Hapag-Lloyd to reduce workforce following UASC merger

Germany’s largest ocean carrier is looking to cut up to 12 percent of its almost 11,000 land-based employees, according to Rainer Horn, director of public relations at Hapag-Lloyd.    Hapag-Lloyd, Germany’s largest ocean carrier will reduce its workforce in the wake of its finalized merger last Wednesday with United Arab Shipping Company (UASC), a Kuwait-based carrier owned by a conglomerate of wealthy Middle Eastern states.
   Hapag-Lloyd is looking to cut up to 12 percent of its almost 11,000 land-based workforce, but the 2,100 sea-based jobs will not be affected, Rainer Horn, director of public relations at Hapag-Lloyd confirmed with American Shipper.
   The job cuts will take place over the next one and a half to two years.
   Hapag-Lloyd does not see job cuts as the biggest and quickest ways to obtain synergies, however, and in the first months after closing, business continuity will be more important, Horn explained.
   Overall, the merger will create synergies that will reduce costs by $435 million per year, Hapag-Lloyd said. A significant amount of these savings should be realized in 2018, while the full amount is expected to first be reached in 2019.
   The primary areas to realize synergies in liner shipping mergers are always network and procurement, said Horn.
   Hapag-Lloyd’s synergies will mainly be derived from network effects, since using bigger ships will reduce the transport costs per unit; procurement effects, as larger volumes and contracts will lead to lower costs; and equipment effects, with reduced imbalances in transport volumes between markets resulting in less empty containers being transported and relocated, he explained.
   The combined fleets of Hapag-Lloyd and UASC will include 230 vessels with a shared capacity of approximately 1.6 million TEUs, according to Hapag-Lloyd. Average vessel size will total 6,840 TEUs, and the average ship age will stand at 7.2 years. The merged entity is estimated to carry in excess of 10 million TEUs per year.
   “Hapag-Lloyd has long-term and extensive know-how when it comes to acquisitions. By merging with the Canadian shipping company CP Ships in 2005 and, more recently, with CSAV in 2014, we have demonstrated that we are able to combine businesses and integrate them quickly, efficiently and profitably,” Hapag-Lloyd CEO Rolf Habben Jansen said.
   After Hapag-Lloyd’s merger with CSAV in December 2014, it saw about a 12 percent reduction in employees over the following 20-24 months, Horn said.