The Haythornthwaite Invensys predicament
On Nov. 23, 2003, Invensys admitted that it could run out of cash by
June 2004. In a letter to shareholders Invensys chairman Martin Jay
wrote that the company probably would not be able to meet a June 2004
deadline to repay $1.5bn (£885m) of debt. Just days later, a US and
UK pension shortfall of £634m($1.08bn) was revealed.
Clearly Martin Jay was cognizant of his fiduciary responsibilities
to shareholders when he wrote that letter, albeit reluctantly. Now
Invensys will be hard-pressed to avoid a self-fulfilling prophecy.
Knowing the situation, potential buyers will figure it's a fire sale.
If YOU were Invensys CEO Rick Haythornthwaite, what would YOU do?
You're a smart guy, age 46, you have a good track record (albeit
primarily with selling a cement company for a good price); you've
taken charge of a FTSE 100 blue-chip company that has dived like a
dot.com to less than 5% of its value; the company is in debt to the
tune of a couple billion and the banks are breathing down your neck;
you know virtually nothing about automation (though you figured you
could learn quickly); you hired a few hotshots (at least you thought
they were hotshots) who hired more hotshots to rejuvenate the company
which refuses to be rejuvenated; you've committed to selling of the
good parts of the company at a good price to give yourself a chance
to save the losers; you find the good companies are not selling for
the price you thought you'd get; your Chairman writes a letter to
shareholders admitting that the company will probably default on the
debt; after climbing a little the stock has dived into the tank again;
your board has decided to move the company HQ to the US and you don't
wish to move. So, what would you do?
Apparently, Rick Haythornthwaite is hanging on.
He cannot simply give up and quit now. Or can he?
UK Independent - Hopes of a rescue at Invensys look forlorn
UK Telegraph - Invensys admits cash crisis looms
Financial Times - Invensys unveils a £634m pension shortfall
Latest news and views on the Invensys weblog
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The flip side of the Wal-Mart phenomenon
Sam Walton opened the first Wal-Mart store in Rogers, Arkansas in
1962 and it is now the world's largest company. With sales of about
$250 billion, it is larger than all but 30 countries in the world,
employing over 1 million people with 3,300 retail stores in the US
alone, and 4,500 in several countries worldwide
The scale can be hard to absorb. Wal-Mart is bigger than ExxonMobil,
General Motors, and General Electric. The company sells 4 times more
than Home Depot, the number-two retailer. It does more business than
Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined.
It is, in fact, so big and powerful that it has become an entirely
different order of corporate being.
Wal-Mart wields its power with just one goal: to bring the lowest
possible prices to its customers. The prices Wal-Mart will pay its
suppliers, and will charge shoppers, are expected to drop year after
year. But few, outside the company and its 21,000 suppliers, know
the high cost of those low prices. To meet Wal-Mart's demands, most
of its suppliers have had to lay off employees, close US plants
and manufacture offshore.
Wal-Mart is accelerating the loss of American jobs to low-wage
countries such as China. Imports from China alone have doubled
in the past 5 years. In 2002, Wal-Mart bought $12 billion from
China, about 10% of all Chinese exports to the US.
Wal-Mart is as a vast pipeline that gives non-US companies direct
access to the American market. The centralized Wal-Mart system
connects Chinese and other suppliers into its digital network very
quickly. So there is a big switch to overseas sourcing, much faster
than anything ever possible before.
Wal-Mart's relentless drive to squeeze out costs is at least partly
responsible for the low rate of US inflation. A McKinsey study
suggests that about 12% of the US economy's productivity gains
in the second half of the 1990s could be traced to Wal-Mart alone.
Last year, 7.5 cents of every dollar spent in any store in the US
(other than auto-parts stores) went to Wal-Mart.
None of Wal-Mart's stores are unionized. In 2002 about 33% of the
employees were temporary. The company is the target of persistent
unionizing efforts, but has aggressively fought off all attempts.
But this success for the centrally controlled behemoth has changed
the local landscape in a lot of communities, and caused a lot of
hardship with drastic changes in the tax-base.
While the Wal-Mart still appears to promote "Made in America", about
83% of Wal-Mart products are NOT made within the US. Anti-Wal-Mart
activists report that some contract companies use prison slave labor
in China. In Bangladesh in 1992, a Wal-Mart contractor was reported
to be using teenagers in "sweatshops", 80 hours a week, at $0.14 per
hour. So, how much of these cheap prices come from sources like that?
This relentless drive for lower-prices - where will it end? The search
for lower costs at all costs is not limited to just Wal-Mart - it just
highlights the problem. In the global village, cause and effect are
clearly visible, and often the end may not justify the means.
Thinkaboutit...
This was summarized from Fastcompany, Dec. 2003
The Wal-Mart you don't know:
Encyclopedia Wal-Mart
Wal-Mart watch
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Automation Unplugged - Pinto's Preface
You might enjoy these extracts from the Preface of my book:
I've walked the crazy catwalks with instrument technicians in hot
humid environments at Dow Chemical in Freeport, TX and Baton Rouge,
LA. I've peered down the vats in the breweries at Busch and Miller.
I've sweated out the deadlines at the jet-engine test-beds with
engineers at GE in Cincinnati and West Lynn, MA., and Pratt & Whitney
in CT. and FL. I've pulled wires through the panels at Edison power
plants in Chicago and Cleveland. I've fixed weighing machines in
Japan, where the engineer was impressed with a president who could
actually use a soldering iron.
I've helped specify instruments for systems integrators in Singapore
and Beijing, and a gold mine in Borneo. I've been through the customs
lines in New Zealand and San Paolo, Brazil, where they wondered what
I what kind of contraband I was carrying as they picked out the
Action Paks from my suitcase. I have dropped my rugged industrial
computer 3 feet to the floor, impressing German audiences with the
thud and convincing them to use it in a major printing press.
I've sold industrial instruments that have helped British and French
engineers drill the Channel Tunnel. I've helped British Steel make
steel in Sheffield and watched a roll of molten steel move past the
window outside, as the bar graph tracked its progress on the screen
in the cozy cage over the catwalk. I've helped start up Heinz ketchup
machines, baby-diaper-making machines, bottle-filling machines,
pineapple slicing-and-dicing machines. I’ve been to cement plants
in Mexico, coffee plants in Brazil, sugar plants in Australia,
automobile plants in France and Spain.
I can go on with these memorable scenarios for a few pages more
- but you get the point. Industrial automation is NOT just one
application or market. It is a conglomeration of fragmented
applications and markets. That is at once the problem and the
challenge. The products and instruments and systems are used for
a bewildering variety of problems and requirements. The knowledge
is specialized, the product usually customized, the quantities are
not huge. But the problems are always challenging, and the results
rewarding.
For those who read my eNews regularly, and have read my articles in
print, or on the web, I hope you enjoy the collection of my writings
in "Automation Unplugged". For those who may have missed some of my
prognostications, pointers, prose and poetry, I hope you'll like
what you read and come back for more.
Read "Automation Unplugged" - Complete Table of Contents
"Automation Unplugged" is now available online from the
ISA website and several others (see web links below).
Buy the book on the ISA website
Automation techies, buy from AutomationTechies.com
Amazon.com - buy with 1-click
Readout - UK and Europe shipments
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Peter P Wilson [bald1@internet.co.nz] from New Zealand on the
threats from China rising:
"You've still not got the full picture. For over a decade Motorola,
Raytheon, Hughes, Lockheed Martin and others have been getting
information to China, with the sole objective of getting satellite
launch costs to a very economical 12M $USD, the approx cost of a
'Long March' launch. As a consequence, China can now deliver
instant sunrise anywhere on the face of the planet.
"The USA has a policy in place to militarize space over the next
15 years. There is a comprehensive PR work already published on
the matter. I've seen it. Could have been a superbly crafted piece
of disinformation, but I doubt it.
"Possible fly in the ointment? Chinas burgeoning middle class foments
a popular democratic uprising, overthrowing the self perpetuating
meritocracy, and settling, eventually, on a constitutional democracy.
A period of maximal instability a la Russia lasting about 5-7 years.
"The US has its eye on the ball, but the gopher holes on the field
of play are going to break ankles. International affairs is not the
subtle ballet we are led to believe by Clancy et al, but a rather
unsophisticated display of paranoia and egoism, and always to the
detriment of humanity at large.
"Please, oh please, tell me I'm wrong!"
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