We Take the Helm
Towards Cruising-Speed Management
To all Colleagues throughout "K" Line and our Group Companies, Happy New Year to each and
every one of you! In addressing you at the beginning of 2009, I’d like you to be
continuously aware that in April 2008 we moved on to "K" Line Vision 100, our midterm
management plan whose main theme is “Synergy for All and Sustainable Growth" with the
aim of guiding us toward the 100th Anniversary of "K" Line’s foundation, just 10 years
ahead from now.
During the 1st half of Fiscal 2008, our profit attained an all-time historic
high attributable to the favorable level of bulk markets that we never previously experienced,
although dry bulk markets plummeted steeply during the 2nd half as a result of the global
economy slowing down rapidly under influence of the financial crisis originating from the
subprime issue in the U.S.. In expectation that our business circumstances will become
extremely severe and more challenging, at the time we announced our financial status for
the 1st half, we therefore modified our prospects downward for consolidated business
achievements during Fiscal 2008 on a yearly basis: Operating Revenues ¥1,380 billion,
Ordinary Income ¥105 billion and Net Profit ¥71 billion.
Fortunately, bunker price
has recently reversed and begun taking a fall, staying rather lower, but foreign exchange
markets show Yen tends to be appreciated with demand for car transport that had continued
to be strong and favorable dropping due to the turndown of the global economy centering on
the U.S. and Europe. In terms of containership cargo movements, the North America service
shows minus growth and European service has begun to level off from last year’s
two-digit increase, each of which will be difficult to recover within this year. Each and
every containership operator is taking positive efforts toward a decrease in sailings and
slowdown in navigational speed to counter the disproportionate imbalance in supply and
demand with a view to the rapidly worsening/widening gap caused by recent completion of
new large containerships one after another. For easier understanding, the present business
circumstances can be compared to a voyage in which a tail-wind suddenly changes into a
head-wind all at once.
Being very difficult to predict exactly when this devastating turmoil
of the global economy arising from the prevailing financial crisis will be normalized, we
have no alternative other than to resolutely take various countermeasures right now against
the economic downturn based on the current understanding that the present adverse business
circumstances are likely to last for a few years to come.
In the face of the global economy
slowing down at a fast speed, the "K" Line Group has decisively taken the helm to slow down
to a cruising speed in promoting the midterm management plan. Nevertheless, we will be
re-steering “the Ship of the "K" Line Group” to the navigational route where she
should go; in short, return to the original route once we have prevailed against this huge
storm.Since brakes are being quickly applied on the global economy, the Group is no longer
able to keep the accelerator down as we have done in the past. Therefore, I have set up an
Emergency Task Force under my command with Vice President E. Suzuki as Assistant Chief. We
have mapped out a concrete plan for drastic reduction in investments effective up to 2011;
by this token we are going to control investments to a level whereby financial indices
wouldn’t be hurt even if business achievement continues to somewhat worsen for a few
years to come. We are going to project a 3-year financial plan in full consideration of every
concrete countermeasure available at the time of compiling our budgetary plan for Fiscal 2009.
In the next process, we will effectively curtail and thoroughly manage all costs. In particular,
an urgent assignment is to stop the present bleeding within the Containership Sector, earnings
and expenses of which are worsening very rapidly. Without the earliest possible business/ financial
recovery of this sector, our entire business and financial management would become unstable since
it is the main business sector for us. I urge people concerned with this sector to give serious
attention to map out a recovery course as immediately as possible on the basis of a thorough analysis
into the existing situation and address every possible improvement free from any precedents.
As a matter of fact, we have never allowed ourselves to rest on our successful achievements under
the favorable business circumstances during the past few years, and at this time, I strongly request
you to brace yourselves. I request every sector and every group company to cautiously carry out a
complete review/inspection in order to confirm that our cost management is being carried out in a
strict manner and that we are not overlooking any opportunity for profit. I call on each of you to
fulfill your roles and assignments in a diligent and steady manner (Kotsu-Kotsu in Japanese).
I understand that the slowdown of the global economy casts a long shadow on all our Group companies
at home and abroad in one way or another. Therefore, I ask you to take every adequate countermeasure
with due consideration to the respective business circumstances you are under.As we have consistently
prevailed against numerous past hardships, I do take a rather optimistic view that we have already
been equipped with appropriate financial power and adaptability that will allow us to shift with
flexibility to whatever responsive and holding-out structure is required to meet and withstand
present circumstantial changes. With a view to this, I firmly believe that to cope and overcome this
tough situation will not be all that hard thanks to the strong will and acting power of all our Group
companies and their staff. In Tokyo Head Office we have launched a BPI (Business Process Improvement)
campaign in which all management and employees participate in an effort for entirely improving/
restructuring working practices. It is aimed at brightening and invigorating our workplace; each and
every one of us should clarify our own roles/goals and feel happy and proud to work them out. I have
a strong and eager intention to elevate all-group-based productivity to a substantial extent. This BPI
campaign will be extended to our overseas subsidiaries and Group companies so that we can build an
enterprise that will be the most prominently competitive in the shipping industry. On this
understanding, I request you to positively take part in the campaign and display just how strong your
acting power is.
The fleet size of the Group already exceeds 500 vessels, but which we are planning to
expand to 600 vessels towards end of 2010. This fleet expansion plan would raise the risk of
encountering accidents or dangers. Since safety in navigation and cargo operation is a shipping
company’s lifeline, we must make every endeavor to seek a solution to them with maximum exertion
and attention regardless of at sea or onshore. The nucleus of endeavors for safety in navigation and
cargo operation lies with practicing each of the fundamentals diligently and solidly. On this
principle, we must comply with the fundamentals on the frontline, we must not attempt to do the
impossible nor let others do it, and we must provide information and support from onshore as much
as possible so that people on the frontline can make appropriate judgment in whatever situation.
Damage incurred by accidents and dangers may be compensated with money, but we must keep in mind
that once we have lost confidence from customers that has been instilled through our long and
ceaseless efforts for safety in navigation and cargo operation, it will take a long period of time
to recover it.
Almost every topic we’ve recently heard sounds bleak and dark. The financial
crisis and devastating turndown of the global economy are giving a dire impact upon each and every
business regardless of industrial sector.
It can be said that those who successfully persevere amidst
such difficulties are given an opportunity for a subsequent huge leap. Let’s interpret this to
mean that the difficulties facing us can also bring us great opportunities. I firmly believe that the
"K" Line Group is a treasure house replete with excellent human resources who are able to develop
business in a favorable wind and simultaneously display their wisdom and potential power in adversity.
Let’s exert all our strength to challenge and prove the above by all means in 2009 when we are
being put in the midst of economic crisis.
In conclusion, I pray heartily that all management and
employees of our "K" Line Group on sea and shore, at home and abroad, together with their families
may be blessed with Good Health, Abundant Happiness and Increased Prosperity in this New Year 2009.
Hiroyuki Maekawa
President & CEO
