Posted by julian on Feb 5, 2010 in
Economy One of America’s great 20th Century industrial titans and personalities had some interesting things to say about the current economic mess we are in. Much of what he had to say was disparaging towards President Obama and the Democratic Party, but even after discounting those political comments, he was on the money about many things, one of them being; “Where have all the leaders gone?” he argues, “Name me an industry leader who is thinking creatively about how we can restore our competitive edge in manufacturing”.
It is sad we have an environment within American industry which almost matches that of Wall Street. Industrial leaders are all about the compensation package they receive and in order disguise that fact, it comes under the heading of stock holder value. Their remuneration is directly linked to the stock price and cutting costs. Not often, I look to my former homeland New Zealand as a beacon of commonsense and fair play, but I can recount a story of one of New Zealand’s most successful businessmen who also happens to be in the same industry as me.
Bruce Plested, founder of Mainfreight (now in the USA after taking over Target Logistics) one of Australasia’s largest transport companies began his career working for Brambles, a large Australian conglomerate. He rose to become Auckland branch manager of Brambles International. The forwarding industry in N.Z. in the seventies was continually being held to ransom by the labor unions. Bruce always settled the disputes ahead of his competition and when he was finally fired in 1978, it could be said his career in transportation should have been at an end. He had burned his bridges! Instead he partnered with former Bramble’s head storeman, Howard Smith and opened up on his own. Over the next twenty five years he swallowed up every one of his opposition to become one of the largest public companies in N.Z. Not only did he and Howard become multi-millionaires, but also many of his staff who came aboard during the eighties enjoyed huge financial reward when the company completed its IPO in 1996.
About four years ago in his annual report, as Chairman he restated his corporate objectives in order of priority; firstly staff would continue to benefit from the company ESOP, it would maintain the same levels of re-investment and above all Mainfreight would keep to its program of investing back into the local communities. His last consideration was to ensure after all this was accomplished, hopefully the company’s profits would continue to sustain a fair dividend yield for shareholders. The “Wall Street” of N.Z. and the media pilloried Bruce and told him these actions were destroying shareholder value and they would have no alternative but to place a sell recommendation on Mainfreight’s stock. Bruce’s response was the company’s prospectus upon going public in 1996 clearly stated these philosophies. Now the company’s revenue through exponential growth exceeded a $billion it was even more important not to lose those core ideals. He told those gathered at the AGM that if they did not agree, they were free to take the recommendation of their financial advisors and sell their stock.
My point in relating this story is Bruce Plested is a fearless leader. He proudly stands up for what he thinks is right. And he is right. Every major Australian or New Zealand competitor over the thirty years since he has built up his business has either folded or been swallowed up by Mainfreight. His belief in his people to always do the right thing for the company and for him to do the right thing by his people has created probably one of greatest success stories in N.Z. business. Funnily enough in spite of Bruce’s “unorthodox” attitude towards the financial world has worked to the benefit of all Mainfreight’s stockholders, as the company is still the darling of the N.Z. Stock Exchange.
America was once full of Bruce Plested’s, Lee Iococca being one of the better examples. Today, we need to see the return of leaders who will act in doing the right thing by America. It starts with bringing the plants back home and re-employing Americans. The Skilling’s, Embers, Kozlowskis, of this world who dominated the headlines because they were nothing but crooks are just the tip of the iceberg of the corporate world as I see it today. Most Fortune 500 CEO’s are self serving thieves who conduct business hiding behind a bunker. They cannot fail. If they get the boot, their golden parachute takes care of them for ten lifetimes; if they succeed, they earn more than they could spend in a hundred lifetimes. We need the return of true leaders to help rebuild industrial America. For starters maybe we should ask octogenarian Lee Iacocca to take over the reigns of General Motors! With former workmate Bob Lutz, (seventy seven and still Deputy Chairman of GM) the pair of them could restore Detroit back to being the industrial capital of the world!
Tags: Bob Lutz, Brambles, Bruce Plested, Democrats, GM, Lee Iococca, Mainfreight, New Zealand, Obama, Wall Street
Posted by julian on Feb 4, 2010 in
Export Our largest exports by volume are waste paper and scrap metal. Even hay and cotton rates a mention! Doesn’t this say something about our malaise? If we are going green as President Obama tells us this is the future, recycling is very much part of that cause. Why can’t we re-process the scrap metal and paper ourselves. It would create two major industries. As I understand it the largest waste paper exporter in America is not even an American Company, so what little profit is derived at destination works its way overseas also. Whenever I receive a card from someone, on the back it proudly proclaims it is made of recycled paper and printed in China! Waste paper is of such low value, shipping companies move the containers at below cost to China. Sure much of it is reprocessed into the cartons that contain the rubbish that is shipped back from China. If we made the cartons here and shipped that finished product to China, the value of the cartons could sustain a more viable freight rate and the added value of the finished product would earn more dollars for America.
Much of the scrap metal is remade into steel rolls which return to America only to be sold at below market prices. It has a huge effect upon the locally made product being able to be sold at all let alone a competitive price because the Chinese literally dump the steel into our market. Again, when you consider the cost of shipping to and from China it beats me why steel mills here cannot absorb the millions of tons of scrap metal and manufacture the steel in America. Maybe then we could start give China back some of their own medicine and start dumping it into the Chinese market.
Growing up in New Zealand the only quality towels we would buy were the American-made Cannon brand. It is now almost impossible to buy an American produced towel in this country anymore. Why do we export cotton only to have it shipped back in finished form? Turning cotton into fabric and then into towels is literally 100% accomplished by machine so the differential in manufacturing costs between China and the United States would be negligible. However there would be huge savings removing the international shipping costs and the consequent delay in getting the finished goods to market that I believe the American-made towels would actually retail cheaper than the imported equivalent.
Presently the insult to injury affecting our exports is a shortage of containers due to the shipping lines reducing capacity. Shipping lines need exports of value to start entering the westbound trade. Shipping commodities of little value is not a solution for export growth. In fact because scrap is a twelve month a year export with containers being loaded close to port, shipping lines are not interested in the time consuming and costly job of positioning containers to inland points for manufacturers entering the export business. Ships are great pollutants in port and at sea. For the sake of our environment more than anything else, international trade should be about moving goods that are needed, not crap that isn’t. Add to this, returning to a philosophy of making as much as we can in America for our home market made good sense. No American city would be allowed to emit pollution like its Asian equivalent.
Tags: China, Export, United, United States
Posted by julian on Feb 3, 2010 in
Economy Even in Great Britain, a country which has had culture snatched from it by indiscriminate immigration and being a member of the EU, is up in arms over losing Cadbury’s a 200 year-old Birmingham-based “institution” majority-owned and run until recently by the Quaker Cadbury, to plastic cheese maker Kraft Foods. Kraft, thanks to Wall Street is 100% funding the nearly $20 billion purchase. Cadbury’s CEO, American Todd Stitzer, since he engineered one of the worst takeover deals in history the acquisition of Snapple drinks, has been hell-bent on sinking the once proud British company, very much like the American Glazer family are presently doing to Manchester United.
Kraft is half the size of Cadbury’s and who is buying who? It makes no sense whatsoever. Over the last few years with the new Stitzer leadership, Cadbury’s has gone from being a British-based confectionery manufacturer, where their original and main plant in Bournville (their own village outside of Birmingham) employing 30,000 plus just thirty years ago to where it is now less than 2,500. Of the worldwide workforce of 45,000 only 6,000 are in England. Cadbury’s confectionery was renowned for its hearty content. Real sugar and cocoa butter was used exclusively in their chocolates for nearly two centuries. In the quest to reduce costs, plants all over England have been closed down under Stitzer and third world countries like Poland and Thailand have benefited from the change. Palm oil, a cheap alternative to cocoa is now the major ingredient in a Cadbury’s chocolate bar.
Quite frankly the fit is now perfect for Wall Street; Kraft with synthetic cheese and other junk food and Cadbury with its phony chocolate and a merged company laden with huge debt. What was wrong with Cadbury’s as it used to be? It had a global reputation for excellence, it had nearly two centuries of tradition and while many of its factories were built in the nineteenth century, tens of thousands of English families benefited from a family business which was a model for top corporate governance. As a kid arriving home from school in those bleak New Zealand winters, I remember well being greeted by mom for years with a cup of hot Cadbury’s Bournville cocoa made with milk and two slices of marmalade toast.
So what do we have to look forward to? No doubt, “re-engineering” to reduce costs will quickly take place. The remaining Cadbury factories will probably be shut down around the world except Asia and China will be the biggest beneficiary. We will be able to look forward to candy full of anti-freeze for flavor, melamine to give us the false protein reading, and contaminated local Chinese milk powder to make us puke! The thought of the “new” Kraft makes me want puke without trying their new range of products!
Tags: Cadbury, E.U., Great Britain, Kraft, Quaker, Stitzer, Wall Street
Posted by julian on Feb 2, 2010 in
Airlines Since the fuel crisis, even the latest 747-400’s are being grounded by many airlines. In the bankruptcy, Japan Air Lines with one of the largest 747 fleets has announced that all forty-seven in the passenger fleet will be left with the Bankruptcy Trustee for him to dispose of. On strongly patronized long route flights the A 380 is rapidly becoming the aircraft of choice and many carriers are placing their faith in the versatility of the 787 as the aircraft of choice to dominate their fleets. Air New Zealand for example was the first carrier to fly a 747-400 straight to the desert for scrapping and as each new 777 arrives the same fate awaits the remaining 747’s. Previously 747’s were converted to freighters but the forecast for the cargo business remains flat at best for the next five years at least.
The response from Boeing to rival Airbus when they announced they were moving forward with the A 380 was to upgrade the 747 to an 800 series. As of this month there were options on only thirty-two of the passenger version but seventy-six for the freighter configuration, almost making it a loss making venture for Boeing. It is interesting to note that some freighter operators, led by Cargolux, are looking at ensuring any replacement aircraft are new rather than conversions. With possible cancelations on the passenger 747-800, it looks like the 747 will go the way of the MD 11. In the last five years of MD 11 production all aircraft delivered were freighters.
I started in the business about the same time as Pan Am started flying the 747 to New Zealand. I have always been in awe that such a huge machine could actually fly. It is sad that starting with the “new” JAL, a mega international carrier, that the 747 will slowly fade from the skies because most carriers will undoubtedly follow Air New Zealand’s choice of scrapping the redundant aircraft rather than find buyers. To think it was 747 which transformed the airline business to move passengers in “bulk” which in turn led to pricing that allowed working class families to enjoy overseas travel at Greyhound bus prices.
Tags: 747-400, 777, 787, Airbus, AirNewZealand, Boeing, Cargolux, JAL, MD11
