Business | Shipping
Evergreen Marine founder steers to a safe channel
Behind Chang Yung-Fa, chairman and founder of Taiwan's Evergreen Marine Corporation, as he greets visitors in his Taipei office, are multiple pictures of himself.
- Financial Times
- Published: 00:08 July 14, 2008
Behind Chang Yung-Fa, chairman and founder of Taiwan's Evergreen Marine Corporation, as he greets visitors in his Taipei office, are multiple pictures of himself.
Chang, now 80, is seen meeting politicians and receiving honorary degrees and medals. In one, he is between John Prescott, former British Labour deputy prime minister, and Baroness Thatcher, Britain's former Conservative prime minister.
Yet, when Evergreen came into being on September 1 1968, few outsiders would have expected it to last many months, let alone end up courted by world leaders.
Chang's then business partners had thrown him off the board of a company called Central Marine and forced him to buy a vessel - Central Trust - which was at sea suffering mechanical problems and the subject of numerous legal actions.
Evergreen, which spent several years in the 1980s and 1990s as world number one container line, is, along with Hong Kong's Orient Overseas Container Line (OOCL), one of only two large Asia-based container lines controlled by their founding families.
The other large container lines in the region - where most world container voyages start or finish - are controlled by listed Japanese conglomerates, Korean chaebols or national governments.
Both lines have pursued distinctively cautious commercial strategies, which have let more aggressive competitors overtake them in world fleet size tables. Evergreen, world number two as recently as 2002, is now number four, while OOCL is number 12, says Paris-based AXS Marine.
However, in a market where most shipowners are buying ships of unprecedented size and price, and multibillion-dollar takeovers regularly go wrong, Chang is stubbornly confident in his own judgment.
Acquisitions
"I just go along a neutral course," he insists. "It's not that I'm cautious or conservative. The other shipping lines around me have grown and expanded too fast."
Chang has put off acquisitions by Evergreen's one, troubled takeover - of Italy's Lloyd Triestino in 1998. Evergreen bought the line from the Italian government after an approach from Romano Prodi, then Italian prime minister.
CC Tung, chief executive of Orient Overseas International, OOCL's parent, fears a takeover might harm the highly profitable company's widely-respected information technology systems.
"Consolidation on paper is always very attractive," he says. "But I think managers tend not to appreciate the difficulty and obstacles of amalgamation."
OOCL has been able to sit out another major trend - a rush to order new, larger-than-traditional container ships - because it ordered such ships cheaply in 2002 before other lines.
Its biggest ships, which carry more than 8,000 20-feet equivalent units (TEUs) of containers, cost about $72 million each, but would cost about $145 million now.
Chang ordered 12,000 TEU ships last year, but still retains long-standing concerns about whether the ships will remain profitable when cargo supplies dry up during a downturn. He has reduced the risk by chartering the new ships for five to 10 years, rather than buying them directly.
"This way, if a reaction sets in, I'm able to return the vessel to its owner without having to bear the cost," he says.
Yet Evergreen, in particular, has been more aggressive in the past. From his first years as a shipowner, Chang has preferred more expensive, new ships.
The stance - at odds with most start-ups' preference for old, cheap tonnage - led to the break with Central Marine, whose other directors were angry that Chang had persuaded them to buy the newly-built but faulty Central Trust.
"If you were to charter a vessel, it's never to your own specification, which I don't like," Chang says. "I always want the kind of specification that will work best for me."
Evergreen also defeated in the 1970s the then-powerful conference system, under which container lines jointly set rates for certain trades. Taiwan's growing industries then used the line for their booming exports.
"Evergreen wanted to join the conferences but we were kept outside," Chang recalls. "Given the situation, I had no choice but to put up a fight."
The key question for both Evergreen and OOCL now is whether their current stances will be proved as right in retrospect as the key past ones - which remains far from certain.
However, many observers still expect two lines with little or no debt and cheap-to-operate ships to survive better in any coming market downturn than rivals.
"OOCL and Evergreen are, to my mind, the yet-to-be-proven winners of this market," one shipbroker says. "They have been conservative where others have been over-eager."
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