traveled all over the world in this business. And finally, we're fortunate to be back in California.

Larry Keller

Company: Port of Los Angeles Title: Executive Director Born: Vallejo, Calif., 1945 Education: B.A. in anthropology, San Francisco State University Most Admired Person: His father, Rex Keller Hobbies: Reading, cycling, camping, spending time with family. Turning Point in Career: Getting into the shipping industry in 1973. Personal: Married, three children, one grandchild.