LDA’s Louis-Dreyfus weighs up the virtues of family businesses
Most people tend to focus on their achievements and successes rather than the mistakes they have made, but this is not the case with Philippe Louis-Dreyfus, president of Pacemar, the supervisory board of French dry bulk shipowner Louis Dreyfus Armateurs (LDA).
A past president of BIMCO and a fifth-generation shipowner, Louis-Dreyfus is well known for his strong views on industry practice – he has been particularly outspoken about shipowners’ ordering proclivities – and he is equally frank with Fairplay about his “error” in joining the family business straight after military service.
“I joined the family group immediately after my education and the army. I could have stayed longer in the military, as I liked what I was doing as an officer in the paratroops. But I was summoned back by my father and I said ‘yes’. In those days, you were quite obedient to your parents. As a result, I found myself in a group where nobody was waiting for me and I was not really needed.
“It is also possible that I was not totally welcome because I had no credibility except for being a member of the shareholder family. It was a very stupid thing to do, and it did not work very well,” Louis-Dreyfus explained.
He admitted that there can be a certain inevitability for those born into a shipping family to join the business, as there is “a specific passion, culture, and approach to life, business, and [the] world” that pervades. “It is the way you are educated, as has been your father and grandfather,” he said. He said he firmly believes that the “courage” it took to leave the family company for a tenure in merchant banking was the most significant decision of his career.
“This made me become a better person, a better businessman, and a better friend, both in banking and in shipping,” he said candidly. “I built my credibility when I decided to leave the group. I developed my career and my personality, and I made a good living in banking [at Banque Pallas France and later at Crédit Naval]”.
The advice to make a mark elsewhere before joining the family group was passed on to his children. His son Edouard Louis-Dreyfus, who is president of the group’s executive board, and his daughter Charlotte Lezius-Doncel, who is a general manager, had roles outside LDA before they joined. “The two who work in the company both come with experience and credibility. If you don’t do it, it doesn’t matter how bright, efficient, or talented you are. You will always find people suggesting that you are there because you are the son or the daughter of the boss,” he said.
His difficult early encounters with family business dynamics have done nothing to dampen Louis-Dreyfus’s ardour for family businesses, and this was a specialist area during his merchant banking career.
“I know the culture. It’s all about the passion and the involvement of the people in charge. They are the best-run companies in the world because they are run by people who have got their own money involved and are concerned about the business’s reputation,” he told Fairplay.
In shipping, one must always have a long-term view, and this is the case for all family-owned businesses. The shareholders and managers look long term. They are not thinking about next month or next year or their bonus. They are thinking about the future of the company, its staff, its name, its image, and its role in the country, Louis-Dreyfus explained. He does not believe in public shipping flotations, a view that he has shared at forums and one that has not been popular with some listeners.
“Some managers of listed groups have a clear view of the future, but this is for one or two years. Family-owned businesses need to be thinking about 20, 50, or even 100 years. Most shipping companies are family businesses as they need people to take risk and have a long-term view. I love family companies because they are better-run, and this is why I don’t believe in listed companies for shipping,” he explained.
Taking a long-term view has paid off for Louis-Dreyfus. Following his return to the family group in 1996, when “shipping wasn’t doing very well”, a EUR60 million (USD82.2 million) venture into laying telecom networks helped turn around the group’s fortunes. This cable-laying offshoot eventually become Neuf Telecom and the group exited with 54% of the EUR8 billion proceeds from its sale in 2007.
Louis-Dreyfus admitted that it was a good deal and it put a lot of cash into the company, which enabled some shareholders to exit. It also allowed for the shipping side of the business to be separated from trading house Louis Dreyfus Company, with Louis-Dreyfus selling his shares in this business to his cousin, who moved it to Geneva.
The net result was that Louis-Dreyfus and his family had 100% control of the shipping business, and the move allowed them “to keep it in France, fly the French flag, and pay French tax. It might not have been the brightest thing, but it was what I and my children wanted to do,” he said.
Louis-Dreyfus acknowledged that running a French company can be expensive. This has been a key factor in LDA’s continued focus on high-tech shipping – including cable-layers, wind turbine installation ships, and heavy-lift tonnage – which is one of its three core business areas, with the others being dry cargo and logistics.
Going forward, LDA intends to boost its activities in high-tech shipping and logistics. It has sizeable operations in Indonesia and Malaysia and is looking to gain a foothold in Africa. It will also continue to invest in dry bulk, a sector it has been involved in since 1893 despite some of the “horrible markets” witnessed in recent years.
However, LDA has been rethinking its fleet composition. There are plans to add more geared Handymaxes to its fleet and move away from large-sized bulk carriers, particularly Capesize vessels. Louis-Dreyfus declined to give a definite timescale as to the pace of the company’s Capesize exit, as this would depend on the market.
“It is a sector that we will not be developing, even though it is a sector where we are an important operator. We believe it is a sector that is just too risky for a family company like ours,” he said.
There is no questioning Louis-Dreyfus’ determination when it comes to taking a strong position on maritime issues. He is clearly fearless, having played rugby for London Irish in his youth, and with BIMCO and European Community Shipowners’ Associations presidencies under his belt, he is well known for chiding the industry and calling for action.
His latest mission is to get shipping to slow down. “I have been asking shipping to reduce speed as this is the only way we can easily and with no cost make a step forward in meeting [environmental] regulations. I don’t believe in scrubbers. They are merely a good solution for a short time. The best way for cutting greenhouse gas emissions is to reduce speed. It’s good for the environment, safety, and the market,” he said.
Contact Nicola Good