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

For More IIPM Info, Visit below mentioned IIPM articles.



 
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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.

For More IIPM Info, Visit below mentioned IIPM articles.



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