Industry changes, friendships don't

Industry changes, friendships don't

One day in 1968, when Mike Diaz was with American Export Lines, he was visited by consultants from McKinsey & Co. They were working for a ship line that was planning to move from breakbulk to containers, and they wanted to learn how AEL had made the switch on two of its services.

Diaz shared details about his line's experience. The consultants thanked him and presumably used the information to advise their client, a Danish company named A.P. Moller, whose Maersk Sealand now is the world's largest container line.

Thirty-five years later, Diaz laughs about the episode. "Maybe I shouldn't have talked to the guys from McKinsey," he says. "Then we might have kept the 900-pound gorilla in its cage."

Diaz told the story this month at a testimonial dinner in his honor. The event, organized by maritime attorney Hal Levy, attracted a who's who of current and former industry leaders that worked with or competed against Diaz, who retired in 1997 after 51 years in shipping.

"That's the great thing about this industry," Diaz said. "Many of the people you compete against the hardest end up becoming your best friends."

The former colleagues and competitors were a convivial group, bonded by years of friendship that began decades ago when they were helping reshape one of the world's great industries, ocean shipping.

Diaz was instrumental in bringing containerization to the North Atlantic and Mediterranean and to South America, although not permanently. He was at Grace Line in 1960 when the company introduced the first full container ship in foreign trade. The Eliana was stranded for 11 months in La Guaira, Venezuela, when dockworkers refused to discharge its cargo.

Diaz entered the shipping business after Army service in World War II, joining Garcia & Diaz, a company co-founded by his father. He later worked with T.J. Stevenson, Grace and AEL. He headed the trans-Atlantic rate-setting conferences for several years and later was top North American executive for DSR-Senator Line.

Now 83, he lives comfortably in Winchester, Va., playing golf and reading Civil War history. He keeps up with the industry and his friends in it, but says he's glad not to have the task of filling today's 8,000-TEU-plus ships. When he retired six years ago, the largest container ships were in the mid-5,000-TEU range.

Although the ships keep growing larger, the biggest change Diaz sees in the industry is not in size but in scope. He said the industry's economics were fundamentally changed by what he describes as "moving the ship's hold inland."

When port-to-port breakbulk services dominated, a ship line's responsibility and cost started or ended at the pier. Now carriers send part of their ship - the containers - far inland. For many carriers, it's been a poor bargain. Even if a line breaks even on its inland costs, the expense of repositioning empty boxes can make the round trip a money loser.

Through most of the 1980s, Diaz was in charge of the trans-Atlantic conferences, which eventually merged into what now is the Trans-Atlantic Conference Agreement. TACA and other rate-setting agreements have lost much of their clout since passage of the Ocean Shipping Reform Act of 1998.

Even in the heyday of conferences, Diaz was struck by the irony of an industry that enjoyed antitrust immunity but still managed to lose money. Carriers would agree on rates, then be unable to resist the urge to cut their rates in an effort to grab a competitor's market share.

That's human nature, a subject in which Diaz is expert, said Don Aldridge, a former executive at United States Lines. Aldridge said Diaz's intelligence, knowledge, assertiveness and humor stood him in good stead during the "mind-boggling" shift to containerization.

Another speaker at the dinner, George Hayashi, chief executive of MOL North America, also couldn't help noting industry changes. Briefcases, business suits and lunches at New York's Whitehall Club have been replaced by laptops, open collars and take-out lunches at the desk, Hayashi noted.

The new working style is undoubtedly more efficient, but it offers fewer opportunities for building and nurturing personal relationships. Don't look for the current generation of shipping executives to hold reunions with their competitors. Even if they want to, their lawyers wouldn't allow it.

Joseph Bonney is deputy editor of The Journal of Commerce. He can be reached at (973) 848-7139, or via e-mail at jbonney@joc.com.