UASC, Hapag-Lloyd Merger: No Layoffs?

 

Middle Eastern enterprise UASC expects most of the tie-up’s $400 million cost savings to come from operations rather than layoffs, The National reports quoting UASC chief executive Jorn Hinge.

 

UASC's initial hypothesis is there will be fewer layoffs than many people would normally expect in a merger, he said.

 

The largest portion of this amount comes from deploying the optimal size ship for each of the trades where the combined company will operate, he added.

 

For example, cost savings will come from negotiating better procurement terms.

 

UASC and Hapag-Lloyd are merging by the end of this year to become the world’s fifth-largest container carrier as a wave of consolidation in the container shipping industry accelerates.

 

Container shippers are merging as they grapple with low freight rates, anaemic trade volumes, and vessel overcapacity, which have dented their earnings.

 

"The outlook for 2016 is for UASC to continue growing ahead of the market due to increased volumes with our new vessels that have been delivered throughout the first half of this year," says Hinge. "The exact amount of the revenue growth will depend on how freight rates evolve during the remainder of this year. "