Kuwaiti logistics firm escapes U.S. security concerns
A fast-rising transportation services company is based in the Persian Gulf region, with close ownership ties to the emir of the nation, acquires a large American corporation responsible for shipping goods in and out of critical U.S. seaports, and is heavily relied upon to support the U.S. military’s war efforts in Iraq and Afghanistan.
Dubai Ports World?
No, it’s PWC Logistics.
The white-hot debate in the United States about the potential terrorism threat posed by a Dubai state-owned company operating facilities in more than 20 U.S. ports raises questions about why one of the most security-conscious organizations in the world, the U.S. military, entrusts the lives of its servicemen and the success of its missions to two Gulf Arab companies.
The answer lies in the fact that both are well-managed companies operated on Western-oriented business principles, that have the capacity, technology and security systems in place to meet Defense Department requirements.
PWC Logistics is based in Kuwait and serves as the principle logistics support contractor for the U.S. Army in the Iraq theater of operations. The company began as a dusty state-owned warehousing company, but began to transform itself into a regional and global, all-purpose logistics and transportation provider after it was privatized in the late 1990s. The company trades on the Kuwait Stock Exchange, but some of its key shareholders are members of the royal family.
Dubai Ports World began as the Dubai Ports Authority, building the ports of Jebel Ali and Rashid in the 1970s and then operating them with the help of Americans from the former Sea-Land Services shipping company. In 1999, the port authority created Dubai Ports International to acquire and manage international terminals in Europe, India and the Middle East. In January 2005, it acquired CSX World Terminals and its nine facilities in Asia, Australia, Latin America and Europe for $1.1 billion from Jacksonville, Fla.-based railroad company CSX and subsequently changed its name to DP World.
And, in a transaction completed just this week, DP World spent $6.8 billion to acquire Peninsular and Oriental Steam Navigation Co., the U.S. assets of which are still in limbo. The U.S. facilities are estimated to be worth between $500 million to $700 million.
Unlike PWC, DP World is completely owned by the government of Dubai and its ruler, Sheik Mohammed bin Rashid Al-Maktoum. Jebel Ali serves as a major support base for the U.S. Navy, with more than 600 military cargo vessels and warships calling the port last year. DP World provides the Navy navigational, logistics, ship replenishment and repair services.
The Navy also sends ships to refuel at a tank farm in Djibouti operated by DP World.
Last year PWC Logistics acquired global freight forwarder GeoLogistics of Santa Ana, Calif., for $454 million, capping a period of rapid expansion into project logistics, forwarding and third-party logistics in Asia, Australia, Europe and the United States.
PWC is now a major provider of ocean and air freight forwarding, warehouse management and distribution, customs brokerage and other supply chain services all under one roof.
The U.S. Defense Department has outsourced a huge amount of its logistics operations in the Iraq theater to PWC. The department last year awarded PWC a $14 billion, five-year contract to supply food and groceries to troops in Iraq. PWC also operates a massive warehouse complex full of parts for the U.S. Army and is responsible for transporting tanks and other equipment to and from the field.
U.S. officials say that PWC provides excellent service and meets all its requirements for security, order accuracy and on-time delivery.
In 2004, PWC had more than $1 billion in revenue and $336 million in earnings. (To learn more about PWC Logistics, see the February issue of American Shipper.)
