OOCL: CARRIER MERGERS ARE NOT GUARANTEED TO SUCCEED

OOCL: CARRIER MERGERS ARE NOT GUARANTEED TO SUCCEED    Mergers among containership operators take time and are not guaranteed to succeed, a senior executive of Orient Overseas Container Line said.
   C.C. Tung, chairman of OOCL, told an industry conference in London there have been 23 mergers or takeovers in liner shipping from April 1997 to December 1999.
   “However, despite having a common goal of reducing costs, building scale and broadening the customer base, no two mergers were alike and no formula guaranteed success or failure,” he said.
   From an industry perspective, consolidation is healthy and promotes stable growth, he said. “With less fragmentation within the industry, destructive competition diminishes as does the dramatic increase in capacity.” The current trend of consolidation is the result of overcapacity and pressure on freight rates, according to the Hong Kong-based carrier.
   OOCL said that many carriers were driven to consolidation because carrier alliances achieve only about 70 percent of the cost efficiencies of full merger integration between companies. However, mergers can create “added bureaucracy” and “stifle the organization’s ability to react quickly to market changes and create value for their customers.”
   Tung warned that profitability for ocean carriers does not depend on cost reduction alone. The OOCL chairman did not reject the possibility of a merger or takeover for his company, as it may “in theory, be an ideal solution.” But he added that OOCL will continue to work on organic growth, generating additional revenue and improving efficiency.