Bush: Ports Storm Sends Bad Message

Reversal Of Deal Hurts Ability To Win War On Terror, President Says

(CBS/AP) 
Foreign companies now own more than 70 percent of U.S terminals and control the overwhelming majority of the cargo that arrives here. About half of the ports in Los Angeles and Long Beach are run by Chinese companies.

"For the most part we live in an international society," says Richard Steinke of the Port of Los Angeles, "and the shipping lines that are moving cargo around the world reflect that."

When DP World offered a stunning $6.8 billion for Peninsular & Oriental in early February, analysts were surprised the price had risen so high during the two-month bidding fight between Dubai and Singapore-owned PSA International Ltd. PSA, the world's fourth-largest terminal operator, withdrew from bidding Feb. 10.

The British firm manages and runs important port operations in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia. It also plays a lesser role in dockside activities at 16 other American ports.

It was unclear which company or companies might run the U.S. port operations. There are only a handful of recognized maritime firms with the resources to acquire all of Peninsular & Oriental's terminal operations in the United States, but DP World could sell the concessions for its U.S. port operations separately.

The largest maritime firms are not based in the United States, although nearly all of them own and operate U.S. subsidiaries.

It was unclear whether any overseas parent company, especially one run by a foreign government, would be acceptable to critics in Congress. In its statement, DP World promised to sell its domestic operations to an unspecified "U.S. entity."

A leading congressional critic of the ports deal, Rep. Peter King , R-N.Y., said, "It would have to be an American company with no links to DP World, and that would be a tremendous victory and very gratifying."

DP World's suitors could include PSA International; Hong Kong-based Hutchison Whampoa Ltd.; Chinese-owned China Ocean Shipping Co.; Hapag-Lloyd AG of Hamburg, Germany; Denmark-based A.P. Moller-Maersk; and Seattle-based SSA Marine.

At Miami's port, an early critic of the Dubai ports deal, Eller & Company Inc., said it was considering an offer to buy out Peninsular & Oriental's operations there and possibly at other ports.

Eller jointly manages and operates a Miami terminal with the British shipping giant. It raised alarms with U.S. lawmakers over the Dubai deal and filed lawsuits in Florida and London to prevent the takeover.

It said it objected to becoming an "involuntary partner" with Dubai's government but previously said it was not in the running to acquire P&O's Miami operations.

"This wasn't on our agenda and not something we had considered," lawyer Michael Kreitzer said Thursday. "But as Congress started to speak out and say there was a dearth of American companies doing this, we started talking to our board of directors about putting a proposal together.

"We could move very quickly, and we're certainly reaching out to see if there is an opportunity for us."

At Maersk, a spokeswoman said the company was always looking to expand its global commerce operations but declined to discuss the Peninsular & Oriental situation. Maersk and P&O jointly manage and operate a major cargo terminal in New Jersey's port.

Despite the furor, the company's U.S. operations were never the most prized part of the global transaction. DP World valued its rival's American operations at less than 10 percent of the nearly $7 billion total purchase.

But that portion of the deal set off a political chain of events unlike any other in Mr. Bush's five years in office. Mr. Bush defended the deal, calling the United Arab Emirates a strong ally in the war on terrorism and pledging to cast a veto if Congress voted to interfere.

Senate Republicans initially sought to fend off a vote to block the deal, and the administration agreed to a 45-day review of the transaction. That strategy collapsed on Wednesday with the vote in the House Appropriations Committee.