Posts Tagged ‘Siemens’

Will the EC approve GE’s acquisition of Alstom’s power business?

May 3, 2015

UPDATE! 

Bloomberg: General Electric Co.’s Jeffrey Immelt is set to meet with the European Union’s antitrust chief Tuesday as the U.S. company seeks approval for its acquisition of Alstom SA’s energy business.

The session in Brussels between GE’s chief executive officer and Margrethe Vestager is part of regulators’ “ongoing merger review,” Lucia Caudet, a European Commission spokeswoman, said in an e-mail.


On February 23rd this year the European Commission announced that its preliminary investigation into the proposed acquisition of Alstom’s power businesses by GE had highlighted Heavy Duty Gas Turbines (HDGTs) as a potential area of concern. Therefore an in-depth investigation would be carried out. This investigation was due to have been completed by 8th July but has been extended – apparently at GE’s request – till August 6th.

The European Commission has opened an in-depth investigation to assess whether General Electric’s (GE) proposed acquisition of the Thermal Power, Renewable Power & Grid businesses of Alstom is in line with the EU Merger Regulation. The Commission’s preliminary investigation indicates potential competition concerns in the market for heavy-duty gas turbines which are mainly used in gas-fired power plants.

Since GE already has HDGTs  in direct competition with Alstom’s GT24 and GT26 engines and even with Alstom’s GT11N2 and GT13E2 engines, I expect that the Alstom range of machines will have to be discontinued. (It would be quite irrational for GE to continue to offer Alstom’s portfolio except for a very restricted time period or for some very particular application. It is not much appreciated by a buyer either when a supplier appears so confused as to offer different machines for the same purpose). The discontinuation of some engines is “no big deal”. But, as I have written previously, it would be a shame if the line of technology for HDGTs within Alstom – which carried forward the lines of technology emanating from BBC, GEC, Asea and ABB (including sequential combustion technology) – were to be entirely lost.

I would summarise the EC’s potential areas of concern as being:

  1. If the European HDGT market can be said to be distinct from the global market, then the number of HDGT suppliers would effectively reduce in Europe from three to two.
  2. Reduced competition in Europe could lead to supplier(s) having greater than 40% market share and could lead to an increase in prices.
  3. GE together with Alstom could have greater than 50% market share and not only in Europe.
  4. In Europe, fundamental R & D on combustion, emissions and materials and innovation regarding HDGTs would be hurt, and
  5. Competition in the HDGT service business would be impacted since Alstom currently is an alternate supplier of service to older GE HDGTs (since Alstom was a GE licencee prior to 1999).

The market for HDGTs is characterised by high technological and financial barriers to entry, leading to a concentrated market with only four globally active competitors: GE, Alstom, Siemens and Mitsubishi Hitachi Power Systems (MHPS). The fifth player, Ansaldo, appears to be a niche player with a more limited geographic reach. The margins in the market for HDGTs appear to be higher than those of neighbouring markets for power generation equipment such as steam turbines. 

The HDGTs market worldwide is divided into two frequency regions, namely those operating at 50 Hz and those at 60 Hz. All thecountries in the European Economic Area (EEA) operate at 50 Hz frequency.

Since MHPS seems to be less active in the EEA than in the rest of the world, the transaction would bring together the activities of two of the three main competitors in the EEA.The transaction would eliminate Alstom from the market, leaving European customers without an important competitor of GE and Siemens. Indeed, in the market for the sale of new 50 Hz frequency HDGTs, the merged entity would reach high market shares in the range of around 50 %, both in the EEA and at worldwide level excluding China.

Furthermore, the transaction might significantly reduce R&D and customer choice in the HDGT industry. After the merger there is a risk that GE would discontinue the production of certain Alstom HDGT models and that advanced HDGT technology developed by Alstom would not be brought to the market.

Finally, in the market for the servicing of General Electric’s mature technology HDGT frames, the transaction eliminates competition by Alstom’s subsidiary Power System Manufacturing.

Overall, the Commission is at this stage concerned that the transaction may lead to an increase in prices, a reduction in customer choice and a reduction of R&D in the HDGT industry, leading to less innovation.

I note that GE have taken on a very-high powered lawyer to help in dealing with anti-trust issues,

Sharis Pozen, a former acting assistant U.S. attorney general for antitrust who joined Skadden, Arps, Slate, Meagher & Flom in July 2012, left the firm this month to become vice president for global competition and antitrust at General Electric. Pozen is the latest high-profile Am Law 100 partner to join the in-house legal ranks of the Fairfield, Conn.-based conglomerate, which has tapped Skadden to advise on its pending $17 billion buy of the energy unit of French engineering giant Alstom.

However, my own opinion is that these potential EC concerns are not sufficient to disallow the proposed acquisition. I believe the market concerns are more theoretical than real.

1. While the EC tends to look at market share rather than market size, the EU market currently (before the advent of shale gas in Europe) is so small that it cannot be considered a market distinct from the global market. No HDGT manufacturer could survive on the strength of the European market alone. A simple test question is very revealing. Could Alstom’s HDGT business be sold as an independent stand-alone business to anybody else with only Europe as the designated market? The answer is a resounding NO and, I think, should eliminate any consideration of the European market as being distinct from the global market.

In fact, even with a global market available, the Alstom HDGT business is of little value to any manufacturer who does not already have high temperature cooling technology and who does not already have a heavy rotating machinery manufacturing background. And I don’t see any such parties around.

2. It should be remembered also that Mitsubishi (formerly MHI now Mitsubishi Hitachi Power Systems – MHPS) is absent from Europe as a matter of their own choice – not because they cannot. It is part of the remains of the old “unofficial” arrangement where the Japanese didn’t come into Europe and the Europeans didn’t enter Japan. This “arrangement” for steam turbines, gas turbines, boilers and generators held quite well through till the 1980s but broke down in the 1990s. Note that the Japanese gas turbine market had a special relationship with the US manufacturers with TEPCO providing GE with a protected “home” market for 60 Hz gas turbines. The Westinghouse relationship with MHI for gas turbines was effectively taken over by MHI. The Siemens equity engagement with Furukawa to create Fuji Electric (Fu- for Furukawa and Ji for Siemens in japanese, jiimensu) was ended after WW 2. The ABB (later Alstom) JV for gas turbines with Kawasaki which I headed for a time was only set up in the 1990s and was eventually discontinued.

To enter a new market for HDGTs, it must either be a growing market or it must have a large fleet of existing machines which can be served. Europe provides neither for MHPS at the present time. If shale gas takes off in Europe and the gas turbine market starts to grow (which I predict will happen), it will not take very long for MHPS to enter.  For MHPS the market size and growth for new equipment must be sufficient to justify the cost of setting up the necessary service network. There is no guarantee either that Alstom – without GE – could continue with a product range rapidly becoming uncompetitive against the “J” class machines, without access to high temperature cooling technology. The Ansaldo/Shanghai Electric tie-up is still in its infancy and – in the event of market growth in Europe – would surely become a significant 4th player. (Even a 5th global player could emerge as a consequence of a particularly strong market growth and my guess would be that it could be Doosan or BHEL, Harbin or from Russia). But as far as the EC is concerned, the key point should be that if the market grows there will be certainly three, probably four and eventually five players. And if the market does not grow then the objection is moot.

3. The risk of one player having 50% (or greater than 40%) market share is not to be trivialised but, in my opinion, is not a real threat. When the market (in Europe) has been as low as it has been and only one or two machines are sold in a year it is a quirk of arithmetic that one player may have a 100% market share in one year or that two may have 50% each. Customers are very well aware of the dangers of having only 2 suppliers. The fact is that if the market were large enough, MHPS and Ansaldo and others would be strongly encouraged to quote by the European buyers. We would probably then have a global market share split of GE/Alstom – 30%, Siemens – 30%, MHPS -20, other (Ansaldo, BHEL, Russians, new players ….) – 20%. When a market is small, market share is misleading and meaningless. In a strong market some of the manufacturers of small gas turbines would also try and follow their customers into larger sizes – a “Honda” strategy.

4. R & D is where I began my career and safeguarding innovation is rather special for me. There is a valid point regarding R&D and innovation and I think it would be perfectly justified for the EC to give approval conditional on some kind of assurance from GE that R &D centres (and possibly R & D jobs and budgets) in Europe would be maintained for some period of time. I don’t believe that innovation can be mandated, but I do see a potential benefit for GE – in time – in absorbing and – even adopting – some sequential combustion elements in their mid-range (rather than their largest) engines (see diagrams below). But that is a call for GE to take in about a decade from now. (It is probably just wishful thinking on my part).

Alstom (as BBC) developed the sequential combustion cycle in 1948 and (as ABB) the GT24 and GT26 engines in the 1990s, when GE moved beyond the “F” class machines to their “FA” machines. The choice was a forced one for ABB, and they had to follow the sequential combustion path because they did not have access to the high temperature blade cooling technology which was available to their competitors. All their attempts to acquire such technology from Russia failed. A technology agreement with Rolls Royce gave no technology ownership and had very strict limitations. Sequential combustion eventually converted a weakness into a virtue and allowed ABB (later Alstom) to maintain efficiency and compete with “G” class machines even though they were effectively limited to an “F” class inlet temperature as a maximum. If ABB had not developed the GT24 and the GT26 – in spite of all their early challenges – Alstom would not have acquired ABB’s power generation business after their GE licence was terminated. (In fact the challenges were so large that ABB had to compensate Alstom through the acquisition price for the power business for all the problems that had to be fixed by Alstom in the field).

Taking a very cynical view, ABB had reached the end of their road with GT development when they divested to Alstom. Alstom in their turn made devlopments that ABB could not but have also reached the end of their road for development of sequential combustion technology – again because of a lack of high temperature cooling technology – and wish now to divest to GE.

GT cycles - conventional and sequential combustion

GT cycles – conventional and sequential combustion

Now as GE, Siemens and Mitsubishi have moved on to even higher inlet temperatures, the “G” class has gone on to become the “J” class. (The “H” class was Mitsubishi attempting to use steam cooling for the turbine blades which didn’t really catch on and “I” has been passed over for the designation of turbine class). Alstom, with its limitations on temperature have successfully squeezed the sequential combustion technology to approach a “G+” performance with temperatures slightly lower than a “G” class from the others. But Alstom now also has reached its temperature limits and, I suspect, it was the lack of a way forward for their machines to compete with “J” class machines which has been part of their decision to get out of power generation.

But I like the concept of sequential combustion which is elegant and fundamentally sound and I look forward to the day when maybe it can be applied together with the high temperatures that GE knows how to handle. Then maybe we will someday see an “M” class gas turbine with 1600ºC and sequential combustion?

M Class GT?

M Class GT?

It can be argued therefore that the acquisition is what may actually keep R & D alive instead of it coming to a stop in the cul-de-sac in which it is stuck with Alstom.

And without R & D and high temperatures and new competitive “J” class products, Alstom’s days as a cutting-edge HDGT supplier would have been limited anyway.

5. The older GE machines  are still serviced by GE licencees and former licencees around the world – including in this case by Alstom (for GE machines prior to 1999). This Alstom does by means of a special subsidiary set up for the purpose. This unit – Power Systems Manufacturing – specialises in formerly licenced GE machines and also acts as a “pirate” for Siemens and Mitsubishi machines.

PSM’s product line includes … parts for GE Frame 6B, 7E/EA, 9E and 7FA machines, the Siemens/Westinghouse 501F (SGT6-5000F) engine and the Mitsubishi 501F engine.

Siemens also has such a subsidiary unit – Turbo Care – to service – where they can – the machines of competitors. This used to be a separate Siemens entity but has now been approved by the EC as a JV with the Wood Group. The “pirate” service business is important to each manufacturer – for intelligence and competition purposes – but the volume is quite small. No customer would select a “pirate” rather than the OEM, except for older machines past their prime or perhaps to teach the OEM “a lesson”. The “pirate” business is just not possible on relatively new machines and really only applies to machines installed more than about 10 years previously – when all liabilities and potential liabilities of the OEM have fallen away. No GT owner would take the risk of resorting to a “pirate” for a relatively new machine. A customer would usually resort to “pirates” only when all investment costs have been fully written off and he is no longer looking for – or particularly needs – any performance or availability guarantees. Even design and manufacturing warranties to be provided are strictly limited since the “pirate” has to rely on reverse engineering.  “Pirates” only come into the picture when the perceived risk levels are low.

The EC concern that if PSM is merged into GE, that some competition for the older GE machines will disappear is not correct I think, because for these older machines the competition for service business is far more with other “pirates” than with the OEM. And there are plenty of “pirates” around.

In the long run I judge that this acquisition is good for the customer, may even be good for R & D and even good for Siemens (and also for Mitsubishi). I imagine that any objections from Siemens are more for the sake of form (and because there is no love lost between Patrick Kron and Siemens).

In any event,  I expect that the deal will go through, but I will not be surprised to see an approval conditional on some assurances from GE regarding R & D centres, R & D jobs and/or R & D budgets in Europe. I think it highly unlikely – and a little meaningless – if the EC were to ask for divestment of Alstom’s HDGT business to a third party (if any such exists). The bottom line is, I think, that Alstom’s HDGT technology has come to a dead-end and can not be developed any further in their own hands. While the business can continue in a diminishing way for some years, Alstom technology has no long-term value except to another party which has access to high temperature cooling technology. To have Alstom continue with the HDGT business as an unwilling and reluctant player does no one any service at all.

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The end of the road for the large Alstom gas turbines?

July 7, 2014

(corrected February 2015)

The large (>50MW) Alstom gas turbines (GT11N2, GT13E2, GT24 and GT26) represent a line of technology which derives mainly from the BBC range of products (developed further as ABB) and acquired by Alstom in 1999. At that time Alstom’s licence with GE came to an end. But as GEC-Alsthom, Alstom had also inherited the gas turbine technology which came out of GEC in the UK. In the current Alstom range not much remains of the GEC tradition. At the smaller end Alstom also once had the gas turbine technology of the Ruston engines from Lincoln and acquired the ABB range of small machines (which themselves carried forward the developments as ASEA and some of the Sulzer range). But the entire range of industrial (<50MW) gas turbines was divested to Siemens in 2003 (and they are doing very well there).

Now as GE takes over Alstom’s power business (which has still to get final regulatory approval but looks to be a done deal), the days of the Alstom range of large gas turbines are strictly numbered. GE (and Siemens) have their own machines competing directly with the GT24 (60Hz) and GT26 (50Hz) and I do not expect that any more of these machines will ever be sold again. The sequential combustion design concept that these machines employ is so far from the GE approach that it seems impossible for any versions of these machines to continue. Alstom (as ABB) had adopted sequential combustion in the late 1990’s firstly to differentiate themselves from GE and Siemens and to get over their lack of access to advanced, high-temperature materials coming out of military jet engine programmes. Sequential combustion was first used/tested by BBC in the 1960’s 1948* though at much lower temperatures and ABB was trying to create a virtue out of a disadvantage – which the GT24 and GT26 did eventually do, but not without great problems and great cost.

GE may well have some benefit from some of the component solutions that Alstom has been forced to develop – at great expense – to get over the challenges posed by sequential combustion. Similarly some of the low-NOx solutions developed by Alstom could possibly be of use for GE. There may be some tricks for GE to pick-up regarding compressors. Certainly GE will continue with the very lucrative service market in maintaining the Alstom fleet and this will continue for perhaps 10 or 12 years at most. So while GE will benefit from the service revenue and by the reach of Alstom’s global sales organisation, the GT24 and GT26 – as products – have very little benefit to offer. It will not be possible for GE to absorb all the manpower currently employed with Alstom’s gas turbines. Not all those currently involved with the design and manufacture of the GT24 and GT26 will be needed for – or be able to switch over to – the design and manufacture of the GE range. GE’s global procurement network and its qualification of sub-suppliers is probably much more advanced than Alstom’s. I don’t expect that GE’s global sourcing will be much enhanced by the acquisition of Alstom’s Power business. Some job losses at Alstom locations are inevitable and I suspect these will be mainly in Switzerland while jobs in France will be somewhat protected by GE’s promises to the French government. At Belfort, Alstom produced GE machines under licence till 1999 and no doubt this will become GE’s centre for large gas turbines in Europe.

The GT11N2 gas turbine will probably die a natural death. It has not been a really competitive machine for over a decade and even though it has gone through many upgrades and cost reduction exercises, It has some unique advantages with low-Btu fuels but I do not think it offers GE any great advantages and they already have competing machines. The GT11N2 may have survived a little longer within the more restricted Siemens stable but even here it would have eventually withered.

The GT13E2 is possibly the only machine that may survive for a while under GE. It has some unique advantages with low-Btu fuels and could have a geographical market niche in Russia and the former CIS countries. But if it does survive it will do so only as a niche product. Again it would probably have had a longer life under Siemens but my guess is that it will not be sold for more than another 2 or 3 years.

The next market boom for large gas turbines – by my analysis – will come in the second half of 2015. This will be due partly to the 7-8 year “normal” business cycle and partly due to, and reinforced by, the advent of shale gas. And when that boom comes, the Alstom machines will be absent and there will be one less gas turbine technology available in the world. GE, Siemens and MHI will be the only three technologies left and they will be the main beneficiaries. But just three technologies are not enough. A growing market together with a dearth of technology suppliers will probably ensure the entry of another player into the field of large gas turbines.

(Actually Siemens and MHI get the best return at the lowest cost. They gain increased market space as Alstom’s machines disappear at no cost to themselves. GE gains no new products, gets the same increased market space and gets increased service revenue for Alstom machines. But GE has a large cost of acquisition and a great deal of hassle – and cost – to come as they restructure and integrate the Alstom business).

I would guess that this fourth player could well be Shanghai Electric with their newly acquired 40% stake in Ansaldo Energia. This has been something of a coup for Shanghai Electric. Doosan were also eyeing Ansaldo as a way of entering the gas turbine playing field (the entry barriers are too high for a scratch player). Both Doosan and Siemens had made bids for Ansaldo Energia but Siemens’ bid was essentially a defensive and a spoiling bid and they eventually withdrew. Doosan were the sole remaining bidder but it seems that Shanghai have pipped them at the post for this strategic acquisition.

* Correction – Sequential combustion was first used by BBC at Beznau in 1948, operating on distillate and with a TIT of 575ºC.

Auction for Alstom develops as GE and Siemens/MHI up their bids

June 20, 2014

UPDATE!

The auction could be over. It looks like the French government is backing GE’s offer and will itself take a 20% stake in Alstom.

France to Back G.E.’s Bid for Alstom Assets

===============================================

Once upon a time I was recruited by ASEA in Sweden. Then ASEA merged with BBC and through no action on my part I became an employee of ABB. Some years later ABB sold all its Power Generation business to Alstom (along with me) and – once again without any action on my part – I became an employee of Alstom. In due course I retired but one of my last actions was to sell off part of Alstom’s industrial power generation business to Siemens as part of a global divestment. Whereupon I was recruited by Siemens in Germany to help with growing the business just acquired from Alstom. And then I finally did “retire” – insofar as “retirement” means that I can now reject engagements which do not interest me.

So the current battle going on between GE on the one hand and Siemens/MHI on the other to acquire all of Alstom’s power generation business is of particular interest. The Alstom Board which had -in principle – accepted GE’s offer, is now faced with evaluating two rival bids. During this week both have improved their bids.

Alstom’s Board will convene no later than June 23 to review the bids.

My personal view is that that the Alstom need for divestment is driven not only by their debt but – perhaps more importantly – by the desire of their largest shareholder to exit. Bouygues owns 29% of Alstom and came in – at the behest of the French Government – when Alstom were in dire straits. But now Boygues themselves are in some trouble and need to exit and they need to convert their 29% to as much cash as possible. With Alstom paying no dividend, Bouygues’ 29% holding represents about €2.5 billion locked up as a non performing asset. So in my view the critical points for Alstom in selecting a buyer will be

  1. ensuring that whatever is left of Alstom after the divestment is more than merely viable, and
  2. that Bouygues gets the maximum cash return for its 29% in a “clean” and lucrative exit.

In any event a good, old fashioned, “bidding war” between GE and Siemens/MHI is probably a good thing for all Alstom shareholders – including Bouygues. I recall – during my time with Alstom – when Alstom was forced to sell its profitable industrial power generation business. The final sale price ended up about 48% higher than Alstom’s internally evaluated value – just because an auction did develop between Siemens and Hitachi. And the auction did not just happen – it took much time and effort to promote.

Whether the Alstom Board can engineer a “good” auction to the benefit of the remaining Alstom train business and their shareholders remains to be seen.

Bloomberg: 

Immelt is in Paris to present new details of GE’s $17 billion plan to officials including Economy Minister Arnaud Montebourg, according to GE. Negotiators for the U.S. manufacturer continue to refine specifics ahead of a June 23 deadline, including the structure of Alstom’s renewable energy, grid and transport businesses, the company said.

Seven weeks after unveiling its proposal for Alstom’s energy operations, GE confronts a counterbid by Siemens that seeks to carve up Alstom together with Japan’s Mitsubishi Heavy Industries Ltd. (7011) and Hitachi Ltd. (6501) The Siemens proposal values the energy assets at 14.2 billion euros ($19.3 billion).

Immelt’s return to Paris underscores the stakes in a deal that would give Fairfield, Connecticut-based GE control of Alstom’s technology for electricity transmission and power-plant maintenance as Europe’s economy starts to recover. The acquisition would be GE’s biggest ever and bolster Immelt’s push to return the company to its industrial roots.

Reuters:

Siemens and Mitsubishi Heavy Industries (MHI) raised their offer for Alstom’s energy businesses to compete with a revised bid by U.S. rival General Electric.

Siemens-MHI and GE have been facing off in a battle for control of Alstom’s power businesses that has seen the Socialist government give itself powers to block any deal in the name of protecting local jobs and influence over a strategic sector. 

Under their amended offer, Siemens-MHI would pay 8.2 billion euros ($11.2 billion) in cash rather than 7 billion and value Alstom’s power businesses at 14.6 billion euros, 400 million more than previously and still well above GE’s 12.4 billion.

……. The improved Siemens-MHI proposal still foresees Siemens buying Alstom’s gas turbine business. But MHI is now offering to buy a 40 percent stake in the combined steam, grid and hydro business of Alstom and bundle them in a holding company. It previously planned to create three joint ventures by acquiring 40 percent of the steam business, 20 percent of grid and 20 percent of hydro. The change will increase MHI’s share of the cash payment to 3.9 billion euros from 3.1 billion. Siemens’s contribution rises to 4.3 billion euros from 3.9 billion, with the company saying the increase was based on “a subsequent, more advanced opportunity/risk analyses”.

In addition, Siemens is offering to immediately enter into a joint venture for mobility management, including signalling, with Alstom.

Desertec Foundation deserts the Desertec project consortium

July 2, 2013

It was always too grandiose for its own good. The economics were never sound but it was “visionary” and it was riding the fashionable “renewables wave”. It seemed to be much more of a public relations exercise to win brownie points than any real project. Domestic German politics and positioning of German companies in North Africa and the Middle East was of more interest than any real commitment to the project itself.

The concept was to generate solar and wind power in the worlds deserts and the transfer them by HVDC links to populous regions upto 3000 km away! The Desertec Foundation started in January 2009 and the Desertec project consortium (Dii gmbh) was established in October 2009 to handle the specific project for generating solar and wind power in North Africa and the Middle East for export to Europe. Now the Desertec Foundation has left the consortium and it is likely that the project and the consortium will quietly disappear into the sand.

DESERTEC-Map_small

PV MagazineUncertainty shrouds the future of the Desertec project to generate energy from the world’s deserts after the foundation which developed the idea announced it had withdrawn from the scheme.

The Desertec Foundation was founded in January 2009 with the idea of generating solar and wind energy from the world’s deserts. The founding principle of the foundation is to use high voltage DC current – which loses only 3% every 1,000km it travels – to bring power to the 90% of the global population living within 3,000km of deserts.

In October 2009, the Dii GmbH consortium was founded in Munich to bring the concept to life using the deserts of the Middle East and north Africa, with the aim of supplying up to 15% of Europe’s energy from renewables by 2050.

But in an extraordinary press release, the Desertec Foundation has announced its withdrawal from the consortium, citing ‘irresolvable disputes’ with its partners over strategy, obligations, communications and ‘last but not least, the managerial style of Dii’s top management.’

(more…)

Siemens boycotts Ryanair

September 27, 2012

I have used Ryanair from time to time – but only when I have had no other reasonable options. They are not customer friendly at all and not my airline of choice. Siemens has decided to boycott Ryanair. Clearly Ryanair is not pleased but I think Siemens are perfectly within their rights, are quite justified in their actions and even ought to be commended. Cutting costs  while adventuring safety must – even for Ryanair – be unacceptable.

It occurs to me that since Ryanair seems to thrive on negative publicity perhaps they secretly welcome this?

Strangely this story is not widely reported in the MSM. 

(UPDATE! Airliners.net had something on this story but the page seems to have been deleted. Perhaps legal action is being threatened.

UPDATE 2! Airliners.net has a new forum page where Ryanair is considered in a rather favourable light by commenters. The original page remains deleted. In my suspicious mind I suspect there has been some pressure from Ryanair on the website.)

The Swedish Svenska Dagbladet reports:

The German industrial group Siemens, with 400,000 employees worldwide, has decided for a global boycott of Ryanair. But Ryanair has threatened legal action.
Siemens Group Management took the decision after Ryanair suffered a number of accidents and incidents in recent times and is a signal to the entire aviation industry.

(more…)

Virus War! A taste of things to come?

September 24, 2010
Advertisement from the 1970s by American nucle...

Wikipedia:Advertisement from the 1970s by American nuclear-energy companies

(Reuters)

A computer virus that attacks a widely used industrial system appears aimed mostly at Iran and its power suggests a state may have been involved in creating it, an expert at a U.S. technology company said on Friday.

Kevin Hogan, Senior Director of Security Response at Symantec, told Reuters 60 percent of the computers worldwide infected by the so-called Stuxnet worm were in Iran, indicating industrial plants in that country were the target. Hogan’s comments are the latest in a string of specialist comments on Stuxnet that have stirred speculation that Iran’s first nuclear power station, at Bushehr, has been targeted in a state-backed attempt at sabotage or espionage.

“It’s pretty clear that based on the infection behavior that installations in Iran are being targeted,” Hogan said of the virus which attacks Siemens AG‘s widely used industrial control systems.

“The numbers are off the charts,” he said, adding Symantec had located the IP addresses of the computers infected and traced the geographic spread of the malicious code. Diplomats and security sources say Western governments and Israel view sabotage as one way of slowing Iran’s nuclear program, which the West suspects is aimed at making nuclear weapons but Tehran insists is for peaceful energy purposes. It was clear the worm’s creators had significant resources.

“We cannot rule out the possibility (of a state being behind it). Largely based on the resources, organization and in-depth knowledge across several fields — including specific knowledge of installations in Iran — it would have to be a state or a non-state actor with access to those kinds of (state) systems.”

BUSHEHR CONNECTION

Siemens was involved in the original design of the Bushehr reactor in the 1970s, when West Germany and France agreed to build the nuclear power station for the former Shah of Iran before he was overthrown by the 1979 Islamic revolution.

The company has said the malware is a Trojan worm that has spread via infected USB thumb drives, exploiting a vulnerability in Microsoft Corp’s Windows operating system that has since been resolved. Siemens, Microsoft and security experts who have studied the worm have yet to determine who created the malicious software, described by commentators as the world’s first known cyber “super weapon” designed to destroy a real-world target.

Israel, which is assumed to have the Middle East’s only atomic arsenal, has hinted it could attack Iranian facilities if international diplomacy fails to curb Tehran’s nuclear designs. Israel has also developed a powerful cyberwarfare capacity. Major-General Amos Yadlin, chief of military intelligence, last year said Israeli armed forces had the means to provide network security and launch cyber attacks of their own.

In Washington, Vice Admiral Bernard McCullough, the head of the U.S. Navy’s Fleet Cyber Command, told Reuters on Thursday after testifying about cyber operations before a House of Representatives Armed Services subcommittee, that the worm “has some capabilities we haven’t seen before.”

On Wednesday, Army General Keith Alexander, head of the Pentagon’s new Cyber Command, said his forces regarded the virus as “very sophisticated.”

Siemens is the world’s number one maker of industrial automation control systems, which are also the company’s bread-and-butter, but it was not immediately clear whether the specific Siemens systems targeted by Stuxnet are at Bushehr.

Computer virus wars instead of mass killing would be a preferable trend to virus wars as a precursor to mass killing.

Source: http://www.reuters.com/article/idUSTRE68N2DY20100924?pageNumber=1

Ethics and Business

April 19, 2010

In the wake of the latest Goldman Sachs scandal, Gordon Brown has accused them of “moral bankruptcy”.

http://news.bbc.co.uk/2/hi/business/8628231.stm

But polticians would be well advised to see to it that they also actually operate under an ethics code of their own.

Milton Friedman, Peter Drucker and others must bear their share of the responsibility for having propagated the view that corporations should only be concerned with the profit they deliver to shareholders. They have – maybe inadvertently – supported the view that humans in a corporate setting can and should abdicate their own ethical codes. The Wall Street Journal has even declared from on high that ethics cannot be learned and ethics courses are irrelevant to business. Utter rubbish of course, but even the “newspapers of record” such as the New York Times or The Times or Der Spiegel or the Wall Street Journal have lost their famed objectivity and have become political advocacy channels. It is such high-profile and basically amoral views which have been greatly responsible for providing a cloak of respectability for the attitude that:

  1. Corporations have no business to concern themselves with ethics, and
  2. Even if ethics is important then compliance with law is a sufficient substitute for having a code of ethics, and
  3. If an action is seen to be compliant with laws then this is sufficient.

Large corporations, ably assisted by the Big Four auditing firms, have fine-tuned the processes and documentation needed to show compliance. After Siemens experienced their scandals in 2007, anti-corruption training courses were held compulsorily throughout the company – mainly to assist in the negotiations with the SEC and minimise the extent of the inevitable fine. The training courses were conducted by staff from KPMG and I was disappointed but not surprised that the trainers either did not have the intellectual capacity to see – or perhaps did not want to see – the distinction between corruption and non-compliance.

There is no excuse for corporations to abdicate from ethical responsibility and satisfy themselves with the appearance of compliance. By taking the position that unacceptable behaviour is only that which is non-compliant they have, of course, also defined everything else that can be done as being acceptable. But it does not stop with just the officers of the corporation. It extends to ownership. Normally an owner is expected to take some responsibility for his property. But yet, no shareholder is really willing or able or required to take his share of the responsibility for the ethical conduct of a corporation he partially owns. And this is so even though the shareholder, as an individual, may well have an admirable code of ethics of his own.

The financial world has been particularly aggressive in promoting the notion that ethics has no place in business, and only the limits set by law have been acknowledged  and accepted as constraints on behaviour. Since law is retrospective this has allowed the creation of strange and wonderful financial and trading products in areas where the law has been silent and lawmakers have not yet written any laws. In such areas, where there is also an absence of any guidance from any ethical code, financial bubbles and dubious practices have grown unfettered by any constraints.

In my view, an organisation cannot isolate itself from the social environment it is surrounded by. It must have an explicit view of its own integrity and therefore of its own ethical code. Merely being compliant with law is insufficient. The owners must be party to this. It is time to bring these into the main-stream of management and into the fundamental vocabulary of a manager. Not for the sake of public relations or for avoiding criticism but because it is the right thing to do.


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