Maersk Line, the world's largest container shipping line, plans to undertake its biggest-ever redundancy programme in a significant reorganisation aimed at returning the AP Møller-Maersk Group's flagship business to profitability.
The line, whose fleet is nearly twice as big as its next largest competitor's, plans to shed between 2,000 and 3,000 of its 25,000 staff, Eivind Kolding, chief executive, said when officially announcing the strategy on Tuesday. Much of the new approach has been known since December, when the Financial Times published details of a letter to staff from Mr Kolding outlining key parts.
The new plan's centrepiece is a drive to make better use of ships by running them closer to full capacity and to seek higher-value cargo. In recent years, as part of an aggressive growth strategy, the line has pursued volume.
The line has been struggling since botching the integration of P&O Nedlloyd, then the world's number three line, which it bought in 2005. Maersk made 1,500 staff redundant immediately after the takeover.
The new job cuts would come mainly from the line's regional offices - a layer of the organisation that stands between individual country offices and the headquarters in Copenhagen, Mr Kolding said. "We do not see the need for large regional organisations any more," he said. "It's very much the mid-layer between centre and countries. It will not totally disappear, but it will be slimmed down."
Maersk announced in November that its container operations - which made a pre-tax loss of $267m on $23.5bn turnover in 2006 - returned to profitability for the first nine months of last year but would probably still make a loss of about $25m for the whole of 2007. The figure implies continuing heavy losses at the line, since the division includes the profitable APM Terminals ports business.
Mr Kolding said the line aimed to return to "sustainably profitable mode".
"We will still be in a cyclical business, meaning that some years will be better than others," he said. "But the clear objective will be that we over the cycle deliver satisfactory results to our shareholders."
In last year's letter, Mr Kolding compared Maersk Line unfavourably with the far more profitable APL, the container shipping operation of Singapore's Neptune Orient Lines, which attracts higher-value cargo. Mr Kolding accepted on Tuesday, however, that Maersk could not rely as heavily on high-value cargo as APL because it was so much larger.
"We also have to compete in the middle of the market," he said. However, he added that there were advantages to Maersk's large size, including its ownership of the world's largest container ships: "We have scale advantages that the others do not have."