Japanese carrier joint venture will help when market is poor

NYK, “K” Line and MOL each reviewed the past year and plans for the future, including the new joint venture between the three companies, which they plan to form in July.    The decision by Japan’s three major shipping companies – NYK, MOL and “K” Line – to combine their container liner and international port operations will provide them with a business framework that is capable of generating profits even when market conditions are as bad as they currently are, “K” Line President and CEO Eizo Murakami said Wednesday.
   Like his counterparts at NYK and MOL, Murakami followed tradition of making a New Year’s message, reviewing the past year and his company’s plans for the future.
   “Previously, our three companies had decided to start joint ship assignments in our containerships businesses, primarily on the East-West routes (Asia-North America, Asia-Europe, and Europe-North America), as members of a same alliance in April of this year,” Murakami noted. This is the so-called “THE Alliance” in which the three Japanese carriers will participate with Hapag-Lloyd of Germany and Taiwan’s Yang Ming.
   “However, given the current business environment, in which competitors cannot be defeated without significantly higher cost competitiveness, we decided to go one step further by integrating our businesses in the spirit of ‘three companies operating on equal footing,’” he said.
   The three Japanese carriers plan to form their new joint venture this July, and begin operating a joint service April 1, 2018.
   “We thus decided to change to a new management structure by founding a new company. Our new containerships business strategy for the future will be as follows: To fight equally with overseas competitors that pursue economics of scale by applying cost competitiveness generated from the size of our combined fleets and integrated systems together with the sales competitiveness each of us has developed over the years,” Murakami said. “It is a strategy that takes a medium- and long-term perspective shared by all three companies.”
   NYK President Tadaaki Naito said in his message that 2016 was a major turning point for the NYK Group. “The company posted a large sum in losses, and recorded a substantial decline in capital stock, which our predecessors worked so hard to accumulate,” he said. “We need to be fully aware of the fact that shareholders are very troubled with our decision to not pay a dividend for the first time in 52 years.”
   He said preparation for the integration of the liner businesses of the three Japanese carriers will have a major impact on the entire NYK group, “so 2017 will be a year for bold steps toward positioning the NYK Group for the times ahead under our ‘Beat the Crisis’ in-house initiative. I want everyone to achieve differentiation in day-to-day operations by staying half a step ahead in each area of business.”
   Naito, Murakami and MOL CEO Junichiro Ikeda all said even after the integration of the container liner business of the three companies, the container liner business will be the core business of their companies.
   “Our objective for the joint-venture company is to maximize its competitiveness by drawing on the best practices and outstanding aspects of all three companies. We shall further enhance the effectiveness of our systems and operations by adopting the superior ones used at NYK,” Naito said.
   “The stable operations of the terminal business should continue, and I would like everyone involved to raise the competitiveness of the business in Japan by taking exhaustive steps toward improving its efficiency,” he said. “The logistics business will become a more strategically important part of our global logistics service. For the future, we need to expand the scale of this business and enhance its operations. I would like to see it grow as a core business for the NYK Group.”
   Ikeda said, “We will continue to offer reliable services to customers until the new containership company starts operation. We will also need to make preparations to ensure a smooth handoff to the new company so that it can offer customer-friendly services from day one. The integration of the three companies will give us a foundation to compete with the world’s leading mega-carriers. That is why I expect the new company to pursue integration synergies and become a leaner, stronger business enterprise.”
   MOL’s top priority is to restore profitability and the ordinary income level in FY 2016, Ikeda said. The three Japanese shipping companies operate on a fiscal year that runs from April 1 to March 30.
   “Since the second half of last year, the long-stagnant containership and dry bulker markets have been showing signs of bottoming out,” Ikeda said. “In the foreign exchange market, the yen remains weaker than anticipated, although bunker prices are trending upward. We must achieve profitability. Every executive and employee, regardless of whether they are in business or corporate divisions, must work constantly to increase income and reduce costs as we head into FY2017.”