JimPinto.com - Connections for Growth & Success™
No. 49 : June 29, 2001

Business, marketing & futures commentary.
New attitudes, no platitudes.
Stay e-tuned....


  • Yurko & Invensys - re-arranging the deck chairs
  • GE/Honeywell re-negotiation ploy
  • Mass Victimization on the Internet
  • Mini-plants in mobile containers
  • eFeedback
    • Thoughts on Siemens buying Rockwell or Honeywell
    • Empathy for the good Honeywell people being jerked around
    • Reminiscing on corporate sins that finally catch up

With a spate of industrial automation news, this remains our key focus again this week. Technology-trends aficionados please bear with us.

Yurko & Invensys - Re-arranging the deck chairs

Allen Yurko, CEO of Invensys, is a financially driven manager who came from a Siebe acquisition (Robertshaw) and soon became CEO of the UK-based industrial conglomerate.

Siebe acquired then ailing Foxboro and seemed to revive it through good management discipline. But Foxboro didn't grow and Siebe continued to acquire aggressively. In a defensive move to stave off acquisition by Emerson, Yurko merged Siebe with BTR (a similar UK hodge-podge) and changed the name to Invensys. The cute name didn't seem to make a difference - the decline continued. Yurko then unwisely acquired Baan, a bankrupt Dutch software company, compounding his problems.

A couple of years ago, Allen Yurko seemed dynamic and street-smart, the driving force behind the formation of Invensys. But recently he has become defensive, erratic and remote. His moves signal increasing desperation at his inability to generate the growth and success he had promised.

This past weekend he and other senior executives have agreed to pay freezes, even after sharp cuts last year. You will note that Allen Yurko still gets paid $1.2m, and Kathleen O'Donovan (CFO) gets about $700K.

Click Read this Financial Times article : Invensys Pay Freeze

This week, in a communication to all Invensys employees signed personally by Allen Yurko, a new "PROJECT UNITY" was announced.

  • Rollout of Baan software globally as a common IT platform. Installation of Baan at most Invensys sites to generate additional Baan revenue.
    (Read: Buy Baan, or else).
  • Outsourcing of IT internal systems (including hardware and software) and transfer of current IT employees to IBM through a "strategic outsourcing arrangement".(Read: layoffs) to take place in "autumn 2001".
    (Read: right away).
  • Through an outside consultant, assessment and re-design of Finance and Human Resources administrative processes.
    (Read: more layoffs in Finance & HR).
  • Implementation of an e-procurement system for MRO and indirect purchasing.
    (Read: more layoffs in Purchasing).
Pinto Prognostications
During the growth period in the 90's, financial managers helped organize good financial results by cutting out inefficiencies and waste. It was reported that, when Siebe acquired Foxboro, there were 10-15 gardeners employed at the Foxboro HQ - it didn't take a genius to outsource that stupidity. Lots of other bloated expenditures (e.g. free and frequent travel to Europe with "associates") were quickly cut.

But, "cutting" and "building" are two different talents, and few people are smart enough or adaptable enough to change their MO. Allen Yurko is a cutter, not a builder. He doesn't recognize the golden ethos, experience and expertise that Foxboro and other major companies within Invensys will lose through this new "PROJECT UNITY" program. (I>(Which marketing idiot came up with that name??)

Only new growth can save Invensys & Baan. Cutting overhead does not generate new revenue. Pushing Baan to subsidiaries makes most observers and analysts chuckle, and does not really generate any meaningful revenue. What margins will those bookings generate??

Out-sourcing IT to a friendly dinosaur saves money short-term, but will throw a lot of valuable inherited expertise out with the bathwater. With NO new revenue.

Asking Deloitte & Touche, the management-consulting firm, to change Finance & HR processes will cause yet more valuable people-resources to be flushed down the drain. Again, short-term savings, with NO new revenue.

One wonders whether Yurko takes advice. If so, from who?

In this fast-moving new millennium, new growth comes through new products, sold to new customers, in new markets. To achieve growth requires technical talent, marketing magic and sales savvy. Sadly, it seems that Yurko and his yes-men minions don't have what it takes. The remaining talent in Foxboro, APV, Wonderware, Eurotherm, etc. has either departed, or been demolished through weak and ineffective management. Key new hires, touted as saviors, depart within weeks or months. Each weekly newsflash announces a new round of musical chairs.

Allen Yurko does NOT have the two year time-table outlined in his PROJECT UNITY plan - in fact, I doubt if he himself will last another quarter. The headhunters are already out interviewing replacements. And, if Yurko is smart enough, he is already working with those same recruiters to be the replacement for his replacement.

Click Judge for yourself - Interview with Allen Yurko on 2001 Results

GE & Honeywell negotiation ploy

On Wednesday (27 June '01) GE is reported to have made an eleventh-hour effort to win European approval for its proposed $41.2 billion takeover of Honeywell. The U.S. government unleashed a new broadside in support of the deal. The new talks seemed to offer a glimmer of hope, but the European Commission called the proposals insufficient.

Click GE & Honeywell float last-minute offer

Click June 28 2001 : EU calls GE proposal 'insufficient'

Richard Corles [richard.corles@worldnet.att.net] ex-Honeywell IAC, Phoenix Arizona, brought up this interesting thought:

    "This GE/Honeywell thing. I think what is going on is positioning to avoid paying penalties. If I remember correctly both sides agreed to a $1 billion payment to the other if it backed out of the merger. Therefore when we see the Honeywell board strongly supporting the merger, and suggesting that GE could negotiate something, they have in mind getting $1 billion. Conversely, when Jack (Welch) is saying that the EC is asking too much, it is trying to put the blame on the EC and allowing itself to avoid the penalty. Assuming that the merger does not go through, we might expect the lawyers to working this for a while."

A high level source close to the original GE negotiations provided these interesting insights:

    "No one at my level was made aware of the details of the deal that Jack (Welch) cut with Honeywell in order to get them to drop the United Tech. offer. We all assume that Honeywell got some financial incentives to complete the deal; this is usual. The legal teams would have put in terms on that protected GE from regulatory rejection of the deal. Essentially, that is the protection that Jack (Welch) can hide behind.

    "GE maintained a position of the value of the deal being Avionics and the capital leverage. All moves the EU asked for diluted that value and did not allow GE to get what it bought. GE did not want the other pieces and would have sold them off. Honeywell can ask for a penalty if there is evidence that GE could really have done the deal, but backed down."

Pinto Prognostication
I had previously reported that GE will NOT proceed with the acquisition/merger of Honeywell, because their due diligence showed that the deal was simply not clean enough. I re-confirm that analysis:

Click JimPinto.com eNews 22 June '01

In the GE/Honeywell merger agreement, when GE offered to top the United Technologies offer, there was a penalty for backing out of the merger. Honeywell will no doubt try to enforce that penalty if GE backs off without good reason.

GE had previously said that they would not negotiate further. And, last week's comment from Jeffrey Immelt, GE incoming CEO, that there was "zero chance" of the deal going through brought a protest from Honeywell (who for their part insisted that they would "do everything possible" to make the deal happen).

This new "eleventh hour" try to negotiate is, in my opinion, just a ploy to placate the political forces, to show that GE is making a good effort to make the deal happen. In reality, (my opinion) GE is simply trying to avoid the real possibility of merger-breakage penalties.

Click Read the complete GE/Honeywell story and analysis

Mass Victimization on the Internet

The increasing reach of worldwide computer communications networks has changed the economics of crime, and individuals are at risk.

A report by Gartner group suggests that by the end of 2002, at least one incident of mass, surreptitious victimization of thousands of Internet users will have occurred in which the object was not vandalism, but theft (80% probability). Given the nature of the crime, and the state of international law enforcement on the Web, the identity of the thief will remain unknown (70% probability). By the year 2004, driven by awareness of the inadequacies of cyber-law enforcement, and by increasing criminal opportunities, the economic value represented by cyber-crimes will increase by two to three orders of magnitude.

The nature of malicious code - code whose explicit intention is to victimize the unwitting - has changed significantly since 1998. Increasingly, the purpose of such code is to surreptitiously read or steal an end user's personal information. A separate, and reinforcing, technology trend is the widespread use of passwords for electronic authentication and signature. These two trends in combination provide criminals, who already possess motive, with both means and opportunity, and will likely lead to a series of mass identity theft attacks (i.e., attacks in which legitimate identification is used by unauthorized persons to impersonate the real owner for criminal purposes).

Click Review this important Gartner Group Report

Production Mini-plants in Mobile Containers

At least one of the predictions made by Dick Morley in his book - The Technology Machine: How Manufacturing will work in the year 2020 - is already becoming reality.

Science Network has developed a revolutionary production method that is self-contained, immediate, portable, competitive, and accessible because it is so cost-effective, and transportable by any means whatsoever: by land, sea, railroad or air. Science Network will supply the technology and the necessary support to countries and developing regions.

The Mini-plant system is designed in such a way that all the production machinery is fixed on the platform of the container, with all wiring, piping and installation parts. The Mini-plant is fully equipped and ready for production.

More than 700 portable production systems will be available: Bakeries, Steel Nails, Welding Electrodes, Tire Retreading, Reinforcement Bar Bending for Construction Framework, Sheeting for Roofing, Ceilings and Fašades, Plated Drums, Aluminum Buckets, Injected Polypropylene Housewares, Pressed Melamine Items (Glasses, Cups, Plates, Mugs, etc.), Mufflers, Electrically Welded Mesh, Plastic Bags and Packaging, Mobile units of medical assistance, Sanitary Material, Hypodermic Syringes, Hemostatic Clamps, etc.

From a technological standpoint, this system is unique in the global arena. It is aimed at solving the most basic problem: the survival of millions of human beings.

Click Mobile Production Mini-plants

Click Get yourself a copy of Dick Morley's book
The Technology Machine: Manufacturing in the year 2020


I continue to get a lotttttt of response on my coverage of automation in decline. Jeff Dean [jeffdean@execpc.com] e-wrote:

    "It seems everyone now is making wild guesses about the next merger/consolidation/etc move in industrial automation. The thought of Siemens buying Honeywell twist in my stomach almost as much as the Siemens-buying-Rockwell rumors that have floated in and out over the last year or two. The feeling must be something like that of the Brits when BMW came upon Rolls Royce. I don't think Siemens wants the brand name; more likely they are simply after a US service and support division for their existing hardware."

On the subject of GE backing off the Honeywell deal, Phil Costantinou [Phillip.Costantinou@indsys.ge.com] was e-sympathetic about the good Honeywell people who are being jerked around:

    "I just hope my friends back at Honeywell land on their feet when this is all done; I abandoned Allied-Signal 10 years ago during Bossidy's term when things were well and haven't looked back since."

George H. Morgan [patagent@evansville.net] now a patent agent, e-reminisced:

    "I worked for Bendix in the early "60's. I followed the mobile home producer take over, the Martin Marrietta attempted merger & the pac man defense where Bendix wound up as a part of Allied Signal, and the latest fiasco. What made Bendix, during WWII, were some people who were draft deferred who figured out some clever ways to triple bill Uncle Same for aircraft replacement parts, among other things. The way they operated was such that I am amazed they survived so long. When a firm is corrupt at the top, they have a corporate culture that eventually catches up with them. I suspect GE was smart enough to find lots of good reasons for changing their minds."

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