Wednesday, December 12, 2012

‘G’effery ‘E’mmelt...

...atleast that name has GE written on it!

Here’s a quick test: Which amongst the following three (who were his top three generals) did Jack Welch choose to succeed him – Jeffery Immelt (GE’s CEO since 2001), Bob Nardelli (current CEO, Chrysler) and Alan Mulally (current CEO & Chairman, Ford)? Immelt, of course! That seemed obvious; and the brackets did help; but what about this one? Who has been the worst-performing CEO for GE in its history of over 100 years? Well, the answer’s simple again – Immelt! Alright, but here’s the biggest surprise, while Welch is arguably touted as the most successful CEO in the history of corporate America, he chose the worst performing CEO for GE, ever!

Of course, many wouldn’t agree to this hypothesis upfront, but how about this one? Welch himself criticised Immelt during a recent interview. These were his words: “Here’s the screw-up: you made a promise that you’d deliver this and you miss three weeks later. Jeff has a credibility issue.” Even in the most recently announced Q1, 2009 results (announced on April 11, 2009), GE disclosed a ghost-scaring 44.41% fall in its net income (that stood at $2.07 billion) as compared to Q1, FY2008. But wait! That’s not why Immelt makes it to the list of the top blunders in capitalism this century... The real reason is here – since Immelt took charge about eight years back, GE’s share price has fallen by a gut-wrenching 70.39% (from $40.83/share in June 2001 to $12.09/share as on April 28, 2009; NYSE) destroying about 95% of GE’s shareholder wealth. What’s worse, Immelt still feels that, “Amid a continued weak economy, we’re performing well and our backlog remains strong.”


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Monday, December 10, 2012

Total rec'oil'!

The deal promises tons to Suncor

You lose some, you gain some. Quite true! Just when the price of oil per barrel eased from a high of $147 (in August 2008) to the current $47.92, thereby threatening bottomlines for most oil companies across the world, there's one name which begs exception to the rule! Alright, though that sounds unreal, yet the situation is not too far from being true, given the condition that the $19.18 billion merger between Suncor Energy Inc. & Petro-Canada comes through. As per experts, the new entity, valued at a mind-blowing $43.4 billion would then have comfortable oil reserves for the next 100 years in its kitty. Now that's a deal!

So what about synergies? Ron Brenneman, CEO, Petro-Canada explains, “The merger will be good for shareholders of both companies, with reduced capital requirements, operating efficiencies and complementary integration opportunities between upstream and downstream assets.” Most definitely, this deal will not only boost Suncor's (the merged entity) balance sheet (with a pro-forma debt to capitalisation of 29.6% and a debt-to-cash flow ratio of 1.2), but will also make it North America's 5th-largest oil company. The fact that there is very little overlap between the refineries of the two companies will also help their case. While, Petro-Canada has refineries in Edmonton and Montreal, Suncor has it in Sarnia, Ont., and Denver. But there are challenges too. Firstly, with this merger, Suncor will venture into the international space, something unknown to it so far. Secondly, the new company shall be governed by the Petro-Canada Public Participation Act that restricts the ownership of more than 20% of shares by a party. This would greatly reduce voting rights for active shareholders.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Saturday, December 08, 2012

TOYOTA & HONDA: SUCCESSION

Toyota & Honda are in trouble... And now, they have new leaders too! But really, have the batons been passed onto the right man? Will they deliver?

Moreover its product-mix includes two-wheelers, which is serving it well in emerging markets. Yes, it’s also true that the company is not immune to global environment, and that it has to delete names from its rolls and curb production for months to come; but having said that, the job ahead for Ito appears less rougher than his Toyota counterpart, and the fact that Honda still expects to close FY2009 with a profit of $860 million (an 86% drop as compared to 2008) stands allibi. And this is where we come to the ‘third-gen descendant’ Toyota President.

Research has proven it in the past – appointing a family CEO isn’t the best solution during times of trouble! To quote just two such works – the 2004 paper by Villalonga (HBS) & Raphael (Wharton) proved after an analysis of Fortune 500 firms that “when descendants of founders serve as CEOs, firm value is destroyed!” Then there was the 2005 report by Hillier (Leeds) & McColgan (Aberdeen) that revealed how family CEO successions are “almost always followed by dramatic declines in not only stock performance, but dangerously, even in operating results.” Indeed, besides the fact that Toyota has reduced its global sales target for 2009 by more than a million units, and that its losses would continue to mount, forcing it to shut plants in US and cut manpower further, it might just have made a succession planning bungle!

Times will get tougher for all in the industry as even Christian Breitsprecher, Analyst, Sal Oppenheim opines, “The scenario for the industry will only worsen in 2009 & I don’t see the industry making a comeback before end-2009.” The coming weeks will surely test the experience of both leaders and while you still wouldn’t want to complain about the powerless Honda engine or about your broken-down Toyota, do plan to pray; these men would surely need it. 


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Friday, December 07, 2012

Multi-billion rupee achievements

MCX still has a long way to go despite the multi-billion rupee achievements. A B&E exclusive interview....

B&E: Of late, you have been undertaking some major overseas activities, like a big stake in Middle East’s largest commodity bourse – the Dubai Gold & Commodities Exchange (DGCX), running exchange platforms in Mauritius through FTIL, etc. How are these go-global steps helping you to cement your place in the global arena?
JS: There is huge potential lying unlocked in emerging economies. In Africa, there are 53 countries, with economic growth rates of around 6% annually for the past several years. In addition, we have India and China registering robust growth rates. Together, there is tremendous growth in Africa and Asia, and this growth must be captured so that its benefits are shared by the largest number of people, and not just by a privileged few. Setting up of exchanges in the regions of Asia, Middle East and Africa are thus part of FT Group’s strategy to harness this enormous growth on organised market platforms, whose benefits will reach out to the market participants including the common people of these emerging markets.

B&E: There was news that you are planning comex operations in Singapore through your joint venture company Singapore Mercantile Exchange. What is the present status of that plan?
JS: SMX is not a JV company but a new venture of FT, which will operate under the monetary Authority of Singapore. Commodities will definitely form a critical part of the asset classes along with other asset to be traded like energy (including electricity), ATF, currency, etc.

B&E: It was really unfortunate that during last year, you had to put aside your IPO plans, keeping in mind the existent poor market conditions. Any clue as to when the plan has been deferred until?
JS: As of now, we have no such plan.
 

Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Thursday, December 06, 2012

Colour me pink...

As the government relents, steel players must get their house in order

“Don’t put the steel industry between two prongs, where one prong is regulated by the suppliers of raw materials and the other end is held by the regulated prices. This way the steel industry will crash…” said Moosa Raza, President, Indian Steel Alliance (ISA), when B&E interviewed him in March 2008. Though ISA has since dissolved, but Raza’s words are finding resonance today, as all major steel players of the country have, one after the other, posted losses for the third quarter ending December 2008. Will 2009 see the Indian steel sector resurface or drown?

While net profit of Tata Steel and SAIL dipped by 56.36% and 56.4% respectively; JSW Steel recorded a net loss of Rs.1.27 billion as opposed to Rs.3.55 billion during the same period last year. “The losses were mainly due to rise in raw material costs, slackening demand in the home market and foreign exchange fluctuations,” points out a Mumbai-based steel and metal analyst.

The problems with the sector date back to 2007, when India’s iron was being guzzled by China whereas the latter was not allowing its coking coal and coke to be exported to India. This lead to high prices of coking coal and coke (key ingredients in steel manufacturing), which forced steel players to increase selling prices of their products. That’s when the Government of India intervened, unfairly, if you take the steel players’ perspective, and withdrew tax benefits entitled to the steel sector in March 2008. The Government also banned exports and scrapped the Duty Entitlement Pass Book (DEPB) Scheme, which allowed steel players duty-free imports of raw materials equivalent to the value of exports. A drop in demand of steel in the domestic market by sectors such as automotive, construction, et al further worsened the situation. And this is reflective in the current balance sheets of the Indian steel players. If those owning captive mines like Tata and SAIL are facing reversals, imagine the plight of the others.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Tuesday, December 04, 2012

Why Ms.Tymoshenko’s no Jap!

Ukraine wins its gas war with Russia; and a lady masterminds it all

She fights like a Japanese, she shouts like a Japanese, she walks like a Japanese, even has a name resounding of the rising sun, but Ms. Yulia Tymoshenko, the Prime Minister of Ukraine, for all her film actress drop dead looks, knows when to call a spade a spade and Putin a jack of the behind! Taking sole credit for forcing Putin to beat a bumbling retreat in resolving the Russia-Ukraine gas crisis on January 19, 2009, Yulia showed how a mix of long term planning, strategic manoeuvres and slapstick humour is enough to put a brash bunch of slipshod ill-dressed truants [read, the Putin platoon] in their place for a long time to come.

The background first. Recently, Russia again stopped its gas supply to Europe, accusing Ukraine of illegally leaking gas out of its continental gas pipeline, which is the primary transit for gas supplies to a major part of Europe [25% of Europe’s and 80% of Ukraine’s gas supplies are from Russia], ergo forcing European countries to immediately get involved. Amusingly, the reason Putin played his master move was not at all economic, but political.

Since Ukraine’s Orange Revolution four years back – when Viktor Yushchenko, the revolution leader, led mass civic protests to become the President – Russia has stopped its gas supply four times to Ukraine to force bickering between its pro-western leaders so that the infighting leads finally to a pro-Russian bench coming to power. Truly, Yushchenko’s approval ratings have fallen dramatically from 60% to around 5%; and his open fights against Prime Minister Yulia have never been worse. But Putin hadn’t bargained for the scorned Yulia. Not only did she force Yushchenko to display a united front with her during this crisis, but she also ensured there was no gas shortage in Ukraine! How? Some observers claim she masterminded the gas leakage from Russian supplies to build up massive Ukrainian gas reserves.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Monday, December 03, 2012

JUDGES: ELECTED OR APPOINTED

Judges should be appointed...

The condition there is that the five permanent member countries of the Security Council would compulsorily have ‘at least’ one judge, and the rest would be from their close allies. Thus when ICJ interrogates any crime, judges of that country and allies will act in support of the state and in extreme, they use veto power. On this unfair state of affairs, even Hilario G. Davide, Philippine Permanent Representative to UN retorted in an open debate before the General Assembly on November 18, 2008, “Why give the Permanent Members of the Security Council such a special privilege, which could result in a continuing violation of the representations requirements?” Even when US Secy. General Ban Ki-moon appointed a committee to independently scrutinise qualification of appointees to ICJ, he was told to consider “geography and sex above all”.

Well, you’ve blamed the judiciary bench at your will for long now, but the next time you decide to do so, remember, there’s nothing wrong with them, it’s us! For we ‘democratically’ voted them to (mis)judge us, didn’t we?!


Source : IIPM Editorial, 2012.An Initiative of IIPM, Malay Chaudhuri

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Saturday, December 01, 2012

HUMANITARIAN INTERVENTIONS: FAILURE

Really, that’s what powerful nations have taught us... Kill the innocent!

Forget about noble intentions, cases of a million people slaughtered in Rwanda or another 200,000 butchered in East Timor speak volumes about how much America under George Bush loved peace.

And what was the West doing then? What was the UN busy with? Remember the manner in which thousands of innocent people in West Timor were slughtered by the Indonesian army? Well, Washington provided arms for the same; after all Indonesia was Washington’s ally! What happened to Afghanistan? The whole country smashed to smithereens, and all because Americans needed an excuse to dispose off their old bomb shells! Were even the two and three year- olds guilty?! In short, humanitarian intervention can’t overpower geo-political interests of powerful nations; well, it hasn’t till now atleast!


Source : IIPM Editorial, 2012.

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Friday, November 30, 2012

ASSEMBLY ELECTIONS: INSIDE CONFLICTS

For the upcoming assembly elections, parties face a tough time

That’s why BJP has already announced Prof. Vijay Kumar Malhotra as their candidate for CM. On the third side, BSP supremo, Mayawati has made Brahm Singh Bidhuri as the new state president and has entrusted the responsibilty of make election strategies on the shoulders of Nasimuddin Siddiqui.

Every leader wants more and more of his people to get tickets. And for the same all parties are facing trouble. They have to face opposition as well as unhappy people within the party. It makes them weak and that’s what is happening now. If candidates are selected on the basis of ability and performance, many names would get cut. A dilemma each party faces.


Source : IIPM Editorial, 2012.

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Wednesday, November 28, 2012

‘C’alumnious ‘S’currilous ‘R’apscallions

Are Corporate Social Responsibility acts really the way corporates portray it? Not really! A. SANDEEP, EDITOR, B&E does a reality check...

Oh yes, even I didn’t understand these words when I read them the first time? That’s the problem with many CEOs. They don’t understand many such words that start with C.S.R, or at least feign incredibly well not to. The protagonist of my editorial is clearly ‘Corporate Social Responsibility’... It was during the late 1990s that this concept of CSR started attaining prevalence within communities, spawning sporadic regulators who kept cribbing about the lusty profits being earned by the so-called “selfish” corporations, and advocating a dire need for society to “reign in” these “money making monsters.” Sadly, CSR is just a clever term that has been used by many CEOs and governments to mask their own under-performance, and worse, to ludicrously waste shareholders’ wealth – for the truth is that CSR should never be undertaken by firms sincere about their commitment to society! In a comprehensively researched paper sponsored by Oracle in 2005, the statement by David Gerald, founder of Securities Investors’ Association (globally one of the top agencies set up in fact to protect corporate governance), dramatically revealed the frittering away of precious shareholders’ wealth by international corporations, “(Company) boards should be given no mandate to give to charities.

If they want to do that... then they should put it to a shareholder vote.” Year 2005 reports by Fortune (of more than a hundred Fortune 1000 companies) and Economist Intelligence Unit (of more than 200 companies’ executives and investors, including in India) killingly revealed the pathetic double speak by global CEOs. While Fortune showed how 91% of surveyed CEOs regurgitated the ostensible statement that “CSR management creates shareholder value,” the Economist report correctly proved how, in reality, only a laughable 2% of investors globally said they’ll invest in companies undertaking CSR. The report also showed how one of the top two reasons for CEOs to undertake ‘corporate responsibility’ was, hold your breath, corporate scandals. Hilariously, “society” as a factor for undertaking CSR did not even find a mention in this list. Oh yes, NGOs did find a thoroughly insignificant mention in the list of who all are considered a firm’s “most important stakeholder”; they were ranked second from bottom (with the coveted last rank going to ‘none of the above’).


Source : IIPM Editorial, 2012.

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Tuesday, November 27, 2012

On the highway to perdition...

Allowing insurance companies to park investors’ money in VC funds will jeopardise their future

A healthy tan is the first sign of skin cancer. Who so ever has said this must have an experience of the sort. However, the brains at Insurance Regulatory and Development Authority (IRDA) are yet to realise the fact. But, never mind, very soon they are going to get their share of experience. Without any doubt (which will be horrifying) not only for IRDA and insurance companies, but also for the poor investors, who knock doors of the insurers to safeguard their future. And, interestingly, all these will happen only because of the desire to earn a little more.

As per the fresh investment guidelines announced by the insurance regulator, life insurance companies are now allowed to invest in Venture Capital (VC) Funds. IRDA has allowed life insurers to invest 3% of their total investible corpus or 10% of the total size of the fund, whichever is lower, in VC funds. For general insurers, the limit is 5% of their investment assets or 10% of the fund size, whichever is lower, thus providing the insurers another asset class to invest. Prashant Sharma, Vice President - Investments, Max New York Life Insurance avers, “This is a high risk; high reward asset class and the policyholders who have the risk appetite can opt for it.” But don’t you think this is going to jeopardise the safety of investors’ money? Certainly, this has left many in dilemma about the feasibility of such investments.


Source : IIPM Editorial, 2012.

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The Pampas are drying again!

With bond buyback Argentina raises fears of another economic collapse

Dry winds are all over the Pampas once again! And interestingly it’s the same that swept away most of it in 2001. Remember the $95 billion default (largest by any country) by the Argentinean government on its bonds that led to the devastating financial collapse! The reminiscences of it still sends shivers down the spines of many! Well, the same doubts are growing over Argentina’s creditworthiness, yet again!

Though the Argentinean government is already into its third week of a debt buyback programme (has bought back $430 million worth of its 2008 and 2009 bonds) to bolster investor confidence, but it hasn’t been of much help. “Bond buyback by government has boosted some investors’ confidence. But still a lot more needs to be done to restore Argentina’s lost credibility,” P. B. Henry, Professor at Stanford University and an expert of Argentinean issues tells B&E. Certainly at 50% (an estimated $140 billion) of GDP (market exchange rate), Argentina’s public debt is still large.


Source : IIPM Editorial, 2012.

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Monday, November 26, 2012

TERRORISM: BIOLOGICAL WEAPONRY

Bio-terrorism adds to the global fear of organised terrorist attacks

But then, all that is, as they say, officially. It is well documented that Iraq was alleged to have conducted R&D to develop bio-weapons in the 80s, which – at a secondary level to WMDs – ultimately led to the Gulf war. In 1984, members of a quasi-religious sect of a spiritualist leader called Rajneesh were accused of using salmonella on local people in New Oregan to win a local election, which resulted in over 751 people falling sick. 1995 saw Aleph, a small terror group using Sarin gas in Japan, which killed twelve and injured over 5,000 people. In 2001, the US was frightened sick with several Anthrax attacks on US citizens.

Bioterrorism is becoming easier as agents are much easier to make. Any trained biologist can engineer it with comparatively lesser cash, but remain equally lethal. Only the US has been able to fight back bio-terrorism with strong regulation and with its capability to produce vaccines. Most of the remaining countries remain vulnerable to it. As the threat from terrorism is increasing, so is the same from bio-terrorism.


Source : IIPM Editorial, 2012.

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Friday, November 23, 2012

Stoned over sex

Gay pride surfaces on the streets of India and around the world...

“We are humans and are born like everyone else, but have feelings contrary to what is acceptable to the society. I am a guy and I love a guy, which means that people hate me and consider me to be different and weaker than others,” says Mayank, a front runner at the gay parade held in Delhi. On 29th June, 2008, Delhi, Kolkata and Bangalore played hosts to India’s first gay pride parades that drew a huge number of people. Holding placards with slogans like, ‘As good as you’, ‘Hindu-Muslim, Sikh-Isai, hetro-homo bhai bhai,’ the gathering marched peacefully through the streets, and was successful in making the Indian gays, bisexuals and transgenders surface and express their individuality.

Commemorating the Stonewall riots of 1969, which occurred in New York and kick-started the modern gay rights movement, homosexuals around the world came out on the roads holding high their rainbow-coloured flags. Like every year, parades were held in several countries and like India, Bulgaria and Czech Republic too held these parades for the first time ever. Though unlike India, those who assembled at Sofia and Brno were given a rather hostile reception. In Bulgaria; stones and gas-bombs were thrown at people attending the parade, while in Brno, right-wing extremists attacked the people with tear gas even before the march began! “I feel sorry to hear of such incidents where people do not respect people and cannot give heed to others’ feelings. I feel sorry for people who cannot accept us. At times we feel that we do not wish to be a part of this heartless society,” reacts Sachin, who had also participated at the parade.

“Hum honge kamyab ek din...” was the song on the lips of the people at the parade, and it showed the high spirits and firm belief of the activists that they would get their rights. All they want is that they should be recognised as a part of the society and people should not hurt their sentiments by mocking at them.


Source : IIPM Editorial, 2012.

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Thursday, November 22, 2012

Mom, can I have a ministry too?

Is portfolio shuffling a born trait or can it be learnt? B&E’s deep review

A few months ago, a research done by the most prestigious Yale University revealed that Indian politicians are extraordinarily intelligent. Well, we should mention they prove to be equally intelligent as ‘fund’ (or should we say, ‘post’) managers to have learnt how to arrange ministerial portfolios to minimise political risk.

Some months ago, when UPA coalition partner, DMK leader Karunanidhi, called back Minister of Communications and IT, Dayanidhi Maran, who was replaced by another party loyalist and Environment Minister A. Raja without any stated specific reasons, even the Prime Minister had no say on it. And Minister of State for Home, S.Rogupathy, another loyal DMK leader, was brought to the Environment Ministry. Similarly, in the era of the NDA government, Suresh Prabhu, who was the then Power Minister, was also forced to leave the Ministry and was replaced by another party leader Anant Geete, a protege of Shiv Sena Chief Raj Thakeray.


Source : IIPM Editorial, 2012.

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Wednesday, November 21, 2012

Not at war?!?!

Unbelievably, Balkans improve...

After the break-up from Yugoslavia, the decade long internal disturbance seems to have settled down. Recently, a UN report on ‘Crime and its Impact on the Balkans’ concluded most positively that the Balkans have become a low-crime region and also are gradually trying to get into the league of some of the world’s most peaceful places. Nevertheless, the report further also warns that politics and organised crime will continue to hamper the region’s path to stability. Crimes like smuggling of drugs, guns and human trafficking is quite rampant. Over 100 tonnes of heroine are traded each year. Creditably, local murder rates fell by almost 50% in the last eight years [from 2,185 to 1,130].

The report further compares Romania with Switzerland in terms of safety and proves that the number of prisoners has gone down dramatically.

Human Rights Watch has also encouraged a country like Kosovo to cooperate with the EU to deploy a sensible rule-of-law mission, which may eventually reform the criminal justice system of the country.


Source : IIPM Editorial, 2012.

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