DOWDUPONT -- JOBS WILL BE LOST

Once again we are seeing outside activist investors demanding restructuring and “efficiencies” to improve shareholder value. Creating mostly tradable spreadsheet profits without any real regard to the companies and their underlying personnel. Of course, we release that any merger will cost jobs as duplicative functions and non-productive operations are reduced or eliminated. The question is how fast will job loss occur and is it better to be among the first to leave, seek lateral transfers, or simply wait-it-out to the bitter end? A question that can only be answered by the affected (or should we say afflicted) individual and their particular circumstances.

Here we find four major activist investors (Third Point LLC, Trian Fund Management LP, Glenview Capital Management LLC, and Jana Partners LLC) attempting to persuade management that their vision for the company should supersede that of the Board of Directors and senior management. Think Gordon Gecko in Wall Street. Individually, these activists own a tiny part of the company, but it is huge when measured against other shareholders. 

This deal has been cooking since 2015, so perhaps the cautionary tale is to track the major activist groups and see which companies are involved. The original plan called for the combined company to be disassociated into three separate companies with each having a more narrow focus: materials, agriculture, and specialty chemicals. One of the biggest points of contention is that the activist investors believe that the “Dow-Corning” assets should be deployed into a separate company and not the materials group.  

We have seen the recent split up of RR Donnelly into three separate enterprises in a similar fashion. Unfortunately for the shareholders, share value plummeted, and dividends were significantly reduced. In fact, it appears that the result was to make the individual parts more attractive to potential purchasers who wanted to buy additional capacity or a foothold in their core businesses. Unfortunately it destroyed much of the company’s value and left one of the newly-created companies in Chapter-11 bankruptcy.

Read the business news; it is often a portent of the future. 
 

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NO LOVE AT GE LOCOMOTIVES IN ERIE, PENNSYLVANIA

General Electric Transportation is planning to end most of its locomotive manufacturing operations at their 100-year-old plant in Erie, Pennsylvania which will result in the loss of approximately 575 jobs. GE’s workforce totals about 2,000 people performing mostly non-manufacturing duties. Of course, if the company decides to cut-back on management, the cuts could run deeper. Manufacturing for international customers will be shifted to Fort Worth, Texas, where approximately 225 workers may be recalled after a previous layoff at the Texas plant.

One of the dangers posed by Wall Street are activist investors who, like the legendary character Gordon Gecko, see their duty as maximizing shareholder value at any cost. And, all too often, executives fearful for their jobs have little choice other than to resign or implement dramatic cost savings measures which usually is a code phrase for moving to a more tax friendly environment and shedding personnel.

According to Bloomberg News, “The Boston-based manufacturer agreed earlier this year to deeper cost cuts through 2018 following discussions with shareholder Trian Fund Management, the firm co-founded by [activist investor] Nelson Peltz.

Nelson Peltz's investment firm Trian Partners has disclosed a new stake in General Electric (GE).  Trian now apparently owns 98.5 million shares of GE worth around $2.5 billion.

Of the stake, Peltz said that "We invested in GE because it is undervalued and underappreciated by the market despite what we believe is a transformation that will allow its world-class industrial businesses to drive attractive shareowner returns.  Our recent discussions with Jeff and his team have solidified our belief that they are highly motivated to fully deliver on GE's transformation and share much common ground with Trian on ways to improve long-term shareowner value." For those wishing to read Trian’s whitepaper on GE, it can be found here.

Jamie Miller, the chief executive officer of GE Transportation, was quoted as saying, “We’ve been operating in a challenged North American locomotive market.” Of course, he was quick to add, “This action is taken so we can be as competitive as we can be.”

Watch a Katie Couric interview with an employee and a union representative from the Erie GE Locomotive facility and how jobs were transferred from unionized Pennsylvania to a non-union Texas facility to capture tax incentives. It's one side of the story and openly acknowledges that jobs have been lost to technology and unionization. Couric was even-handed as she asked the union rep straight out if the union is responsible for the loss of jobs.

It pays for employees of large public companies to keep their eyes on company information that is freely available through the SEC’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval ) site.

Are you asking yourself, Am I Next?

AM I NEXT? Is Retail Dying?

Updated September 9, 2018 — Sears engages bankruptcy, workout, and turnaround experts.

As Sears prepares for a potential bankruptcy filing, many readers have noted that Sears fall from the retail pantheon was the result of Amazon and Walmart.

I disagree. In my opinion, it was the arrogance, incompetence, and self-dealing, asset-stripping tendencies of Sears’ Chairman and CEO, largest creditor, and larges shareholder — Eddie Lampert who destroyed the company. Once regarded as a financial genius, Lampert continues to treat Sears poorly.

Original post…

Amazon and Sears are both in the news these past few weeks. Sears due to store closures and employee job losses; Amazon because it is said to be the prime retail killer.

When I was much younger visiting a Sears store in Santa Monica California was a treat, an experience to explore the wonders of tools, toys, and unimaginable things. As I grew older, my favorite shops disappeared one-by-one. Kerr's Sporting Goods, the Abercrombie & Fitch (the old sporting goods outfitters, not the clothing company) of Beverly Hills, California A cornucopia manly things like guns, fishing gear, barbecues, and all types of gear for almost every sport imaginable. Where you were introduced to a salesman and made a friend for life. Where you were among sportsmen, who walked the walk as well as talked the talk. Jerry Knight, who sold me my first target pistol, shot a massive charging Cape Buffalo off one of the most famous of African Hunters, Peter Hathaway Capstick. I later asked Capstick about the incident, and he replied, "Beats me, I was face down in the muck under half the animal. I am alive now, so it must have gone well." 

Likewise, I miss Mr. Bonaparte, the impeccably dressed lord of Desmonds, the clothing shop in Westwood, California. Where you not only purchased "recommended" clothes but were subtly instructed in how to be a young gentleman. And there were many others, mostly specialized stores driven out of business by rising rents and real estate prices and a general drop off in business as the new generations had their own idea of "the good life." I am not quite sure what would have been Mr. Bonaparte's reaction if I walked in dressed in dirty jeans, a torn tee-shirt, and sneakers. Somehow, I get the feeling that a long lecture would be forthcoming. 

Times have changed. The pace of life has increased exponentially as we find ourselves responding to the electronic slave callers we carry around in our pocket. Yes, I can buy something on the internet, and I frequently do use Amazon Prime's second-day delivery. But, other than branded merchandise, it is a crapshoot with customer reviews taking the place of a genuinely knowledgeable salesperson. 

So I ask you, how much are you willing to pay a premium for the happiness of the personal touch and experience of a knowledgeable employee at a brick-and-mortar store? Or are you going to be a weasel and visit a retail store for information and then purchase the same merchandise cheaper on the internet? 

The way you answer this question might just be a clue to the things that are to come that will affect your life and livelihood. 
 

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