The merger of liner businesses of Japan’s big three shipping companies, Kawasaki Kisen Kaisha (K Line), Mitsui O.S.K. Lines (MOL), and Nippon Yusen Kabushiki Kaisha (NYK Line), will have a far-reaching impact on NYK’s business, according to the company’s president Tadaaki Naito.
“This liner integration will have far-reaching impacts, and I believe it is a major turning point for the group,” Naito noted while speaking on the occasion of the company’s 132nd anniversary.
The new joint-venture company, announced in October last year, is planned to start operations in April of next year.
As explained by Naito, the decision to integrate the liner business was made in order to achieve competitive strength by “securing critical mass in terms of operational scale and ensure the business survives.”
“The new joint-venture company will utilize the best practices of the three companies and everything will be created from scratch, and this will require significant effort. For us, getting the new company off to a smooth start will initially be the most important issue. Following this, it is my expectation that the business will be able to achieve stable profits,” he added.
Currently, NYK’s liner business accounts for almost 30% of sales, 19% of all employees, and 13% of operational ships group-wide.
Through the integration, this huge division will be shifted outside the company as an affiliated company accounted for by the equity method, Naito said.
As disclosed, once the integration is complete, it will be necessary for the remaining divisions to take over the functions that are currently performed by the liner business division, including fostering international personnel.
Naito further stressed that the company would “aggressively work to increase sales.”
“In response to this, we have reviewed the governance of the group companies operating around the world and have decided to shift to a new organizational framework from April 1 of next year. In addition, while the new joint-venture company will adopt the best practices from each line with the aim of increasing its competitive ability and overtaking the competition, the businesses that are peripheral to and affiliated with the liner business — such as domestic terminals and harbor transport within Japan, tugboat services, inland transportation, and ship management — need to further refine their capabilities and achieve even higher competitive strength in order to survive in the new era,” he noted.
“In this way, through the liner business integration, the entire group will face a major turning point.”
Moreover, due to the ongoing changes in the business environment, the company president said that as of next year, NYK will revise the group management structure from the ground up and shift to a structure that enables “the effective use of management assets throughout the group. “