Israel shipping company charts new course on Internet navigating its operation via Silicon Valley te

Zim Israel Navigation is embarking on an online voyage with eight other major ocean carriers to carry out shipping transactions on the Internet, signaling a new willingness by the stodgy shipping industry to throw paperwork overboard.

The shipping lines — including APL, Mitsui O.S.K. Lines and "K" Line America — announced last month that they are partnering with Tradiant Inc., a Silicon Valley venture based in Alameda and headed by Israeli founder Aaron Sasson. Tradiant will operate the software and technology that will enable shippers and carriers to book and track cargo and shipments online.

It's a regular mutiny for Zim, the partially state-controlled shipping company that is about to undergo privatization. But Zim has long been revitalizing and revamping its shipping efforts, partially due to its other owner, Israel Corp., the holding company owned by the Ofer Group.

"The Ofer brothers have made Zim much more efficient," said Haim Israel, an analyst at Nessuah Zannex Securities. "They're leasing instead of buying boats, opening new shipping lines, getting involved in the Internet. But they need real investment to get anywhere with the joint ventures."

Many carriers, including Zim, are already using their Web sites to allow customers to trace shipments online. Large shippers like Zim, however, generally use several carriers, requiring them to communicate simultaneously through several Web sites. The purpose of the nine-member Internet partnership, code-named Global Transportation System, is to provide a unified method for shippers to talk to carriers.

"The frame of mind of shipping executives is in e-logistics and technology," said Eyal Goldwerger, founder and CEO of, a New York-based logistics exchange that grew from 200 to 13,000 clients within a year. "It is the top of the agenda for everybody and it touched on a real need very fast."

At the Zim Web site,, customers can trace their shipments by simply plugging in the destinations and the tracking number: The site will figure the number of days until the ship is expected back at port.

Most of Zim's customers are exporting tons of agro-chemicals to South America or importing cars from Korea. Zim ranks as Israel's fifth-largest company, with 1999 revenue of $1.6 billion. It also happens to be the world's 10th largest shipping conglomerate, with 80 percent of its business conducted outside Israel. Those rusty brown containers with the familiar Hebrew-English logo are seen worldwide, from Morocco to Madagascar.

It's a far cry from Zim's Zionist beginnings, when it was founded in 1945 by the Jewish Agency, the Histadrut Labor Federation and the Israel Maritime League. At the time, it ferried refugees and immigrants from Europe to Israel on secondhand cargo vessels, some with 15,000 passengers on a single voyage.

The British eventually seized the old ships that were later scrapped. By 1953, Zim acquired 36 new vessels in the German-Israeli repatriation program and moved into passenger liner activity, offering service throughout the Mediterranean and to and from the United States. In the late 1960s, 12-hour plane flights outstripped weeklong boat rides and Zim phased out passenger travel.

At that point, Zim expanded its cargo service and began operating bulk carriers, refrigerated ships and tankers, carrying everything from oil from Iran to Israel to petroleum products from Israel to Europe.

Now Zim operates a fleet of 80 vessels. With 1999 revenue of $1.6 billion, it is expected to turn a profit this year, reversing losses of $5 million in 1998 and $38.9 million in 1997.

It hasn't been an easy decade for the shipping conglomerate. The high cost of fuel hit Zim hard, given that the shipping giant consumes 10 percent of Israel's crude oil. The increasing rate of chartered ships raised costs and they are still reeling from the effects of the 1998 Asian financial crisis that crushed a segment of the shipping business.

"There's a lot of competition in the shipping industry these days," Israel said. "Energy costs are up, salaries are high and as an Israeli company, Zim can't ship to Qatar or the Persian Gulf."

There are also labor disputes and strikes as Israel's longshoremen dispute the pending privatization of the Ashdod and Haifa ports. Zim business makes up some 60 percent of port traffic in Haifa, and 30 percent of port traffic in Ashdod. The last two years have brought various work sanctions and stopped traffic at the two ports, backing up shipments and causing losses.

Nevertheless, the government is finally ready to sell the state's 48.6 percent stake in the shipping giant. A government committee agreed last August to sell most of the stake and received approval for the process from the Knesset Finance Committee in early October. The Government Companies Authority, which is handling the sale, is now negotiating with 11 investment banks, including Goldman Sachs, JP Morgan, ING Barings and Salomon Smith Barney to accompany and advise the privatization process.

The Authority is currently negotiating with Israel Corp. as to whether the holding company is willing to give up its first refusal rights for the state holding, or offer its stake for sale. At this stage, it seems clear that Israel Corp. wants to take over Zim, although the company would not comment.

"We don't have any certainty of what will happen until the end of the process, but we're trying to build a mechanism to create a certain equality between the partners," said Yaron Jacobs, director of the Authority.

"I'm not sure that Israel Corp. won't be able to buy the whole thing when this all comes to a head," Israel, the analyst, said. "But even an outside interest is better than the government. The minute there are new owners, it will bring money to Zim."

As the man in charge of the Zim sale, Jacobs is carefully navigating the waters. "I give Israel Corp. a lot of credit," he said. "The Ofer brothers are very talented and sophisticated businessmen. This is one of the main parts of their business and they know what they're doing."

At the same time, they're shrewd players who were unwittingly forced into privatizing Zim, said Jacobs. Last April, he met with the Ofer brothers, who wanted him to sign a $300 million purchase of six new ships that they would then lease to Zim. He wasn't interested, because he knew it would leave Zim with a worthless fleet of old boats when it came time to privatize.

After three months of fighting, they agreed to buy three ships. In return, Jacobs got the go-ahead to privatize the shipping giant.

"I'm looking for similar opportunities in the other state companies," he said. "It's all about making a deal."