Koninklijke Nedlloyd N.V. History

Company Perspectives:

Nedlloyd aspires to obtain a leading position as an international logistics services company, with the emphasis on providing tailor-made logistics solutions both in the area of European Transport and Distribution and in worldwide Container Logistics. Nedlloyd aims to offer its shareholders a competitive return on their investment in the Company. Nedlloyd's client friendly and well-motivated staff may rely on the Company optimally protecting their employment in the widest sense, which includes offering competitive employment conditions. Nedlloyd considers it its social duty to limit the burden its activities may place on the environment wherever possible.

Company History:

Koninklijke Nedlloyd N.V. (Royal Nedlloyd) is one of the leading international logistics services companies in Europe. Based in Rotterdam, The Netherlands, Nedlloyd has refocused its organization onto its logistics offerings--including warehousing, transportation, and specialty and other logistics services--through such subsidiary companies as Mammoet, Van Gend & Loos, and others. Nedlloyd and its subsidiaries offer extensive logistics design and implementation services, from warehousing to delivery and the formation of distribution networks, while adding special focus to chemical logistics, fashion services (clothing transportation), and customs activities.

During the 1990s Nedlloyd has undergone a thorough restructuring to recoup profitability while preparing the company for the upcoming single European market competition. Nedlloyd has jettisoned its noncore activities, including its interests in airline company Martinair; oil drilling and exploration under Neddrill; and other interests, including a share in Smit International, and the company's holdings of North Sea Ferries. The most significant split was the company's decision to merge its worldwide container (shipping) activities with those of the United Kingdom's Peninsular and Oriental Steam Navigation Company (P&O), to form the new independent company P&O Nedlloyd. Royal Nedlloyd holds a 50 percent share and a continued active interest in the operations of P&O Nedlloyd.

Shipping Foundations in the 19th Century

The formation of Nedlloyd occurred in 1970 as the result of the amalgamation of four major Dutch ship-owning companies, but its origins could be traced back to the founding of the Koninklijke Nederlandsche Stoomboot Maatschappij (KNSM) in 1856; the company joined Nedlloyd in 1981. In the mid-19th century, when the British, Russian, and French merchant fleets were occupied with the Crimean War, there was an acute shortage of vessels available to carry out everyday trade. Christian Ramann, a young German businessman, persuaded two Dutch merchants, C.A. von Hemert and M.S. Insinger, of Amsterdam's potential as a major European port. The trio successfully applied for a royal charter to establish liner services between Amsterdam and several Baltic ports--including St. Petersburg, Gothenburg, Copenhagen, and Königsberg--and between Amsterdam and Bordeaux via Le Havre. The resulting company, KNSM, started its Baltic service on October 1, 1856, with two chartered sailing ships. Expansion was rapid, and by 1863 the company was operating 11 ships totaling 4,200 tons.

In 1870 the Stoomvaart Maatschappij Nederland (Nederland Line) was founded for the purpose of trading with and in the Far East. The company got off to a bad start when its first ship, S.S. Willem II, caught fire in 1871, but the vessel was not seriously damaged. In 1883 Rotterdam Lloyd, a company that was to become both a competitor and a collaborator, was founded.

Meanwhile, KNSM entered a difficult phase. In 1869 it decided to enter the lucrative migrant trade to North America, but by the time its new ships, S.S. Stad Haarlem and S.S. Amsterdam, were delivered in 1875, the combination of a severe economic depression in the United States and a European boom severely reduced the number of immigrants to North America. KNSM put the new ships into service but losses increased and the ships were sold in 1879, leaving KNSM seriously in debt. The managing directorship of Ernst Heldring restored the fortunes of KNSM. He consolidated existing services and added new ones, helping KNSM to develop successful trade with North America. European governments commonly used mail contracts during the 19th century to subsidize their national shipping lines. This was part of a strategy to consolidate their overseas possessions and expand their spheres of interest. In 1888 the Dutch government, intent on strengthening its links with the Indonesian archipelago, awarded the Indonesian mail contract to a new company, the Koninklijke Paketvaart Maatschappij (KPM). KPM was founded jointly by Nederland Line and Rotterdam Lloyd expressly for the purpose of developing interisland trade in Indonesia. The service began on January 1, 1891, with 30 ships on 13 regular routes.

KPM's early years were difficult: it sought to establish trade with the smallest and most inaccessible islands of the archipelago and suffered fierce competition from British ship owners. After overcoming these initial difficulties, KPM started to expand and during the early years of the 20th century began services between Indonesia and Australia and Indonesia and Thailand (then known as Siam). In 1911, with a fleet approaching 100 ships, KPM introduced fast weekly services between several Far Eastern ports. Following a temporary halt in its progress during World War I, KPM became the largest shipowner in the Far East by the late 1920s.

Postal service also played an important part in the development of KNSM. Koninklijke West-Indische Maildienst (KWIM) had been established to deliver mail to and from the Dutch West Indies. It expanded too rapidly, however, and left itself vulnerable to competitors. By 1913 KNSM had gained effective control of KWIM, seeing the opportunity to become a leading player in the West Indies. KNSM also hoped to expand its services through the Panama Canal and across the Pacific, but World War I intervened before this became possible.

KPM, Rotterdam Lloyd, and Nederland Line also had shares in the Java-China-Japan Line (JCJL), a company founded in 1902 to take advantage of the growing traffic between India and the Far East. JCJL's major shareholder was the Nederlandsche Handel Maatschappij, a government-backed bank that provided capital for Dutch overseas investors. JCJL's progress was steady rather than spectacular; by 1939 its services were limited to 11 vessels. JCJL came into its own, however, after World War II and the Dutch withdrawal from Indonesia.

In 1908, KPM, Rotterdam Lloyd, and Nederland Line came together, this time through a holding company, to found Koninklijke Hollandsche Lloyd (KHL)--a consolidation of the South America Line that had been established in 1899. By 1914 those companies that eventually came together to form the Nedlloyd Group were, for the most part, in sound financial condition and had extended their sphere of activity to the Far East, Australasia, and the Americas. During World War I, the allied forces exercised the "Right of Angary"--that is, the right of a belligerent state to utilize the property of a neutral state. Consequently, the portion of the Dutch fleet that had escaped the German navy (138 ships altogether, including 22 KNSM vessels) was used to support the Allied cause.

The immediate postwar years were prosperous for Dutch ship owners. They benefited from restraints imposed on German competitors and from Europe's determination to rebuild its stocks of basic commodities. By 1920, however, freight rates had started to fall and shipping companies were feeling the pinch. The Nederland Line, Rotterdam Lloyd, KPM, JCJL, KNSM, and three other small companies came together to form Vereenigde Nederlandsche Scheep-vaartmaatschappij (United Netherlands Navigation Company, or VNS), a joint venture that was intended to help restore prewar services and to strengthen the competitive position of Dutch shipowners in anticipation of a German shipping revival.

The fortunes of VNS companies varied during the interwar years. KPM recovered quickly; most of its fleet was fully intact after the war and the company rapidly resumed business on its old routes. Before long it was the largest shipping company in the Far East and during the boom years between 1925 and 1930 it added 60 new vessels to its fleet. KPM also entered the tourist market during this period, opening hotels in Bali and other Far Eastern countries.

The early 1930s were for shipping, as for most industries, a time of contraction. Most Dutch shipowners, including Nederland Line, KPM, and Rotterdam Lloyd, went through a period of severe cost-cutting. KPM was the only company to begin its recovery before the start of World War II; in 1937 it brought two state-of-the-art cargo ships into service and started up the Zuid Atlantische Lijn, which linked Durban, Montevideo, Buenos Aires, Santos, Rio de Janeiro, and Capetown.

At the outbreak of World War II, all Dutch ships in European waters were instructed to make their way to British ports if they were able to do so. Vessels outside European waters continued with their existing activities until it was decided how they could aid the Allied cause at sea. The future Nedlloyd Group companies served the Allied war effort, incurring severe losses of personnel and ships. In 1939 the KNSM fleet, for example, comprised seven passenger vessels and 76 cargo ships; six years later it had fallen to three passenger vessels and 39 cargo ships. KPM lost 98 vessels in the conflict, having begun the war with 146 ships.

Insurrection in Indonesia and the subsequent declaration of the Republic of Indonesia on December 27, 1949, precipitated the most immediate postwar change in Dutch shipping. KPM's success had been based on their services in the Indonesian archipelago and, in view of the political upheavals there, the company did not find postwar business in the area profitable. Accordingly, KPM's Far Eastern fleet was merged with JCJL in 1947. The latter company had lost 6 out of 11 vessels during the war but, with the help of "Victory" ships, had quickly resumed its old services between Indonesia, Hong Kong, China, and Japan, and had added the Philippines to its route. The new JCJL-KPM company was called Koninklijke Java-China Paketvaart Lijnen (KJPCL), but it eventually became known by the English title Royal Interocean Lines.

The remaining portion of KPM's fleet tried to continue its Indonesian interisland services but was under constant harassment from the Indonesian government, which seized some of its ships and expelled the company in 1957. The remaining 40 ships initially were put in dry dock, but some were later sold and others used as tramp ships. In 1966 the remnants of KPM joined Royal Interocean.

The rise of civil aviation accelerated the withdrawal of future Nedlloyd companies from passenger services. In 1964 both Nederland Line and Rotterdam Lloyd sold their passenger ships. The company's final passenger ship was not sold, however, until 1974 when Royal Interocean's New Holland left the fleet.

Merging in the 1970s

The modern era in Nedlloyd's history began in 1970 with the full integration of the activities of Royal Interocean Lines, Rotterdam Lloyd, Nederland Line, VNS, and their subsidiaries into the Nedlloyd Group. In 1977 the name was changed to the Koninklijke (or Royal) Nedlloyd Group.

In 1981 the Royal Nedlloyd Group took over KNSM, which, with a history of 125 years of service, was the world's oldest shipping line still operating independently. During the postwar era, KNSM had rapidly rebuilt business halted by the hostilities and reestablished its routes, particularly in Central and South America. It was not able, however, to withstand the severe shipping slump of the late 1970s and early 1980s.

During the 1980s, Nedlloyd was affected by the recession in liner shipping, and divestment rather than expansion became the company's watchword. The company's strategy of concentrating on shipping and inland transport and disposing of peripheral activities eventually became profitable: after losses in 1990, Nedlloyd returned to the black in 1991. Nedlloyd remained in fragile financial condition (no dividend was paid in 1991), but liner shipping, out of all of its core activities, exhibited the most improved performance.

In 1983, the company, in an attempt to bolster its inland transport business, decided to move further down the transport chain and provide transport service not only from port to port but also from the factory gate to the final consumer. Feeling it necessary to purchase regional transport companies to improve its services, Nedlloyd bought Van Gend and Loos a Dutch company active in storage, distribution, and specialized transport in 1986. Nedlloyd also purchased the Spanish shipping company Fernando Roqué in 1987, the German companies Andreas Christ and Union-Transport in 1989, and Great Britain's Transflash, also in 1989. These acquisitions were criticized later for being inconsistent with the company's policy of concentrating on its core activities, that is, container logistics through a global network of shipping links, and transport, forwarding, inventory management, and distribution, including those for specific industries and products, principally in Europe.

While attempting to take advantage of the greater integration of the European market, Nedlloyd also targeted road transport companies in northern Europe, especially in Germany. The financial demands of acquisitions and new building (seven large ultramodern container ships were ordered in 1989 and 1990, with five ships delivered in 1991 and 1992, and two to be delivered in 1994 and 1995, respectively) were high and Nedlloyd sold noncore activities to help finance them.

Success Amidst Difficulties: The 1990s

Despite the active divestment policy in 1991, the Nedlloyd supervisory board was criticized by Torstein Hagen, a Norwegian citizen who held almost 30 percent of Nedlloyd shares in early 1992. Hagen believes that Nedlloyd, rather than focusing on core business, overexpanded into areas it did not fully understand. Campaigning periodically since 1988 for a seat on the Nedlloyd supervisory board, Hagen was thwarted initially by Dutch takeover barriers, but the board eventually agreed to grant Hagen's wish in the spring of 1992. The move was blocked by the employees' council but the board sought to overturn the decision in the Dutch courts.

In 1992 economic conditions affecting the freight industry remained difficult: freight rates in most markets had fallen dramatically, the weakness of the dollar--the currency of the shipping industry--also was expected to affect earnings adversely, and economic slowdown in major European markets was impeding business. This combination of factors made the short-term future of Nedlloyd uncertain.

The continued economic crisis soon forced Nedlloyd to undertake an extensive restructuring of its activities. A first wave of reorganization brought the company back into the black by 1994--for net profits of NLG 92 million on sales of NLG 6.6 billion, after 1993's loss of NLG 112 million. By the late 1990s the company had eliminated its interests in oil exploration and drilling, selling its Neddril subsidiary to the United States' Nobel Drilling Corporation, and in commercial airlines (after selling its share of Dutch airliner Martinair), passenger and other ferry lines, represented by North Sea Ferries. The most significant phase of the company's restructuring occurred as much as a step toward meeting increasing globalized competition. In 1996 Nedlloyd reached agreement with the Peninsular and Oriental Steamship Company (P&O) to merge the two companies' container shipping operations. The resulting 50-50 partnership company, P&O Nedlloyd, began operations in 1997 and featured one of the largest container shipping fleets in the world, with revenues of nearly US$4 billion per year. Initial returns were less than dramatic, however: by year-end 1997, Nedlloyd posted profits of US$37 million (NLG 72 million) on deconsolidated turnover of US$1.79 billion (NLG 3.46 billion).

Nonetheless, Nedlloyd had successfully transformed itself into a tightly focused, Eurocentric logistics powerhouse in time for the arrival of the single European currency slated for January 1999. As the premier logistics operator in the Benelux countries, as well as Germany, Nedlloyd began actively seeking to extend its operations throughout France and Spain and beyond the European Community into Switzerland and much of Eastern Europe. If the economic crisis, which, starting in late 1997, looked to cripple much of the Asian economies for the rest of the decade, also was hurting Nedlloyd's P&O Nedlloyd revenues in 1998, the company's core European logistics activities were showing strong advances.

Principal Subsidiaries: European Transport and Distribution: Nedlloyd Unitrans GmbH (Germany); Nedlloyd NTO GmbH (Germany); Van Gend & Loos B.V.; Nedlloyd Districenters International B.V.; Nedlloyd Flowmasters B.V.; Nedlloyd Road Cardgo B.V. (a.k.a. Nedlloyd Chemical Logistics); Nedlloyd Fashion Services B.V.; Gerlach & Co. B.V. Ocean Shipping: P&O Nedlloyd (U.K.; 50%). Other activities: Mammoet Transport B.V. (66%); Gerlach Art Packers & Shippers B.V.; Europe Consolidated Terminals B.V. (30.56%).

Further Reading:

• Cockrill, Philip, "K.N.S.M.--The Royal Netherlands Steamship Company (1856-1981)," Newbury, Berks: published by the author, 1981.
• Cockrill, Philip, and Halebos, J., "Koninklijke Paketvaart Maatschappij (1891-1941) with the Java-China-Japan Line to 1970," Newbury, Berks: published by Philip Cockrill, 1982.
  Lloyds Shipping Economist (various issues), London, England.
• Mulder, P., "De schepen van de KNSM 1856-1981," Boer Maritiem, Weesp., 1983.

Source: International Directory of Company Histories, Vol. 26. St. James Press, 1999.

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