14 ★ FINANCIAL TIMES Wednesday28 August 2019COMPANIES
MYLES MCCORMICK— LONDONThe oil tanker industry is approaching
an “inflection point” as shipowners
prepare for greater volumes of crude
pumped out of the Permian basin and
the impact of tougher environmental
regulations, says one of the world’s big-
gest operators in the sector.Frontline,controlled byJohn Fredrik-
sen, the Norwegian billionaire,is hoping
to ride a wave of growing demand after
announcing last week it would buy 10
Suezmax tankers fromTrafigura, the
commodities trader,in a $675m deal.
Robert Hvide Macleod, chief execu-
tive, said: “Frontline is well positioned
as we approach what we believe is an
important inflection point in the tanker
market.”
The company cited three factors: ris-
ing US production, the return ofrefineries from maintenance and the
impact of tighter International Mari-
time Organisation rules on emissions.
US crude output has grownrapidly in
recent years, fuelled by the fracking
boom in the Permian Basin that strad-
dles Texas and New Mexico, making the
country the world’s largest oil producer.
The US is set to become a net oil
exporter by 2021, according to Interna-
tional Energy Agency forecasts, with the
anticipated resolution of pipeline bot-
tlenecks over the next 18 months set to
further boost growth.
With much of these exports being
shipped to Asia — the longest possible
seaborne journey — that is set to boost
tanker operators. However, analysts
have warned that the looming threat of
recession could crimp globaldemand.
Frontline also expected to benefit
from the introduction of the stricteremissions regulations set to be imposed
by the IMO from 2020. These will force
owners to either switch to low-sulphur
fuels or install exhaust scrubbers.
The company anticipated a “large
number of older vessels will be taken
out of the market” as a result, decreas-
ing competition to the advantage of its
younger fleet — which has an averageage of less than four years. Lukas Daul,
analyst at ABG Sundal Collier, said:
“With the new regulations I think there
will be an adjustment period and people
are anticipating some disruption
in terms of supply and transit patterns,
and that is typically good news for ship
owners.”
Frontline’s comments came as it
reported first-half results broadly in line
with analysts’ expectations, with net
income of $41.1m up from a loss of
$36.5m in the same period last year.
However, the bulk of this — $40m —
came through in the first quarter as a
result of the recent refinery outages.
The company said its Front Altair
tanker, which wasdamaged in an explo-
sionclose to the Straight of Hormuz in
June, that the US blamed on Iran, would
return to operations in the fourth quar-
ter of the year, following repairs.Oil & gas
Tanker group Frontline prepares for market surge
The tanker Front Altair that came
under attack in the Gulf of OmanFerdinand Piëch, the gifted and ruthless
engineer who transformedVolkswagen
into both the world’s largest carmaker
by sales and a company beset by scan-
dals, has died aged 82.
Piëch, the grandson of Beetle designer
and founder of the eponymous sports
car maker Ferdinand Porsche, reunited
VW and Porsche and made them part of
a 12-brand empire that stretched from
Lamborghini to Skoda.
Chosen as car executive of the century
in 1999, Piëch was at the heart of the
German car industry for five decades,
leading motor racing competition at
Porschein the 1960s, turningAudi
around in the 1970s and 1980s, and
reviving VW in the 1990s and 2000s.
But his cold manner and often cut-
throat leadership style contributed,
according to critics, to threebig scandals
at VW in the past 30 years, culminating
in the company-threatening crisis in
2015 over diesel emissions test cheating.
The German weekly Der Spiegel once
described work life at VW as “North
Korea without the labour camps”.
Bob Lutz, former vice-chairman of
General Motors, told the Financial
Times that Piëch was “one of the greats
in the automotive industry... There’s
no question Ferdinand was a brilliant
person, a brilliant engineer, and a great
leader.” He added: “I didn’t always agree
with his dictatorial style of leadership,
but he was certainly results-driven and
accepted no excuses for failure.”
Piëch’s death was confirmed by his
widow Ursula, who said he died “sud-
denly and unexpectedly”. German
media reported he had collapsed at a
restaurant.
Hans Dieter Pötsch, Piëch’s successor
as chairman, said: “Ferdinand Piëch has
written automotive history — as a man-
ager, ingenious engineer and a visionary
entrepreneur. Since the 1960s, he
has shaped the development of the
automobile like no other, pushing for-
ward the entire industry and above all
Volkswagen.”
Richard A Johnston, in his 2005 book
Six Men Who Built the Modern Auto Indus-
try, said Piëch “more than any single
individual, promoted and maintained
Europe’s technical advantage over the
rest of the automotive world in the sec-
ond half of the 20th century”.
Piëch was born in 1937 in Vienna with
“petrol in his blood”, as he wrote in his
memoir,Auto. Biographie. His mother
Louise was the daughter of Ferdinand
Porsche, who designed the Beetle at the
behest of Adolf Hitler, while his father
Anton Piëch ran the main VW factory
for the Nazis for most of the secondworld war. After his father died when
Piëch was15, he was sent to Swiss board-
ing school. Allies said that helped to
form a personality that allowed fewto
get close to him.
He dreamt from an early age of
becoming an engineer, and after earning
a degree at a respected technology col-
lege in Zurich, Piëch went to work at the
sports car maker his grandfather had
recently started. He became responsible
for its motorsport division in the 1960s,
and built his reputation by setting out to
dominate the Le Mans 24-hour race.Against the recommendation of Por-
sche’s board, he investedto build the
917, which became one of the most suc-
cessful racing cars in history, winning
two Le Mans races that transformed the
company, but in the process nearly
bankrupted it.
In 1972, he moved to Audi where, as
head of technical development, he
launched the Quattro and engineered a
series of innovations that turned a lack-
lustre brand into a viable competitor to
the two leading luxury brands ofBMW
and Mercedes.
After rising to serve as Audi’s chief
executive, he took the same job at par-
ent company VW in 1993. He saved the
company from financial oblivion and
launched an empire-building spending
spree that led to the purchases of expen-
sive luxury brands such as Bugatti,
Bentley and Lamborghini as well as
truckmakersScaniaand MAN, and
motorcycle brandDucati. But he was
also known for pricey follies such as a
failed attempt to compete with Mer-
cedes via the VW Phaeton and the
development of the world’s fastest but
lossmaking car, theBugattiVeyron.He cemented his power in 2002 by
becoming chairman, but concerns grew
about his brutal management style, his
interest in technical excellence over
profitability and his disregard for corpo-
rate governance standards.
He had a habit of defenestrating rivals
and executives that displeased himwith
a few choice words to the media, most
memorably in 2006 when he under-
mined his successor as chief executive,
Bernd Pischetsrieder, by saying that an
extension of his contract was “on open
issue”.Monthslater,hewasdismissed.“It
is not possible to bring a company to the
summit while maintaining harmony,”
Piëch once said. “VW, family, money”
washiswayoflistinghispriorities.
The dismissal of Mr Pischetsrieder led
to discussions between VW’s then larg-
est shareholder, the state of Lower Sax-
ony where many of its factories are
located, and Anglo-American investors
about ousting Piëch. But the wily Aus-
trian outmanoeuvred them all, and
soon had the chance to show his disdain
for corporate governance norms.
In 2012, he nominated his wife
Ursula, the family’s former nanny and19 years his junior, to VW’s supervisory
board. “Kindergarten teacher with
additional qualifications in business
and law (not currently working)” was
how VW described her qualities in a let-
ter to shareholders.
By then, Piëch’s control over VW
seemed almost total, as his extended
family had become the carmaker’s big-
gest shareholders after a complicated
deal in which it also bought Porsche.
Still, his tenure at VW was partly
overshadowed by a series of scandals
that both insiders and outside critics
blamed on the system Piëch developed
in which he managed the company
closely with workers. In 1993, he
poached a top executive from GM, lead-
ing to a torrent of insults and lawsuits
over alleged corporate espionage. A sec-
ond scandal, this time involving bribery
and VW allegedly paying for prostitutes
and even Viagra for workers, broke out
in 2005. Piëch admitted there had been
“irregularities” but said he had no
knowledge of them.
Most seriously of all came the diesel
emissions scandal in 2015, only a few
months after Piëch had beenousted as
chairmanfollowing a boardroom strug-
gle with his one-time acolyte and then
chief executiveMartin Winterkorn.
Many blamed Piëch’s domineering
management style for creating an
atmosphere in which the cheating could
flourish. Mr Lutz recalled once compli-
menting Piëch on the finish of the new
VW Golf, particularly how small the
gaps were between the doors and the
frame.
Piëch’s response stunned Lutz. He
said he had cobbled togetherhis body
engineers and manufacturing teamand
said: “In six weeks I want 3-4mm gaps
on everything. If I don’t have it, every-
one in this room will be fired.”
It has never been fully explained what
happened between Piëch andMr Win-
terkornthat led to the chairman’s
abrupt departure from VW in 2015 just
before the scandal. The paranoia at the
time in Wolfsburg, home to VW’s head-
quarters, was that Piëch had leaked the
scandal to bring down his adversary.
Months after the scandal broke,
leaked testimony caused uproar in Ger-
many when it emerged that Piëch had
told prosecutors that certain VW board
members had early knowledge of the
cheating. No evidence was produced to
back the claims, which were never
stated directly.Piëch himself remained
publicly silent about the episode.
He was vague about his private life
and according to various interviews had
12 or 13 children with three, four or
more women. Ursula told the DPA: “Fer-
dinand Piëch’s life was marked by his
passion for the automobile and for the
workers who built them. He was an
enthusiastic engineer and car lover until
the end.”SYLVIA PFEIFER— LONDON
PATTI WALDMEIR— CHICAGOA Russian aircraft leasing company is
suingBoeingfor breach of contract in
connection with its grounded 737 Max
in what is the first lawsuit brought
against the US manufacturer by a cus-
tomer over thesafety crisis.
Avia Capital Services, a subsidiary of
Russian state conglomerateRostec,
claims two deadly crashes were due tothe “negligent actions and decisions of
Boeing” not just in designing a plane
that was “defective” but also in “with-
holding critical information” from the
US aviation safety regulator during cer-
tification.
The complaint,filed in Cook county
circuit court in Chicago on Monday,
claimsthat Boeing “intentionally” failed
to disclose information about the air-
worthiness of the Max to its customers,
including Avia, in order to induce them
to buy the aircraft.
Avia ordered 35 Max 8 jets fromBoe-
ing before they were grounded world-
wide in March, and now it wants to
cancel the order. The company says itgave Boeing a cash deposit of $35m to
secure the order, and is asking for that
amount to be returned with interest,
along with $75m in lost profits for a total
of $115m in compensatory damages,
plus “several times the amount” in
punitive damages.
Avia’s lawyer, Steven Marks of the
Miami aviation law firm Podhurst
Orseck, told the Financial Times in aninterview that Boeing had offered com-
pensation but it was inadequate. He said
other Boeing customers had been in
touch with him about bringing similar
lawsuits. The Chicago-based aircraft
manufacturer has been negotiating
compensation deals with customers and
it took a$4.9bn chargein the second
quarter for that purpose.
“I think you will see a number of other
operators filing suit in coming months.
This will be the first of many to come,”
Mr Marks said.
The lawyer is also representing 30
families of victims of both theLion Air
crashin October last year and theEthio-
pian Airlinestragedy in March, whichtogether killed 346 people. The fallout
from those two crashes has damaged
Boeing’s reputation and finances; the
company posted itsbiggest quarterly
loss in July.
Even before thecrashes, Avia and
Boeing had agreed to delay delivery of
33 of the Max aircraft to the Russian
company. Originally scheduled for
delivery between October 2019 and
February 2022, the orders were pushed
back to between March 2022 and
December 2024. The reason for the
delay was not clear.
While official investigations into the
accidents are ongoing,an anti-stall sys-
temcalled MCAS, which is unique to theMax, has been implicated. The system is
designed to pitch the plane’s nose auto-
matically downwards when it senses a
stall is imminent, which it was found to
have done repeatedly in both accidents.
Boeing has been working on a software
fix to ensure the system only activates
once. It will also no longer be triggered
by only a single sensor.
Dennis Muilenburg, Boeing’s chief
executive, said in April that the com-
pany had “followed exactly the steps in
our design and certification processes
that consistently produce safe aero-
planes”. The company has said it
expects the Max to start returning to
service “early in the fourth quarter”.Aerospace & defence
Boeing faces first lawsuit from 737 Max customer
Russian client accuses US
plane maker of negligence
and deceit in sales driveObituary Driven and ruthless engineer who built Volkswagen
‘Ferdinand
Piëch has
writtenautomotive
history — as amanager,
ingeniousengineer
and avisionary
entrepreneur’Ferdinand Piëch
was born in 1937
in Vienna with
‘petrol in his
blood’, as he
wrote in his
memoir, ‘Auto.
Biographie’.
Below, with
Angela Merkel,
Germany’s
chancellor—Jochen
Luebke/EPA-EFE$115m
Compensation
Avia is claiming,
plus much larger
punitive damages$4.9bn
The charge taken
as compensation
negotiations with
customers unfoldFerdinand Piëch
Car businessman
1937–Contracts & Tenders
Financial
BusinessesFor Sale
Business for Sale, Business Opportunities,
Business Services,
Business Wanted, Franchises
Runs Daily
.............................................................................................................................
Classified Business Advertising
UK: +44 20 7873 4000 | Email:
[email protected]
RELEASED RELEASED
BY"What'sNews"vk.com/wsnwsTELEGRAM: TELEGRAM:t.me/whatsnws