Q&A with Jon Ramon Aboitiz: 'Never fall in love with your business'
CEBU CITY, Philippines – Rappler is sharing excerpts from a wide-ranging unpublished Rappler interview with Jon Ramon Aboitiz in June 2017.
He talked about being part of the family business, and the challenges, successes, and innovations of the Aboitiz Group. He also shared a key lesson he learned from his late grandfather, Don Ramon Aboitiz, which became part of his personal business philosophy.
The interview is part of Rappler’s special project for 2019. We are publishing excerpts in light of his death.
Baptism of fire
(JRA is asked about becoming the first among the fourth generation Aboitizes to join the Aboitiz & Company Board in the 1970s.)
I didn’t want the position. It was forced on me because my uncle retired, and there was nobody else. So they thought, “Why don’t you just make me COO, and you become the president?" And he said, "No, if you’re going to run it, you be the president." So I mean, it was my baptism of fire.
If you want to call it express lane, or whatever it is, it was a lot of work. I didn’t take a vacation for 5 years. And I worked 7 days a week. It was not easy.
And then that’s also when we also started putting together all the shipping companies. There were so many challenges. At the end of the day, one of the most memorable things was we started containerization in the Philippines. Domestic containerization was started by us, in Aboitiz. The first ship was by Aboitiz.
How it started
This was in the mid-'80s. Those were our first containers.... We were carrying the export out of Cebu – basically all rattan and buri. At that time, it was still a very young business. We would carry the containers here, but we could only put 4 or 5 containers, and no ships would go to Cebu for containers. So, over time, as furniture factories in Cebu turned more and more to buri...that’s when we got the first container ship to carry 50 to a hundred TEUs.
That’s how we started. But it was really based on Cebu growth of the furniture business.... Over time, the demand was there, and containerization was international, we said, “Let’s do it, let’s try it for the Philippines.” And we were the first to get into containerization.
Addressing the needs of the time
[We were] reacting to the needs of the time – we were the first to go into the super ferry type – and this was the first domestic container ship in the Philippines.
It was like an experiment, but at the beginning, we were focusing only on Cebu because of exports. So you had to bring in the empty containers to Cebu. Then what we started doing is we started using empty containers and loading local cargo. So we would bring the local cargo to Cebu. We would use foreign containers at that time, but eventually, we needed more and more. And we wanted to expand, so that’s when we started buying containers....
Instead of bringing a container that was empty, we told the shipping lines, “We will use it but just make sure you remove the cargo as soon as it arrives.”
And then we started doing what you call "door-to-door," and it was very, very popular for a while. So you would load the container here [in Manila] and go to PMC or Unilever, for example, fill it up, load it onboard the ship and deliver it to their warehouse in Cebu.... It started growing more and more, and then everybody else said, “Hey, we’re going to be left,” so other shipping lines also started. It was just natural.
On a focused business strategy
Yes, we had the largest logistics. We had domestic logistics because otherwise, it was a total transport company when Aboitiz shipping and WGMA bought out Gothong, then we bought out William Chiongbian, then it became ATS (Aboitiz Transport System). It was 2Go as the brand name.... It was a total transport business. It has outgrown and now Shoemart owns 2Go.
You know, when I took over as CEO in ’91, we had many businesses – we had too many, many small businesses. I got Bain & Company, a consulting company, and I asked them to come. To make the long story short, we got them, and I told them, I said, “You know, we’re in so many businesses.”
We need to find out and strategize and rationalize what are the businesses we need to be in: What are the businesses that are underperforming, what are the businesses we should get out of because there’s no future in them, what business returns are lousy, what are the businesses we should focus on. We spent a lot of time – we spent nearly a year discussing with the management and the board.
To make the long story short, right before the Asian financial crisis in ’97 – that was in June – in May, we approved...what we call our focused strategy. The focused strategy said that it would focus on 4 businesses: power, finance, food, and at that time, even transport. We were looking at the possibility of land. Four businesses. And the mandate was to sell everything else.
It was right before [the] ’97 [Asian crisis], that was when we made the decision. Because we had too many businesses, some of them were small businesses, and they were taking a lot of executive time, which was the worst thing – they were waiting for the results. Because of globalization at the time, not being able to compete, that’s why we decided. What we did was we sold Filipinas Kao – we had the Kao corporation, although I’m still with them as an advisor – but as we sold that, the Coco Chemical, we sold all our industrial gases. We were the largest in the Philippines for industrial gases, CIGI.
We sold our cement but came back. We sold cement, we sold our insurance, and we closed our hemp, which was our beginning.
We wanted to sell shipping, but we couldn’t find a buyer until the opportunity came years afterward. And so we closed a lot of businesses – we closed our marketing, AboMar...and so many of the small businesses.
We had a wood treatment plant because it would sell poles for electric plants. We had cement pole-making, because again, the sooner you make cement poles, you can use that also, we got rid of that also. All the small, little stuff that was taking executive time and not giving returns, we said, let’s get out. And so now we can focus on what we feel we’re good at. And those are the 4, and that’s what we did. Until today – except we added infrastructure, and we’re back in cement – we’re in the same businesses: Power, banking, food, land. That was in ’97.
Learning from the 1997 Asian financial crisis
We were fortunate. We did not have that much then. One of the biggest problems in the Asian financial crisis was that a lot of the companies were holding companies that had many businesses all over the place. They had a lot of debts here, the parent company. They depended to get paid by dividends from this area. So they borrowed at the mother level. When this (subsidiary) didn’t give any dividends, dead. They couldn’t repay their debt. We did not have that much of a problem, because we didn’t have much debt. We were relatively conservative. Even today, we watch our balance sheet and debt levels very well, but we didn’t have that.
We did go through a process of selling all these other companies, we raised 4 billion at that time. Four billion, selling these companies. We had some properties. We ended up with zero debt. If you want to have debt, you carry it at the subsidiary level. So we did not give dividends for 3 or 4 years, but because we wanted to make sure we had the cash flow to pay all our debt. But we were never in trouble because we watched our debt very carefully.
We started in September. And the crisis hit in June, July. In fact, I was in Norway because we had a joint venture with Norwegians (Jebsen), and our partners said, “What happened to the peso?” and I said why. They said it was going from 70 to 80, to 20 or 30. Holy sh*t. And that’s where we found out because it started in Thailand, and then it was downhill, everything. It was just boom, boom, boom, boom.
We got good prices because they were joint ventures also with good people. Like the Kao corporations were the largest in Japan. I mean, shampoo, and all that; business was good. It wasn’t like, no we’re going to sell anything for fire sale, no. The prices were good....
In shipping, we didn’t have a buyer [right away]. Who the hell was going to buy shipping in those days? Patay. So it took us time. But we always wanted to get out of shipping. It was a pain in the ass! It was a lot of work, a lot of capital that was required, it’s very intensive. You have to be there, watching it all the time – so many areas, you know.
One of the first things my grandfather imparted, “Never fall in love with your business.” And it’s very, very true. You never fall in love with your business. If it’s time to sell the business, then you sell it. But you cannot sell it because you love it. It’s not your wife. You can’t sell your wife. Sell a business. And that’s the basic thing. Don’t fall in love with your business. If it’s the right time to sell, for the right reason, for the right price, then sell it. And move on. So we had no problems.
I’m a shipping man until today. I love ships. I follow ships. I know about ships. We have a shipyard with a Japanese partner. So I still love ships. But I have no regrets.
– Interviews by Lala Rimando and Sofia Tomacruz/Rappler.com