By Andrew Spurrier, Fairplay, May 16th
There have been other founders of shipping companies in France over the past 130 years but none can claim to have matched the achievement of Jacques Saadé.
At a time when French shipping was in general decline and the large liner companies that had built their trading empires during the colonial era were disappearing one after another, he reversed the general mood of gloom afflicting French shipping during the 1980s and early 1990s.
He demonstrated in a remarkably brief period of time that it was still possible for a French company to succeed in the liner trades and even to become one of the global giants that dominate the sector.
Ironically, it was in taking over state-owned Compagnie Générale Maritime, a company formed through the merger of two former giants of the colonial era, in 1996 that the company, which had until then been known as Compagnie Maritime d’Affrètement, began its fast forward rise to global ascendancy.
That takeover, for an astonishingly modest FF20M (€3M), was surrounded by controversy as CMA was accused of having benefited from political support from France’s then right-wing government to obtain control of CGM.
Saadé was accused, too, by his younger brother and co-shareholder in CMA, Johnny, of having unlawfully taken control of the jointly owned Saadé family holding company to carry out the transaction without his consent.
The legal battle between the two brothers continued for several years but Jacques succeeded in keeping control of the group which, as CMA CGM, began climbing rapidly up the container shipping rankings.
Today, the Marseille-based company, which began its life in 1978 as operator of a single line between Lebanon and the French Mediterranean port of Marseille, is the world’s third-biggest container carrier behind Mediterranean Shipping Company and Maersk Line.
According to its own data, it operated a fleet of 414 ships on 170 routes at the end of last year, when it carried containerised cargo totalling 10.6M teu. It employs 18,000 people worldwide and maintains 650 agencies and offices around the world, including 64 in China alone.
Financially, too, the company is a giant. Its revenues increased by 7% last year to $15.9Bn and, following a $5M loss in 2011, it made a strong return to profit, with net income totaling $361M.
What has characterised the company most over the years has been its ability to spot and seize opportunities. The eastern Mediterranean origins of Beirut-born Saadé and his faithful number two Farid Salem have, arguably, given them the advantage of a non-Eurocentric view of world development. This enabled them to spot the economic potential of China at an early stage.
It is interesting to note, for instance, that CMA CGM opened an office in Shanghai as early as 1992 and that China quickly became the company’s biggest source of cargo. The takeover of CGM was another crucial seized opportunity in the life of the company. State-owned CGM had dropped all pretentions to a global role at the time of the takeover but had been largely relieved of its loss-making activities. It also had a useful owned fleet and lines with considerable strategic potential, including a round-the-world service and trans-Atlantic services to the French Caribbean and South America.
Most importantly, however, CGM came with a FF1.3Bn (€198M) cash injection from the French government, supposedly to put the company on a viable footing and make it an attractive prospect for would-be buyers.
In any case, CMA knew what to do with its acquisition and was soon climbing towards the position it occupies among the leaders of the container shipping sector today. The family-controlled company came close to ruin when the global economic crisis led to a trade collapse in 2009, leaving it overstretched with a huge $5Bn debt and under pressure from its bankers to accept a radical financial restructuring.
Jacques Saadé and his senior management team, which includes son Rodolphe and daughter Tanya, fought tenaciously, however, to keep the company under family control and, helped by an unlikely white knight in the form of Turkey’s Yildirim group and a rapid albeit uneven trade recovery, have piloted the company intact through its difficulties, with 70% of its capital still firmly in Saadé family hands.
Excessive capacity has rendered trading conditions difficult in the container shipping sector this year but the group can be trusted to find solutions to the vagaries of the market as it always has in the past.
Reducing slot costs has long been a central tenet of its development strategy and, with its finances now stabilised and three 16,000 teu vessels newly entered into service, it is unlikely to be the first casualty of the freight rates war currently in progress.