Chinese Company Sets New Rhythm in Port of Piraeus

By LIZ ALDERMAN Published: October 10, 2012

Privatizing the Port of Piraeus: The International Herald Tribune’s chief business reporter, Liz Alderman, profiles a Greek port where Chinese management is struggling to recast labor relations.

PIRAEUS, Greece — The captain gazed from his elegant office overlooking this port on the Aegean Sea and smiled as towering cranes plucked container after container from a giant ship while robotic transport vehicles fanned out to transfer the cargo to smaller vessels bound for the Mediterranean.

The cargo volume here is three times the level it was two years ago, before the captain, Fu Cheng Qiu, was put in charge by his employer, Cosco, a global shipping giant owned by the Chinese government.

In a 2010 deal that put 500 million euros ($647 million) into the coffers of Greece’s cash-starved government, Cosco leased half of the port of Piraeus and quickly converted a business that had languished as a Greek state-run enterprise into a hotbed of productivity.

The other half of the port is still run by Greece. And the fact that its business lags behind Cosco’s is emblematic of the entrenched labor rules and relatively high wages — for those lucky enough to still have jobs — that have stifled the country’s economic growth.

“Everyone here knows that you must be hard-working,” said Captain Fu, under whose watch the Chinese-run side of the port has lured new clients, high-volume traffic and bigger ships.

In many ways, the top-to-bottom overhaul that Cosco is imposing on Piraeus is what Greece as a whole must aspire to if it is ever to restore competitiveness to its recession-sapped economy, make a dent in its 24 percent unemployment rate and avoid being dependent on its European neighbors for years to come.

As the Greek government contemplates shedding state-owned assets to help pay down staggering debts, it might be tempting to consider leasing or even selling the rest of the port to China. But if the Cosco example is representative, the trade-offs — mainly a sharp reduction in labor costs and job protection rules — might be ones many Greeks would be loath to accept.

“Unionized labor will push back to keep the protection it has enjoyed,” said Vassilis Antoniades, the chief executive of Boston Consulting Group in Greece. But the Cosco investment, he said, “shows that under private management, Greek companies can be globally competitive.”

Captain Fu, for his part, says Greece has much to learn from companies like his.

“The Chinese want to make money with work,” he said. In his view, too many Europeans have pursued a comfortable, protected existence since the end of World War II. “They wanted a good life, more holidays and less work,” he said. “And they spent money before they had it. Now they have many debts.”

Greece’s troika of foreign lenders — the International Monetary Fund, the European Central Bank and the European Commission — has made similar arguments. Among other things, they are urging Prime Minister Antonis Samaras to end blanket protections for workers and unions and to require Greece itself to operate more like a productive modern business.

Besides the $647 million that put half of the port of Piraeus into Chinese hands, the Greek government is receiving more income from taxes as a result of the port’s pickup in business.

Other than a handful of Chinese managers, moreover, Cosco’s operation is providing around 1,000 jobs to Greek workers — compared with the 800 or so who work the dock that is still under Greek management.

On Cosco’s portion of the port, cargo traffic has more than doubled over the last year, to 1.05 million containers. And while profit margins are still razor thin — $6.47 million last year on sales of $94.2 million — that is mainly because the Chinese company is putting a lot of its money back into the port.

Cosco is spending more than $388 million to modernize its dock to handle up to 3.7 million containers in the next year, which would make it one of the world’s 10 largest ports. Beyond that, workers are also laying the foundations for a second Cosco pier.

The Greek-run side of the port, which endured a series of debilitating worker strikes in the three years before Cosco came to town, has been forced by the Chinese competition to seek its own path to modernization. Still, only about a third of its business consists of cargo handling; the rest is made up of more lucrative passenger traffic

For years, the container terminal was a profitable operation. But Harilaos N. Psaraftis, a professor of maritime transport at the School of Naval Architecture and Marine Engineering in Athens, said it was inefficient “because worker relations were very cumbersome.”

The salaries of some workers reached $181,000 a year with overtime; Cosco is typically paying less than $23,300. On the Greek side of the port, union rules required that nine people work a gantry crane; Cosco uses a crew of four.

“It was just crazy,” recalled Mr. Psaraftis, who was the chief executive of the port from 1996 to 2002. “I told them, ‘If you keep this up, this thing will be privatized.’ But they didn’t listen.”

Since Cosco arrived, “competition has forced us to take initiatives to find better ways of working,” said Stavros Hatzakos, the general director of Piraeus Port Authority, which runs the Greek operation. “Employees think twice about strikes and labor action now,” he said. And the ones still on the job have taken salary reductions as part of the across-the-board wage cuts of 20 percent or more that the government has placed on public employees.

On the other side of the chain-link fence that separates the Chinese and Greek operations, Captain Fu said he would love for Cosco to run all of Piraeus if the government put it up for sale. That expansion would cement Chinese dominance of one of the most strategic shipping gateways to Southern Europe and the Balkans.

Such a move, though, might meet stiff opposition from Greek unions and officials at the Piraeus Port Authority, who criticize Cosco’s approach to labor.

“It’s like another country over there,” Thanassis Koinis, a deputy director at the Piraeus Port Authority, said one recent morning as he stared out the window of his dilapidated office at the cranes soaring above Cosco’s docks.

Mr. Koinis and some other Greeks accuse Cosco of using employment subcontractors that hire temporary, unskilled, nonunion workers desperate for jobs and exploit them by paying low wages.

Babis Giakoymelos, a board member of the Dockworkers’ Union, contended that Cosco was also saving money by cutting corners on worker safety. “They are bringing third-world labor standards to Europe,” he said.

For Tasos Vamvakidis, Cosco’s commercial manager here, such complaints amount to sour grapes. “It’s easy to say things against Cosco; but when you come here, you see that everything works properly,” he said one morning on the Cosco dock, raising his voice to be heard above the machinery’s din. “We win business by showing that we work 24-7, 365 days a year.”

Casting a glance at the Greek side, he added: “Maybe in other terminals, people work less. In any case, if it’s so bad, thousands of people would not be applying to work for Cosco.”

Dimitrios Batsoulis begs to differ. He was fired from his job as a Cosco dockworker in February, after he tried to organize a workers’ committee to raise concerns about safety violations that he said Cosco subcontractors repeatedly ignored.

He said his bosses had blacklisted him several weeks earlier after he left the steering compartment of a crane when the heater broke one snowy morning, leaving his hands too cold and stiff to control the giant machine from his post 49 feet above ground.

“I was jeopardizing my life and my colleagues’ lives,” Mr. Batsoulis said. When he climbed down to warm himself, he said his manager and a Cosco executive chastised him for slowing operations. He said he was not called back to work for another week.

“If you are a worker for Cosco, then you know suddenly how it is to work in the Chinese Republic,” said Mr. Batsoulis, who is now suing the company for unlawful dismissal and unpaid overtime.

Cosco said it would not comment on the pending case. But Captain Fu contended that disgruntled workers like Mr. Batsoulis were in a minority.

Captain Fu said Cosco took pains to avoid seeming like an invader, partly by hiring Greek companies to rebuild the pier and to oversee the labor force in accordance with Greek law. He boasted repeatedly that Cosco had only seven Chinese managers, who he said trained their Greek work force up to the highest standards.

In the gleaming executive suites abutting Captain Fu’s expansive offices, a recently completed $1.29 million renovation attested to the efforts in Chinese-Greek corporate diplomacy. Pictures of sculptures of Greek gods faced paintings of Chinese dragons, while blown-up photos of President Hu Jintao standing shoulder to shoulder with Greek leaders adorned a cavernous meeting room.

“At the beginning, the Greeks were worried that the Chinese would come in here and take over,” Captain Fu said. “Instead, we showed the local people that we want to help them develop; we don’t want to take work from them and give it to the Chinese.”

As Greece struggles to overhaul its economy, he said, Cosco represents an opportunity for Greek workers — and the country itself. “Cosco is their future,” he said. “We are here to stay.”

Dimitris Bounias contributed reporting

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