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Why is Maersk shaking things up at the executive level?

Shipping giant A.P. Moller-Maersk has confirmed the appointment of Vincent Clerc as its new chief executive officer as they prepare to navigate through a difficult period. Freight rates in the company’s core shipping container business are falling quickly as trends indicate an oncoming global recession.

Clerc, a company veteran, will take over the role from Soren Skou on January 1, 2023. Skou leaves after 6 years in the position. The company are expected to place an increased emphasis on its land-based logistics business during the slump.

Shares in Maersk have doubled since Skou took over in 2016 and in this period the company became a truly integrated logistics firm after selling off its oil and gas businesses.

“During his tenure as CEO of Maersk, Soren has been instrumental in redefining Maersk into a customer centric end-to-end logistics provider with a global leadership position in sustainable transportation solutions,” Robert Uggla, chairman of the board, said in a statement.

However, the forecast is turning darker and a change was felt necessary.

"The strong tailwinds that benefited the supply chain industries during the pandemic are coming to an end," Maersk Chairman Robert Maersk Uggla told a press conference at the company's headquarters in Copenhagen.

"I think it's an advantage for the company to have some new energy in the CEO position... at a time when we can see turbulence on the horizon," he said.

Fitch Ratings recently revised their outlook for shipping from neutral to deteriorating. The easing of supply chain pressures has led to the near normalization of container freight rates, suggesting the supersized profits of the last three years are set to end.

Further, forecasts for a harsh global recession and the continuation of pandemic-related lockdowns in China continue to weaken capacity and demand.

Germany’s Hapag-Lloyd is seeing a small uptick in demand after a decline in recent months but even they have repeated their muted expectations this week. Shipping saw a noticeable contraction in demand in September and October as global economies managed spiking inflation and the rising cost of living. There is now concern supply will considerably outstrip demand in 2023.

Maersk's new CEO Vincent Clerc and Soren Skou

Maersk's shares have lost significant value since January, around 40%, and Maersk was trading 2.7% lower following the announcement.

However, those within Maersk are projecting confidence in Clerc. The former Chief Commercial Officer is well respected within the company, having joined over 25 years ago, and has a strong record as CEO of the company’s Ocean and Logistics division.

“He has been a pivotal leader for Maersk’s transformation, demonstrating great strategic acumen, an ability to execute complex plans and deliver long-term shareholder value through compelling customer solutions”, commented Uggla.

Addressing the challenges the company faces, Clerc stated "on the heels of a pandemic, and now with the war in Ukraine and an energy crisis upon us, there are many tough challenges ahead; challenges that impact us all and where Maersk can make a difference. Companies are rethinking their supply chains in this new environment, they are looking for more stability, and more support on their decarbonisation journey. This represents an incredible business opportunity for Maersk that we all are eager to seize."

It will demand of us that we stay the course on our strategy, delivering on our digitalisation and decarbonisation roadmaps, while keeping a sharper than ever eye on our operational excellence and performance. When we do that, we will make a profound positive impact for all our stakeholders.

Thus, while Skou retires with a distinguished reputation, built over 40 years, well intact it is clear the company are concerned about the prospects for 2023. Could a change in CEO truly bring the energy required to steer Maersk through troublesome waters or will global chop prove too much?

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