Executive Interview: Björn Rosengren, President and CEO, Wärtsilä
On Thursday, April 26 Wärtsilä had the distinct honor of ringing the opening bell on NASDAQ. Visiting New York from Finland, CEO Björn Rosengren took a few minutes to talk with The Maritime Executive on what Wärtsilä is up to and how he sees the future for the industry and his company.
MarEx: Tell us about yourself and your background. What is your experience in the maritime industry?
Björn Rosengren (BR): My background in the maritime industry is quite short. I’m coming in as CEO from a company called Atlas Copco, in the construction and mining business where I spent 13 years. The maritime and energy business is new for me and I’m in the learning phase.
MarEx: Wärtsilä’s vision is to be the most valued business partner for all of its customers. What steps are being taken to accomplish this?
BR: We have customers in every part of the world and from all different segments – merchant, cruising, offshore and other sectors. We not only provide first-class equipment for the industry but we also have the most built-out service operation to support them. We think that if you buy this advanced equipment and if at any time something goes wrong, you should always have the security that there is a Wärtsilä service technician that can help you. We have between 7,000 and 8,000 technicians around the world and service available 24/7. I think from a customer perspective that gives a certain amount of security.
MarEx: In January the acquisition of Hamworthy was finalized. What value has this acquisition brought to Wärtsilä’s current operations? What plans do you have for Hamworthy?
BR: We are very excited about Hamworthy. Our strategy for the future is very much to support our customers in being more efficient and also in being more environmentally friendly. There is a lot of legislation coming up here in the American market related to gas emissions and ballast water.
(Pictured left: Björn Rosengren)
Starting in 2015 the U.S. coastline as well as a big part of Europe will be part of these protected environments called ECAs – Emission Control Areas – meaning that when you approach these areas you have to fulfill these regulations. We feel we are the right company to help our customers reach their goals. There are different ways of fulfilling these regulations. One way is using gas as a fuel; gas is much cleaner than using heavy fuel, both when it comes to sulfur and NOX on emissions. And it even gives you less greenhouse gases. We supply engines that can be run both on heavy fuel and on gas. We see this as a great opportunity for the customers. They can use the heavy fuel when they are out in the ocean and as they approach these sensitive areas they can just press a button and start using the gas and be in full compliance with the regulations. Another way for the customer to solve this is to use a scrubber technology, meaning cleaning the exhaust out of the engine. There are different technologies to do this, and Wartsila has developed one technology and Hamworthy has developed another and by merging these two entities we have created what we call Environmental Solutions within Ship Power. This is there to support our customers. We can actually offer the most advanced technologies to comply with this, both from the gas side as well as the scrubber side. Hamworthy brings port knowledge and good products to the table.
The other regulation that is coming, which is driven by the IMO, concerns ballast water and is meant to preserve the biodiversity of the oceans. You pump in the ballast water when you have no cargo and then you pump it out in a different part of the world. It really creates some problems in coastal areas. You need to make sure that all the organisms that are in the ballast water are dead before they come out. Wärtsilä, as well as Hamworthy, has good technology in the front line and we can offer our customers excellent service from this. In addition, Hamworthy is very strong in handling gas. We are very strong in using gas in our propulsion systems. But they do the liquefaction as well as the pumping and handling on the ship. This gives a little extra value to customers and ensures the gas is handled in a safe and efficient way. Hamworthy is in the middle of our core strategy; they are a vital part of the goals that we are trying to meet.
MarEx: In talking with our readers and industry leaders, we know that meeting these stringent requirements is of great concern.
BR: We understand that many of our customers are worried about these regulations because they’re adding costs. I think they’re all concerned about the environment and making sure our industry is clean, but I think many of our customers are worried that so much is coming in a short time and it’s putting an extra financial burden on them when many are having a tough time today. Our job is to support them in complying with these regulations in the most cost efficient way.
MarEx: Many world economists believe that the BRIC (Brazil, Russia, India, and China) nations will be wealthier than most by 2050, and several companies have included increased operations in these countries as part of their future strategies. Do you think that the economists are correct? What plans does Wärtsilä have in these emerging markets?
BR: It is true that a lot of the shipbuilding industry has moved to this part of the world. In fact, 85 percent of all ships today are built in Korea, China and somewhat in Japan. In the future we foresee Brazil as another exciting market. We have moved to these places also. Today we have factories making our products in these areas, which place our products close to the customer. In these parts of the world we also have joint ventures making propulsion equipment and engines in all different sizes. You need to be close to the customer if you want to do business in the future.
There’s a reason the shipbuilding industry has moved to this part of the world: The cost of production is lower. So for us moving into this part of the world we’ve tried to localize ourselves as much as possible to lower our costs and make our operations more efficient.
MarEx: What share of market does Wärtsilä have in stable economies like Korea and Taiwan?
BR: Korea is a very exciting market. The Koreans took over the shipbuilding industry at an early stage and lately China has increased and is taking market share from Korea, but mainly in the merchant segments. The Koreans have been very much in the forefront of offshore and special vessels like LNG and other areas that are still growing, while the merchant segment is suffering. Today Korean shipyards are most successful in meeting customers’ needs. The Chinese are quick to learn and are developing their shipyards and are now trying to focus on these special areas as well. In Brazil there’s also an exciting market coming up, driven by the new legislation that says you need to have 65 percent of the content of your products produced in the country. There are companies in Brazil, especially in the offshore business, that have big plans to invest for the future. There will be a lot of offshore building in this part of the world.
MarEx: As you mentioned before, LNG is the future. What role does Wärtsilä plan to have in this segment of the market?
BR: We started with LNG or dual-fuel engines at an early stage. During the previous boom on the LNG side – which was not really driven at that time by the environmental legislation and availability of gas, but rather by the need to import gas to the U.S. - a big fleet of LNG ships was built. During this period Wärtsilä was the forerunner in the development of engines that could run on LNG and heavy fuel when they were offloaded. We started making these engines long before any of our competitors were even thinking about this. And today, due to the availability of the gas and the environmental regulations that are coming, our advantage over our competitors is that we have a huge number of engines in the market that have been running on dual fuel, which means we have a little bit more knowledge than them. From a customer perspective, they probably feel more comfortable buying our technology because it’s proven – especially when it comes to the main engines, where durability is most important.
MarEx: With 19,000 employees and facilities in 70 countries and work being done with multiple international partners, what challenges does Wärtsilä face just in managing the various currencies and exchange rates?
BR: It’s always a challenge for any global company. Today we have 40 percent of our business in Asia, 30 percent in Europe, 20 percent in the Americas and 10 percent in the Middle East and Africa. For many years we’ve been a global company, and you learn how to secure your currencies and you also have production facilities in different areas to compensate for swings in different currencies. This is something you get used to. In the long run it usually evens out, but in the short run there can be some dramatic swings.
MarEx: What percentage of your overall business comes from the marine division?
BR: If you include our service operations for our marine products, it’s about 50 percent of our business. The other half goes to the power plant business.
MarEx: In March Wärtsilä signed a long-term contract with U.S.-based Prestige Cruise Holdings to provide lifecycle maintenance and service to six vessels with 27 Wärtsilä engines. Can you tell us a little more about the work you’re doing in the cruise market.
BR: For the cruise lines it’s extremely important that the engines are working. They’re transporting people all around the world, and we’re talking thousands of people. Safety and the security that those engines are working are highly important. We have some contracts also with Royal Caribbean and some others. We also have long experience from the power plant side where more than 60 percent of our power plants are maintained, serviced and operated by Wärtsilä people. It’s very much the way we do business. We know the engines are the best and we feel we can give added value to our customers by servicing them.
MarEx: Today you are in New York, ringing the opening bell at the NASDAQ. What was this like?
BR: What an experience! It was exhilarating.
MarEx: On Tuesday a dedication ceremony was held at the United States Merchant Marine Academy where Wärtsilä donated a controllable pitch propulsion system. These two events show significant presence and leadership in the U.S. market. John Hatley, Vice President, Ship Power, Wärtsilä (Houston), who is a “Kings Pointer,” has worked closely with the Academy to bring Wärtsilä technologies to the classroom. He was on hand to talk about Wärtsilä’s involvement in maritime education and training and this most recent donation.
John Hatley: We were very pleased to have our dedication ceremony at Kings Point as the propulsion equipment we’ve offered them brings some unique opportunities. Obviously Wärtsilä’s commitment to education today is looking forward to the new maritime leadership of tomorrow. All generations have an obligation to education, and this Wärtsilä gift reinforces our sailing course and dedication to Kings Point. Some years ago in the 1990s we provided the training facility along with a two-stroke sulfur engine followed by a Vasa 22 engine including a lot of other components and equipment that they have housed in a Wärtsilä lab room on the first floor of the engineering department. Students are able to learn using these advanced technologies from Europe. We think it is very important to provide great opportunities for future leaders to understand the technologies and take the theory from the classroom to actual practice by touching, understanding and working with this fine advanced equipment.
We are as well providing significant support to the State University of New York’s Maritime College in Fort Schuyler. We also see their student body as leaders in the power generation and marine industries, and last October we provided them with a brand new engine and gear shaft, which they housed in a new building named Wärtsilä Hall. This is an excellent training opportunity for them, and we see it as a tremendous investment in America’s leaders, who tomorrow will be making the executive decisions guiding the industry.
MarEx: Thank you very much, Mr. Rosengren and Mr. Hatley.
Those in the photo from the dedication ceremony (Left to Right):
Frank Donnelly, President Wärtsilä North America, Inc., Capt. Peter Kahl, Assistant Professor of Engineering USMMA, Dr. Shashi Kumar, Superintendent USMMA, Paul Glandt, Sales Manager, Wärtsilä North America, Inc. David Matsuda, MARAD Administrator, John Hatley, Vice President Ship Power, Americas, Wärtsilä, Dr. David Palmer, Academic Head of Marine Engineering, USMMA, Atte Palomäki, Group Vice President, Communications and Branding, Wärtsilä, John Kennedy, Director Services Unit USA, Wärtsilä
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.