- Obtaining Citizenship Grants Permission for MSC's Entrance at HHLA
The Hamburgische Bürgerschaft, serving as the city's highest authority, endorsed the controversial partnership between the Hanseatic city and the world's largest shipping company, MSC. This approval was facilitated by the red-green coalition, who utilized their two-thirds majority in parliament to push the deal through. The opposition, consisting of CDU, Left, AfD, and FDP, collectively voted against it. Now, sole approval from the EU Commission remains.
Let's delve into the details of the business on the table, which is expected to last at least 40 years.
Who bears the title of HHLA?
The Hamburger Hafen und Logistik AG, commonly known as HHLA, is not just a simple cargo handling company. It emerged from the Hamburger Freihafen-Lagerhaus-Gesellschaft, established in 1885, and occupies the essential core of the port. Last year, their three container terminals - Tollerort, Altenwerder, and Burchardkai handled approximately 5.9 million standard containers (TEU), accounting for approximately 77% of the total annual handling of 7.7 million TEU in the Hamburg port. The HHLA, with its 6,800 employees, also manages terminals in other ports such as Odessa, Trieste, and Muuga.
Beyond its terminal work, HHLA plays a vital role in transporting containers via road and rail. Its subsidiary Metrans handled around 1.4 million TEU last year, contributing significantly to the industrial sector of numerous countries in Central and Southeast Europe, accounting for more than half of the 2.5 million TEU moved by rail in the Hamburg port.
The HHLA's history has intertwined it with the real estate sector as well. Due to the development and construction of the Speicherstadt, a then-largest warehouse complex by its predecessor company, the HHLA continues to manage and oversee this UNESCO World Heritage site, alongside other properties in the popular fish market area.
What's the current state of HHLA?
The situation facing HHLA is challenging. As a globally-oriented company, HHLA is frequently impacted by major crises. In 2022, they generated a profit of only 20 million Euros, despite earning about 1.45 billion Euros in revenue. The handling of containers decreased by 7.5%, and container transport by 5.4%. These trends have persisted since 2008, while competing ports like Rotterdam and Antwerp have experienced growth. In the first quarter of 2023, HHLA even crossed into the red, but managed to recover in the second quarter.
The industry's major shipping companies also have experienced shifts, such as forming collaborative agreements like the "Gemini Cooperation," which aims to prioritize ports with terminals they control, like Bremerhaven and Wilhelmshaven. As a result, Hapag-Lloyd has pledged a 10% reduction in cargo volume in the Hamburg port. The HHLA's stock price, which debuted on the stock exchange in 2007, started at 59 Euros per share but recently fluctuated between 16 and 17 Euros. The company's pressing need for funds to modernize and automate its terminals cannot be understated.
Hamburg's Red-Green Senate, previously holding approximately 70% of the shares with the remaining in free float, decided to implement an unprecedented therapeutic shock. On September 13, 2023, Mayor Peter Tschentscher, Economics Senator Melanie Leonhard, and Finance Senator Andreas Dressel (all SPD) appeared before the media to announce the investment of the world's largest shipping company, MSC, in HHLA, securing 49.9% of the company's future ownership. The city would hold a 50.1% stake in return. Tschentscher described the agreement as a landmark one that would foster a strategic partnership between the city and the Geneva-based MSC Group of the Italian Aponte family. "This can provide the boost our entire maritime economy needs in challenging times."
Exactly what was agreed upon?
HHLA will allow MSC to increase its cargo volume at their terminals by half starting in 2025, reaching one million TEU per year by 2031. MSC also plans to construct a new German headquarters in Hafencity and establish MSC Cruises in Hamburg, resulting in 700 additional jobs. The city and MSC aim to increase HHLA's equity capital by €450 million. Finance Senator Dressel expressed that the negotiations, at least 40 years in duration, focused on two aspects: "We must maintain the majority, and we must ensure co-determination." Both objectives have been met. "As a city, we will continue to have the right to propose candidates for CEO and supervisory board positions."
Basically, people are really upset. Workers have been taking to the streets repeatedly, screaming their anger in intense protests – most recently just last week – and even hinting at an unexpected strike. Even organizations like the works councils, the Verdi union, and experts have spoken out against it in expert forums and public hearings in Hamburg Parliament, cautioning against "a major mistake" and urging lawmakers not to steer us towards disaster. The text mentions that actions like job terminations, substantial staff reductions, or leaving employer associations won't be considered within the next five years. Critics, however, believe this will happen eventually.
Mainly, MSC's business practices are getting criticism. MSC isn't recognized for its dedication to employee participation, having even fired a former works council head at a Hamburg subsidiary – a move that was eventually blocked by the labor court, as per Verdi. Or there's MSC CEO Soren Toft, who's no stranger to Hamburg. In his role as CEO of the world's second-largest shipping company, Maersk, in 2017, he promised that Hamburg Süd would stay an "independent commercial brand" after its acquisition. In 2021, it celebrated its 150th anniversary, but by 2023, not even its name existed.
Now, where did the criticism towards the MSC deal intensify?
Regarding the price, many critics argue that the 16.75 euros per share, amounting to roughly 233 million euros for the municipal HHLA shares, is significantly low. The former president of the Association of Hamburg Harbor, Gunter Bonz, put it bluntly in "Hamburger Abendblatt": "Kudos to MSC, they've nailed it and cleaned out the Senate." HHLA, these critics believe, is far more valuable, with Metrans alone being worth two billion euros. Already, the spokesman for harbor policy of the CDU parliamentary group, Goetz Wiese, has made a complaint to the European Commission. "Confidential negotiations, no tendering, no evaluation according to recognized economic principles, independent experts were not even allowed to review the contract documents," he explained his actions.
So, who exactly is MSC?
Not much is known, actually. Publicly known facts include: MSC is the largest container shipping company in the world. Its container division includes 760 ships serving 520 ports in 155 countries. Through its subsidiary TiL, the company is involved in around 70 terminals worldwide. In Bremerhaven, MSC is associated with Eurogate on a 50% joint venture, called MSC Gate Bremerhaven. That's pretty much it – aside from the fact that MSC CEO Toft has indicated: "We only provide the information we're required to." The company's income and profits remain confidential. Rumors float around that MSC earned over 86 billion euros in revenue and 36 billion euros in profit in 2022, a claim some analysts deem plausible – the profit alone would almost match the budget of the Hanseatic City of Hamburg for 2023/24.
The 'Other' criticisms towards the MSC deal include concerns about its business practices, such as the lack of employee participation and the disappearance of independent brands after acquisitions. The 'Other' party, CDU, has also lodged a complaint with the European Commission, alleging that the negotiations were not transparent or adhering to recognized economic principles.
