Jim Newsome, President & CEO of the South Carolina State Ports Authority

LowcountrybizSC:
What is your education and professional background?

Jim Newsome:
I was born and raised in Savannah, Georgia.  My dad worked for the Port of Savannah so I have been around ports my entire life. 

I majored in transportation and logistics at the University of Tennessee where I earned my Masters of Business Administration. Proctor and Gamble offered me a job out of college, but my father convinced me that my logistics degree was better suited for the transportation sector. I went to work for a family-owned container line company Stratchan Shipping Agency.

After ten years, I joined called Nedlloyd and worked there for 10 years.  I became the president of their Americas division and the first non-Dutch person to be on their executive committee.  After a merger, I joined Hapag-Lloyd (now the 5th largest carrier in the world) where I was President of the Americas, the first non-German in that role. 

LowcountrybizSC:
Why leave the private sector and move to a publicly-owned company?

Jim Newsome:
I was intrigued with this opportunity because I knew about the Port of Charleston growing up and had also experienced it as a customer. When I applied, I was not aware of the challenges surrounding the Port. As the vetting process continued, I saw this as an amazing opportunity to help engineer a turnaround of an important asset to the state of South Carolina and to end my career in a wonderful city. 

LowcountrybizSC:
You have reached a resolution with one of your key customers, Maersk, who announced in December 2008 that they were leaving the Port.  How did you accomplish this?

Jim Newsome:
Maersk had close to 400,000 containers move through our Port in 2005.  They don’t have nearly that level of volume right now, but we are very happy to have them back as a customer. This is an industry that is based on relationships, so we did as any business when faced with the prospect of losing its biggest customer.  First, we opened a dialogue with Maersk to let them know that we did not want them to leave.  Second, we asked them what we could do to keep them as a customer.

LowcountrybizSC:
It’s has been a tough couple of years at the Port, but business is improving, correct?

Jim Newsome:
As with all ports, we lost a lot of business in the first half of 2009 because of the global economic slowdown. Our volume was up 24.4% March 2009 to March 2010.  More importantly, our numbers for March 2010 were up 11% over February.  As 2009 is a low comparison point, we like to focus more on the month to month numbers so we are moving in the right direction.

In 2005, we were the 2nd biggest port on the East Coast and bigger than our geographic rival, the Port of Savannah. Today, we are the fourth biggest port and we have been surpassed by the Port of Savannah. The Port of Charleston lost 40% of its container volume between 2005 and 2009, a drop that cannot be entirely explained by the decline in worldwide economic activity. The Port of Savannah has aggressively recruited customers and done a great job attracting distribution centers to locate close to the port. Conversely, the state of South Carolina fell behind in this key strategic area of establishing the distribution center business and we also missed the boat on watching our cost competitiveness.  Our contracts were not in line with other ports in the region so they took business away from us with aggressive pricing. 

LowcountrybizSC:
What strategies are you putting in place to improve business?

Jim Newsome:
We didn’t lose the business overnight, so while we are currently on a high growth path, it will take us 4 or 5 years to return to previous high levels of volume.  Port development is a two track proposition.  First, our major sales approach is towards the twenty carriers that handle 90% of the world’s freight.  We have a finite subset of customers and prospects. We have a superior sales and marketing team in place and we are dedicated to creating new business by focused selling to the people that can bring us the most benefit.  If you have a shot gun approach to sales, it never pays dividends.

Second, we are calling on manufacturers and distributors who want to move goods internationally.  As we have become more of a consuming nation and less of a manufacturing one, we naturally import more.  As a result, distribution centers located near the major ports have become critical to importers.  We also call on the 100 or so importers and exporters who influence where freight goes in the world: International Paper, Wal-Mart, Lowe’s, Target, Home Depot etc.

LowcountrybizSC:
What are some of the most important developments in the history of shipping? 

Jim Newsome:
American entrepreneur Malcom McLean, founder of Sea-Land Corporation, is credited with creating in the late 1950’s the first major break-through in logistics – containerization. Goods shipped in containers and lifted by crane directly onto long haul trains moved product around the country.  As the rail roads ratcheted up their prices on containers, an opportunity was created for placing containers on trucks.  Containers are to this day the dominant method of shipping and all of the key metrics for shipping are based on TEU, a measure of the volume of containers that a ship can handle.

In the 50’s, 60’s and 70’s, most sourcing in the United States was domestic. The distribution model in this country emanated from the traditional smokestack manufacturing locations in the Midwest.  Centers in Scottsville, Kentucky and Dubuque, Iowa played a key role as hubs in the supply chain.

When we started to offshore our manufacturing (furniture, as just one example), and source internationally, the distribution for imports was placed, rather awkwardly, onto that interior distribution network.  It now made more business sense to locate distribution centers closer to a port.  Home Depot, Lowes and Wal-Mart have already taken that step, but many others will soon follow suit. 

Today, the biggest trend in shipping these days is that ships are getting bigger – quickly.  A recent Alphaliner report calculated that there were 325 ships currently on order each of which is 5,000 TEU’s or more, most of which are due for delivery in the next couple of years. 

The pending deepening of the Panama Canal to allow larger ships to pass is the game changer in our industry.  Customers who currently have traditionally used the Port of Los Angeles and rail to move their goods into the United States will look to ship directly to the East Coast.  Seventy percent of the population lives east of the Mississippi River. The economies of scale of an 8,000 TEU ship mean that companies will save $200 a TEU in slot costs.  In what has increasingly become a commoditized industry, lines that can successfully operate big ships will have a decisive economic advantage over ones that don’t

This is a huge opportunity for the Port of Charleston. Our deep harbor means that people are starting to look at us again.  Our ability to handle ships of this size is not contingent on a dredging project. We now already handle a ship a week that has up to 48 feet of draft.

LowcountrybizSC:
Is South Carolina doing anything different to attract distribution centers?

Jim Newsome:
Savannah hasn’t done anything that we can’t do.  The landscape has changed since the Boeing announcement in North Charleston.  More than ever now, legislators and business people see the linkage between the port and locating customers adjacent to the port.  New tax credits have been put in place in South Carolina designed specifically to attract distribution centers.  A state that has a good port in the global sourcing environment is going to grow faster than a state that doesn’t.  People get that in South Carolina.

LowcountrybizSC:
What challenges do you face in moving the Port forward?

Jim Newsome:
The major challenge is the capital intensiveness nature of our industry.  We are currently building a new $800M terminal at the old Navy Base, a project that will encompass 280 acres of infrastructure when completed.  It’s an especially expensive undertaking because of the need to stabilize the soil before construction can take place.  By 2017, the volumes at the port will have returned to previous levels, so the new terminal is critical to not just the Port of Charleston’s long-term success, but the state’s.  It’s the last one that can be built in Charleston. The next terminal built after this one will be in Jasper County. 

Environmentalists challenge most terminal development today and Charleston is no exception.  We were going to build a terminal on Daniel Island, but after a thorough analysis by the Army Corps of Engineers we were granted a permit to build on the Navy Base.  We are vigorously defending the law suit; it is our biggest hurdle these days.

LowcountrybizSC:
Why are you being sued?

Jim Newsome:
The major points are that we have not provided a rail solution, that we have not done enough to deal with how the new terminal will affect air quality, and that we are adversely impacting I-26. 

LowcountrybizSC:
How do you counter these assertions?

Jim Newsome:
Firstly, if you challenge the validity of a permit, it has to be based on the prevailing conditions of the time, not projections of what will happen 25 years out. 

We need to get our message out by talking about the facts.  The environmentalists want us to be regulators, but that is not our job.  Shipping and transportation are largely federally regulated industries; we don’t need a new group of people regulating shipping. The International Maritime Organization just designated the entire coast of North America as an emission control area.  For 230 miles off shore, ships will have to use low sulfur fuel.  We have retrofitted much of our existing equipment such as our cranes with electric power, cleaner engines and cleaner fuel.  We received grants from the EPA to help the truckers retrofit their trucks to be more fuel efficient, and tugs in the harbor have done the same.  I-26 has issues regardless of the port. 

We believe that we have acted responsibly.

LowcountrybizSC:
If you are facing price pressure, is your profitability down?

Jim Newsome:
In restoring our price competitiveness, our profitability per container is down.  We have taken about $7M in costs out of our port and we have had to lay off some staff.  Our core business is handling containers so we have focused our efforts in improving our efficiencies in this area.

LowcountrybizSC:
What is your ownership structure?

Jim Newsome:
We are government owned.  I report to our board chair, Bill Stern.  We have a legislative oversight committee that was established in the Port’s governance bill that is very committed and knowledgeable about the port.  We exist from our cash flow and from our bonding capability and do not receive any money directly from the government.

LowcountrybizSC:
Should the Port be privatized?

Jim Newsome:
We would not be more profitable if we were to privatize, in fact, it would be more expensive to run our operation.  We have an efficient operating model, but given the capital intensity of the industry, we may have to look for equity partners in the future.

LowcountrybizSC:
Discuss the expanding impact of cruise ships coming to Port?

Jim Newsome:
We have a thirty year history of cruise ships using the Port of Charleston as an embark-debark point.  Cruise ships will make over 60 calls to Charleston this year and represent  a wonderful opportunity for the city.  Some locals disagree and do not want to see extra tourists walking through the city, but it’s hard to argue with the economic impact.  As a result of expanded numbers of cruises heading out of Charleston by Carnival and Celebrity lines, we are able to employ 50 longshoremen, a sector that has faced serious underemployment in this recession. We also see a huge surge in hotel and restaurant bookings when the ships are in town. 

LowcountrybizSC:
Discuss the role of the Port of Georgetown in your business?

Jim Newsome:
The Port of Georgetown is a smaller port, but very strategic to our future and an important part of that community.  At an authorized depth of 27 feet, it is shallower than the 45 foot depth of the Port of Charleston, and therefore handles smaller ships.  All of the harbors along the East Coast are naturally silting harbors, and as a result, the Port of Georgetown needs to go through a deepening process to get back to 27 feet.  We are currently working with our congressional delegation to help get this job done.

LowcountrybizSC:
What is your leadership style?

Jim Newsome:
I have been fortunate to have had a mentor at each of the companies that I have worked at.  Being an American working in a foreign company, I found mentoring to be critical to becoming integrated into what is a different business culture.  I am very supportive of the idea of mentoring within organizations as part of developing leadership. 

As a leader, my role is to make sure that our organization is maintaining focus on what can bring the maximum impact to our bottom line.  Put another way, a leader’s role is to make sure that the organization does not get – unfocussed.

I thrive in a high energy environment where there is a culture of taking intelligent risks. I trust the people around me until they give me a reason not to trust them.  I don’t like to make excuses for myself, so I expect the same quality in others around me. My style is to remain accessible, something that I need to do a better job of at the Port, and I like a work environment where everyone is on a first-name basis.

LowcountrybizSC:
What is your day-to-day focus at the moment?

Jim Newsome:
We need to restore confidence in the Port.  We have a lot of talented, high quality staff at the Port, most of whom live in Charleston.  We are changing our culture to one that is more focused on business where the intelligent taking of risk is rewarded.  For too long we have had a bunker mentality.  We need to create new ideas, new initiatives and watch our profit and loss (P&L).  I see this job as running a business; our shareholder just happens to be the government.  We need to take ownership of our problems and solve them.