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with Robert Magnusson, General Manager, Berg Propulsion International Pte Ltd

23.06.2010 / Energyboardroom

Berg Propulsion was founded in Sweden 1912 and set up its first international facilities in Singapore in 2008. Can you explain to our readers why you chose this location at that particular time?

To start off, the actual office in Singapore was already established in 1999 while it was the factory that has been opened in 2008 The owners was given the opportunity to purchase Berg Propulsion 1999 and they saw an opportunity on the Asian market. The new owners also used to live in Singapore, so they knew their network, the market potential and how things work in this part of the world. The service office in Singapore started with service engineers and administration personnel. In addition to attracting new service staff, the office gradually expanded its sales force over time until the company saw the opportunity to add a manufacturing facility in 2008 as well. Externally, the corporate entity acts as one but internally the operations are lead as two separate companies.

Operating expenses are very high in both Sweden and Singapore. How do you manage to remain competitive in the market and why did Berg Propulsion not choose to set up its operations in a lower cost environment such as China?

Berg Propulsion looked into moving into China but considering the cost of the products the company sells, a large part of the production cost is attributable to the material cost. To deliver good products, it is essential to have quality material inputs which Berg Propulsion continues to source from Europe. With such cost structure, the company would only be able to save on labor costs when relocating to China. Secondly, Berg Propulsion aims to attract good labor to offer a good end product. At the end of the day, the company’s propellers are Swedish products. A large number of the product components are still produced and manufactured in Sweden before they are assembled in Singapore. Another important aspect to prefer Singapore over China is the country’s advantageous positioning as a logistics hub. Most of the equipment is delivered by container and Singapore is a very convenient place to ship to and from.

If you say the product is still Swedish, how difficult was it then to establish a Swedish company in Singapore?

Customers in this area of the world consist of a network of business that still turn to Europe for good quality products. Even the good Chinese shipyards still source their products from European suppliers. Establishing the network in Singapore was not very complicated because it was already there. The company could count on the support of the customers it already had in Singapore, as long as the products remained European-made. From the early start, local people were at the heart of setting up the company because they knew the tax regulations and they had the experience to overcome the issues of setting up a company in this particular environment. Moreover, the fact that the owner had already been living in Singapore facilitated the entire process.

Looking at Berg Propulsion’s business model, what is the rationale behind its niche orientation, rather than offering additional solutions to propellers alone?

Berg Propulsion believes it should be delivering products in which the company has its expertise. Compared to Berg’s competitors, most of these organizations have a workforce of thousands of people and a wide range of products, which makes them less agile. Berg Propulsion knows propellers and can better prevent its customers from experiencing downtime. This downtime is a key factor for shipowners and justifies the premium for Berg Propulsion’s robust products. It is thus very important to know the customer’s business, especially when it comes to the offshore market. Based on the type and purpose of the vessel, Berg Propulsion decides what propeller is better suitable. The company has no business selling engines because it has no expert knowledge on such products. Nevertheless, the company is still able to deliver packages with parts that are related to the propeller, but these are sourced from other manufacturers. For vessels in particular for example, there is the propeller, the gearbox and the engine. Berg Propulsion does not manufacture gearboxes, but because of its extensive supplier network, the company is able to deliver them in addition. In the end, it is important that the entire package is relevant. It would not make any sense for Berg Propulsion to sell cranes or radars for example.

What are the trends Berg Propulsion capitalizes on in terms of research and development in its niche?

For the moment, Berg Propulsion just launched its new product BAT (Berg Azimuth thruster) While the market has been asking for such product for a long time, to make sure the company could deliver the highest quality, significant research and testing had to take place before the Azimuth Thruster could be brought to the market. In a way, it is trendy to use the BAT towards controversial propellers but for Berg Propulsion, this product is simply a development of the existing products
While Berg Propulsion also delivers products for tankers, container vessels and so on, the major market has been offshore. While this market is still significant nowadays, there have been many new requests for tugboats as new ports are being further developed to handle the increase in cargo. The BERG Azimuth thruster itself can serve both the offshore and the tugboat markets.

Berg Propulsion has the tendency to involve its clients in the product development phase. How does this work in Singapore?

The client himself normally knows what type of vessel he will build. The first thing he needs to find out is what type of engine he needs. Based on this choice, the client will ask Berg Propulsion what propeller is most suitable. However, the company is trying to turn this process around by bringing in the client from the start of the decision-making process. By finding out the purpose of the vessel, the company is able to suggest the propellers that are best suitable. Berg Propulsion aims to provide maneuverability. This approach can help ship owners to save costs by helping them choose the most relevant rather than the most expensive solutions.

You also stated that you need to be close to your clients wherever they are and whenever they need you. How can you do so in practice?

The company knows that the vessels of its clients operate 24 hours per day and thus also has a 24/7 helpline to serve the customers, regardless of the location of the shipowner or vessel. While some problems are relatively small issues that can be solved by phone, others are bigger that need assistance on location. In that case, the closest office to the vessel’s location is contacted to send over technical assistance. Another issue is the supply of spare parts. Lead times for spare parts have to be as short as possible to limit any downtime of the vessel. To deal with this issue, Berg Propulsion has set up a factory that only produces spare parts. In order to guarantee timeline assistance, this workshop is open 24 hours and 7 days per week. Compared to the competitors, the smaller size of the company prevents any internal politics to slow down customer assistance. It is easy for the employees to get to know everyone within the company and its network, and call the relevant person that is needed at that time. Larger organizations have stricter rules on which employees are responsible and allowed to speak to the different customers.

By adjusting the blade pitch, optimal efficiency and fuel savings can be reached. In a context where environmental concerns and energy efficiency have become increasingly important, how has the demand for CPP evolved and what has been the market evolution?

There has always been a strong focus on the fuel the vessels consume. Today, Berg Propulsion has projects involving twin screw vessels. The company has developed a propeller where the blade, or the pitch, can move 90 degrees. If the vessel needs to cross the Atlantic within 20 days of sailing for example, it can use 2 propellers when it is leaving the port and shut one off to feather during the remainder of its course. By turning the propeller 90 degrees, there is no resistance in the water, allowing the vessels to maintain a good street on one engine. It is a good example of an option that allows the vessel to save on fuel consumption. When it comes to offshore vessels, 99% of these vessels are twin-screw vessels, meaning that they are driven by two propellers. By offering such solutions, Berg Propulsion can contribute to its customers’ cost-savings and the environment.

Where do you see the most opportunities for Berg Propulsion to grow globally and in Asia and Singapore in particular?

It might be too early to say, but Vietnam and Indonesia are up and coming. In order to operate offshore vessels in Indonesia, they need to be built in Indonesia and operated by Indonesian companies. As a result, there has been an increase of new companies being established in Indonesia. Looking at a market where Berg Propulsion is already big in, the company can also build on a long history in Malaysia, where the market is still expanding.

Next to Asia, Latin America is of great interest where Berg Propulsion has just opened an office in Rio. The set-up in Brazil is also similar in the way that the government prefers vessels to be built by shipyards in their country, while these shipyards in turn look for shipowners in Brazil.

What has been your main mission in Singapore after arriving from Sweden and Dubai?

The problem is that, as a Swedish company, Berg Propulsion has a certain way of doing business. The Asian way of doing business is different and as I came in, I wanted to implement more of the Swedish business mentality. The Swedish culture is very open and less hierarchy compared to the Asian mentality. The Swedish culture allows people to make mistakes and learn from them.
Another ambition has been to develop into new areas. Berg Propulsion will also try to develop in to Australia and New Zealand while these markets offer a fair amount of potential.

How are you going to increase your presence in these markets?

For the moment, Berg Propulsion has been spending a significant amount of resources to be closer to the customer. While many competitors decided to decrease their travel budget, Berg Propulsion did the exact opposite. And once business opportunities arise, the company opens an office in that particular location. China is a land of opportunities and in order to address this market better, Berg Propulsion has recently opened a second office there. Besides China, the company is currently in the process of setting up an office in Korea.

Compared to many other players in the industry, Berg Propulsion has a very particular style. You have got a facebook page, a linkedin page, a youtube video and so on. In a rather old-fashioned oil and gas industry, what has motivated Berg Propulsion to be so different?

This style is a particular way to approach the customers. Looking at the marine industry in particular, it consists only of a small number of an older generation of people that all know each other. Berg Propulsion approaches the customer in a different way by developing products together with them. Further to that, the company spends significant resources on marketing, exhibitions and social events. For example, for the upcoming Formula 1 event in Singapore, Berg Propulsion invites shipowners from all over the world. This approach represents one side of the company’s way of building relationships. Once again, this attitude is facilitated by the absence of internal politics within the company.

By 2015, what will the company look like here in Singapore and the region?

Berg Propulsion will have more offices to support the sales and service team as well as more repair facilities in Asia. The first expansion phase in that field will most likely occur in China.

If you were to send out a final message to the readers of Oil and Gas Financial Journal, what would it be?

One of the company’s slogans is “if the vessel is moving, it is making money”, which represents the company’s ambition to sell a quality product and create a win-win situation where all parties involved can make money. By being different, Berg Propulsion is able to be the preferred partner in the industry.



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