Responding to a critical review, Liz Coutts says big egos have derailed a port safety and efficiency project that would have helped the NZ economy get through this supply crisis
Exclusive: When Liz Coutts was chair of Ports of Auckland, she would take a walk on Sunday afternoons, down along the big red wrought-iron fence that has separated the docks from the central city for more than a century. "I would stand at the fence and watch the project," she recalls. "Watch these a-strads working. You know, for hours I would stand there, just watching to see how they were loading the trucks.
"And I'd always phone Tony on the Monday and say things like, look, I don't think they're attaching the locks to the trucks – is that a risk? And then we put some cameras on to watch just to see whether they are loading them properly."
This is more than nostalgia for Coutts. This is the opening submission to her defence ... her defence to criticisms, in an independent review of the port's governance, that she and the other directors didn't "fully understand the risks that the company was assuming". And that former chief executive Tony Gibson failed to present an adequate business case for taking those risks.
READ MORE: ► Ousted Ports boss Tony Gibson hits back, ahead of court hearing ► Furious Phil Goff on a future without Port-omation
The a-strads were the tall blue straddle cranes that, over the past three years, helped load and unload thousands of containers from 120 cargo ships – without a human worker at the controls.
This was the automation project that is described by champions and critics alike as "transformational". And it is the project that ended with a whimper, not a roar, when the new board shut it down in June this year. It wrote off $65 million, and ordered the big blue straddles be retrofitted to be operated by drivers.
That decision was a bitter irony for the families of those men who died in workplace injuries, as the company's health and safety culture suffered in its pursuit of efficiency. And it was a triumph for the Maritime Union, which had fought tooth and nail against automation – a project that was projected to cost about 50 straddle operators and other port workers their jobs.
Over the months and years, as straddles knocked over walls and containers and delays mounted, the union looked on with some element of mirth. "We didn't have to do to do anything really," says union boss Craig Harrison. "It was destroying itself."
Liz Coutts retired from the board when her 10-years as a director came up in January last year. Gibson followed her out the big ornamental iron gates in June, blaming “persistent and sometimes personal attacks”. He left with a $1.8m contractual exit payment, and a pending prosecution over the death of Pala'amo (Amo) Kalati, crushed when a container was dropped during a lifting operation in August 2020.
Coutts and Gibson have kept their own counsel – until the publication last month of the two-and-a-half page report by independent reviewer Mark Binns. Now, they have given interviews to Newsroom, to rebut the report's criticisms.
Coutts, too, has fired lawyers' letters at Auckland's outgoing mayor Phil Goff, and the new Ports of Auckland board. She declines to supply copies of those letters, but says the key concerns expressed in them were about the process, the reviewer's "predetermined view", and his perceived failure to act with the necessary independence and impartiality.
After signing a non-disclosure agreement, and under her lawyer's supervision, Coutts was allowed to read a copy of Binns' draft findings – which she says were more substantial that the summary he eventually provided the port's board and the mayor. The draft report, as she characterises it, was 15 to 20 pages long.
This characterisation came as some surprise to the new Ports of Auckland chair, Jan Dawson, and to Mayor Phil Goff, as they had been provided only the summary document – and insisted that was all there was.
"That's the only report that I've received, and it's the only report I'm aware of. And it's the only report you need," Goff tells Newsroom. "I'm being very careful now, because I'm under threat of legal action. And I don't intend to leave a legal action pending as part of my legacy. I asked for an independent and objective report from a competent person. And I got an independent and objective report from a competent person. That person says that there were significant shortcomings that led to this project not delivering."
The port's head of communications, Julie Wagener, says Coutts and Gibson were given an opportunity to review the confidential documents and information from Binns' interviews and review of company documents, so they could respond before he finalised his findings. "This is standard practice," Wagener says.
"The project should have continued and have been a success, and it is an extreme disappointment for Auckland and New Zealand that we do not have this automation technology operating in New Zealand to improve our overall productivity and competitiveness as a nation." – Liz Coutts, former chair
What is apparent is that Binns softened some of his criticisms, after the former company leadership offered their robust critiques. For instance, his accusation that Gibson oversaw a "septic culture" appears nowhere in his ultimate findings.
While Coutts is legally constrained from disclosing the contents of the draft, she has supplied Newsroom with the seven-page written response she sent back to Binns last month, in which she tells him his draft was "factually incorrect" and "fundamentally flawed" and entirely failed to consider the impact of Covid lockdowns.
"You have failed in your considerations and conclusions to acknowledge as a minimum the difficult operating environment at the port with shipping irregularities, Covid lockdown restrictions and operating protocols, inability to get visas for critical staff and consultants which seriously affected port productivity, in-person staff training by international experts, labour availability which essentially halted the project for at least a year."
She also provided him with 10 board documents, which she says he had not been provided with by the company.
In her response, she points out that the company had its own automation experts on the project team, and the board engaged KPMG to review the project governance and reporting.
IN-DEPTH AT NEWSROOM PRO ($): ► Furious Phil Goff on a future without port-omation: "I probably exceeded the authority that I might have had ... but people were dying."
She rejects an inference of "bias" in the selection of the incumbent technology provider Konecranes and its subsidiary TBA to propose an automation solution; the reason was that the port has just upgraded its terminal operating system at a cost of $12m. The competing provider Kalmar would have required the port to change to its own operating system, Navis.
"The Board and management did not wish to have further disruption and cost ahead of the automation project. The Board considered they had just reached the stage where Ports of Auckland Ltd had a stable terminal operating system and this stable environment was a benefit ahead of automation."
She concludes that the new board's reason for stopping the automation project was "far from clear".
"It was nearly at completion and in the process of being optimised which takes time and requires 100 percent commitment."
In her response to Binns, she argues that the port's staff today need strong supportive and committed leadership to assist them to change behaviours and old habits – not leaders who lack commitment. "The project should have continued and have been a success, and it is an extreme disappointment for Auckland and New Zealand that we do not have this automation technology operating in New Zealand to improve our overall productivity and competitiveness as a nation."
United we fall
Ports play a critical role in the economy. "We want our imports to be at the lowest cost and exports returns maximised, and port processes and operating costs and their location impact New Zealand’s trading performance and New Zealanders' cost of living," Coutts says. "Without automation, the port will reach capacity sooner, this will result in an increase in transport costs and emissions as imports will then have to be transported from other ports in New Zealand to reach the Auckland market."
Port automation is the use of integrated technologies to develop intelligent solutions for efficient traffic and flow controls across the port, increasing port capacity and port efficiency. When automation is working well, she says automated container terminals are faster, safer and more efficient than conventional ports. Other benefits include reduced emissions and noise, and reduced labour risk.
By that, she means that automated straddles turn up to work, day in and day out. Humans call in sick. Humans demand extra breaks. Humans demand pay rises. Humans go out on strike.
Much of the criticism of the Ports of Auckland automation project was over the accidents, and perceived risk to people.
But in fact, nobody was hurt in those accidents; all the injuries were on the manual cranes and straddles and exchanges. As Coutts sees it, one of the most fundamental reasons for automation is health and safety.
"There is no question, on a worldwide basis, the maritime unions dislike automation. There's a philosophy that automation destroys the fabric of our society." – Tony Gibson, ex-Ports CEO
Ultimately, she is aghast that, as she sees it, such a basic and necessary step forward as automation has been thrown out, because of disputes between people and personalities.
All the research shows automation increases ports' capacity and efficiency, she says. And the only reason that ports aren't automated is union opposition; some American ports have actually been forced to sign deals with unions that they will not automate within the next 10 or 20 years, she says.
"It is a contentious issue with unions. But new ports are being automated and of course they would be. Never mind efficiency and capacity, it's just sheer safety. You just can't have people and moving equipment together. There's always going to be safety risk, no matter what you do, it will always be there.
"Automation is the way of the future. And I'd like to see it in New Zealand because you know, we need all the assistance we can to increase the productivity and increase the wealth of our country. Because that's the only way we pay for social services."
'Destroying the social fabric'
The port workers didn't much like working with the automated straddles. It wasn't just that ultimately, they feared the giant blue machines would take their jobs. But even in the trial, the workers had to stand out in the rain with a little controller to load the container onto trucks, rather than sitting nice and warm in the cab. "Everyone hated that," laughs Craig Harrison. "Imagine a day like today in Wellington, it's blowing and it's wet. You have to stand outside and load the container on a truck, where before you would have been sitting in a cab in the air conditioning."
Seriously though, Harrison didn't like this automation project. From when he was appointed national secretary of the Maritime Union, he was determined to stop it. "We were against this particular model at all costs," he says.
To be fair, he doesn't like automation, full stop.
"It comes down to the volume. And we don't think any New Zealand ports are big enough for automation. The dynamic is just not there."
He describes "a lot of trouble" automating at Rotterdam, and at new ports in America. He cites a cyber-attack on facilities run by Maersk and APM Terminals in Europe, that took some European ports offline in 2017.
Automation is all very well with robots packing pallets on a Fonterra production line, Harrison says, but it just doesn't work in such a complex setting at a port, where the vagaries of the ocean meet the complexities of the land.
That's an issue, because of course his union has members at Tauranga Port, which is embarking on its own automation project. "It still comes down to, if you've got a finite wharf link and finite hours in a day, then you are doing fewer containers per day, then you do fewer containers per year, then your throughput goes down.
"The Bay of Plenty grows and the Auckland economy grows – it used to be rule of thumb that the Ports of Auckland grew by GDP. If it keeps on growing and they can't keep up pace, then there's going to be more supply chain congestion and more charges."
Former Ports of Auckland chief executive Tony Gibson did battle with the unions from his first months in the job, when they went out on strike. "Put it this way, it was not the relationship that you would expect that would contribute to a more effective and efficient port," he says now.
"There is no question, on a worldwide basis, the maritime unions dislike automation. There's a philosophy that automation destroys the fabric of our society. But what we were saying is that we're going to do a retraining program, whether it's inside the organisation, or at a polytech. We're going to retrain you.
"And I think that the unions have an obligation to make people aware as we were, on what the future around technology and AI is going to bring in their industry, and what you need to do to be retrained."
This may sound obvious, but it's surprisingly contentious. Harrison cites an Australian Competition and Consumer Commission report as providing evidence, from ports around the world, that automated cranes and straddles are often slower than manually-operated ones. A good manually-operated port can take 30 containers an hour of a ship, he says. That's called the box rate. But even the best automated ports can manage a box rate of just 22 or 24 containers an hour.
This reduces the automation argument to its most basic metric: the unions think automated ports are slower, most ports operators think they're faster.
Phil Goff is not entirely sold on automation. And the new Ports of Auckland board, which terminated the existing automation project, is equivocal about committing to any new automation initiatives. New chair Jan Dawson will say only: "While this particular automation project failed, there are ports around the world that have automated successfully, and it would be short-sighted to rule out the use of automated systems in the future."
There is one respect in which Craig Harrison may agree with Coutts and Gibson. He'd like to get his hands on Mark Binns' fuller 15-to-20 page draft. He still has questions about the initial business case and investment decision, and the budgeted cost for the automation project. He wants to know what timeframe and implementation plan were, and the board and management had done a risk assessment if things went wrong.
"We will be asking for a full document," he says. "And given it's really owned by the ratepayers of Auckland, Auckland needs a detailed explanation. How did we get to such a state?"
Ending on a good note?
The Ports of Auckland's new e-tug Sparky, billed as the world's first full-sized ship-handling electric tug, arrived in Waitematā Harbour in June. Last week, it won the International Tug and Salvage Tug of the Year award, and was named a finalist in this year's Sustainable Business Awards.
The press release celebrating the win made no mention of it, but Liz Coutts reckons the Ports' previous management should have got some credit. Sparky is the result of a six-year collaboration between the port company and Damen Shipyards in the Netherlands, which took on the project in 2016.
It was another example, too, of the board's deep engagement in the port's future, she argues. She cites the photo of herself piloting the tug Waka Kume, which is atop this article. "When this photo was being taken I was interested to know as much as I could about tugs before we committed to the e-tug purchase."
Repeatedly in the interviews with her, Coutts talks of her "passion" for the Ports company and their future-proofing projects: electrification, hydrogen production, automation. "People do tell me that I'm not an administrative chair, that I take a real interest in the industry. And I take a real interest in the companies and the people."
Indeed, Coutts was elected as the first female president of the NZ Institute of Directors in 2017 and (as we're listing awards) just a month before she retired from Ports of Auckland, she was named Chairperson of the Year at the Deloitte Top 200 Business Awards.
But Mark Binns wasn't looking for passion and enthusiasm when he conducted his review. He was looking for robust oversight and scrutiny – and in his view, it was missing.
He certainly asked the tough questions. Coutts says she was subjected to "bullying" in the review, in her opinion. "It was very unusual. I was denied the ability to review the final report. And I was required to agree to unnecessarily draconian confidentiality measures to review the draft report. It was a highly unusual process. And people that I thought should be interviewed, for example the vendor of the software, were not interviewed, and the interviewees were kept secret. So it certainly gave me the impression that it was not impartial, that there was a predetermined outcome."
No doubt it stings to be so castigated in the ports' governance review. Is that why she has sent threatening legal letters to the mayor and the new board – protecting her reputation, protecting her legacy?
She insists she's not worried about where her next directorship might come from. "I'm winding down, not winding up. It might have been about 15 years ago, but not now. No, I'm close to retirement.
"But I'm the sort of person who likes to know that I do things properly," she adds. "When you've spent all your career in business, you certainly don't want it tarnished by something. I've spent my whole life working hard and and I am I certainly want to finish my career on a good note. I think I deserve that."
TOMORROW ON NEWSROOM.CO.NZ: ► Furious Phil Goff on a future without port-omation: "I probably exceeded the authority that I might have had, because it's operational. But people were dying." ► New chair Jan Dawson says they can still lift productivity: "It would be short-sighted to rule out the use of automated systems in the future."
