Executive Interview: Kommer Damen, Chairman, Damen Shipyards Group

He has run the company founded by his father and uncle for more than 40 years, through good times and bad. For Kommer Damen, the best is yet to come.

By Tony Munoz

 

MarEx: Tell us about the history of Damen Shipyards Group that began in 1927 and its growth from a single yard to a global powerhouse with 33 shipyards and related companies worldwide.

Damen: My father and his brother, Jan and Rien, respectively, began the company in a shed next to the family home in the Dutch village of Hardinxveld in 1922. They formalized the company as Damen Brothers in 1927. It remained a small but prominent boat builder until I purchased the company from my father in 1969 with the modular concept for building small boats and launches. This was an immediate success and from thereon we grew gradually till today and hope to continue.

MarEx: In 1969 the modular concept was new. How did you come up with it?

Damen: From the time I was a boy I was always around Damen Brothers and remember clients asking about building boats with a shorter delivery time, but back then they couldn’t. I recall thinking, “If all the components and hulls were in stock, boats could be turned around in weeks.” The whole family thought this was too risky, but I knew it would be a success. After I took control of the company I began delivering boats in weeks and, later on, we began delivering four to five boats in a few weeks. Modular construction of standardized ships has evident advantages, such as shorter delivery times and lower production costs, and standardized ships are better than single-built ships because more emphasis can be put on the design and the continual improvement of the standardized design.

We did the analysis and found Damen vessels have better resale value, which makes financing easier due to their second-hand value. The fleets also have lower operating costs because the operator needs fewer spare parts in stock. Crew changes are also much easier with standardized vessels.

MarEx: You are a naval architect and marine engineer by training. When did you begin working for Damen and in what capacity?

Damen: I officially joined the company after technical college in 1968, but I had always been associated with the family business and I knew this was my career. 

MarEx: In 1969 you took control of the company from your father and uncle. How many yards did the company have at the time, and when did you begin the global expansion?

Damen: I bought one yard of the three that existed at the time, and I began with only six employees. We began exporting boats immediately because many Dutch dredging companies were some of our main clients and they were working all over the world. It was an exciting time and our vessels became a standard in many foreign markets.

MarEx: Damen is a family-owned company with turnover of €1.3 billion ($1.8 billion). Will the company stay private and is the next generation of the family being groomed for corporate management?

Damen: Yes, the company will remain private and in the hands of the family. I also hope that the management will also stay within the family for some time to come, but it is not necessary.

MarEx: How big is the company?

Damen: Today the company has 6,000 employees worldwide and we operate in 11 countries, but we also have numerous affiliate associations in many more countries. Since I took the reins in 1969, the company has built over 5,500 vessels, and we build about 150 a year. We operate in many shipbuilding sectors and have tried to become a leader in these sectors as well as a prominent and recognized shipbuilder throughout the world.

MarEx: Damen also builds naval, coast guard and patrol vessels for governments around the world. In the U.S., many of these projects go way over budget. Does Damen employ standardized designs with these vessels and, overall, are deliveries on time and budget?

Damen: Yes, we also standardize military ship designs for naval vessels, patrol boats and coast guard ships. Standardization provides us with more accurate cost estimates and delivery times. So when we obtain a contract our experience with building standard-design ships makes the whole process more accurate and manageable in terms of equipment costs and labor. The largest military vessel Damen has built is the Joint Support Ship (JSS) for the Dutch Navy at 204.7 meters (671 feet). We have been very active in military shipbuilding since 2000 when we took over the Dutch state-owned shipyard “Royal Schelde.” 

MarEx: The maritime industry is one of the most regulated in the world. What designs has the R&D department developed concerning ship emissions, and what is the E3 tug initiative?

Damen: Our R&D group has focused on the reduction of power and meeting the lower emission requirements that are being put on the shipping industry around the world. We have long had a generic knowledge and the tools for application throughout the full range of our product lines. Our Damen “Sea Axe” concept reduces fuel consumption by 20 percent in real operational conditions. We’ve applied this successfully in offshore fast crew/supply vessels, patrol boats and megayachts. Additionally, we have fully tested, after extensive research, fuel-consumption reduction for inland waterways ships through the Damen “Air Chamber Energy Savings” (ACES) system, which has a proven 15 percent reduction in fuel for typical operational speeds.

The “E3 Tug,” which stands for Environmentally friendly, Efficient in operations, and Economically viable, is a cooperation of Damen, end-user Smit, and power management supplier Alewijnse to develop a low-emissions harbor tug. The “three E” criteria have been tested and optimized for the operational profile of a harbor tug, and the result is a hybrid propulsion configuration with a shore power supply system capable of reducing harmful emissions by 60 percent over conventional tugboats.   

MarEx: Offshore wind is a fast-growing business and well-established in Europe. The U.S. has finally approved its first wind farm off Massachusetts. Does Damen build vessels for wind farm projects?

Damen: Indeed, we have built many boats that operate for wind farm businesses all over Europe. We recently designed a fast “Axe Bow” catamaran to service windmills at far distances from the coast.

MarEx: Damen builds public transportation vessels too. According to a company brochure, all of these ferries are built in Singapore. Why in Singapore, and does the company use different locations for specific designs?

Damen: We took over the former Kvaener Fjellstrand fast ferry business in Singapore. However, we also build fast ferries in China in cooperation with AFAI in Guangzhou. In general, we try to build one type of ferry at a yard because of the cost advantages, especially for larger ferries. The exception to this rule is when we build smaller ferries due to the cost of transporting them to their areas of operation.

MarEx: Damen provides financing for its clients and for governments too. Do most customers take advantage of this? What is the “buyback” program?

Damen: The fact is about 50 percent of our turnover has involved offering a financial package, but only 20 percent has included final financing for the client. In terms of the “buyback” program, we have been able to guarantee a buyback on certain vessel types, which allows us to buy the vessel back and resell it in the marketplace. I am very proud to say that many of the tugs and workboats are sold into the market after 20 years of service for the same price as they were originally. However, the buyback program only relates to tugs and workboats.

MarEx: Damen also builds components and specialized equipment for ships of all kinds. Please explain that part of the business.

Damen: While it is not a core business, we have reduced production costs by building our own rudders, nozzles and power systems. These systems are only built and used for the largest series we build, and we sell them only to other colleague shipyards.

MarEx: The global downturn hurt shipbuilders around the world. Did the downturn of 2007 through 2009 impact your company?

Damen: While the economic downturn affected many companies throughout the maritime industry, I am pleased to say we only had a small slowdown in turnover and profits, and the profits were normal again last year. The company is continuing its organic growth by buying production capacity in competitive markets, especially those companies whose products fit our overall strategy.

MarEx: Can you benchmark the shipbuilding industry in 2011 for us?

Damen: When I first started in the shipbuilding industry, more than 50 percent of all the shipbuilding capacity of the world was in Scotland. It was then taken over by Japan, Korea, and now China due to lower labor costs. In the future, Asia will be the center for building the majority of cargo ships, but I also believe there will be room for specialized vessels in the rest of the world. While the entire industry has been affected by the collapse of the global economy, shipbuilding is recovering. At Damen, we didn’t have much trouble, but our turnover suffered a little with lower profits. With that said, I am extremely optimistic about new markets in Europe and offshore energy, and the potential for military and coast guard ships will continue to grow as emerging countries need to protect their borders and offshore activities. Consequently, I am very optimistic about the future of shipbuilding throughout the world over the next few years.        

MarEx:  Thank you. That’s good news for Damen and the entire industry. – MarEx