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Let Saab die with some dignity

June 24, 2011

Victor Muller continues pimping Saab around the world and dragging it through the mud to a slow and undignified demise — all just to satisfy his own inflated ego. He continues jetting around the world ostensibly to find new money to rescue Saab but he has never addressed the fundamentals. Saab now cannot pay its workers  (but Muller took out a fat bonus on the grounds that Saab had achieved 80% of its business plan!!!!!).

There are demands from the unions that the government should step in — one wonders why and to what purpose? Or that the government should allow Russian dirty money into the company. But these are both incredibly  short-sighted suggestions and little more than the empty posturings of an obsolete and  decadent trade union.

The fundamentals don’t work and subsidising Saab with taxpayer money is no solution. For 12 years I always drove a Saab (a Saab 9000 and later Saab 9.5’s) and I admire the car and the brand which is still strong. But the cars are no longer competitive and it is time to end the agony and call it a day.

From the FT:

Labour unions have threatened legal action after the owners of Saab, the struggling Swedish carmaker, said it could no longer pay employees’ wages.

Netherlands-based Swedish Automobile – which used to be known as Spyker Cars – said that Saab Automobile, which it owns, would be unable to pay employees’ wages because it had not yet obtained the short-term funding that it was seeking.

The news will fuel doubts about the survival of Saab. Production at its plant in Trollhättan, north of Gothenburg, has been closed for most of the past two months because of a dispute with suppliers over unpaid bills.

http://www.ft.com/cms/s/0/d1a78c26-9d68-11e0-9a70-00144feabdc0.html#axzz1QAFzI4Y7

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Posted in Automobiles, Business, Ethics, Sweden | 1 Comment »

Rolls Royce settles with Qantas for over $100 million

June 22, 2011

Qantas has reached a settlement with engine maker Rolls-Royce over last year’s mid-air disintegration of a the Trent 900 engine, which temporarily forced the grounding of its entire fleet of A380s. The terms of the agreement have not been revealed but will give Qantas a $100 million (A$95 million) boost in profits. For Rolls Royce the cost of the Qantas settlement is therefore likely to be somewhat greater and my guess would be in the region of $110 million.

My estimate made in November 2010 that Rolls Royce would face a hit of around $300 million for direct costs and in settlement costs seems to be not far off the mark. The cost to Rolls Royce of loss of future sales remains intangible and perhaps only temporary.

The Telegraph:

Alan Joyce, the Qantas chief executive, said the terms of the agreement are confidential, but said the settlement’s profit and loss impact would amount to a A$95m boost to the Australian airline’s bottom line.

Mr Joyce said the settlement marks an end to the legal proceedings Qantas launched against Rolls-Royce in the Federal Court of Australia in December.

In November, a Rolls-Royce Trent 900 engine on a Qantas A380 disintegrated shortly after takeoff from Singapore, forcing the plane to make an emergency landing.

The Australian Transport Safety Bureau’s interim report on the A380 incident said a manufacturing defect in an oil pipe deep within one of the engines led to an oil leak, which sparked a fire. The fire caused a disintegration of one of the engine’s giant turbine discs, sending pieces of it shooting through the plane’s wing and raining onto the ground below.

The engine explosion was the most significant safety issue an A380 had ever faced since it began passenger flights in 2007, and prompted intense scrutiny of Rolls-Royce engines. 

The settlement will help Qantas recover from the millions it lost following the incident. The airline was forced to temporarily ground its entire fleet of A380s for a series of inspections, and Joyce said the plane damaged by the explosion won’t return to service until February.

“Qantas and Rolls-Royce have had a long and successful commercial partnership spanning several decades,” the airline said in a statement. “Qantas looks forward to a continued strong relationship with Rolls-Royce on the basis of the settlement announced today.”

The compensation payment helped boost the airline’s expected underlying pretax profit for the year to June 30 to between A$500 million (£326m) and A$550 million (£359m), up from A$377 million (£246m) a year ago.

…… Qantas shares rose 0.8 per cent to AU$1.84 in afternoon trading.

This leaves Rolls Royce the task of settling with Airbus and some less costly settlements with Lufthansa and Singapore Airlines.

My estimate is that it will take another 2 to 3 quarters for most of these costs to have worked their way through Rolls Royce’s accounts. However RR will have to bear an increased and continuing service cost regime for some time to come for the Trent 900.

The Trent 1000  for the Dreamliner is still a long way off from generating real revenues for Rolls Royce.

The wrecked engine after the plane landed in Singapore.

The wrecked Trent 900 engine after the Qantas plane landed in Singapore.Photo: AFP

It could be time to buy Rolls Royce again.

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Posted in Aviation, Business, Engineering, Technology | 1 Comment »

Rio Tinto wins battle for Riversdale coal as major shareholder Tata Steel accepts offer

June 16, 2011

I had posted back in December last year about the battle for the acquisition of 13 billion tons of coking and steam coal reserves with Riversdale in Mozambique.

Riversdale Mining Ltd. has 13 billion metric tonnes of known coking and thermal coal reserves in its Benga and Zambeze projects in Mozambique. A global battle is now hotting up for the acquisition of Riversdale . International Coal Ventures Ltd., an Indian state-run joint venture, is studying an offer for Riversdale Mining Ltd. to counter a A$3.9 billion ($3.9 billion) bid from Rio Tinto Group.

The largest share holder was Tata Steel and they have now decided to exit. Hindustan Times reports

 

After months of speculation, steel major Tata Steel on Thursday said it had sold off its entire 26.27% stake in Australian mining firm Riversdale, facing a takeover from giant Rio Tinto, for Australian $1.06 billion (approximately Rs4,940 crore). It is a rich exit, as the Tatas have doubled their investment in a 4 year period.

Rio Tinto, which had made an open offer to the shareholders of Riversdale in March that had been repeatedly extended to a final deadline that now closes on Friday, sees its shareholding go up from 73.20% to almost 99.7%. 

The British-Australian group had said it planned to delist Riversdale from the Australian bourses and Tata Steel, which had for long maintained that it wanted to remain invested in the company, said on Thursday that it finally decided to sell the stake in the absence of a pact with Rio.

“Tata Steel has decided it would not want to hold its equity investment in Riversdale Mining Ltd which is proposed to be delisted, without any joint venture agreement with the majority shareholder in unlisted Riversdale Mining Ltd,” Tata said in a statement to the Bombay Stock Exchange.

“The sale represents around 100% appreciation of value in less than 4 years since its first investment,” it said.

Even as more shale gas becomes available and “peak gas” becomes less and less likely, the value of coal assets is also increasing. Shale gas may well lead to a move back to fossil energy and the future availability of gas does not seem to hurt the value of coal.

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Posted in Business, Energy | Comments Off on Rio Tinto wins battle for Riversdale coal as major shareholder Tata Steel accepts offer

Tokyo Electric close to insolvency

June 10, 2011

NYT: On Thursday, shares in Tokyo Electric again fell to a record low, at one point slumping to 148 yen ($1.85), down 93 percent from prequake levels. Shares finished at 192 yen ($2.40), down 4 percent from the previous day, and the company already had a 1.25 trillion yen loss in the year ending March 31, the largest annual loss for a nonfinancial institution in Japanese history.

Current Stock Chart Performance for TOKYO ELECTRIC POWER CO INC (9501)

http://investing.businessweek.com

The physical damage from the accident at the Fukushima Daiichi nuclear power plant has been so widespread that even conservative estimates of compensation claims amount to tens of billions of dollars — a burden that could render Japan’s largest utility insolvent….

….

And banks were so certain of this that they agreed, in early April, to lend almost 2 trillion yen ($25 billion) to the struggling utility company. In the eyes of the market, Tokyo Electric was too big to fail.

Now, three months later, the market is not so sure.

…. Meanwhile, the head of the Tokyo Stock Exchange, Atsushi Saito — who was once the president of a state-sponsored organization that assisted ailing companies, — shocked investors when he suggested in an interview last week with local media that Tokyo Electric should go through court-led restructuring, similar to the path Japan Airlines had taken since declaring bankruptcy last year.

Tokyo Electric is Japan’s biggest corporate bond issuer, representing about 8 percent, or about 5 trillion yen, of the country’s 70 trillion yen corporate bond market. And because many of Japan’s largest banks hold shares in Tokyo Electric, they have already taken a direct hit from the utility’s difficulties.

The Tokyo Metropolitan Government owns about 3 percent of Tokyo Electric’s shares, and the city’s finances have been thrown into disarray as share prices plunge and dividends are canceled.

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Ryanair fails the ethics test

April 18, 2011

It is what passes for civilised behaviour which is the true test of whether we are truly developing as homo sapiens .

Ryanair lost this case but will still appeal the £1750 fine. They even offered more to settle and suppress their behaviour. But they seem to have forgotten – if ever they knew it – that ethics is more than a matter of law.

Terminal U

A disabled woman has successfully sued Ryanair after her husband resorted to carrying her onto a plane when the airline failed to provide boarding assistance. 

Jo Heath, who suffers from multiple sclerosis and is wheelchair-bound, spoke of her “humiliation” when her husband felt he had no choice but to carry her onto the plane at Luton airport, after being told their flight to Brest Brittany would leave without them. Northampton Country Court heard how the couple were left waiting by the plane for over half an hour, when a hydraulic airlift that they had requested at the time of booking didn’t arrive. Airline staff then allegedly refused to offer any boarding assistance for health and safety reasons. Mrs Heath says they proceeded to prepare the plane for departure. “They treated me like an inconvenience, not a passenger. I was made to feel like it was my fault,” Mrs Heath said. “When I was carried onto the plane, everyone was looking over their seats to see what was happening.”

The court forced Ryanair to pay the couple £1,750 compensation for its breach of contract and breaking disability discrimination laws. Mr Heath said: “We feel vindicated because we have had to fight to get where we are.”

“I don’t think Ryanair will learn from this because they tried to brush us under the carpet. The airline actually offered us more money [out of court] than we eventually received [in court], but we refused it because they wanted us to sign a confidentiality clause. But we wanted open justice.” The ruling Judge in the case, Paul McHale said: “She is a disabled person and she made arrangements with the airline to avoid humiliation in embarking the plane. The defendant did not provide that service.

“All Ryanair was interested in was getting the plane airborne in time”. The court heard how Ryanair staff, including the plane’s pilot, had said that it was their policy to leave disabled passengers behind if they could not be boarded in time for the flight – a point that Ryanair did not dispute in court, the Northampton Herald & Post reports.

Ryanair is appealing the court’s decision, blaming what happened on Luton airport.

A spokesman for the airline said: ‘Under EU law airports, and not airlines, are responsible for the provision of special assistance to passengers. ‘This service is paid for by Ryanair and the failure of Luton Airport’s service provider to assist Mr and Mrs Health in this case was not the responsibility of Ryanair.’

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Posted in Behaviour, Business, Ethics | 1 Comment »

TEPCO shares recover – somewhat – as short sellers get nervous

April 9, 2011

In the long term Tokyo Electric will need Government support probably in the form of a partial nationalisation but now it is the market traders and their games which control the movement of the share price.

From the Wall Street Journal:

Shares of Tepco ended at their limit-up level of Y420, up 24%, as the Tokyo Stock Exchange imposed a temporarily higher margin rate requirement on new investors. The TSE hiked the margin rate on Tepco shares to a minimum of 50%–of which at least 20% must be cash–from 30% (with no cash requirement), in line with a pre-existing rule set up by the exchange. “The selling pattern has changed, and some people are covering their existing short positions as they are nervous about even stricter rules in the future,” said Yukifumi Watanabe, a trader at Himawari Securities.

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Saab fights liquidity crisis while Victor Muller plays a game

April 6, 2011
Victor Muller, Founder and CEO of Spyker Cars,...

Image via Wikipedia

SAAB’s production has ground to a halt again and will probably not start again for a week because suppliers are not being paid and they are stopping supplies. But Victor Muller still gets his bonus for following the business plan which suggests that the cash crisis is being engineered.

Over the weekend, Victor Muller was very critical of the suppliers who stopped deliveries when they didn’t get paid and accused them of carrying out negotiations in the media. He denied that SAAB Automobiles had any long standing liquidity crisis and that they were merely renegotiating supplier terms and conditions.

But a continuing shortage of supplies has caused the production line at SAAB to have stopped again and it may stand still till next Tuesday. It seems clear that Victor Muller will drive SAAB to the verge of bankruptcy to ensure that Vladimir Antonov can be seen as a rescuing angel and allowed in as SAAB’s owner. He may even drive it through a bankruptcy. Whether it is Victor Muller just playing his games or whether it is a strategy being directed by Antonov is not clear. But cash flow is the fundamental basis of any business plan of substance and it seems apparent to me that a good part of the cash crunch is being engineered by Muller / Spyker and probably Antonov.

Is cash crunch just a ruse to get SAAB into Russian ownership?

Dagens Industri reports:

On Tuesday Automaker Saab stopped production at the plant in Trollhättan. Sources said that the stop will be extended until Tuesday next week. Yesterday’s stop is the third in a week, and is caused by the car manufacturer’s problems in paying subcontractors on time.

Saab’s CIO Eric Geers would not confirm that production will be stationary for that long, but said that production has stopped until the material problems are solved. The company is working right now to resolve the funding issue.

“We are working really hard to find a solution and are trying to get started as quickly as possible. At the same time we want to get rid of this jerky production flow, “he says.

…….  Saab management’s way of responding to concerns and criticism on this occasion has not been the best.

Meanwhile Svenska Dagbladet reported:

Victor Muller regrets that Saab presented a target for number of vehicles to be produced and distributed. Last year the forecast had to be reduced twice, which increased uncertainties regarding the company’s survival power. “It’s our own fault. We should never have gone out with some predictions. It’s so easy to measure that all else is lost sight of. The fact that we stayed within the business plan is ignored.

Retiring CEO Jan Ake Jonsson, admits that liquidity has become more strained in the second half of the first quarter. “There are a number of different reasons and I can not go into these because a variety of partners are involved”, he said before a large number of journalists who come to Saab’s spring exhibition. Jonsson stated that Saab has been very, very close to the expectations of the business plan. “In relation to the lower sales, we have managed to keep costs low”.

That they stayed within the business plan is the reason that both Muller and Jonsson got bonuses though Saab made a net loss of nearly two billion kronor last year. Victor Muller has no qualms in maintaining his 4.5 million kronor ($0.7 million) in bonus on top of his salary and other benefits. Overall, it means that he got a remuneration in 2010 worth around 14 million kronor ($2.2 million), according to Dagens Industri.

Of course Muller does not explain how they managed to stay within the business plan but ran out of cash. Or perhaps cash flow was not included in his business plan.


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Posted in Automobiles, Business, Ethics, Politics | 4 Comments »

Is cash crunch just a ruse to get SAAB into Russian ownership?

March 30, 2011

While SAAB’s production has ground to a halt as supplies dry up because of non-payment of suppliers dues and SAAB’s owners Spyker Cars sees its share price drop, comes news of further efforts by the Russian financier Vladimir Antonov to gain entry as an owner of SAAB. He has been trying to get in for some time and “money on the table” could be irresistible if Spyker and SAAB are really going through a cash crunch.

Vladimir Antonov

Spyker’s report warned – a little unexpectedly – of a cash crunch last Friday. Could it be that this is an elaborate ruse between Spyker and Antonov? I am probably being a little cynical but with Russian finance I have learnt that nothing is ever as it seems and conspiracy theories are not necessarily as far fetched as they might seem. The Swedish government does not want Antonov to get in as a SAAB owner but Victor Muller and Spyker Cars do.

I suspect that the liquidity crisis at SAAB has been – at least partly – engineered by Spyker and Antonov.

SvD reports:

The Russian financier Vladimir Antonov has filed a formal application to Sweden’s National Debt Office to go in as the owner of Saab Automobile. This was confirmed by  the Debt Office and Antonov himself for TTELA.

“We can confirm that we received an application from Vladimir Antonov, yesterday  (Tuesday)  evening, but, because of commercial confidentiality, can not say what it contains, “said Daniel Barr, project manager for Saab at the Debt Office, to TTELA.
Even Vladimir Antonov confirmed briefly that he had submitted an application. Previously, he has declared that he wants to go in with capital of between 440-620 million SEK , so that  Saab and its parent company Spyker Cars NV can get a better buffer capital. Such money could be used in times of a liquidity crisis.
The Debt Office will process the application and submit a statement to the Government. The government will then makes a decision on the matter. The Debt Office does not comment on applications received.

From the Spyker financial statements presented on Friday, it appears that cash flow reduced faster than expected in late 2010 partly because of  lower sales volumes and  large investments. At the end of 2010 the company had  negative equity and a working capital of 220 million euros, equivalent to almost 2 billion Swedish krona.
Vladimir Antonov and his banking group Convers Group.have submitted the  application to the Debt Office. Oleg Sukhorukov, vice president of Convers Group, would not give any additional comments.


Vladimir Aleksandrovich Antonov (born 1975) is a Russian banker, entrepreneur and investor. In 2007 Antonov’s personal wealth was estimated at $300,000,000 which ranks him as number 182 among Russian millionaires.

In February 2011, it was announced that Spyker Cars NV, the Dutch owner of Saab Automobile, agreed to sell its sports-car unit to Vladimir Antonov. Antonov, a former Spyker chairman and shareholder, is expected to pay 15 million euros ($21 million) for the company.

In 2007, Bankas Snoras acquired 29.9% of Dutch luxury automobile manufacturer, Spyker Cars, making Vladimir Antonov the single largest shareholder in the company.

In January 2010, it was reported that General Motors was preparing to sell Saab to Spyker for a nominal fee, and that the Swedish government had agreed to guarantee loans for the purchase from the European Investment Bank (EIB). If the takeover had been successful, the Saab brand and its operations would have been largely unaffected.

Antonov’s interests (29.9% of the shares) in Spyker Cars were said to have delayed the purchase of Saab Automobile in late 2009. An investigation by the Swedish monetary agency Riksgälden and the Swedish security police Säpo had allegedly found connections between the Antonov family and organized crime, as well as involvement in money laundering. Säpo reported their findings to the United States Federal Bureau of Investigation, and shortly afterwards GM stopped further talks about the deal until the Antonov family had sold their shares in Spyker Cars.

In January 2011, it was reported that GM was preparing to reverse its decision not to allow Antonov to hold a financial interest in Spyker and Saab and allow him to invest. Antonov said that he has no “connection to any criminal people” and that he had hired an investigative firm to produce evidence that he has no criminal background.

Victor Muller Spyker cars

In December 2010, it was reported by Swedish financial newspaper, Dagens Industri, that two independent reports, one of which was commissioned by the Swedish government had shown that there was no evidence that Vladimir Antonov is guilty of any of the accusations made against him. Victor Muller, CEO of Spyker Cars, also stated that he believed Vladimir Antonov to be innocent of the accusations. Following this, Antonov acquired the sportcars division of Spyker Cars NV.

Maybe this all just to get Antonov to be a “white knight riding to SAAB’s rescue” but something does not smell right.

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Posted in Automobiles, Business, Russia, Sweden | 1 Comment »

TEPCO stocks are on their way to losing all value

March 30, 2011

Shares in Tokyo Electric, commonly known as TEPCO, dropped another 17.7 percent on Wednesday to 466 yen and trading was later stopped.

Chart: tepco stock 20110330

It seems inevitable that TEPCO stocks will lose all their value and will be driven to zero – unless nationalisation comes first. Now even the largest shareholders are being hit:

Shares in TEPCO’s main bank, Sumitomo Mitsui Financial Group , which is also a large shareholder with a 2.7 percent holding, fell 2.1 percent.
Dai-ichi Life Insurance , which is the second-largest shareholder in TEPCO with 4.1 percent stake, rose 3 percent after Deutsche Securities said the impact of TEPCO stock price fall is limited on its embedded value, a measure of an insurer’s worth that includes the present value of future earnings from life insurance contracts.  However, Dai-ichi shares have fallen 18 percent compared with a 10.3 percent decline in the benchmark Nikkei 225 index .

There is a vacuum in the leadership of TEPCO. The President of TEPCO Masataka Shimizu has been hospitalized for high blood pressure and dizziness. Chairman Tsunehisa Katsumata will take over operation of the power company. He is 70 years old and faces an unenviable task.

Tsunehisa Katsumata: kyoto photo

Tsunehisa Katsumata served as President of Tokyo Electric Power Co., Inc., from October 2002 to June 2008. Mr. Katsumata has been the Chairman of Tokyo Electric Power Co. Inc., since June 2008. Mr. Katsumata serves as Chairman of the Board of Federation Of Electric Power Companies of Japan. He has been an Outside Director of Sompo Japan Insurance Inc. and NKSJ Holdings, Inc. since April 1, 2010. Mr. Katsumata has been a Director of Tokyo Electric Power Co., Inc. since June 1996. He serves as an Outside Director at KDDI Corp. He serves as Chairman of Evaluation Committee at Japan Finance Corporation.

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Posted in Business, Japan, Natural Disasters, Nuclear Power | 3 Comments »

Is SAAB Automobile nearing a bankruptcy?

March 30, 2011

When suppliers don’t get paid a vicious circle begins of : lack of cash >> unpaid dues>> lack of some critical supplies>> reduction of production>> stoppage of other supplies>> diminishing of trust>> withdrawal of credit >>leading to a further lack of cash. After years of living from hand-to-mouth but still producing what I consider one of the best cars on the road, SAAB automobile may now be approaching a fateful point in an illustrious history.

Svenska Dagbladet:

There are worrying signs that came out from Saab Automobile on Tuesday night. Saab may have suffered an acute liquidity crisis. Saab production, according to several sources came to a standstill on Tuesday because suppliers were not paid. Even union IF Metall’s Chairman Hakan Skött confirmed that production had stopped. And then came the news at 8pm on Tuesday night, that Saab’s advertising agency Lowe Brindfors had suspended their ongoing engagement due to nonpayment.

In recent weeks, warning bells have been ringing louder and louder. Saab’s new CFO quit before he even had time to start. And one of Saab’s heaviest funders, Pieter Heerema, who had lent 25 million U.S. dollars, recently abandoned Spyker’s board with immediate effect.

And then the CEO Jan Ake Jonsson left, oddly enough just last Friday after Spyker came up with its report – even if is due to stay until May on paper. But the issue of  of Saab’s liquidity has become serious just recently. When I asked the chairman Victor Muller last Friday in connection with the report whether Saab has enough capital to pay bills this year, he replied that “probably not”. The report also described that liquidity is lower than expected. But Muller was talking in his characteristically intense way that they will find solutions – including selling their new platform Phoenix to other automakers.

But the signals that came in Tuesday night are very worrying.

Saab could choose to put a lid on it.

It would be of great regret if SAAB Automobiles went bankrupt. But perhaps SAAB have had their day and it is time to move on.

 

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