[CG] Message to Japan

[Dutchy]

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Citadel Group
Private​

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To: Ministry of Economy, Trade and Industry, The State of Japan (@Suvorov)
Cc:
Subject: Commercial Vessel Procurement

To whomever it may concern,

I wish to introduce myself, my name is Maurice Davidson. I am the Vice President and Chief Executive Officer for the Citadel Group. My company wishes to inquire whether or not it would be possible to procure a number of commercial merchant vessels from your nation, as after extensive research we have come to the conclusion that your shipbuilding industry offers both the most high quality and diverse range of vessels which we seek. Therefore we wish to negotiate the purchase of four (4) 20,000 TEU Type Container Carrier and two (2) 207,000 MT D / W Type Bulk Carrier.

I hope I have contacted the right institution, if not would you please forward this message to the appropriate authority.

Respectfully,
Maurice Davidson
Vice President & Chief Executive Officer
Citadel Group

 

[Suvorov]

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Mitsui O.S.K. Lines, Ltd.
株式会社商船三井
Private

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To: Maurice Davidson (@Dutchy)
Cc: Ichirō Ozawa, Deputy Prime Minister, Minister for Economy, Trade and Industry
Subject: Commercial Vessel Procurement

Dear Mr. Davidson,

Your message has been forwarded to our offices. We at Mitsui O.S.K. Lines, Ltd. ("MOL") are the current holders of the export license for commercial vessels from the State of Japan. We have only recently been given such a designation and we apologize for not advertising our status sooner. We have several possible arrangements that may satisfy your needs.

We offer two proposals that may satisfy your needs. One, we may offer ships to your company on a lease agreement. This saves your company the enormous up-front cost of ship procurement as well as freeing you from maintenance of the ships. We will provide personnel to man the fleet as well. Your company may be better positioned to lease more ships sooner and thus grow your profitability. For a mere $22.5 million per month over the course of a year, your company could have immediate access to this fully operational merchant fleet.

Two, if your company wishes to purchase these vessels, our standard rate for such a large single purchase would be $270 million. We can offer these vessels on a line of credit as well, with MOL technically owning the vessels until they are paid off. We could arrange for 5 installment payments of $58 Million or 6 installment payments of $50 Million.

Of course, we are open to proposals for more long term business plans that might affect our pricing. We are always seeking more international partners.

Regards,
Yoshikazu Kawagoe,
Senior Managing Executive Officer,
Chief of the International Sales Department

 

[Dutchy]

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Citadel Group
Private​

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To: Yoshikazu Kawagoe, Senior Managing Executive Officer of Mitsui O.S.K. Lines, Ltd. (@Suvorov)
Cc:
Subject: Commercial Vessel Procurement

Mr Yoshikazu Kawagoe,

Thank you for your quick response, you have nothing to apologise for and I am glad that the message has been forwarded to the appropriate authority. I also wish to thank you for your solid proposals and we will most certainly consider them, however before we proceed to those negotiations we wish to offer you a third proposal.

We were unaware of the foundation of your maritime logistical company and it does change our situation slightly. Due to the lack of such companies in the world, it was our intention to establish a business venture that would supply services such as maritime transport in order to prevent nations having to perform expensive investments in a state-owned merchant fleet. With the establishment of your company we believe that it would be better to cooperate rather than compete against each other, as by working together we could capture a larger market share of global maritime transport.

By combining our strengths, Citadel being able to offer accountancy and financial knowledge and with MOL being able to produce high quality vessels at low cost I wish to propose the establishment of a joint-venture. Such a venture would allow the company to start with a higher initial capital ensuring that we could invest in a larger fleets to operate from hubs both in Asia (Japan) and Europe (The Netherlands).

Before we go into further detail I would like to hear your thoughts on the matter, if you are interested perhaps a face-to-face meeting would be more suitable.

Respectfully,
Maurice Davidson
Vice President & Chief Executive Officer
Citadel Group

 

[Suvorov]

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Mitsui O.S.K. Lines, Ltd.
株式会社商船三井
Private

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​

To: Maurice Davidson (@Dutchy)
Cc: Ichirō Ozawa, Deputy Prime Minister, Minister for Economy, Trade and Industry
Subject: Commercial Vessel Procurement

Dear Mr. Davidson,

It seems we share a common business model, then. Yes, we would be very much interested in a joint venture. Our combined access to ship production and capital could help us obtain a large market share in the world's trade sphere. We have a vision for a fully connected trade system that would facilitate almost all international trade. Linking ports from New York to Tokyo and everything between. Our enterprise is currently funded by an almost $600 million loan from the Japanese government. We have already begun building our modern trade fleet and we would welcome your capital to join our current efforts.

We invite you or your representatives to our offices in Tokyo. We have attached a sheet of available meeting times, so please simply respond with your preferred time and meet us at the appointed hour.

We look forward to our meeting.

Regards,
Yoshikazu Kawagoe,
Senior Managing Executive Officer,
Chief of the International Sales Department

 

[Dutchy]

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Citadel Group
Private​

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To: Yoshikazu Kawagoe, Senior Managing Executive Officer of Mitsui O.S.K. Lines, Ltd. (@Suvorov)
Cc:
Subject: Commercial Vessel Procurement

Mr Yoshikazu Kawagoe,

Once again I wish to thank you for your quick response, I am truly pleased by the positive reception to the proposal and am eager to meet you as soon as possible in order to further discuss possible cooperation. I will have my secretary book the first available flight from Amsterdam to Tokyo. I will be bringing along a few colleagues from Citadel to assist me in these negotiations.

I cannot wait to meet you and hope to see you soon

Respectfully,
Maurice Davidson
Vice President & Chief Executive Officer
Citadel Group

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With the flight booked Maurice Davidson would grab his pre-prepared travel bag and head to Amsterdam Airport Schiphol where various legal and financial experts were waiting for him. They would be booked into business class with KLM, allowing them to enjoy the long flight from Europe to Asia.

Upon arrival they would disembark with the rest of the passengers and ensure they had their papers ready to present to Japanese customs and immigration. If they were to all pass without issue they would take a private taxi which would deliver them to the hotel which had been booked for them. After dropping off their bags and having the opportunity to take a shower and change into fresh suits the group would once again take the private taxi to the headquarters of Mitsui O.S.K. Lines. Upon arrival the group would head to the reception and Maurice Davidson would introduce himself to the receptionist.

 

[Suvorov]

When the Dutch party arrived at the MOL offices there were several refreshments, snacks, and sweets awaiting them. Several gifts as well for each member of the team were presented. To greet them was none other than Ikeda Junichiro, President and CEO of MOL. He bowed to the Dutchmen and welcomed them, through a translator the CEO said, "Good afternoon and welcome to Mitsui O.S.K. Lines, Ltd. We are excited to welcome you to our home. Please follow me to our conference room where we might discuss further." Ikeda led the party to an elevator and then to a conference room on the 30th floor, surrounded by glass overlooking Tokyo. On the conference table were pre-prepared handbooks of MOL's vision of the future. Ikeda sat at the head of the table and would look on and smile at the Dutchmen. "Let us begin when you are ready, there is much to discuss."

Within the handbook were several sections:

I. Who We Are: Outlining the MOL is both a shipbuilding and logistics corporation.

II. Our Model: Offer maritime logistics support to nations of the world.

III. Our Dream: Connect all the world's ports in a single stream of commerce, using scale as negotiating power to arrange favorable deals with each country. The chain of goods would effectively form a relay system between ports that would eventually connect the world through trade hubs. Japan and now the Netherlands would serve as trade hubs for each hemisphere. Once hemispheric goods were delivered to the trade hub of one region, the region would send ships to the next hub for distribution in the next region.

IV. Our Assets: A comprehensive list of the ships currently being built for MOL as well as the shipbuilding facilities owned by MOL.

 

[Dutchy]

Maurice Davidson would return the bow in order to conform with the local culture, as it was always polite to adhere to local traditions. He extended his hand as he introduced himself in English, "It is a pleasure to make your acquaintance, I am Maurice Davidson Vice President and CEO of the Citadel Group."

Davidson smiled and gestured for the man to lead the way. As they entered the conference room the Citadel delegation would all take their places on one side of the table, with Maurice Davidson seating near President Ikeda. In front of him he notices the handbook and he picked up one of them and gave it a quick read. "I must admit, you've got quite an ambitious vision. I do like ambition so I think we've got some common ground to work on."

@Suvorov

 

[Suvorov]

After the Dutchmen had reviewed the documents and commented, Ikeda smiled, "Absolutely, it is our intention to secure a strong foothold on global trade. Our government is clearing the path for our ships to navigate the world's waters. Now you have seen behind the curtain, you know what we are. How can we incorporate your company into our vision, or create a new, shared one?"



@Dutchy

 

[Dutchy]

"Before we proceed, do you mind me asking whether MOL is a state-owned or subsidised company or fully private?"

"Well, my company is a simple holding company seeking to diversify our assets into multiple companies. Therefore, our suggestion for future cooperation is the creation of an independent entity which would become a subsidiary of both our companies. This subsidiary would then be responsible for all the merchant shipping contracts, while MOL provides the necessary vessels and Citadel the financial expertise."

@Suvorov

 

[Suvorov]

"MOL is a private organization that has won government contracts to handle most of Japan's trade for the near future. The government has extended generous credit to us to help us get started. Given the strong national benefit of the success of our organization, the government is assisting where it can to ensure profitability.

Very well, we can relegate our shipping business to a subsidiary and focus on shipbuilding at our level. How much initial capital investment can your company afford to invest? We can relegate our entire merchant fleet recently purchased and soon completed to the task. Once again, that would put our initial investment at about $600 million. Should your company match that, we can double our fleet capacity."



@Dutchy

 

[Dutchy]

"Yes, we can match your initial investment of $600 million, though I would advise not rushing into doubling capacity until we become aware of the demand of our services. However, that is something to be discussed at a later date once the business has been founded."

"In the mean time, it is important that we come to an agreement on details such as the name, corporate structure and the location of the headquarters. I've had our legal personnel write up a draft agreement which I would like for your to take a look at and please do not hesitate to voice your opinion, concerns or suggestions."

@Suvorov

 

[Suvorov]

"Excellent. The exact value of the ships produced is $567 million, so we would not ask for more than that as an initial investment. We can hold that capital to use as necessary. I would suggest that we use a portion of it to construct or buy offices in the Netherlands and Japan. We may need the rest to produce more ships, or to invest in foreign distribution centers." The lawyers for MOL looked at the agreement, exchanged words between themselves, then handed the CEO a revised edition. "It seems our lawyers have added a few provisions that would likely be almost unnecessary additions but for the sake of completeness it seems they have added them.

As far as initial demand, I know our government here in Japan would likely be a strong first customer. We are unsure of whether your government will need our services as well. We can start marketing our service immediately through diplomatic channels and through advertisement."

 

[Dutchy]

"You have presented some valid amendments, though I believe they would be better implemented in a different format. The Directors are mainly present to supervise the company while it is up to the Chief Executive Officer to actually manage the day-to-day business."

"We are aware that the Dutch government is interested in securing a contract with the private sector to manage its trade responsibilities, so I'm certain that we will have a profitable customer there."

@Suvorov

 

[Suvorov]

"It seems this version has incorporated much of our revisions but we see that the line item about approval of share sales has been eliminated. M.O.L. is interested in working with Citadel and Citadel's personnel. We fear that free sale of the shares open us to the possibility that we may be made to work with an unforeseen and undesirable partner. We have made additional revisions as well. With the production of our ships completed, we are eager to see them sailing the world laden with cargo. Hopefully we can iron out this agreement post-haste."

@Dutchy

 

[Dutchy]

"My apologies for not copying your amendment to the version I presented you, I must have accidentally missed it. I feel that the final version you have presented is suitable for establishing our joint venture. I believe we are now ready to establish the company here in Japan and begin advertising our services."

 

[Suvorov]

"Excellent." Ikeda signed the final version of the JVA and handed his copy for the Dutchmen to sign. "In anticipation of this meeting, we had our artists sketch up some company logos. These are all preliminary and we may not use any, but we felt it might be a good starting point. With the headquarters in Japan, we suggest a Dutchman to be our first CEO of global affairs. We shall appoint the Chief Operations Officer as well as designate the initial Executive Vice President of Pacific Strategy. We must decide who will create the initial public profile.

Furthermore, we must discuss our financial model. It seems in theory that we were both of the same mind to have our ships leased to companies for some fee. Another viable strategy might be to create our own trade routes and offer nations a charge to be part of the network of ships. This would save them time from negotiating individual trade agreements and open them up to the full line of trade we might offer. We are unsure of the market need at this point. We would also need to decide a price point on what to charge.

Another point of concern for us: Ship building is part of our business model. However, with this venture underway, we stand to potentially sell away our own customers by selling our ships. We, however, do not wish for our business to suffer.

Finally, depending on what model we decide upon, we could also consider branching into different types of shipping. We have partnerships with trucking manufacturers. We could also consider branching into airliners-either renting planes to nations or having nations pay to be one of our destinations. There are many ways we can attack this market.

Finally, with your initial capital investment, we could possibly consider purchasing and/or construction headquarter buildings in Japan and the Netherlands."

Ikeda handed the Dutch a sample of logos that were prepared.
1.

2.

3.

4.

5.

@Dutchy

 

[Dutchy]

"Hmm, as we are starting small I wish to propose the following distribution. Your company may select a Chief Executive Officer, who at this time will be responsible for all affairs in regards to expanding our operations, in exchange we select an qualified individual to become the Chief Financial Officer, who's responsibility it will be to manage the finances of the company. I don't believe that at this time we require positions such as COO or Executive Vice President, though depending on our growth we can always restructure the company at a later date."

"I believe that in order to gain a foothold we must perform contract work to begin with, leasing cargo space to nations that seek to trade with other nations. If we were to implement a route based system without any demand it would result in a financial loss for the company. Once again, this can always change at a later date."

"While I cannot speak on behalf of your company's future policy in regards to the sale of cargo vessels, any sale would create completion or remove potential customers. I hope that the dividends from ITS will be enough to cover this potential loss in sales, but you're in your right to sell vessels at your own regard."

"While I absolutely love the style of logos one and two, I belive that logo four is most representative as it could be interpreted to represent both our nations rich history in global trade."

@Suvorov

 

[Suvorov]

“Very well, we will appoint a CEO to manage the general affairs of the business. We would hope that growth could be driven by efforts of diplomats or sales representatives in Europe that might assist us in growing our operations.

The route based system would of course be for a charge. We would charge nations or companies for access to our routes. I do believe that contract work is the easiest to begin with and we could build up to a route system if we find it feasible.

We are glad you see and understand our position with regards to shipbuilding. We will voluntarily halt international shipbuilding efforts while begin this enterprise. However, we will continue to build ships domestically for our government and companies. Prior to this agreement, the government of Japan ordered an additional two vessels outside of our current model. These vessels have already been committed to trade with Egypt. However, our government is in talks with other nations and will likely utilize our services to service those trade routes.

We share your sentiments as well with regards to the logos. We had our designers include numbers 4 & 5 to represent our national histories. We can brand ourselves initially with number 4, or use it as a working logo until we finalize our model.

Back to the model, our initial fleet cost $567 Million. We must determine what rate to charge for the use of each vessel. Our current models had us breaking even on the initial production cost after approximately a year or so. If we decide our break-even point as a basis for our rates, it can become easier to set them as a percentage of production cost.

Finally, we wish to inquire as to our inventory. Does ITS wish to acquire the $567 Million trade fleet, or some smaller portion? We are also highly interested in Cargo Planes. They are quite expensive but could result in daily trade between nations. If we acquired a cargo plane or two, we could test the market for aviation based trade and capture more market share.”

@Dutchy

 

[Dutchy]

"Thank you for being willing to lead this company and guide it to growth. I can say that I do not see the Dutch government personally advocating our case, however we may be able to participate in future trade delegations and advertise ITS' services. I hope that we can play our part in helping this business grow."

"In regards to finances, I have had our experts at Aurora Financials look into possible models and they suggest that we work on a basis of adding together the base cost and any overhead costs that come with the route before adding a profit margin. I believe that this model will allow flexibility in our pricing as well as offer us a competitive advantage on an international scale. One issue that the CEO will have to investigate is any costs associated with the use of the Suez Canal, we must seek to gain access in order to allow trade between Europe and Asia."

"I believe that the trade fleet you suggested should be enough for the moment. An expansion into cargo planes at this time seems unfeasible in regards to the cost of aircraft, however it is something we could look into and see if there is a market for their usage."

"Lastly, I wish to propose the use of one of Citadel's subsidiaries, namely Polaris Banking, as the company's corporate financial account. Opening an individual account would be rather expensive and Polaris seeks to lower the costs by allowing companies to make use of its account for a small fee. It would offer the same services as an individual account but at a lower cost."

@Suvorov

 

[Suvorov]

"Very well, we will be zealous in advertising our services. As far as the Suez is concerned, our government will seek a deal for Japanese registered ships. Cargo planes may be cheaper than expected. We believed that Russian Il-96Ts may be purchased for around the same price as our bulk carriers. We know of sister companies exploring that possibility at this very moment. Obviously, cargo planes have limited comparative capacity to ships, but the frequency with which they travel means that they could readily link nations. We accept your banking prospect. We could alternatively bank with the Bank of Japan, but as your expertise will be in the financial sector we hope that you can secure us free to low cost banking in the interim."
@Dutchy