Sunday, July 31, 2011

Wit = α + βxit + εit.

I haven't read Time magazine for quite a while. They were (are) just getting a little too rag-like, focusing on celebrities and such. But the other day, I came across an excellent piece from their magazine, which certainly summarize my feelings about the world of business, which shipping certainly is now - big business.

The piece is called "Driven off the road by M.B.A.s" by author Rana Foroohar, written earlier this month. Like most American media "news", the article is selling something, in this case, its a book on the article's subject matter, by ex auto executive Bob Lutz. Regardless of that angle, the article, and I imagine the book, certainly feels mighty right from my point of view. You can find the article here, and the text is below. A definition of what an M.B.A. can be found here.

Driven off the Road by M.B.A.s
By Rana Foroohar, Time Magazine, July 10, 2011

Bob Lutz (pictured right), the former Vice Chairman of General Motors, is the most famous also-ran in the auto business. In the course of his 47-year rampage through the industry, he's been within swiping range of the brass ring at Ford, BMW, Chrysler and, most recently, GM, but he's never landed the top gig. It's because he "made the cars too well," he says. It might also have something to do with the fact that Maximum Bob, who could double as a character on Mad Men, is less an éminence grise than a pithy self-promoter who has a tendency to go off corporate message. That said, his new book, Car Guys vs. Bean Counters: The Battle for the Soul of American Business, has a message worth hearing. To get the U.S. economy growing again, Lutz says, we need to fire the M.B.A.s and let engineers run the show.

Lutz's main argument is that companies, shareholders and consumers are best served by product-driven executives. In his book, Lutz wisecracks his way through the 1960s design- and technology-led glory days at GM to the late-1970s takeover by gangs of M.B.A.s. Executives, once largely developed from engineering, began emerging from finance. The results ranged from the sobering (managers signing off on inferior products because customers "had no choice") to the hilarious (Cadillac ashtrays that wouldn't open because of corporate mandates that they be designed to function at -40°F). It's pretty easy to imagine Car Guy Lutz removing his mirrored shades and shouting to the cowering line manager, "Well, customers in North Dakota will be happy. Too bad nobody else will!"

The auto industry is actually a terrific proxy for a trend toward short-term, myopically balance-sheet-driven management that has infected American business. In the first half of the 20th century, industrial giants like Ford, General Electric, AT&T and many others were extremely consumer-focused. They spent most of their time and money using new technologies to create the best possible products and services, regardless of development cost. The idea was, if you build it better, the customers will come. And they did.

The pendulum began to swing in the postwar era, when Harvard Business School grad Robert McNamara and his "whiz kids" became famous for using mathematical modeling, game theory and complex statistical analysis for the Army Air Corps, doing things like improving fuel-transport times and scheduling more-efficient bombing raids. McNamara, who later became president of Ford, brought extreme number crunching to the business world, and soon the idea that "if you can measure it, you can manage it" took hold — and no wonder. By the late 1970s, M.B.A.s were flourishing, and engineers were relegated to the geek back rooms.

This is not to say that the Whiz Kidding of American business yielded no positives; things like the hyperefficient FedEx logistical hubs and the entire consulting industry were born out of it. But ultimately, moving numbers around can do only so much. Over the long haul, you've got to invent or improve real products and services to grow.

In the U.S., the growth of the financial industry has only exacerbated the trend toward balance-sheet-driven management. Companies everywhere, but particularly in the U.S., where the banking sector wields the most power, are under tremendous short-term pressure to make their quarterly numbers. This often leads to planning that's reactive rather than smart: force the highest-paid engineers to retire, even if they are the best, and reduce payroll costs across all divisions rather than invest in the ones that are pushing the New New Thing through the pipeline.

It's interesting to note that the one area of the U.S. economy that's adding jobs and increasing productivity and wealth is also the one that is the most relentlessly product- and consumer-focused: Silicon Valley. The company off Highway 101 that best illustrates this point is, of course, Apple. The only time Apple ever lost the plot was when it put the M.B.A.s in charge. As long as college dropout Steve Jobs is in the driver's seat, customers (and shareholders) are happy. The reason is clearly the one Lutz puts forward in his book: "Shoemakers should be run by shoe guys, and software firms by software guys."

Worth of an MBA

Meanwhile, despite all the post-financial-crisis soul searching within the business community about the value of an M.B.A., schools are still churning them out. There are, and will be for the foreseeable future, a lot more bean counters than engineers in this country. But the same may soon be true in China, where the state plans to open 40 new graduate schools of business in the next few years. As Lutz puts it, "That's the best news I've heard in years."

Read the original article here

Incidentally the author of the above piece, has also written another interesting article for Newsweek magazine, entitled "The Joys of Economics", which introduces "Happiness Economics".

If you read the above you might get the feeling "...of course, that makes sense", which is always a nice feeling. But more importantly, that rejecting this "digging for the bottom of the barrel for the last quarter of cent profit", devoid of any semblance of a moral compass, is not the sole reason for our existence. I take comfort in knowing that others around me, think that having some backbone, and taking pride in providing a real product, mindful of quality and longevity is not a worthless endeavour. Not only is it worthwhile, but also brings happiness, even to lowly engineers aboard ships.

You might be wondering what the title of this post represents, I like to make it catchy, and this one is actually the formula for measuring happiness, or as Wikipedia states it -

"Micro-econometric happiness equations have the standard form:Wit = α + βxit + εit.

In this equation
W is the reported well-being of individual i at time t, and x is a vector of known variables, which include socio-demographic and socioeconomic characteristics."

Graphics from various internet sources. On the right, is a submitted info graphic on an MBA degree, by, click on graphic to see full size.

Tuesday, July 26, 2011

Your thoughts on MarPol

The Society of Naval Architects and Marine Engineers (SNAME) is requesting your kind participation in an environmental survey they are currently conducting. They summarize their objectives with the following...

"The Society of Naval Architects and Marine Engineers is a 117 year old professional Society based in the northeast US with 9,000 plus members. We are an international Society with active sections who host a number of events designed to stimulate professional development, technical content, and the interest of our members.

We publish academic and contemporary business works, manage a portfolio of scholarships and research, and are growing a modern web presence to deliver services to members and information to the public.

One of our Technical and Research Panels, EC-7, is studying environmental management in the martime industry.
We have developed a survey for the purpose of determining environmental awareness on various issues both within and outside the maritime community.

The aim of the survey is manifold, but hopefully we will be able to answer questions such as:

1. What are environmental perceptions within and outside the maritime community?

2. How much is the public aware of the maritime industry’s environmental practices?

3. Is there sufficient training for operating environmental equipment?

4. Are things getting better or worse?

The survey can be found here.

We would appreciate it if you could take the survey, but even more importantly also send the survey on to people you know within and outside the marine industry and ask them to complete the survey as well.
The greater the number and variety of responders we collect, the greater the effectiveness of this effort.

We hope to get responses from people such as high schoolers, teachers, candlestick makers and policy makers from all over the world.

The survey is fully anonymous and cannot match responses with actual people.
Thank you in advance and we look forward to providing you with the results of the survey."

Friday, July 22, 2011

Who's the busiest person at the Davie Shipyard...

...the answer is... its a three way tie between the lawyer's office, bankruptcy court and the sign shop. That's a tough call to make! At this point, one might say the sign shop is now the busiest, with the latest twist in the saga of Davie Shipyard in Quebec City.

While politician, up until very recently, were extolling the populist virtues of promising even more money to that ferret, Gary Bettman, and his merry band of ultra quazillionaires, with the faintest of hope that could bring an NHL franchise to Quebec City. Meanwhile, within sight of the Assemblee National - Quebec's seat of government - the politicians could hear the dying groans of an industrial giant across the river in Levis, where the Davie Shipyard is situated.

After a long drama of bankrupcy(s) which I must admit I did not follow very much (I also don't follow Coronation Street - seemingly similar drama), the shipyard saw some tremble of life, several years back, when all the world's other yards, were too busy. The Norwegian wanted the yard, and started to build three offshore support ships there... alas, the bottom fell out of the economy, and the ships sit unfinished in the yard's dry-dock.

The last couple of years have seen the bankruptcy trustee busy looking for a pulse. Unfortunately not much was to be had, until Davie's defacto entrance into the National Shipbuilding Procurement Strategy bid competition. During this time, industrial giants salivating at their bottom line, took their turn on the dance card, and after the Italians came and left, the Koreans and SNC Lavalin loaned their names to a purchase of Davie by Upper Lakes Group.

For those Canadians wondering... wasn't Upper Lakes sold to Algoma... well that is a very good question. From what I can tell, Algoma only acquired the ships of Upper Lakes. Upper Lakes Group seems firmly secured ashore with Allied Marine, Canal Marine, Seaway Marine, Lakehead Marine, Hamilton Marine under the groups banner.

Upper Lakes Group was already in the NSPS bid process, with its Seaway Marine Yard (Port Weller) in the race, but rumoured to be targeting the smaller portion of the Two Tier Federal contract (Combat = $$$ and non combat = $). With "only a few hours" before the deadline for the submission of bids, on July 21st, Upper Lakes Group, Daewoo and SNC Lavallin's bid for Davie was accepted (pending many caveats) by the bankruptcy courts.

Now, this is what I would call a juicy political steak, ready for the devouring. Here you have the Conservative Party solidly entrenched in the Canadian west, and looking eastward, with the potential to hand out billions of federal dollars, in not just one, but both of the most important electoral areas in Canada; political areas that are crucial to a government staying or gaining power in Canada; Ontario and Quebec.

The conservative have gone out of their way to say that the process is not a politicized one, but one cannot overlook this massive elephant in the room. Never mind the mind boggling concept of how one organization, made up of three marquee names, including the mighty and powerful Montreal based SNC Lavalin, can submit a cohesive bid, when the entity did not exist, two hours before the bid deadline.

So going back to the busiest guy at Davie, I don't know, but one things for sure the sign shop guy must be wringing his hands in anxiety with the numerous logos that have been painted on the signs over the years, and the many more that might be needed. In the meantime the bid deadline is now past, we should be hearing the results in a few weeks.

Here's a little more about the deal to buy Davie.

Friday, July 15, 2011

I knew I should have been a fireman!

Just came across some big news...

VShips, my current employer, is reportedly being bough by behemoth pension fund OMERS - Ontario Municipal Employees Retirement Scheme. The fund with $53 billion under management, representing the pension of 400,000 Ontario employees is said to be spending $500 million to acquire VShips, one of the world's largest ship managers and ship operations service provider.

OMERS is made up of the pension of 931 public employers in the Province of Ontario - such as transit workers, policemen, firemen, municipal workers, children aid workers, non teaching school workers, and hydro employees.

In Canada, based out of their Montreal Offices, Vships Canada manages the bulk of the Martin family CSL's fleet, along with some vessels for Kirby Corp, Shell, and Intelecom, to name a few. The company, based in Glasgow, and / or Monaco, and / or Isle of Man, has numerous brands such as VManpower, VShips Leisure, Seatec, etc. VShips is the founding brand, with their website listing VGroup as the overarching brand. I am not sure if the Groups is spinning off just the ship management side of things; but based on my observations, I assume it will be the whole group.

According to the VShips website...

"Formed in 1984, V.Ships is the leading supplier of independent ship management and related marine services to the global shipping industry. Currently, it supplies services to a fleet of over 1000 vessels and manages a crew roster of 24,000 staff."

The company has many facets, in numerous offices all over the world, but has a primary UK flavour to its operations. You can find out more about VShips here, VGroup here, OMERS here. Below is the news article from Reuters with (unconfirmed) details of the deal, and transaction.

Ontario pension plans are no stranger to the maritime business. For instance, the Ontario Teacher Pension Plan, managing a massive $107 billion portfolio, has a wholly owned subsidiary called Global Container Terminal - which is the biggest operator in the Port of Vancouver (TSI in Vancouver and Delta) moving 70% of the containers traffic. They also control container port operations in Bayonnes, New Jersey, and Staten Island, along with airports and a $140 stake in Carnival Corporation.

Canadian pension fund OMERS to buy V. Ships
Thu Jul 14, 2011 9:36pm IST, By Claire Ruckin

LONDON, July 14 (Reuters) - Canadian pension fund Ontario Municipal Employees Retirement Scheme (OMERS) is set to buy V. Ships, one of the world's biggest ship managers, for about $500 million, a person familiar with the matter said on Thursday.

Private equity firm Exponent agreed the sale to OMERS, which could be completed by the end of next week, after talks with Charterhouse Capital Partners broke down, the person said.

OMERS was not immediately available for comment.

The Canadian pension fund was in the original auction for V.ships along with Cinven, Permira and Charterhouse.

Charterhouse and Exponent failed to agree the sale after Charterhouse revised its offer and linked part of the payment to the future performance of V.Ships by adding an 'earn out' clause. Exponent preferred an all-cash offer, the person said.

OMERS' purchase of V.Ships is expected to be financed with leveraged loans. Royal Bank of Canada is close to the deal, banking sources said. Lazard is advising Exponent.

HSBC and Citigroup were leading the financing backing Charterhouse's bid, several sources said.

Exponent bought V.Ships with management in 2007 backed by $267 million of debt according to Thomson Reuters LPC data.

This included a $180 million, eight-year term loan B; a $60 million, seven-year acquisition facility; and a $27 million, seven-year revolving credit facility.

Under Exponent's ownership, V.Ships has completed three acquisitions including Norway-based engineering consultancy business RC Consulting in 2007, Dubai-based International Tanker Management in 2009 and Singapore-based underwater engineering company Maritime Underwater Maintenance and Services in 2010.

Formed in 1984, V.Ships is a leading supplier of independent management and related marine services to the global shipping industry.

The Glasgow-headquartered company supplies services to a fleet of over 1000 vessels and manages a crew roster of 24,000 staff. (Reporting by Claire Ruckin, edited by Tessa Walsh and Erica Billingham)

OMERS Board of director (my new bosses) pictured...

Tuesday, July 12, 2011

Half Ofer Passes

Few know the "powers that be" behind shipping, but at the beginning of June, a central person in the world shipping, passed on. Below is an article from Cruise Solutions, giving us an glimpse of a shipping empire monarch. A bit more about the Ofer Brothers, and here's another news story about his death.

Sammy Ofer Dies At 89

Sammy Ofer passed away Friday 3rd June, a member of the Royal Navy during the Second World War, and a major shareholder in Royal Caribbean Cruises. Ofer was a businessman, shipping magnate and one of the wealthiest people in Israel. His shipping interests included not only Zim Integrated Shipping Services Ltd and Zodiac Maritime Agencies Ltd in London, but also a 16.5% interest in Royal Caribbean Cruises Ltd and a 12% stake in South Korea’s Hanjin Shipping Co Ltd.

Born in Galatz, Romania, on February 22, 1922, Sammy Ofer, then known as Samuel Herskovich, immigrated with his family to Palestine in 1924 and settled in Haifa. Starting his career with Haifa-based shipping agency M Dizengoff & Co Ltd, with the outbreak of the Second World War, he enlisted in the Royal Navy and served as a petty officer in a minesweeper based at Alexandria. He later also served as an officer with the Israeli Navy.

Ofer’s first ship purchase was the 460-ton motorship Eyal, named after his eldest son. The Eyal ran for Mediterranean Seaways Ltd, which was founded by Sammy and his brother Yuli, together with Mordechai Mano, in Haifa in 1956 to run services in the Mediterranean, to the Adriatic and to Bulgaria and Romania. Mano left the association ten years later to found Mano Maritime, which today operates the cruise ships Golden Iris and Royal Iris out of Israel.

The Ofer brothers meanwhile expanded into other areas of shipping, amassing a fleet of well over 200 bulk carriers, tankers and container ships, as well as taking an interest in Royal Caribbean Cruises Ltd, and in real estate and banking. Sammy’s son Eyal took his father’s position on the board at Royal Caribbean in May 1995 and Sammy’s wife and Eyal’s mother Aviva sponsored Royal Caribbean’s Grandeur of the Seas at Miami in 1996.
Six years later, Eyal’s wife Marilyn also sponsored a Royal Caribbean ship when she acted as godmother for the Brilliance of the Seas at Harwich in 2002.

In March 2008, Ofer donated £20 million to the National Maritime Museum at Greenwich as part of a £35 million expansion program. [The National Maritime Museum at Greenwich] He also donated £3.3 million to help complete the restoration of the preserved clipper ship Cutty Sark, also at Greenwich. That November, Ofer was made an Honorary Knight Commander of the Order of the British Empire (KBE) in recognition of his involvement with maritime heritage in the United Kingdom. The Sammy Ofer Wing of the National Maritime Museum is due to open on July 11.

Contributed by Kevin Griffin. Pictures from various internet sources.

Saturday, July 09, 2011

Reaching out to the "public"

Seaspan recently launched a "Were in it to win it" National Ship Procurement Strategy (NSPS) website. The company aims to get the word out on its advantages, over the other Canadian yards, competing for the federal shipbuilding contracts. The website is very sharp looking and well put together.

Seaspan and Irving both opposed the extension on the bid deadline, requested by the other two competitors, Seaway Marine and Davie. Obviously Seaspan is rearing to go, since the team has enough time to reach out to the public. I think this is a good omen of things to come from them, should they win a share of the program. Check out the website here. I particularly like the "Why the west is best" section.

I am not sure which came first, but Nova Scotia and Irving Shipbuilding also have their own web site, touting the benefits of awarding part of the NSPS program to the region. You can find their website here.

Thursday, July 07, 2011

What goes around the world, while remaining in its corner

My son had a riddle for me the other day...

"What goes around the world, while remaining in its corner...?"
I answered... "a dutiful sailor !?!?!"
"No, silly!", he said, "its a stamp !"

This Month the United States Postal Service will officially unveil four new stamps to highlight the Merchant Marine. They will make the launch on July 28th, and if you are near New York City, you are welcome to attend... below is the press release and a description of the vessels depicted.

The Postal Service will salute the U.S. Merchant Marine on four forever stamps July 28 at the United States Merchant Marine Academy in Kings Point, NY. Admission is free and the public is welcome to attend the 11:30 a.m. dedication ceremony that takes place in the Ackerman Auditorium, 300 Steamboat Rd.

Since the founding of the republic, the United States has looked to the commercial maritime industry for much of its growth and security. This issuance pays tribute to the U.S. Merchant Marine, the modern name for the maritime fleet that has played this vital role. The four-stamp design on this pane features types of vessels that have formed an important part of this history: clipper ships, auxiliary steamships, Liberty ships, and container ships.

U.S. Merchant Marine stamp

Since the founding of the republic, the United States has looked to the commercial maritime industry for much of its growth and security. This stamp issuance pays tribute to the U.S. Merchant Marine, the modern name for the maritime fleet that has played this vital role. The four-stamp design on this pane features types of vessels that have formed an important part of this history: clipper ships, auxiliary steamships, Liberty ships, and container ships. The stamps go on sale in July.

Illustrator Dennis Lyall of Norwalk, CT, created the stamps under the art direction of Phil Jordan of Falls Church, VA.

Since colonial times, America’s merchant ships have plied the oceans and other navigable waters conveying goods and passengers. During wartime, they have also helped deliver troops and war materials. This role was formalized shortly before World War II, when legislation empowered the "U.S. Merchant Marine" to serve as a naval auxiliary unit. During World War II, the U.S. Merchant Marine bore the brunt of delivering military supplies overseas to U.S. forces and allies. Today, it continues to help meet the nation’s security needs while also transporting commodities that sustain the American economy.

Clipper ships, ushered in by the California Gold Rush of 1849 and noted for their streamlined shape and majestic cloud of square-rigged sails, set numerous speed records for their time.

Auxiliary steamships—steam-powered ships with back-up sailing rigs— were the ocean liners of their day, competing in the 1850s with clipper and other sailing ships for transatlantic mail and passenger service.

Liberty Ships - During World War II, the United States built more than 2,700 Liberty ships, plain but sturdy cargo vessels that sustained the Allied forces with a steady supply of food and war material.

Container ships, pioneered in the 1950s, are the lifeblood of today’s global economy, carrying nearly all the world’s manufactured goods across the oceans and exemplifying the modern merchant marine.


Sunday, July 03, 2011

Marine engineer at the helm...

In its 106th session, the International Maritime Organization (IMO) elected a Japanese marine engineer, to the post of Secretary General, the head of the IMO. The married father of two, will take over duties from current IMO Secretary-General Mr. Efthimios E. Mitropoulos on January 1st 2012. Below is the official press release from the IMO.

Mr. Koji Sekimizu elected as IMO Secretary-General
27 June to 1 July 2011

Mr. Koji Sekimizu of Japan has been elected as the Secretary-General of the International Maritime Organization (IMO), with effect from 1 January 2012, for an initial term of four years.

The vote took place during the 106th session of the 40-Member strong IMO Council, which is meeting from 27 June to 1 July 2011. The decision of the Council will be submitted to the IMO Assembly, which meets for its 27th session from 21 to 30 November 2011, for approval.

Mr. Sekimizu, 58, is currently Director of IMO’s Maritime Safety Division. Mr. Sekimizu studied marine engineering and naval architecture and joined the Ministry of Transport of Japan in 1977, working initially as a ship inspector and moving on to senior positions in both maritime safety and environment related positions within the Ministry. He began attending IMO meetings as part of the Japanese delegation in 1980 and joined the IMO Secretariat in 1989, initially as Technical Officer, Sub-Division for Technology, Maritime Safety Division, becoming Head, Technology Section in 1992, then moving to become Senior Deputy Director, Marine Environment Division in 1997 and Director of that Division in 2000, before moving to his current position in 2004.

Congratulating the winner, IMO Secretary-General Mr. Efthimios E. Mitropoulos said he looked forward to “working closely with Mr. Sekimizu between now and the end of the year to introduce him to the current state of organizational affairs so that the transition of administration from me to him will be as smooth, harmonious and successful as possible.“

“For him to succeed in the hugely demanding and heavy task the Council entrusted him with today, he will need all the understanding, support and co operation of the entire membership and the Secretariat to enable him to provide direction and steer the Organization prudently and wisely in the challenging times that lie ahead. While I have no doubt that the membership will provide all that I just suggested (as they did to me, over the last seven and a half years, for which I am ever so grateful), I can assure him that the Secretariat will stand by him to support him in any way possible and under all circumstances,” Mr. Mitropoulos said.

The other candidates for the post were:

Mr. Lee Sik Chai (Republic of Korea)
Mr. Andreas Chrysostomou (Republic of Cyprus}
Mr. Neil Frank Ferrer (Republic of the Philippines)
Mr. Jeffrey Lantz (United States of America)
Mr. Esteban Pacha Vicente (Kingdom of Spain)