John Hassell, Interim President and CEO, South Carolina State Ports Authority

LowcountryBiz:
From Board member to CEO.  Two very different roles and not an easy task.  What is your job description?

John Hassell:
As Interim President and CEO of the South Carolina State Ports Authority (SCSPA), I am tasked with running the Ports Authority and managing the transition as we search for the best candidate to lead this organization. 

When Bernard Groseclose, our former CEO, resigned, the Ports Authority board felt that I was uniquely qualified for the job because of my lifelong involvement with the maritime industry.  My exposure to the seaport began back in 1980 when I worked for the Ports Authority under Don Welch who was for 25 years its executive director.  I also have experience with the Department of Commerce (then the Development Board), the Charleston Development Board (now the Charleston Regional Development Alliance) and more recently for 15 years I was the President of the Maritime Association of South Carolina.  I have also served for the past seven years on the Ports Authority Board.

It’s a fascinating, challenging opportunity to make a difference within a finite period of time – 3- 6 months or so.  I want to get this organization moving in the right direction strategically so that the new President can hit the ground running.  I am not a candidate for the permanent job. 

LowcountryBiz:
What have you done in your first couple months?

John Hassell:
We identified three key focus areas: our mission, our people and our partners. 

During the first three weeks, I called in all of the department heads – operations, human resources, marketing and sales, IT, terminal development, public relations, governmental and environmental affairs, and special projects – to identify the challenges and roadblocks that they faced to achieving their goals.

One interesting thing that I found out was that none of our employees had ever received any formal customer training. Since then, starting with the senior management, everybody will receive customer relations training with a goal of building an organization that goes beyond best practices in customer relations.  That will be our culture.  We need to be more customer-centric. 

LowcountryBiz:
What is your mission?

John Hassell:
Our mission is to provide facilities to promote trade and economic development and that will never change. 

LowcountryBiz:
What is your business structure?

John Hassell:
The enabling legislation that created the Ports Authority as a state agency in 1942 foresaw that South Carolina would not be able to handle the costs involved to build and maintain terminals, so they set us up as a state agency with the ability to raise money through the services we provide and the fees we collect.  We are an enterprise economic development agency, run like a business with no state appropriations. 

The state has maintained a role in helping us with dredging costs and, on the infrastructure side, it has spent about $182M to help build the access road that connects the new terminal that we are building to Highway 26. 

LowcountryBiz:

Does the Ports Authority have any major strategic shifts planned?

John Hassell:
About five years ago, because we needed cash to build our new terminal that is under construction, the Ports Authority started to put more emphasis on the enterprise side and became a margin driven business.  When business started to slow down a few years back, we did not react fast enough with our rate structure, and as a result, we lost market share because we were not competitive.

Now, within our mission area, we are starting to focus more on our economic development role and be more market share-driven. 

LowcountryBiz:
How are you dealing with the business challenges?

John Hassell:
International trade has dropped off dramatically in this economic climate and ports all over the world are struggling.  Most of the businesses that benefit from a port are companies that provide a service to cargo such as moving it, storing it, or handling it.  Or they provide a service directly to the ships – tug boat operators, stevedores, harbor pilots, line handlers, and longshoremen.  The best way we can help the economy of the state, and also our importers and exporters, is to build back up our volumes. 

Here are three strategies to build up our cargo throughput.

Job number one is to reach a successful resolution with Maersk.  Maersk is a division of A.P. Moller, one of the largest vertically integrated shipping and transportation companies in the world.  They represent 200,000 containers a year or about 20% of our business.  As such, they are our biggest customer, but as many people know by now, they announced in December that they were leaving the Port of Charleston.  Maersk is a critical partner for the port not just now but also into the future.  When the economy turns around, it’s critical that they be in the port.  The negotiations are ongoing and I am hopeful that we will work things out. 

Secondly, your best customer is the one you already have.  Our customers are all hurting in this challenging environment so we are looking to be very proactive about helping them through this difficult time. 

Lastly, we need new business, new customers.  We simply have to be more aggressive and more creative on the marketing and sales side – even if it means that we have to be more flexible with our rates. 

LowcountryBiz:
Why did Maersk choose to leave?

John Hassell:
Every steamship line is under huge pressure to reduce costs not only in the US, but also in their worldwide operations.  The issue with Maersk is costs, but that said, there are obvious union implications with this issue.

Here’s our business model and a simplified overview of how cargo is moved on and off of ships. The Ports Authority provides a 400 acre, concrete-covered container storage yard with huge cranes to get cargo on and off of ships.  Private companies such as stevedores (the management side of loading and unloading), and the longshoreman (the labor side) are also involved at our facility. 

If an ocean carrier decides to come to the Port of Charleston and use our services, they will put a request for proposal (RFP) for stevedoring companies.  The stevedore leases the crane and our operators in the cab.  This represents a major source of revenue for the Ports Authority.  The stevedore’s responsibility is to then bring in the longshoreman to move the cargo on and off the ships.  

The labor that the stevedore brings are members of the International Longshoreman’s Association (ILA).  All of the Gulf and East Coast ports are signatory to a master contract to use ILA labor wherever ships call on port. 

Maersk has a license agreement to use a dedicated area of the Ports Authority’s Wando Welch Terminal.   The Ports Authority entered into negotiations with Maersk to reduce their costs on this licensed area, but back in October of 2008, it became clear that Maersk was not satisfied with the progress of the negotiations. We sought to enter into a new agreement whereby Maersk would move out of the licensed area into what is known as a common user area.  The licensed area is governed by the ILA and the common user area is not.  In December, Maersk made an abrupt announcement that they were leaving the Port of Charleston. 

The latest offer is to negotiate a new license agreement with Maersk for them to stay in the ILA part of the port.  We have a lot of enlightened leaders who are actively working together for a solution.  One of the unique aspects of the Charleston business community is that everybody in town knows each other well.  Ken Riley, the union president of the local ILA 1422, is a good friend on mine and we are all working together to come up with a solution that everybody can live with.

LowcountryBiz:
Are the workers at the Ports Authority unionized?

John Hassell:
Our employees are all state employees who are part of the state retirement system; they are non-union.  They are not paid directly by the state but rather by the revenues derived internally from the Ports Authority. 

LowcountryBiz:
How do you manage your team with all the distractions?  Maersk.  The Governor’s desire to privatize the Ports Authority.  A search committee for a new president.

John Hassell:
I tell the management team and the employees to not let what is going on in Columbia be a distraction – focus on what you can control.  We were created by the South Carolina state government and the governor and the legislators are doing exactly what they are supposed to do – that’s their job.

Our job is to continue to provide the best service to our customers.  The port of Charleston existed for 260 years before the ports authority was created in 1942.  Sometimes we make the mistake to think that we ARE the Port of Charleston.  We may be the most visible part of the port, but whether you are an Upstate manufacturer or a trucking company, we are all in this together. 

LowcountryBiz:
What impact is the Port of Savannah having on your business?

John Hassell:
We are only 110 miles apart; in international trade that is not a great distance so there are certainly long-standing competing interests. 

Back when containerization became a promising new technology, Charleston got off to an early start when the first crane that the Port of Savannah installed fell in the Savannah River.  In the 1980’s Savannah surpassed Charleston in terms of container volume and we found ourselves playing catch-up.  When US Lines, which was handling about 80% of the cargo that was coming in and out of the Port of Savannah, went bankrupt, a large percentage of that business came to Charleston.  We began to pull away from Savannah to become the fourth largest container port in the United Sates and the second largest on the East Coast.  Over the past decade or so, Georgia started working on a strategic plan to attract large distribution centers to the Port of Savannah. They bought property, put in the infrastructure and spec buildings and lured huge retailers such as Home Depot, Target, and Dollar General to occupy these million square foot warehouses surrounding the port.  This strategy paid off as Savannah became the fastest-growing port in the United States.  

LowcountryBiz:
What about the planned terminal on the South Carolina side of the Savannah River in Jasper County?

John Hassell:
The governors of both states came up with the idea of partnering together through a bi-state commission to build a major container port on that property.  Though it will have to pass the legislatures of both the state of Georgia and South Carolina as well as Congress, a new terminal on the Savannah River is clearly part of our future.

LowcountryBiz:
How have you countered this competitive threat?

John Hassell:
While Savannah worked on attracting distribution centers, Charleston did things such as deepening and widening our harbor and the state also built a new bridge over the Charleston Harbor (the new Cooper River bridge) to remove any impediment to ships moving in and out.  Savannah is working hard to deepen the water up the Savannah River, but still is limited with its 42 feet of water. We have an advantage there.

We have a major new terminal that will cost between $700M and $1B under construction on the site of the former naval base.  This modern berth with just shy of 300 acres of container yard is due to come online in about 2014 right about the same time that the Panama Canal expansion and deepening will be finished.   When the new Panama Canal opens and bigger ships from Asia start arriving on the East Coast, we feel we that will be well positioned to capture this business. 

Also, the private sector is now building 20 million square feet of warehouse distribution space in Dorchester and Berkeley counties right near the interstate along Highway 26 as you are driving into Charleston. 

 

by Alan Cooper, Publisher, LowcountryBiz