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“You have to be afraid of what you don’t know,” Maersk Line President and CEO John Reinhart told Executive MBA students Dec. 4. “And also, keep the antennae out in your own industry.”

John Reinhart

Executive MBA Luncheon Speaker Series: Maersk Line President and CEO John Reinhart

The shipping company leader talks about the rising threat of piracy and navigating the stormy economy

By Amy Trang

12/15/2009 - John Reinhart’s company made headlines in April when its ship, the Maersk Alabama, was hijacked by Somali pirates.

Within two hours of learning of the attack, all of Maersk Line Ltd.’s departments, from communications to government relations, gathered in a “situation room” where they worked 24/7 to resolve the crisis.
“I told everyone, ‘We have one priority: to bring people home,” Reinhart said in a talk to Kellogg Executive MBA students on Dec. 4. “‘Do nothing that won’t promote this mission.’”

After several terrifying days, the crew and the captain were returned to safety. But the problems of piracy haven’t gone away, said Reinhart, president and CEO of Maersk Line Ltd. and the most recent speaker in the Executive MBA Luncheon Speaker Series.

Attacks on commercial ships have increased dramatically in the last year, as pirates have been creative in using advanced technology to take over ships, Reinhart said. Maersk’s ships are unarmed, so the company takes other precautions, such as rerouting ships from dangerous areas. Another defensive measure is to send in fast and large ships so that pirates are less likely to overpower a vessel.

“Piracy has always been a threat to the high seas,” Reinhart said, noting that the political instability in Somalia has contributed the increased violence on the high seas. “We can reroute to stay out of the way, but pirates can readjust as well.”

Reinhart addressed other topics during his talk to Executive MBA students, including the future of the business and the economic downturn.

On values: Maersk’s values encompass one simple notion: constant care. “You can be the smartest person in the room, but you fail if you don’t have values,” Reinhart said. People should take risks on behalf of the company, but not risks that will destroy the company, he said.

On the economy’s impact on the industry: Reinhart said the shipping industry was hit hard by the downturn, specifically in October 2008, when “volumes went down so quickly that companies couldn’t adjust quickly enough.” The shipping industry still hasn’t recovered; top shipping lines cumulatively are losing $30 billion this year, he said. Reinhart predicts that shipping will see more bankruptcies and consolidation going forward.
“We’re positioning our response to the crisis by looking for opportunities to build up the company,” Reinhart said. “I think it will take two to three years to get out of the decline.”

On the future of the industry: Reinhart predicts that people will see regional zones of manufacturing, and that as a result, routes will be shorter and ships will be smaller. He added that shipping companies are looking for clean fuels and better energy processes to make their ships run more efficiently.

“You have to be afraid of what you don’t know,” Reinhart said. “And also, keep the antennae out in your own industry.”

The Executive MBA Luncheon Series invites senior executives from a variety of industries to address EMBA students at the Kellogg School. The speakers are nominated by students and have included Scott Griffith, CEO of Zipcar (Nov. 20); Matt Ferguson, president and CEO of Careerbuilder.com (Nov. 13); and Todd Lachman, president of Mars Snackfood US (Oct. 30).