GOOD NEWS
Lest readers get the impression that this website is written by a congenital Jeremiah, devoted to rattling chains, self flagellation and frequent cries of "'Aint it awful", here are a few reasons to be cheerful:
Nissan Sunderland exports cars to Japan.
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British-built Nissan cars are being exported to Japan for the first time in more than a decade. The order for 20,000 vehicles built in Sunderland is seen as a major coup for the 4300 strong workforce at what is now Europe's most productive car plant.
Nissan's British plant opened 21 years ago, re-assembing Bluebirds from Japanese produced kits. This year it produced its 4.5 millionth car; it has
been the UK's largest car exporter for more than nine consecutive years.
Another good news story is the New Mini.
Notice any connections between the two? Both are foreign-owned, but are staffed by British workers.
Are there any equivalent British owned and managed automotive companies? Alas, no, they all died of incompetence and underinvestment.
See New Mini, Decline Section
M&S continues to prosper.
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M&S continues to make progress under the leadership of Stuart Rose. Unlike M&S's last revival under Luc Vandevelde, Rose's revival begins to look quite solid. Mr. Rose sensibly said: "Recovery is a finite word. It sounds like you have finished. You have never finished....We are out of intensive care now, we are pretty robust, but we have got to get ourselves super-fit".
Let us pray that Mr Rose has the appetite and stamina for the long haul - as he said, there is much to be done before he can hand M&S over confident that the improvements are sustainable. And let us pray even more fervently that private equity raiders do not come and derail a good, back to basics, management-led, customer and operationally focused turnaround of the sort that Boots was also pursuing before getting into the clutches of deal junkies.
John Lewis Partnership powers ahead.
From 'The Week' 17 March 2007:
Imagine if private equity got its hands on John Lewis, said Nils Pratley in the Guardian. Would its partners sailing club survive? Or the orchestra, the country mansion for holidays, the holiday homes and the non-contributory final salary pension scheme?
Happily, it should never happen: John Lewis's status as a partnership is built on legal rocks so solid it would take something close to an act of Parliament to shake them.
Record profits announced last week were a great swansong for outgoing chairman Sir Stuart Hampson, noted the Independent, but they also brought "yelps of delight" to the shop floor, where Partners (employees) shared a £155 million bonus.
The model's power to motivate is clear, concluded Pratley: "It's strange so few public companies have seen fit to copy it"
Memo to Mr. Pratley.
It's pretty clear why quoted companies don't copy the John Lewis model:
- It takes an act of altruism on the part of top managers/owners to change their companies into enterprises which have the purpose of maximising the happiness of their employees.
The John Lewis constitution states that "the happiness of its members" is the Partnerships's ultimate purpose. Not the wealth of investors and bosses? You must be barmy! No more share options, no more 'shareholder value', no more huge bonuses for 'world class quality' - and no more dividends to investors, no more M&A, no more investment banking fees - quite makes one dizzy to think about it! - John Lewis's 60,000 odd Partners have a real say in the direction of the company. Which quoted company CEO would want that? And which investors would want to lose the ability to demand that the companies that they 'own' be jerked about according to the condition of their portfolios?
As John Lewis's chairman said: "Our strength is that we have thousands of shareholders who meet our customers every day".
Alas, very few, so John Lewis as one of the UK economy's great good news stories is likely to be pushed into a dark corner of consciousness by the powers who currently control our economic thinking, lest it contaminate the public's mind.
Come to think of it, when did you hear of a senior politician in either of the main parties lauding the John Lewis 'model' as lighting the way for 21st century industry?
Sainsbury rejects Private Equity bid - Barbarians furious.
A private equity consortium, consisting of mainly American investors, CVC, Blackstone, Texas Pacific and KKR of 'Barbarians at the Gate' fame finally withdrew from their attempt to shake the board of Sainsbury into compliance with their bid by employing every dirty trick in the book to get a low price and then bludgeon the Sainsbury family into acceptance. The smear campaign about members of the Sainsbury family, holders of a significant 18% or so of the company, reached very grubby levels.
The attitudes and values of the financial sector can be judged by the piece in thisismoney.co.uk : "The (Sainsbury) family owns about 18% of the group and last week blocked a £10 billion takeover bid by a consortium of private equity groups. Their aim was to save Sainsbury from what they saw as rapacious financiers keen to wring cash out of the group by selling its property. (Not only this, but usually laying off staff and loading it with debt - author).
But in blocking the bid they have enraged City bankers and other shareholders.
One source involved in the talks said: "Shareholders will never see this kind of value again. It's been lost for ever. A bunch of unelected interferers have blocked what is in the best interests of shareholders. So unless they are overruled, they will control the company. This is the most disastrous outcome imaginable. The only ones who are happy are Tesco and M&S".
Hell hath no fury like thwarted greed.
The report goes on to imply that the whole board, with the exception of the family, was behind the bid and that CEO Justin King would be heartbroken and demoralised by the fact that his potential £20 million payoff from a deal would only be £5million in bonus for continuing to develop the company.
In fact, most of this has transpired to be untrue - several members of the board, and billionaire investor Robert Tchenguiz felt that the bid price was daylight robbery - and that the consortium had employed the old trick of bidding very low and upping the price a little, claiming that they had suddenly made an un-refuseable offer.
Behind all of this readers should see the disembowelled spectre of Debenhams, gutted by private equity and realise that the primary purpose of private equity investment is to enrich a small group of equity insiders - and to hell with employees, ordinary lenders, and customers. A likely reason for the Sainsbury's attitude to the bid is that they felt a sense of responsibility towards the company - its employees, its culture, its customer and its future - all those things that sustain long-term performance and are treated with contempt by people who are enraged at seeing the "prospect of instant profits evaporate".
Our friends in thisismoney.co.uk should have the second to last say:
"A wounded board, a property mogul agitating for change and thousands of shareholders (?? Surely dozens of institutional investors) who have seen the prospect of instant profits evaporate - Sainsburys has never looked so directionless".
Good God, what tripe! Sainsburys is a retailer, which makes money through serving customers through (hopefully) motivated staff, not a bundle of assets to be bought and sold to enrich a tiny group of extremely wealthy people. It is also in the middle of a rather impressive recovery based on sound retail management, such as is also being practised at M&S and was at Boots before the Alliance merger. Let us hope that the barbarians and their acolytes have not destroyed this healthy process - otherwise staff and customers will suffer. Thank God for John Lewis, a model of how to do it - and beyond the reach of thisismoney.co.uk and its readers.
Ed Balls announces action to educate the populace in making financial decisions.
Economic Secretary to the Treasury Ed Balls announced recently that the government was at last taking seriously the education and support of the average citizen in their dealings with the financial services industry.
Speaking at the (Anne Taylor Childrens' Centre in Hackney), he announced that a new taskforce, led by Otto Thoresen, Chief Executive of AEGON UK, has been asked to research and design a national generic financial advice service - ensuring that every person, including those on the lowest incomes, can get quick, easy and simple access to good quality financial advice. A cross-departmental Ministerial group will co-ordinate the Government's work plan to enhance financial capability ensure Government programmes link effectively to the new advice service.The Government believes that everyone in society has the right to get advice they can understand and trust on the financial options available to them, from getting out of debt through to choosing a home and saving for a pension.
Otto Thoresen will report to Ministers by the end of the year. The Government will publish an action plan by the end of 2007 setting out how financial capability will be integrated into existing services, particularly for those most vulnerable to the consequences of poor financial skills and taking forward plans for a national approach to generic financial advice.
The visit marked the start of the first ever Child Trust Fund (CTF) week, promoting CTFs as a straightforward way to start saving for a child's future. The Government is seeking to promote better financial education and to develop a savings culture amongst children and young people, and is encouraging schools and parents to use the Child Trust Fund account - which every child born since September 2002 receives - to help teach children about the value of money and the importance of savings.
Ed Balls said:
"We want everyone in society to have access to, and use, financial services with confidence. So we must use all the levers we can to improve financial understanding and capability, including the Child Trust Fund. Financial decisions are difficult. Financial products are complicated and there can be too much jargon. This puts people off, or they can end up buying something that is not right for them. Sometimes people just want to discuss their financial options and not buy anything. We believe there is a gap in the provision of this last type of advice - generic advice - and I have asked Otto Thoresen to research and design a national approach for filling this gap. I am determined that we should extend the benefits of generic advice to all consumers who need it."
All of this is most welcome news given the past and current behaviour of the financial services and banking industries in screwing their customers. Past government inaction on these matters amounted to a total dereliction of duty.
We hope that effective education and support may even the odds a little in favour of the citizen, as self-regulation and greed limitation by the industry has clearly not worked.
See Financial Services Industry malpractice, Cannon Fodder section
Insurance industry cut out of National Pension Savings Scheme.
Jill Insley reports in the Observer: "The government has done the right thing by adopting Lord Turner's concept for the personal account on pensions and rejecting that proposed by the insurance industry.......Many occupational (pension) schemes achieve charges of 0.3% to 0.5%, yet the insurers who provide personal pension plans squealed when the government set stakeholder charges at an initial maximum of 1% and continued to complain when this was raised to 1.5%.The insurance industry has overcharged investors for the last 20 years, its commission payment structure has encouraged financial advisors to churn their clients' investments, and performance for many has been very disappointing. It is now reaping its rewards by being left out of the personal account party".
Let us hope that they will be kept away from the punters for the National Pension Savings Scheme altogether, lest they get another bite at the mis-selling cherry.
Let us also fervently hope that the scheme provides savers with excellent advice on their options and that the 'default' option for individuals who do not care to exercise choice is very well designed - given the current level of financial education amongst the populace this is crucial. At least we can be comforted that they will not be cast to the insurance company sales wolves.
Breakthrough in drug research.
Here's an uplifting story about the cost of drugs. The pharmaceutical industry has developed an apparently convincing 'narrative' about innovation and the costs of research. The bit missing from the story is that the industry spends far more on pushing existing drugs or tarting old drugs up for patenting than it ever does on original research and pushing the boundaries of treatments for the less well-off. The investment industry has bought the big pharma narrative, as big costs mean big margins and big returns to investors. Somewhere along the line the average punter gets missed out - never mind the poor in developing countries.
Sarah Bosley, the Health editor, reports some potentially good news:
"Until recently, hepatitis C, a potentially fatal blood-borne infection that could affect as many as 500,000 people in the UK, was treated with an antiviral drug, ribavirin, together with interferon.
The drugs are old enough to be out of patent and so can be made cheaply, but the necessary frequent injections of interferon cause serious side effects.
Then in 2003 scientists working for Roche and Schering Plough developed a variation on the drug designed to last longer in the blood and so require fewer injections. The trial results were spectacular - half of the patients were cured. The drug was patented and is sold to the NHS. The catch, as so often when it comes to cutting edge pharmaceuticals, is cost: the £7000-a-course price tag is expensive for the NHS and beyond the means of developing countries, where the need is greatest.
Enter Sunil Shaunak, professor of infectious diseases at Imperial College, and his colleague from the London School of Pharmacy, Steve Brocchini. Involved the battle to contain the AIDS pandemic from its outset in 1985, Professor Shaunak was committed to finding ways to provide cheap medecines for people in the developing world.
In the case of hepatitis C, Professors Shaunak and Brocchini decided to try to make a different, improved version of the Roche drug which would be cheap and stable in a hot climate. They redesigned the drug, known as pegylated interferon, so that it would have a larger sugar molecule, which made it last longer in the blood on the inside, rather than the outside. They then contacted a company called Shantha in Hyderabad, which had made the world's first cost-effective hepatitis B vaccine and was already making the original interferon. Shantha has agreed to make the medecine and the Indian government will subsidise the clinical trials....
"If it works in India, it will eventually come back to the NHS, said professor Shaunak. "What we started doing is creating this model of what we call ethical pharmaceuticals". Professor Shaunak says they want to make a difference - not just to create new drugs, but see them through to become good medicines to treat people in poor countries.... He wants the idea of the model in the public domain so that other young academic scientists and doctors can use it.
More power to his elbow - maybe the drug companies will have to cut back on their marketing and promotions budgets to fund cost-effective research.
Wait for the backlash from the drug industry and investors.
Michelin gives big business a good name.
Dominic O'Connell reports in the Sunday Times of April 1, 2007: "The French tyre group is lending money to worthy manufacturing start-ups to give something back to the community".
He goes on to describe a scheme under which Michelin has laid out £2 million in loans to 80 start-ups and small manufacturing companies. 70 of these companies now employ 800 people between them. Not only does Michelin lend money, it also provides skilled support - for example, Michelin Development has ensured that its staff provide free advice on marketing, accounting, engineering and health and safety.
At each of its four UK sites, a steering committee of local agencies and Michelin executives vets applications and approves loans. The loans are made by the Royal Bank of Scotland and guaranteed by Michelin.
The programme has a few basic rules - it will not lend money for retailing, favouring manufacturing and technology ventures. Businesses helped include technology companies, university spin-outs, packaging and pottery firms and toy makers.
The article describes the case of BCW Engineering, auto and electrical components manufacturer, which started with four people, now employs 68 and has a £5 million turnover.
It is a revealing irony that it takes a French company to support high-quality enterprise in Britain. British examples include Corus, which inherited the enterprise scheme of British Steel. British Coal enterprises also fostered a large number of enterprises before it was privatised.
Other British companies funding new enterprise? Not many, and not in manufacturing and technology - not sexy any more and anyhow, British companies have hungry shareholders to feed.
Memo to Gordon Brown.
Now, Mr. Brown, Michelin seems to have done a lot of good for only £3 million.
Why not save the vast waste of money that will be splurged on a probably abortive Identity Card and instead spend the money on something really useful? Surely Michelin will advise on how to do it without letting the scheme fall into the hands of incompetent bureaucrats. And why don't British companies do the same thing?
JCB explodes the myth that UK manufacturing is finished
New article: Very good news, JCB explodes the myth that UK manufacturing is finished in the UK plc section.
Arsenal chairman Peter Hill-Wood invites oligarch Usmanov to take his money elsewhere.
Hill-Wood said, "He's certainly not an open book. Business is murky in Uzbekistan, and that in itself is an argument against him being involved in Arsenal. I wouldn't want him to be the owner of the club".
Controversy over Usmanov's record has surfaced since he paid Arsenal's vice-chairman £75 million for a 14.5 % stake in the club last month, and then rapidly increased his shareholdings to 21%.
In 1980, he was convicted for offences reported to include fraud, corruption and theft of state property and served six years in prison.
In particular, the influx of Russian and ex-Soviet bloc companies into the FTSE 350 is probably only the thin end of the wedge. But, of course, such companies are able to assume a veneer of respectability by appointing a 'Lord on the board' - see Boards section.
In praise of Canada
New article: In praise of Canada
