Doron Grosman knew a fair bit about moving boxes before he took the reins of Canada’s largest maritime employer, but not the kind of boxes GCT Global Container Terminals Inc.
The boxes GCT moves come in 20-, 40- and 53-foot lengths, and they contain pretty much everything and anything that makes world consumer markets and major global trade routes tick.
In 2017, Vancouver-headquartered GCT handled approximately 3.9 million 20-foot-equivalent units (TEUs) through its four container terminals – GCT Vanterm in Vancouver, GCT Deltaport at Roberts Bank, GCT New York on Staten Island in New York and GCT Bayonne in Bayonne, New Jersey.
Depending on cargo traffic through its terminals, the company employs about 5,100 people. Roughly 380 are
GCT Canada accounts for the lion’s share of that employment at around 4,250
Canada has a majority equity stake in the company. The Ontario Teachers’ Pension Plan holds 37.5% and the BC Investment Management Corp.
Business in Vancouver sat down for a chat with Grosman a little over a year after his first anniversary of taking command of GCT. The focus was twofold: to determine whether the Johannesburg-born executive had gotten his sea legs yet and to get his insights on the current state and future prospects of the volatile global container cargo business.
The announcement from GCT’s board introducing Grosman as the company’s new leader noted that he was a “seasoned, multi-industry executive with a variety of C-suite roles at global Fortune 1000 companies.” However, that included no marine industry seasoning.
It instead included stints as an operating partner with New York-based Court Square Capital Partners; as president of Hexcel Corp., a company involved in advanced composites technology; and as president of Quebecor
He’s also a Harvard man with an MBA from that university’s highly regarded business school, and he served 11 years in various executive roles at General Electric.
But, again, no sea stories in his resumé, no stints down at the waterfront, no long sea voyages, no executive adventures in Shanghai, Singapore, Rotterdam or other major global container ports.
Q: So how and why did the former CEO of American Standard’s global Trane air conditioning business end up at the helm of a top international container terminal business? Is it more a matter of management style and leadership? After all, the container cargo business is basically about moving boxes, right?
A: Right, it’s just moving boxes around. All the businesses I’ve worked in have been very asset intensive. So
Q: What were some key priorities for you when you first joined GCT?
A: My mandate was three things that the board and I agreed to … seek opportunities to grow the business profitably, increase the return on capital, and the third was that the way the company had been run and allowed to be run by the board was fragmented. There was the U.S. operation along the East Coast run in U.S. dollars, and there was the Canadian operation on the West Coast in Canadian dollars, and there wasn’t a lot of connection between the two, and so – this is not difficult stuff – I created a concept called One GCT.
Q: So you’ve been here about 18 months now, likely got your sea legs. How have those priorities changed?
A: The priorities haven’t changed. There are two external context areas that have a big influence on the priorities.
External context one relates to the container industry, the shipping industry and the container terminal operating industry. Things are evolving and changing there reasonably rapidly.
Then, more recently, the second external context that has changed is obviously the man down in Washington barking and waving his arms and creating all kinds of waves across the world that don’t exactly help global trade and promote movement of goods, and we are a carrier of international goods imported and exported out of our container terminals. So those are two big external factors that are influencing where we are at and where we are going.
Q: What challenges are specific to GCT’s operation?
A: [Consolidation in the shipping company industry] is an ongoing trend, and I think it is going to continue.… There are only 11 or 12 shipping companies in the world that we would have any interest in doing business with. So that number is coming down dramatically, and they have significant challenges – not that we don’t – but … cyclical profitability, the price of oil has a dramatic impact on them, and they are increasing the size of their vessels to move more containers per ship, and that carries over as a challenge to us.… The largest ships will be coming in ever-growing excitements and challenges. The shipping companies need to be moving more boxes; it’s more efficient to move them on fewer ships. In the old days, we used to have 5,500 TEUs on a vessel. Then it grew to 9,000, and people said, ‘Nine thousand – how can you even dock a vessel like that?’ Then it went to 14,000, and now it’s at 20,000 to 22,000. I just came back from Shanghai and Singapore, and you look at these vessels and [laughing] this thing floats? But the challenge for us as container terminal operators is that the bigger the vessels, the higher the cranes need to reach, and the further out the cranes need to reach because the vessels get longer, they get higher and they get broader, so we continue to invest in that capability.
Q: Is that part of the rationale for the $300 million GCT Deltaport upgrade?
A: Not the rail densification project. We just put two new cranes in there that can deal with 14,000-TEU vessels without a problem; we are going to be doing a similar project in New Jersey-Bayonne. Now we can handle one 14,000 [TEU vessel], but we want to be able to handle two 14,000s, so we have a big investment project that we are working on.
The [GCT Deltaport] rail project is not an outcome of larger ships. The rail project is an outcome of more boxes [containers]. Whether they are coming on 3,000, 5,000 TEUs or coming on one 15,000 TEU [ship], there are more boxes coming in every year, and we have got to get those boxes out. So 80% of containers that come into Deltaport go out on CP or CN railroad, so we have got to get them off the ship, put them in the yard and get them on the train, or when trains are coming in for export we have to take them off.
The rail project went live [September 24], and it is a beautiful purring machine.
Q: In simple terms, what did it do?
A: Two things: it increased the [terminal’s] ability to move rail boxes out by 50%, and it increased the capacity in the overall terminal by 33%.… There is no project or operation in North America that has this degree of rail automation and sophistication. I don’t know about the wider world, but here in North America, this is the most advanced rail loading and unloading project anywhere.
Q: The cargo liner industry has traditionally been conservative and very slow to embrace technology, especially the new digital disruptive technology that is revolutionizing pretty much every other industry. Is that a frustration for terminal operators?
A: Yes. They are metal people. They are moving boats; they are moving boxes. Technology is not at the forefront of their thinking, but, having spent time with CEOs of a number of our customers, they are working hard at it. They want to get there, but it costs money, and it’s new, and it’s different, and they are not necessarily located in parts of the world where they can draw on the capability of young millennials who will just hammer out a bunch of code and all of a sudden you have an app and it’s doing this and it’s connected to that, and you have a chain.
There is not much in [blockchain] for us. As a company blockchain doesn’t help us much, but it is very important in order to move the cargo from A to B, where that three- or four-day window from the time it gets off the vessel onto the train or the truck, and we have got to be able to service it.… To go from here to Chicago [via train] is 96 hours; to come from Asia to Vancouver is 21 days, so our three or four days is a small component of it, but it’s a link, it’s a chain – you break the link, and you don’t have what you need.
Q: Has GCT got ambitions to expand beyond its two central locations?
A: Yes, why not? Anywhere in North America where you can make money.
Q: What are some other issues container terminals are facing that need more airing?
A: I’m not going to tell you for a second that I’m a world expert [on the ongoing trade wars between the United States, China, Canada and other regions].… I am an American citizen; unfortunately for right now, we are moving in the wrong direction. Nobody in the world was perfect before in [U.S. administrations], but we were all trying to move in a direction that was for the improvement of the world at large, with a lot of squabbling, but the intention was honourable. So we had the transpacific trade, we had NAFTA [North American Free Trade Agreement]; we didn’t poke our best allies in history in the eye; we didn’t say rude things about them; we argued, and we figured it out. That will hopefully end in two years’ time, and, if not, it will definitely end in six years’ time … but it’s not helping; it’s not enhancing trade. It’s not hurting our business today; it may hurt our business in [2019], [but] that’s still not clear.
One way or the other, it is short-lived.… There is a lot of barking but not a lot of biting, and the biting that is occurring is not adversely impacting the container business – yet.
