"Zim won't make it"

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

25 Feb 2010

Igal Dafni, who built Zim's business in the East until he fell foul of Idan Ofer, says mismanagement, not the global crisis, is to blame for the shipping line's woes.
As Area President (Asia Pacific Region) of Zim Integrated Shipping Services Ltd, Captain Igal Dafni would visit various Muslim countries, including some that did not like to shout about their connection with the Israeli shipping line, or even allow Israelis to enter their territory. On one such visit, Dafni was staying in a luxury hotel while a special gathering took place there: the foreign ministers of the Arab countries were holding a meeting. "There were a lot of police," Dafni recalls, "It's lucky no-one asked me to identify myself, but as you know, there's a thin line between being caught and not being caught."
Why did you do it?
"I took these risks because I wanted to develop Zim's business in these countries."
Dafni worked for forty years at the former national shipping line, now controlled by Sammy Ofer and his son Idan. Stories like this one may seem like the nostalgic tales of a veteran seaman who looks back with a smile, but in Dafni's case they illustrate the gap between past and present, between the days when his identification with the company made him risk his life, and the ugly war waged between him and Zim in recent years.
In December 2007, about eighteen months after he resigned from Zim, and when he was already CEO of a competitor, French company CNC, Zim sued Dafni in Singapore, claiming that he received benefits and secret payments from business people who sought to compete with Zim, and accusing him of breach of trust and breach of his obligations. Zim demanded the return of salary and bonuses amounting to nearly $2 million.
The sensational lawsuit made the headlines in the shipping press worldwide, and was reported in Israel too. For his part, Dafni maintained strict silence, until about a month ago the Singapore court handed down its ruling, which left nothing standing of Zim's claims. These claims, the judge said, were simply not backed by evidence, and in certain instances made no sense and were actually contradicted by Zim senior managers. Zim claims in response that the lawsuit was dismissed on technical grounds, and that the matter "is still undergoing legal clarification, after the company filed an appeal."
Now, with a following wind from the favorable decision, Dafni agrees to give his side of the story for the first time, and to speak his mind about the conduct of the person who controls Zim, Idan Ofer. He is convinced that it is Ofer, no less than the global shipping crisis, that is responsible for the severe problems at the company. Illicit benefits? Hidden payments? Dafni of course denies that he received such things as incentives to harm Zim's interests, but he can tell about payments of this sort made by Zim itself to others to promote its interests. "In some countries in Asia things are fairly well ordered, and there are no under-the-table payments," he says, ' but in other countries, you can still settle many things that way."
I built the company from nothing
Dafni, 63, started out at Zim as an ordinary seaman in 1966, when he was 20. He was managing director of Zim unit Gold Star Line (GSL) from November 1995 to December 2004 . "I received the company with four ships, thirty thousand containers, and losses of half a million dollars," Dafni says. "When I left, it had 28 ships, handled nearly one million containers a year, had annual turnover of nearly $350 million, and a profit of $25-27 million. From next to nothing, I created its entire set up. I kept the company going in 2001-2002, when Zim was making losses and GSL was in profit. GSL supported Zim and enabled it to pay wages. Over the years, I was hugely appreciated by all the company's CEOs. I have letters of recommendation from them all. Not one of them failed to be impressed by what I did here, in the East. Idan Ofer too after all, it was he who appointed me Asia Pacific Region president."
At that time, ever sharper disagreements with Idan Ofer began to overshadow the progress and the success. As someone with holdings in many other businesses, one might have thought that the involvement of the chairman in running Zim would be fairly limited, but the picture painted by Dafni is of a controlling shareholder who is very involved indeed too much, by his account. "All kinds of disputes started to occur over his interventions in management, his attempts to push people forward for all kinds of jobs, over his direct approaches to me without going through the CEO. A thousand and one things."
Does he centralize control that much?
"He's very controlling. Listen, the man doesn't know how to operate within a framework. He would go over the CEO's head, and call me directly about a great many things, appointments of people. We came into conflict many times over that kind of thing."
For example?
"For example, it was decided to cut back at Zim's representative office in Japan, and the post of representative there was abolished. I didn't think that was right, but fine, they decided to cut staff. Not more than a few months go past, and Idan says to me, 'I have someone that I want to be Zim representative in Japan.' I said, 'What do you mean? Just now it was decided to abolish the post.' Idan said, 'No, I'm sending him to you for interview.' He sent him, it turned out it was someone who had helped Idan in the past. He had high demands an annual salary of $250,000 and other benefits; it was a contract that would cost about half a million dollars. I told Doron Goder (Zim CEO until March 2009, A.R.) that I wouldn't sign on such a thing and wouldn't take him on. In the end, Goder signed the agreement."
"Globes" approached Doron Goder, who refused to confirm or deny Dafni's account, and would respond only with "No comment."
"We had many disputes like that," Dafni continues, "He (Ofer, A.R.) also didn't like the fact that every telegram he sent me privately, I would send back with a copy to the CEO. I told him, 'Listen, there's a CEO at Zim. You can talk to me, but you can't conceal these things from the CEO.' That's it, relations between us started to become strained, until in the end it seems he lost patience. It got to a situation in which he called me and said, 'I own the company, not you. Either you dance to my tune or we can't work together.' I told him, 'I have worked at Zim for forty years, and I have never danced to anyone's tune,' and I left."
On May 16, 2006, Dafni resigned from Zim. Although there was no lack of bad blood between Dafni and Ofer when he left, what caused the personal feud to deteriorate into all out war was what Dafni did afterwards. In April 2007, he was appointed CEO of CNC, a shipping company from Taiwan that in part of its activity competed with Zim. "I tried to do with this company what I had done with Zim," Dafni relates. "I expanded its activity to a million containers. This gained huge publicity in the professional shipping press. When Zim saw that this business was steadily expanding, and was likely to harm its own activity in the Far East, they started with the nonsense of this court case. My success at CNC bothered Idan personally, because of the way he allowed someone talented, who could have led Zim to achievements, to leave. It seems he is someone who feels that whoever works for him belongs to him. He can't accept a situation in which someone leaves him, only when he decides who will leave. If someone leaves, as far as he is concerned that's betrayal of him."
The lawsuit also reached Dafni's employer; he claims that Zim sent it and even contacted the company's owner. "The company's owners were Lebanese and were anxious that publication of the Israeli connection might damage it. In the end, after consulting their legal counsel, they decided that as long as there were legal proceedings against me, I could not continue in the post."
Zim blames its situation on the global crisis in the shipping industry.
"What a story, what a story. What got Zim into the situation in which it finds itself today, in my opinion, was Ofer's interference in management." Here, Dafni offers his interpretation of the deals reported widely in the past, in which Zim leased and bought ships from Ofer Shipping and other companies.
"Ostensibly, they wanted to enhance Zim, and bought ships for it without limit. At any normal company, when you buy ships, you know in advance that these are ships of the size you want, and where to put them. At Zim, they didn't know at all. Suddenly they would be informed that certain ships had been bought. What, why, where from, when for? No-on e knew. To this day, they don’t know. They're lucky, so now the shipyards have postponed the deals until 2014. And what are they going to do with these ships in 2014? They don't know that either. (Zim denies this.)
"So true, there's a crisis in shipping, but a large proportion of the companies are emerging from it and can see ahead. The financial results of most of the companies today show an improving trend. As far as Zim is concerned, I'm very pessimistic. There's a European company that does research on shipping, and in research published two months ago, it stated that Zim's revenue per container was the lowest of all. So I think that a great deal there has to do with management. Of course, the entire shipping industry is in a bad way, but that still doesn't mean you have to reach the kind of position that Zim is in.
"Look, what the Ofer family knows how to do is to buy ships cheaply and sell them dearly. They have done for years, at Zim too. In the good times, to obtain bank finance for buying ships, you had to show that you had a long-term contract with a shipping company. No bank would give you a loan unless you showed you had a long-term contract.
"What would the Ofers do? They would exploit Zim for long-term contracts. At the time, they would buy ships, even before they were built, for, say, $70 million, and sell them for $100 million. The ships they have now bought were never intended for Zim in my view. They simply didn't expect the crisis. They bought the ships with finance on Zim's back, as though Zim was the lessee of the ships, and suddenly the crisis broke out, and instead of selling the ships at inflated prices, their prices fell to half of what they were. Now they come to Zim and say, 'Listen, you have a problem, the ships are leased, find a solution.'"
What's your opinion of the debt arrangement between the controlling shareholders and the bondholders?
"I say that I don't see Zim emerging from the crisis. I don't see it emerging from its losses, unless for reasons that have nothing to do with it, such as a sustained trend of improvement in trade. The company needs luck, and then it might perhaps get out of the crisis. But if the current crisis continues, and in my view it is liable to continue, Zim won't make it. Zim, with its current management, is incapable of moving ahead."
One more problem will be added to Zim's pile in the next few months a suit for slander and for compensation that Dafni plans to file for the damage done to him by the accusations of bribery that stuck to him. "I'm going to sue them for a very high sum for the damage they have caused me," he says, "because I was the one most injured by them. I had a very good contract of over a million dollars a year with the French company, and I was forced to leave. Just the lawyers in the court case cost me nearly half a million dollars. It was a hard experience, and certainly not easy psychologically."
Zim's response: His behavior was not becoming of an employee
Zim claims in response that Dafni does not know all the facts and figures.
Zim's spokesman, Rani Rahav, sent the following response: "The lawsuit against Dafni was filed because of conduct not becoming a senior employee, and damage to the company. It should be pointed out that the suit was dismissed mainly on technical grounds, and is still going through the courts, following an appeal lodged by the company."
On the claims about Idan Ofer's conduct, the statement said, "On the comments about Idan Ofer, these are slanders and completely baseless claims that are not worthy of a response."
On the purchase of ships for Zim, the statement said, "The claims about the purchase of ships for Zim are also baseless. Igal Dafni is wrong and misleading, since he does not know all the facts and figures. The ships bought from the Ofer group were bought in accordance with the company's needs and at the company's request. The purchase was made close to the time of the company's privatization, when Zim was unable to buy the ships directly. The ships were sold to Zim on the same terms as the purchase of the ships by the Ofer group, back-to-back.
"To complete the picture, it should be pointed out that Zim made a gain of some $100 million on the sale of two of the ships and the leasing of two others to a third party. The huge procurement of ships was done directly by Zim, without the involvement of the Ofer group."
On Zim's business conduct, the statement said, "All the claims raised about Zim's supposed conduct are blatantly untrue. The company runs its business honestly and transparently, according to law, and acts in accordance with the provisions of the law."

Source: Globes