ONE, from pink to hot red

In October 2016, the three main Japanese shipping companies (NYK, Mitsui, and K.Line), announced the merger of all their container shipping lines under the name of ONE (Ocean Network Express) although they would keep all their other specialties independent.

The new joint services would start 18 months later in the first quarter of 2018. This was the time they considered to obtain the authorizations of international regulators and to ensure the proper preparation of the future operating structure. Thus, the gestation period of the sixth largest shipping company in the world began.

2016 was the sixth consecutive year of losses for maritime companies, so these Japanese shipowners were simply following the path of the recent mergers/acquisitions of CMA CGM/Neptune-APL, Hapag-Lloyd/UASC and, above all, the merge of its great regional rival COSCO/China Shipping.

Like all the aforementioned shipping companies, ONE sought two major objectives in the merger: significant economies of scale in personnel and IT costs and optimizing their offer of spaces and services.

The biblical prediction of seven skinny cows was not fulfilled this time and 2017 turned out to be a very good year for the container industry, generating profits of some 7 billion USD in the set of shipowners.

During that period, the Japanese trio composed the scorecard of the new mega shipping company and appointed Jeremy Nixon (NYK) the role of CEO, seconded by three vice presidents, one for each associated shipping company. In addition, they agreed that the IT environment to be used would be the one of NYK, which with 38% of the shares, would be the majority shareholder.

At the end of February 2018, on the scheduled date, flashy containers of a warm pink color happily decorated the esplanades of the main terminals of the world. Bankers, shipowners, and lawyers are known to adopt serious, solid, restrained corporate colors, accordingly to activities of, supposedly, high wisdom. Seeing ONE container was not exactly like seeing a bishop dressed in Desigual… but almost.

This colorful start was accompanied by a 114 million dollars forecast of benefits at the end of the first year of activity.

In June, ONE had to publicly admit that their beginnings had been clumsy and that their main “lifelong” clients had begun to reduce their support.

The economic losses at the time reached 120 million dollars. But, since they were improving energetically the detected flaws in the service, they maintained the profit forecast for the end of the year because the economies of scale generated by the merger would correct, finally, the initial poor results.

With great sadness, four months later, ONE had to report that it has not managed to recover, for now, the full confidence of the main shippers who fear to put the Christmas campaign of their own customers at risk. In consequence, its forecast for the end of the year is now losses of 600 million dollars, an intense hot red color.

The own people in charge of the shipping company, in a much-needed exercise of self-criticism, point as the main causes of these bad results to:

– The slow adaptation of the personnel to the IT environment of NYK.

– The fast reduction of collaborators that left many clients without their usual interlocutors.

– The rise in the cost of fuel.

– The war of US/China tariffs.

Observation 1. The great myths also cry.

The merger of the three main Japanese shipping companies is not receiving any congratulations neither for its good organization nor for its technological environment.

Angela Merkel arrives 12 hours late (and on a regular flight from Iberia) to the G.20 meeting in Buenos Aires for an unexpected breakdown of the presidential plane of the all-powerful German state.

Observation 2. Jeremy Nixon.

The most bitter acquisition/merger to date has been P&O, NedLloyd and Maersk in 2005.

The current CEO of ONE, Jeremy Nixon, participated prominently in that operation as the Chief Commercial Officer in Europe and global sales of P&O-NL first, and as the head of large accounts of Maersk later on.

If at any time soon, a super-shipping company is considering a future merger/acquisition, they should sign Mr. Nixon because, without a doubt, he is the person, in the whole world, who knows best everything, everything, everything that can go wrong in this type of operations.

VR Mercante
Dic 2018