Birmingham Post - Business Blog tag:blogs.birminghampost.net,2008-02-08:/business//33 2009-11-09T09:58:14Z Movable Type Enterprise 4.21-en They shall not grow old, as we that are left grow old tag:blogs.birminghampost.net,2009:/business//33.178972 2009-11-09T09:50:48Z 2009-11-09T09:58:14Z Every year, as Remembrance Sunday approaches, I adopt what I like to think is a slightly more philosophical outlook on life than my usual day-to-day worries about Dundee United's midfield (better than could be expected) and Scotland's chances of success... Stuart Pemble Every year, as Remembrance Sunday approaches, I adopt what I like to think is a slightly more philosophical outlook on life than my usual day-to-day worries about Dundee United's midfield (better than could be expected) and Scotland's chances of success in the Six Nations (non-existent); although my good lady assures me that I am just being even more pretentious than usual. I'll leave it for you to decide where the truth lies, but I do hope there is an important message hiding in what follows.

Here's what brings me over all reflective: no matter how dreadful things may get politically or economically, there is an immense good fortune in having been born a citizen of a First World democracy like the UK. Despite the ongoing economic gloom and the seemingly never-ending headlines about the money our elected representatives spent at John Lewis on flat-screen tellies, twenty-first century Blighty remains a nation founded on some fundamental and important foundations. Freedom of speech, education and healthcare for all (whatever the flaws in practice, the principle holds true), free and fair elections and the rule of law may not be utmost in our thoughts on the morning commute, but they underpin every aspect of our way of life, including our business dealings. I'm no Adam Smith, but free trade seems to sit more easily alongside a free political system than it does a totalitarian one.

But, as this time of year reminds us, these freedoms are not without cost. 1968 remains the only year since the end of WWII when British service personnel have not been killed on active duty; and considerably more have been severely injured and disabled. Yet all this loss and suffering may have happened in conflicts where our freedoms may not have obviously been under attack or where the benefit of hindsight questions the wisdom of going to war in the first place. And these concerns raise their head before you get into the difficult ideological arguments about whether or not any war can be morally justifiable.

However, and whatever your views on war in general or specific conflicts (past or present) in particular, I would like to think that most (if not all) of us agree on the importance of remembering the sacrifices made by others to protect our way of life. My usual introspection on this issue was highlighted last week by two contrasting stories - the sorry tale of Sheffield Hallam student Philip Laing who could face jail after being caught urinating on a poppy wreath after a very heavy drinking session and the rather odd but now overturned ban against wearing a poppy that toiletries store, Bodycare, briefly imposed on its staff.

Bodycare's explanation was that it viewed the poppy as a charitable symbol and, seeing as it was company policy to forbid any charitable emblem of any kind, staff were asked to remove their poppies. Whilst not ignoring the incredibly important work done by the Royal British Legion for which the annual poppy appeal is a huge fundraiser, it seems to me that this argument misses the point about buying and wearing a poppy. It is a lot, lot more than a charitable donation - rather, it is in itself an act of remembrance and, if the possible custodial sentence faced by Mr Laing gives us any indication, one which we as a society still value as being hugely important.

Indeed, taking some time out of our busy working days once a year to contemplate the sacrifices made on our behalf seems the least we can do to say thank you for the freedoms we all enjoy (and perhaps take for granted). So, at 11am this Wednesday (the symbolic anniversary of 11th hour of the 11th day of the 11th month when the fighting finally stopped on the Western Front leaving an estimated 1.5 million dead), I hope you might find the time for some quiet reflection. And if the pressures of modern living mean that you can't, then why not find another moment to remember? After all, as we are encouraged to do in the famous verse of Laurence Binyon with which I began the blog, "At the going down of the sun and in the morning, We will remember them."

]]> Chocs Away? Cadbury to face hostile takeover bid tomorrow? tag:blogs.birminghampost.net,2009:/business//33.178947 2009-11-08T22:36:04Z 2009-11-09T07:29:01Z US cheese-to-chocolate mammoth Kraft is said to be readying a hostile takeover bid for the icon of British chocolate, Cadbury. Meanwhile Cadbury's board is said to be ready to meet to shore up the firm's defences. Tomorrow the City Takoever... David Bailey US cheese-to-chocolate mammoth Kraft is said to be readying a hostile takeover bid for the icon of British chocolate, Cadbury. Meanwhile Cadbury's board is said to be ready to meet to shore up the firm's defences.

Tomorrow the City Takoever Panel's 'put up or shut up' deadline expires at 5pm and if Kraft doesn't bid it will have to wait another six months to get the chance again. Analysts suggest that Kraft is deciding whether to formally table its existing cash-and-stock offer, which was previously worth £10.2bn (745 pence a share), or to up the bid in an effort to win over shareholders.

The original cash-and-stock offer by Kraft has actually declined in value because of a drop in the value of Kraft's shares (caused by poor results) and exchange rate movement. Kraft's original bid was for 300p in cash and 0.2589 new Kraft shares for each Cadbury share, so the offer is now worth just 720p.

Cadbury has - rightly - said that the original Kraft offer "fundamentally undervalued" the firm and that it would prefer to remain independent. Cadbury chairman Roger Carr stated in a letter to Kraft chief executive Irene Rosenfeld that Cadbury being "absorbed into Kraft's low growth, conglomerate business model" was an "unappealing prospect".

]]> Kraft's shares have in fact fallen some 4% cent since it went public with its offer, closing at $26.78 on Friday. Cadbury's shares, which were trading at 568p before Kraft went public with its proposal, closed at 758p. The Daily Telegraph suggests that 820p a share would be a "starting point" for discussions with Kraft, according to some Cadbury shareholders.

Cadbury has certainly come out fighting; last month it reported higher-than expected sales for the third quarter, raising pressure on Kraft to improve its bid. The firm also raised its forecast for revenue this year to "around the middle" of its previous guidance of 4-6% growth.

Carr is expected to reiterate tomorrow that while Kraft may need Cadbury to deliver growth, Cadbury does not need Kraft. He is understood to be holding out for an offer approaching 850p a share before he will even begin discussions with Kraft.

But is Kraft willing to raise its offer price significantly? Last week's poor results for Kraft effectively eroded the value of the stock component of the offer; it may have to increase the amount of cash it is offering to compensate. While the firm is also heavily indebted, it has secured another £5.4 billion in bridge financing from nine banks last week.

Kraft's approach two months ago sparked much talk of a take-over battle, but interest from firms such as Nestle and Hershey has yet to materialise and Unilever, also touted as a bidder, last week publicly ruled itself out of the bidding.

Kraft has tried to appease union opposition here in the UK by offering to keep open the Cadbury Somerdale chocolate plant in Keynsham, near Bristol, which Cadbury has said will close. This would theoretically save 500 jobs, but the union Unite union remains sceptical, stressing that two meetings with Kraft have failed to produce any concrete details.

Given that Kraft shifted its Terry's Orange operation out of the UK back in 2005, closing the Terry's factory in York, one wonders how committed Kraft really would be to the UK. The US firm has indicated it expects to find $625m of cost savings from a link-up with Cadbury, with some analysts putting the figure as high as $1bn. Where will the savings come from if factories aren't closed?

But hang on a minute, why is this happening at all? Cadbury is a well run firm which has delivered some excellent results in a tough trading environment.

As I've stressed in previous blogs, the economics textbook tells us that the stock-market supposedly provides a mechanism for enforcing good corporate governance. According to the theory badly run firms will be vulnerable to takeover by well performing firms which see the unrealised efficient gains in the share price and are able to offer a premium bid to get hold of a firm and then run it more efficiently. This is supposed to keep management on their toes.

There's just one small problem with the theory. It doesn't reflect reality.

Huge amounts of academic and management consultancy research have overwhelmingly shown that at least two-thirds of takeovers fail on the very terms the takeover firm sets itself, never mind the wider social and economic impact that ensues.

Post takeover, profits usually stay the same or go down, and not up as the free-market takeover model predicts. In fact, takeovers usually lead to huge organisational disruption that leads to higher costs. And of course management often take their eye off the ball in terms of focusing on assimilating activities rather than the real job; serving customers and adding value.

So why do businesses do it, repeating the same mistakes over and over again?

One driver of this socially-sub optimal behaviour is a band-wagon effect; other firms are doing it so if management of firm X doesn't do it they fear losing out. That's how bubbles happen - the madness of crowds.

Secondly, being big is something of a defence (albeit not perfect) against being taken over yourself. So best to buy someone else to stop getting swallowed up yourself.

Thirdly one of the biggest determinants of a manager's salary and benefits is the size of an organisation they manage. Grow your business through takeovers and you can pay yourself more.

Fourthly, the stock market operates a 'dual valuation' system whereby firms like Cadbury can suddenly find themselves in play through no fault of their own. Ordinarily there are people like you and me buying and selling shares like Cadbury, adjusting their portfolios.

The share price reflects exactly that - often a small number of trades at the margins of investors' portfolios. Those trades are not valuing strategic decision-making control of the firm but rather the price put on shares as a portfolio investment by a small number of people.

That all changes in an instant when - suddenly - another firm (usually a large one) wants control. The bid price and share price jump - not because of unrealised efficiency gains but because something else is being valued: control of the actual takeover target.

The difference in what is being valued in this 'dual valuation system' means that institutional investors have an opportunity to put the firm in play and sell at a profit. It makes short-term sense for them, but not for the firm being targeted, and probably not even for the acquiring firm, which often ends up over-paying.

So, here are four reasons why Cadbury management and shareholders should stick with the firm and not sell out:
1. Cadbury's management team has been doing a good job - leave them to it to grow the business.
2. Most takeovers really do fail. It really is a fact.
3. Kraft is already weighed down by debt and borrowing to buy Cadbury will make it worse. This will not help Cadbury long term.
4. Cadbury becoming part of a multinational may well eventually lead to Kraft cutting UK operations long term and may threaten high value added functions here in Birmingham like R&D and marketing.

If you want to see what can happen when a British choccy firm is taken over by a huge foreign multinational, think back to Rowntree which was acquired over by Nestle in the late 1980s. By 2006 the Rowntree brand had been ditched and Smarties production was moved abroad, leading to over 600 job losses in York.

I should stress that I am not against foreign investment in the UK - after all I welcomed the Tata takeover of JLR. What concerns me is the risk to another well run British firm that is now exposed because of the workings of our capital market.

Takeovers -especially hostile ones - need to be made more difficult so that efficient businesses can plan and invest long-term and grow their businesses organically.

Labour promised to do this before being elected in 1997. Blair backed off in the face of big business opposition. We are still living with the consequences today.

Professor David Bailey works at Coventry University Business School.

]]> British Airways - fighting on! tag:blogs.birminghampost.net,2009:/business//33.178792 2009-11-06T11:01:27Z 2009-11-06T11:03:47Z Announcing a six month operating loss of £111m, a pre tax loss of £292m, paying no interim dividend and painting another poor outlook for the rest of the year would in more normal circumstances be more than enough justification for... Howard Wheeldon Announcing a six month operating loss of £111m, a pre tax loss of £292m, paying no interim dividend and painting another poor outlook for the rest of the year would in more normal circumstances be more than enough justification for markets to push the shares of BA down this morning. Not a bit of it - in fact the shares traded around 5 per cent ahead in early morning trade today.

]]> Why? Several factors are at play here. Firstly, following yesterday's court outcome BA now intends to push ahead implementing changes to the cabin crew contractual arrangements. For the record, according to the company this comprises incremental benefits of worth between two to seven percent for more than 10,000 crew members.

True, risks of industrial action remain but amongst those that watch the struggling airline industry and that know British Airways well there are few that would argue that if this one is to survive and prosper the urgency of need to bring the cost base down at least into line with peer legacy/flag carrier airline competitors is compelling. And by the way, this does not mean we believe that BA should attempt to emulate or even compete with Ryanair - quite the opposite in fact!

Whilst on the subject of what little good news BA was able to provide today worth mentioning that liquidity remains very strong at £2bn and that net debt as a whole decreased slightly to £2.3bn. The better than expected position on reserves at the end of the six month period and that was also helped by a partial refunding through the issue of a £350m convertible bond has, according to the airline, primarily been driven by retranslation of foreign debt and marked to market improvement on currency hedges.

A bit of luck then but nonetheless welcome. In fact fuel costs were down a hefty 17.3 per cent on those of the previous year and other operating costs fell by 4.3 per cent. The bad news is that passenger revenue was down 13.6 per cent on capacity reduced by 3 per cent. Neither was there any good news in the accompanying traffic data for October that showed RPK's (revenue passenger kilometres) down another 1.9 per cent on load factor slightly improved to 80.7 per cent.

For now we prefer to ignore any small signs that the airline appears to have noticed suggesting that premium class yields may be starting to improve. We reason this on the basis that whether or not cabin staff decide to take industrial action or not there can be little doubt that some potential BA passengers will have chosen to look elsewhere on the belief that there could well be strike action at BA over the Christmas/New Year period.

Meanwhile thoughts of most commentators quickly move away from actual results and the thought of possible industrial action that would make an already bad situation for BA a lot worse to the potential of the quarter seeing the potential of a three way merger alliance between BA, Iberia and American Airlines move on to a next stage. For that to occur is firstly in the hands of both US and EU regulators and the belief is that we should have movement on this over the coming days and weeks.

For my part I remain absolutely neutral to the potential benefits of a merger with the Spanish airline Iberia although I readily accept that there are benefits to be had for both airlines. As to the greater three way alliance with American Airlines I can see large scale benefits should this be allowed to occur. What are the chances of one or both mergers/alliances occurring? My reading currently is that the case for BA/Iberia has not fallen on deaf ears and that although regulators are bound to attempt to extract a cost from BA in terms of Heathrow slots (BA currently has a 40 per cent market share at Heathrow) the end results could be positive.

As to the forging of much closer relationships between BA and American Airlines and to attempt this in a three way form whilst we believe that the regulatory case is much better placed to pass muster than the two previous occasions and likely at a far lesser cost to BA in terms of potential slot losses at Heathrow it occurs to me that for political reasons the temperature on the 'Hill' may not be quite ready for this to occur.

No account of British Airways is of course complete without mentioning the huge pension deficit. Ahead of the next tri-annual pension valuation (due in the autumn of 2010) that, following market events over the past 18 months will likely show a steep increase in the actual New Airways Pension Scheme for now we are left to work on the £2.66bn net liability that the airline disclosed in September.

The disclosed liability is of course greater than the current market capitalisation (this stood at £2.299m at the time of writing). Nevertheless even though the assets in the scheme have fallen by around £2bn since March 2008 (from £14bn to £12bn) BA continues to have the full support of the pension fund trustees. Indeed, as it released BA from £230m of guarantees to the Airways Pension Scheme (this is the older scheme that is believed to carries no deficit) and £100m to the New Airways Pension Scheme earlier this year the trustees confirmed that they were satisfied with corporate activities and initiatives being taken by BA management will serve to improve the financial position and prospects of the company with a view to meeting its obligations to the scheme. Clearly BA is in no position to increase contributions to the fund and we suspect that following the next actuarial review a revised funding plan will need to be agreed with the trustees.

There can be absolutely no doubt that the outlook for BA remains very difficult and fraught with many difficulties. However, we continue to view that management, provided it does not allow any of its plans to cut cost to be watered down, is taking all the right measures to improve the situation. The bottom line is that BA is just not competitive and must bring its costs into line with its peers.

I would, as I have said many times, like to see BA pull away from short haul and European allowing the airline to concentrate on long haul and North Atlantic routes. Nevertheless, whilst BA cannot have any control over the current weak airline market it is in my view making the best of a bad job. IF - and it is a big IF - BA can get its industrial relations on a sound footing, get it cost base down and, if allowed by regulators, make the best of the consolidation opportunities it is currently pursuing then two to three years from now we may see a fit for purpose airline emerge. There is a long way to go before then and a lot of problems to deal with. Financially though I do believe that BA has enough muscle to survive this huge process of change and I for one do believe that this is an airline that will not only survive but given time, will again prosper.

]]> The Big Debate - Ten more ideas tag:blogs.birminghampost.net,2009:/business//33.178713 2009-11-05T16:17:28Z 2009-11-05T16:36:14Z by Jerome Turner On November 2nd, I attended The Big Debate as one of Birmingham City University's facilitators helping consolidate the ideas coming from the discussion. The event highlighted a range of issues and opportunities. This is a response to... the_big_debate by Jerome Turner

On November 2nd, I attended The Big Debate as one of Birmingham City University's facilitators helping consolidate the ideas coming from the discussion.
The event highlighted a range of issues and opportunities. This is a response to some of them, including things that could be tried out pretty easily but also consists of a lot more questions... because as we all know, it's easier to ask questions than answer them.

]]> Be ambitious and aim... low. It sounds mad, but I think some people were discussing the problem with large projects / initiatives having lots of money attached, largely that they're often then crippled / stifled by paperwork and a need to 'report' on outcomes. Someone said they'd be interested to see smaller projects with smaller pots of money that could be more fluid, and I'd also like to see the effect of sparking small bushfires of creativity like that. An example was the BCC DIY work which came about very quickly, with little need for planning / funding. A lot of people were talking about it over a concentrated period - it now seems to have gone a bit quiet, but it was a good catalyst. These kind of projects need the creativity and enthusiasm more than the money and can create great profile, develop learning, transfer knowledge and provide the basis for research/further work.

How do large structures / organisations work with small ones? One problem I think smaller SMEs and freelancers may find is that although there are structures to support them, they may be unsure as to how that can happen, or the benefit. How do we communicate this? Anyone organisation who has put on a free event they feel will benefit the attendees and then faced the frustration of people not attending, will understand this.

The creative industries are... In the same way that we forgot on the day to talk about the midlands, rather than Birmingham, we shouldn't forget CI is at least

• Advertising
• Film and video
• Architecture
• Music
• Art and antiques markets
• Performing arts
• Computer and video games
• Publishing
• Crafts
• Software
• Design
• Television and radio
• Designer fashion

...if you go with the DTI categories, or we might need new categories.

If the video games industry is so large, larger than film industry even, why (to my knowledge) are there no major developers based in Birmingham? Yes, Codemasters, Blitz and Freestyle Games are based in Leamington, but what is it about Leamington that makes it suitable / attractive to those companies and the leaders in their field that they attract? It's surely not the shops, nightlife, house prices or transport links...?

Where is the Custard Factory for the areas of architecture, or fine art? Is there a midlands hub for publishing?

What is the potential for invading unused buildings for a month at a time? What would the effect be of five Digbeth creative industries moving into and working in a Walsall warehouse for a month? What might we learn from that kind of experiment? Or from inviting graduate creatives to do the same? Don't forget, not all unused buildings are owned / managed by councils.

Give a creative industry a shop front. E.g. something that is a visible working space, rather than a hidden office, only really visible online. For example, a street level shop space in Birmingham New Street, or in a smaller town? They would meet a different kind of client or interested party, but in greater volume. It might give them a better understanding of the context they work within, that's it's not part of a small hub, but a large city that consists of hundreds of businesses in all kinds of sectors - commercial, manufacturing, service industry, healthcare, etc. I think Make Architects have a shop front in the Mailbox.

Team up thinkers with doers - technologists, programmers, designers, makers, builders, sculptors

Help undergraduates into business. What initiatives are in place for equipping soon-to-be (creative) graduates with business and employment skills? Are these built into university and college courses? E.g. how to complete tax returns, how to engage with clients, how to develop online portfolios, desk research skills, project management. i.e. the kind of skills explored in magazines like Computer Arts. And where these initiatives exist, how visible are they to the people that need them? I'm not sure if it's enough to make these available to people once they've graduated - I would consider making 'business engagement' compulsory modules as part of a final year of study.

There are probably enough social media events and associated cafés - but how about spaces that encourage creativity in different ways, like a café / library hybrid (Librafe? Cabrary?). Something like a relaxed, open research library of periodicals, magazines and books. I'm sure we've all seen them in other cities, I've never come across one in Birmingham.

Lo-tech spaces to think, work, create ideas. Spaces to think - and here's an idea, spaces to think that DON'T have network points, wifi, or electric supply, so they're cheap to maintain and encourage lateral thinking. E.g. the beanbag room at Perry Barr BCU may be a bit of a dot.com cliché, but it encourages creative thinking without the reliance on being able to Google, phone or tweet someone.

David Burden had great ideas about use of university spaces. Where two unexpected groups mix, what does one group learn from the other, if anything? Do people interact? What is the financial implication of running a space like this?


Jerome Turner is Design Manager at User-lab, BCU.

]]> The Big Debate: Opening Up tag:blogs.birminghampost.net,2009:/business//33.178507 2009-11-04T15:27:02Z 2009-11-04T17:58:44Z By Kevin Johnson I'm a little slower to post my thoughts after the Big Debate than the excellent analysis and follow ups from the likes of Dave Harte and Paul Bradshaw or the instant (and spot on) post from Andrew... the_big_debate By Kevin Johnson

I'm a little slower to post my thoughts after the Big Debate than the excellent analysis and follow ups from the likes of Dave Harte and Paul Bradshaw or the instant (and spot on) post from Andrew Brightwell. That's what comes of being a corporate comms type, wanting to have your thoughts structured and every dot and comma in their perfect place.

]]> In a way, that's one of the things I hope the Big Debate will help change in Birmingham over time. We - including the wider business community and public bodies - should feel freer to engage in conversation, admit errors and work collaboratively. So what if your first post (or perhaps whole website) is not as good as it might be. No problem, open up and lots of people will help you improve it.

My sense is the event was not hailed a great success by 'some' (to satisfy Pete Ashton, I won't refer to the so called twitterati). I can see why. There was an element of we've heard it all before; same old faces and I think the event didn't have the sense of purpose its title question suggested.

However, there was much to take away. I really enjoyed Charles Leadbeeater and Toby Barnes. The suggestion from the keynote speaker for Birmingham to be a home for pirates has resounded positively already. The challenge is to bring the public - and indeed parts of the rest of the private - sector on board with that vision.

My reflection on the bccdiy initiative is that many people do not understand why a group of people would want to collaborate on a project without any funding or formal structures in order to demonstrate what's possible and because they want to help their fellow citizens access and make the most of resources (notably data) which is already available.

A defining characteristic of the creative community is that its members have both social and business principles and objectives. Many live for identifying and solving problems. If we can bring this spirit of both community and creativity into other parts of Birmingham life, it would have dramatic benefits. As Leadbeater and others suggested, Birmingham needs to open up to encourage new ideas to emerge and grow.

Just as Professor Parkinson did previously, Leadbeater basically called for us to have more confidence. The most successful; the most creative cities are the ones with most confidence (and best connected). I agree that we should not obsess about other cities or trying to brand ourselves a 'global city' (others will form that judgment if justified). We should compete with other cities... we just don't have to use them as our benchmarks. We should invent our own. Too much place making and destination marketing revolves around accepted criteria - cathedrals, concert halls, conventions centres etc. Birmingham should worry less about making sure we have all the things which cities above us in the league tables enjoy, and instead create the criteria they will all be judged by in years to come.

I struggled at the conference to work out whether we were trying to increase recognition of the creative sector in Birmingham; to position that sector from this city as the saviour of UK plc or to increase creativity more generally. All are laudable propositions, but in my mind at least they became confused.

As others have commented, the terms creative and digital seemed to become interchangeable. They are not the same thing. Creativity can, should and does extend beyond the DCMS definition of creative industries. Digital has come to mean many things, but we can probably all agree data, the internet, electronic means of communication etc. will only increase in importance and value to our lives. We need to be careful about their use, and not allow discussions about culture or creativity to be sidelined by just talking about social media, games or other aspects of digital media.

Yes, creative and digital types love to chat, on and offline. It is good to talk. We just need to be careful about not allowing cliques to develop that impose artificial barriers. We need to connect more communities, including creative ones that revolve around one discipline or area of the city. We don't benefit from the same degree of interchange between, say, advertising and architecture or performing arts and software as some other cities. Actually, Monday's event was better at bringing people together from different circles than many previous occasions.

There are many things on the 'to do' list to help grow our creative sector and make Birmingham even better known as a creative place, from opening up working spaces to improving access to finance. Perhaps more important than anything, though, is to open up. Have more conversations; allow a more creative culture to invade technically non-creative organisations and realise you can no longer control information or brands as we did in the past.

Kevin Johnson is managing director of Urban Communications.

]]> GM pulls the plug on Opel / Vauxhall Sale. Where next? tag:blogs.birminghampost.net,2009:/business//33.178473 2009-11-04T13:26:40Z 2009-11-04T13:29:14Z In a shock statement, and after six months of haggling and its fourth meeting on the issue, the GM board yesterday announced that it was cancelling plans to sell its European car operations including Opel and Vauxhall. GM said in... David Bailey In a shock statement, and after six months of haggling and its fourth meeting on the issue, the GM board yesterday announced that it was cancelling plans to sell its European car operations including Opel and Vauxhall.

GM said in a statement that its board had made the decision in light of "an improving business environment for GM over the past few months". Earlier this year GM had agreed to sell Opel and Vauxhall to Canadian car parts firm Magna.

Part of the GM board was always against the plan and the deal had been effectively rammed down the throat of GM by the German government which had offered €4.5bn (that's around £4bn) of loans to support a Magna bid, hoping that this would minimise job losses in Germany. GM probably wanted a deal with RHJ, the Belgian based firm, but German cash wasn't on offer for that - probably in breach of EU state aid rules.

But GM was always unhappy about sharing technology and brands with Magna, fearing that Opel might compete with the GM brand Chevrolet which is doing well in Russia, and that it could lose control of key technology that Opel is developing. The latter is critical to GM's need to develop smaller, energy efficient cars, especially as it is under pressure from the Obama administration to cut emissions.

In other words, GM Europe has turned out to be of critical importance to GM after all. In addition GM now thinks it can afford to keep its European operations given that it has emerged from Chapter 11 leaner and fitter and given that the business environment is picking up.

This throws up a whole load of questions about GM Europe's future. For example, in the short term a €1.5 billion bridge loan expires at the end of this month which GM will have to re-finance.

GM stated yesterday that it would now "initiate a restructuring of its European operations in earnest" and seek aid from the German government, and other European states. This risks degenerating into the US based transnational playing off governments in a divide-and-rule game to maximise the subsidies it gets.

The process of GM-downsizing (and indeed auto industry downsizing more generally) in Europe now needs to be effectively overseen by the European Commission to stop such wasteful subsidy competition and to avoid a repeat of the situation where Germany tried to trump everyone else by offering huge sums.

In Britain's case, the union Unite and the British government had already done most of the work in brokering a deal with Magna to safeguard as many jobs as possible in the UK. In return for a two-year pay freeze Magna had promised no compulsory redundancies and some 600 job cuts - well down on what was initially expected.

Lord Mandelson had also indicated a desire to support Vauxhall operations in the UK with financial aid if needed. Both will now need to repeat this work with GM, but as one commentator noted, "better the devil you know".

My first preference was always to keep Vauxhall part of GM to keep access to key new electric vehicle technology coming from the US and to share platform costs across different brands. The British government was slow off the mark in recognizing this but now has a chance to safeguard Vauxhall's position.

There is a deal to be done here - GM should ultimately be able to recognise the efficiency of Vauxhall's operations in the UK if they are effectively backed by unions and the British government. There is also a real chance of bringing electric car production - in the form of the European version of the Chevy Volt - to the UK.

Things actually look brighter for Vauxhall after this decision, if unions and the governments can strike a deal with GM. There is every chance they can do so.

Professor David Bailey works at Coventry University Business School.

]]> In other words, GM Europe has turned out to be of critical importance to GM after all. In addition GM now thinks it can afford to keep its European operations given that it has emerged from Chapter 11 leaner and fitter and given that the business environment is picking up.

This throws up a whole load of questions about GM Europe's future. For example, in the short term a €1.5 billion bridge loan expires at the end of this month which GM will have to re-finance.

GM stated yesterday that it would now "initiate a restructuring of its European operations in earnest" and seek aid from the German government, and other European states. This risks degenerating into the US based transnational playing off governments in a divide-and-rule game to maximise the subsidies it gets.

The process of GM-downsizing (and indeed auto industry downsizing more generally) in Europe now needs to be effectively overseen by the European Commission to stop such wasteful subsidy competition and to avoid a repeat of the situation where Germany tried to trump everyone else by offering huge sums.

In Britain's case, the union Unite and the British government had already done most of the work in brokering a deal with Magna to safeguard as many jobs as possible in the UK. In return for a two-year pay freeze Magna had promised no compulsory redundancies and some 600 job cuts - well down on what was initially expected.

Lord Mandelson had also indicated a desire to support Vauxhall operations in the UK with financial aid if needed. Both will now need to repeat this work with GM, but as one commentator noted, "better the devil you know".

My first preference was always to keep Vauxhall part of GM to keep access to key new electric vehicle technology coming from the US and to share platform costs across different brands. The British government was slow off the mark in recognizing this but now has a chance to safeguard Vauxhall's position.

There is a deal to be done here - GM should ultimately be able to recognise the efficiency of Vauxhall's operations in the UK if they are effectively backed by unions and the British government. There is also a real chance of bringing electric car production - in the form of the European version of the Chevy Volt - to the UK.

Things actually look brighter for Vauxhall after this decision, if unions and the governments can strike a deal with GM. There is every chance they can do so.

Professor David Bailey works at Coventry University Business School.

]]> GM pulls the plug on Opel / Vauxhall Sale. Where next? tag:blogs.birminghampost.net,2009:/business//33.178471 2009-11-04T13:18:55Z 2009-11-04T13:25:20Z In a shock statement, and after six months of haggling and its fourth meeting on the issue, the GM board yesterday announced that it was cancelling plans to sell its European car operations including Opel and Vauxhall. GM said in... David Bailey In a shock statement, and after six months of haggling and its fourth meeting on the issue, the GM board yesterday announced that it was cancelling plans to sell its European car operations including Opel and Vauxhall.

GM said in a statement that its board had made the decision in light of "an improving business environment for GM over the past few months". Earlier this year GM had agreed to sell Opel and Vauxhall to Canadian car parts firm Magna.

Part of the GM board was always against the Magna plan and the deal had been effectively rammed down the throat of GM by the German government which had offered €4.5bn (that's around £4bn) of loans to support a Magna bid, hoping that this would minimise job losses in Germany. GM probably wanted a deal with RHJ, the Belgian based firm, but German cash wasn't on offer for that - probably in breach of EU state aid rules.

But GM was always unhappy about sharing technology and brands with Magna, fearing that Opel might compete with the GM brand Chevrolet which is doing well in Russia, and that it could lose control of key technology that Opel is developing. The latter is critical to GM's need to develop smaller, energy efficient cars, especially as it is under pressure from the Obama administration to cut emissions.

]]> In other words, GM Europe has turned out to be of critical importance to GM after all. In addition GM now thinks it can afford to keep its European operations given that it has emerged from Chapter 11 leaner and fitter and given that the business environment is picking up.

This throws up a whole load of questions about GM Europe's future. For example, in the short term a €1.5 billion bridge loan expires at the end of this month which GM will have to re-finance.

GM stated yesterday that it would now "initiate a restructuring of its European operations in earnest" and seek aid from the German government, and other European states. This risks degenerating into the US based transnational playing off governments in a divide-and-rule game to maximise the subsidies it gets.

The process of GM-downsizing (and indeed auto industry downsizing more generally) in Europe now needs to be effectively overseen by the European Commission to stop such wasteful subsidy competition and to avoid a repeat of the situation where Germany tried to trump everyone else by offering huge sums.

In Britain's case, the union Unite and the British government had already done most of the work in brokering a deal with Magna to safeguard as many jobs as possible in the UK. In return for a two-year pay freeze Magna had promised no compulsory redundancies and some 600 job cuts - well down on what was initially expected.

Lord Mandelson had also indicated a desire to support Vauxhall operations in the UK with financial aid if needed. Both will now need to repeat this work with GM, but as one commentator noted, "better the devil you know".

My first preference was always to keep Vauxhall part of GM to keep access to key new electric vehicle technology coming from the US and to share platform costs across different brands. The British government was slow off the mark in recognizing this but now has a chance to safeguard Vauxhall's position.

There is a deal to be done here - GM should ultimately be able to recognise the efficiency of Vauxhall's operations in the UK if they are effectively backed by unions and the British government. There is also a real chance of bringing electric car production - in the form of the European version of the Chevy Volt - to the UK.

Things actually look brighter for Vauxhall after this decision, if unions and the governments can strike a deal with GM. There is every chance they can do so.

Professor David Bailey works at Coventry University Business School.

]]> GM pulls the plug on Opel / Vauxhall Sale. Where next? tag:blogs.birminghampost.net,2009:/business//33.178470 2009-11-04T13:18:55Z 2009-11-04T13:24:54Z In a shock statement, and after six months of haggling and its fourth meeting on the issue, the GM board yesterday announced that it was cancelling plans to sell its European car operations including Opel and Vauxhall. GM said in... David Bailey In a shock statement, and after six months of haggling and its fourth meeting on the issue, the GM board yesterday announced that it was cancelling plans to sell its European car operations including Opel and Vauxhall.

GM said in a statement that its board had made the decision in light of "an improving business environment for GM over the past few months". Earlier this year GM had agreed to sell Opel and Vauxhall to Canadian car parts firm Magna.

Part of the GM board was always against the Magna plan and the deal had been effectively rammed down the throat of GM by the German government which had offered €4.5bn (that's around £4bn) of loans to support a Magna bid, hoping that this would minimise job losses in Germany. GM probably wanted a deal with RHJ, the Belgian based firm, but German cash wasn't on offer for that - probably in breach of EU state aid rules.

But GM was always unhappy about sharing technology and brands with Magna, fearing that Opel might compete with the GM brand Chevrolet which is doing well in Russia, and that it could lose control of key technology that Opel is developing. The latter is critical to GM's need to develop smaller, energy efficient cars, especially as it is under pressure from the Obama administration to cut emissions.

]]> In other words, GM Europe has turned out to be of critical importance to GM after all. In addition GM now thinks it can afford to keep its European operations given that it has emerged from Chapter 11 leaner and fitter and given that the business environment is picking up.

This throws up a whole load of questions about GM Europe's future. For example, in the short term a €1.5 billion bridge loan expires at the end of this month which GM will have to re-finance.

GM stated yesterday that it would now "initiate a restructuring of its European operations in earnest" and seek aid from the German government, and other European states. This risks degenerating into the US based transnational playing off governments in a divide-and-rule game to maximise the subsidies it gets.

The process of GM-downsizing (and indeed auto industry downsizing more generally) in Europe now needs to be effectively overseen by the European Commission to stop such wasteful subsidy competition and to avoid a repeat of the situation where Germany tried to trump everyone else by offering huge sums.

In Britain's case, the union Unite and the British government had already done most of the work in brokering a deal with Magna to safeguard as many jobs as possible in the UK. In return for a two-year pay freeze Magna had promised no compulsory redundancies and some 600 job cuts - well down on what was initially expected.

Lord Mandelson had also indicated a desire to support Vauxhall operations in the UK with financial aid if needed. Both will now need to repeat this work with GM, but as one commentator noted, "better the devil you know".

My first preference was always to keep Vauxhall part of GM to keep access to key new electric vehicle technology coming from the US and to share platform costs across different brands. The British government was slow off the mark in recognizing this but now has a chance to safeguard Vauxhall's position.

There is a deal to be done here - GM should ultimately be able to recognise the efficiency of Vauxhall's operations in the UK if they are effectively backed by unions and the British government. There is also a real chance of bringing electric car production - in the form of the European version of the Chevy Volt - to the UK.

Things actually look brighter for Vauxhall after this decision, if unions and the governments can strike a deal with GM. There is every chance they can do so.

Professor David Bailey works at Coventry University Business School.

]]> GM Europe - A dangerous yet very interesting game begins tag:blogs.birminghampost.net,2009:/business//33.178409 2009-11-04T11:20:46Z 2009-11-04T11:22:03Z Please be under no illusion that the decision by GM to abandon a sale of its European Adam Opel and Vauxhall interests has been taken on the basis the outlook for the European auto industry has suddenly gotten a lot... Howard Wheeldon Please be under no illusion that the decision by GM to abandon a sale of its European Adam Opel and Vauxhall interests has been taken on the basis the outlook for the European auto industry has suddenly gotten a lot better! Far from it, take the stimulus factor away and nothing has changed.

]]> Neither has it been done because the parent US based company feels in a sufficiently leaner and fitter state that it no longer has to abandon its foreign based children. So, it hasn't been done for the benefit of GM's overall financial health then!

And despite views from some that would prefer to believe GM never really wanted to get rid of its European interest at all could this be a sufficiently good enough reason for the GM board to reverse what had been a reasonably sensible escape route from the very difficult problem of Europe. What is though and what reasons the change of mind may be one or indeed, all of the following ideas:

1) GM well knew that although the German government was firmly behind the decision to bring Magna in as the majority owning partner of new 'GM Europe' pressure on the European Competition Commissioner from British. Spanish and other interested European parties involved reached such fever pitch that there was absolutely no way she could allow this deal to go through or that even it already had, it would have needed to be unwound. Thus GM was faced with a potentially huge and embarrassing position deciding whether to risk waiting for the European Competition Commissioner to rule or to grab back control of the overall situation itself by pulling away. It sensibly chose the latter and in doing so the hope will be that the international company will avoid much of the adverse publicity and uncertainty that would then be attached had the European Commissioner ruled that the deal arranged with the Russian backed Canadian car parts maker Magna was after all anti competitive.

2) Nothing has changed in my view that would allow the GM parent company which has after all received significant support from US taxpayers that could allow the company to invest even a dime in any foreign subsidiaries aside perhaps from those in China where there remains a good case for growth. Thus we are unable to see any possibility that even if it GM had money to burn that the parent company intends to despatch funds to its problem European child.

3) An aside maybe, but we would also note that GM has continued to have great concerns over the Russian involvement in Magna and the potential of damage to the wider base of GM international intellectual property.

4) We do not believe GM has pulled away from the Magna plan on the basis of hoping to attract other competing offers. We reason this on the basis that any further protraction of the overall GM Europe problem can only but further damage the standing of GM internationally. In other words, GM may actually have determined to take the situation back under its own control to wind it down itself.

5) To test the resolve of both EU Commissioner and indeed, the German government itself. After all, there is the small matter of the 1.5bn euros that presumably the German Chancellor Angela Merkel will now require to be repaid by GM. Then there is the small matter of the additional EUR4.5bn funding promised to Magna by German government in return for a hugely unfair plan that was hugely biased toward retaining German jobs over those spread across the rest of Europe.

At a stroke it seems to me now that if GM or indeed, GM Europe itself was to attempt to hold a gun to the German governments seeking loans then German, British, Spanish and other governments would be forced to respond. Given that GM Europe could actually say that it intends to close almost the whole of its European operation down in an attempt to save money we rather doubt that despite making a few negative noises European governments will in the end fail to deliver. However, we know now that GM Europe is in absolutely no position to make promises to the German government or to any other government come to that over a very specific number of plants and jobs that might be protected across Europe.

Angela Merkel herself must be absolutely gutted today and it seems to me that there is now very little that she can do without being accused of breaking existing EU competition rules. But this is not time for others to smirk either. For instance, while UK Business Secretary Lord Mandelson can at least hold his head higher having behind the scenes acted to encourage the debate meaning that his influence was large and that that EU Competition Commissioner was indeed likely about to declare the Magna deal null and void, his problems over Vauxhall are probably just beginning.

So what about the future of British based Vauxhall jobs at Ellesmere Port and Luton? My view on this is that as far as Ellesmere Portis concerned nothing is changed. Some jobs will need to be lost of course, perhaps about the same number as likely suggested by Magna, but essentially with the new Astra a likely success the plant remains safe for the next three to four years. Hopefully by then there may well be opportunities to build electric cars but for now it is far too early to judge. Meanwhile I take the view that without Magna chances of Luton surviving much above two more years look even more thin.

Indeed, I can almost see the official planning application being put in for the plant to maybe be turned into housing and shops. Indeed, it had been my understanding is that closure of the Luton van plant was foreshadowed some years ago to the point that some preliminary discussions took place with the local authorities over the future use of the site on a similar basis to that of the original car plant sited next door - already a vast complex of housing and shops! Sad to say that this is good real estate and the funds that could be achieved by its sale would clearly be very useful to GM!
Those that prefer to argue that GM never wanted to rid itself of its European Adam Opel and Vauxhall interests are in my view living on another planet. Neither should anyone be in doubt that just because all of a sudden and primarily due to government inducements such as the various car scrappage schemes that have occurred across Europe that US GM management has suddenly had the wool pulled over its eyes to believe that the improved sales situation may be permanent. The bottom line is that this is a political, strategic and tactical decision! GM management know full well that effectively Adam Opel is at best walking wounded - a vast and complicated unit that needs to be drastically cut down in size and that despite good plants such as that of the UK Ellesmere Port plant look to be well placed for a few more years yet with the new Astra decisions over its long term future will also have to be made as well.

Meanwhile, ask yourself this question: even if it could and it wasn't under the thumb of the US taxpayer could GM, a still vast US based company that was after all only a few months ago on the verge of filing for Chapter 11 bankruptcy protection likely to have sufficient funds available over the next two or three years to make the necessary investment to bring Opel kicking and shouting into the 21st century? I very much doubt it - well not making cars in such an expensive place as Germany and where the strength of the Euro adds even more problems.

Indeed, whatever is done to prop up GM Europe in the short term with money provided form European governments we must brace ourselves for eventual crushing and burning of plants and the cutting of vast numbers of jobs across GM Europe at some point in the future.

How long away? That I do not know but I do know that in the meantime governments will do what they can to put that day off as long as they can. With consolidation opportunities virtually none existent and clear knowledge that Europe as a whole probably has 30 per cent to 40 per cent too much car manufacturing capacity GM management well knows that the timing to do what really is required across Adam Opel and Vauxhall - clear out maybe one third to one half of jobs and many plants Europe - isn't quite right yet. It seems to me then that decisions over timing of this are now very much in the hands of European governments.

]]> Move over Darling Part Two... How about some basic principles to underpin your latest huge banking bail out? Afterall, we're all paying for it. tag:blogs.birminghampost.net,2009:/business//33.178244 2009-11-04T07:13:31Z 2009-11-04T10:01:21Z Blogged by David Bailey and John Clancy Another day, another near £40 billion of tax-payers' money to prop up the banks, with another £13 billion of government borrowing to finance the bail out. Government borrwing costs may rise as a... David Bailey Blogged by David Bailey and John Clancy

Another day, another near £40 billion of tax-payers' money to prop up the banks, with another £13 billion of government borrowing to finance the bail out. Government borrwing costs may rise as a result and the deficit may widen yet further.

The sums announced yesterday were staggering and eye-watering, especially when you talk to SMEs - notably in maunfacturing - about what support they get from said banks. A shake of the head, a wry smile and a raised eyebrow is perhaps the most polite form of reply we receive from MDs in factories across the Midlands.

Quite why we couldn't have used the crisis to re-engineer the system so that an industrial bank makes proper long-term funding available to British business is a huge missed opportunity.

Instead, as Robert Peston noted dryly in his blog, the Treasury has itself become perhaps the biggest hedge fund in the world, betting that both banks' share prices will go up and also that the massive commercial property portfolios which form most of RBS's dodgy asset base will go up in value rather than plummet in a second property bubble burst.

]]> What we saw today was Lloyds saying that it no longer needs the insurance of the government's asset protection scheme. It has somehow convinced the government that it no longer needs the insurance and will attempt a £21bn fundraising exercise, with £13.5bn coming from the largest cash call ever on the London market. Oh, and we taxpayers will have to buy £5.7bn of new shares to maintain its stake at 43%.

RBS will still need the insurance from the government on revised terms, and will place some £282 billion in toxic debts into the Asset Protection Scheme - essentially a taxpayer-backed insurance scheme. As a result the taxpayers' stake in the bank will rise from 70% to 84%. The government will put in £25.5bn of capital and have another £8bn in reserve.

Nice money if you can get it.

What was also announced today was the break up of the part-nationalised Royal Bank of Scotland and Lloyds Banking Group. RBS is selling RBS-branded branches in England and Wales, its NatWest branches in Scotland, the Churchill, Direct Line and Green Flag insurance operations, and parts of its investment banking business.

Breaking up the big beasts that we have had to rescue is welcome, but what sort of banking system are we aiming to create? Buying shares and propping up the banks - even if they are broken up - risks simply starting the bubble all over again unless some serious reforms are made.

Indeed, Labour have to come up with a set of basic principles on which to base the banking restructuring, something they have so far failed to deliver. In saving (at our cost) the banking system we suggest the following reforms to the banking system for wider public and business benefit:

1. Make sure the banks (which we've bailed out) deliver on promises to lend to British businesses - which are still suffering from the effects of the credit crunch.

2. Avoid putting revenue-raising for the government as the number 1 policy goal. The key goal should instead be a sustainable banking system that serves business and households and which avoids another catastrophic failure. What we've seen is that the financial market system can - we hope - one day be a good servant, but is a very poor master.

3. Deliver on Gordon Brown's promise to set up an industrial bank, an infrastructure bank and a mortgage bank. The industrial bank needs to provide long-term, patient finance to business and could be regionally based.

4. There needs to econo-diversity in the banking system to give consumers choice about where to bank, and to offer low-risk, high-quality services. That should include PLCs, mutuals like a renewed Northern Rock, as well as state-owned banks which would lend at competitive rates and help keep the sector competitive.

5. The utility function of banks needs to be separated from their high-risk casino activities - at the moment banks are literally too big to fail and there is a moral hazard problem for bankers' high-risk gambling. The state needs to support basic banking services for businesses and households, but should let casino banks go bust if need be.

6. Bankers' bonuses (some £6 billion this year) need to be taxed (we'd suggest at 100% this year) to put money into an industrial bank backing a green new deal. Many of the bankers wouldn't even have a job, let alone a bonus, if the state hadn't rescued the entire banking system.

7. Competition policy needs reforming. Darling now claims that having 'half a dozen' banks is not enough - well under your current competition law, Mr Darling, it's perfectly OK. We need to re-assert a 'public interest' element of competition policy - something Labour has mistakenly tried to row back from in recent years. That would also mean stopping banking takeovers not in the public interest (and indeed other takeovers in manufacturing - think Cadbury's).

8. Big banks' control of the insurance market also needs tackling. The possible demerging of Churchill and Direct Line from RBS (how many readers knew they were all one company?) could bring more competition, but we also need econodiversity here as well. The government could for example, demerge Churchill or Direct Line from RBS and set them up as mutual and/or a state corporate entity in the market, to improve efficiency and competition.

Simply splitting up banks and leaving them to the market, with state guarantees and insurance, risks repeating another bubble and this whole mess all over again. More serious reform is needed if finance is to again serve society and business, rather than the other way around.

]]> The Big debate - The Big Myths tag:blogs.birminghampost.net,2009:/business//33.178241 2009-11-03T22:02:43Z 2009-11-04T07:38:42Z By Dave Harte So the Big Debate on the future of the Creative Industries was fun wasn't it? A chance for us to get our heads together and proclaim to the world how great the West Midlands is at, well,... the_big_debate By Dave Harte

So the Big Debate on the future of the Creative Industries was fun wasn't it? A chance for us to get our heads together and proclaim to the world how great the West Midlands is at, well, erm, creative things. Well almost. It had the feel of a call to arms alright but some recurring themes emerged that need nipping in the bud. I say recurring because having been to such events in the past some myths get repeated which I reckon need debunking if we're ever going to be top dogs at, well, erm, creative stuff:

]]>
Myth 1: Less talking more doing.
Talking is the new doing, hadn't you heard?. Okay, not quite, but talking IS doing. Discussing, debating, thinking out loud, re-thinking out loud, researching, provoking - that's the kind of talking any sector should be doing, at conferences, in bars, on twitter. Some people (I think I'm one) are professional non-doers and proud. We need more, not less of these people. Value them. They're in your corner, fighting your cause, bragging about your work.

Myth 2: We don't shout loudly enough about what we do well.
Every time someone says this, check whether they work in marketing. They're probably after a commission to do the shouting for a decent-sized fee. Good work shouts, it always will. We're crafting amazing work here, it will show if it's good enough. If we're not getting national/international attention then our work isn't good enough. Simple.


Myth 3: It's only the usual suspects at these kind of events.
If you think that then you're not half as good as networking as you think you are. Try speaking to more people who aren't on twitter. This particular event was full of plenty of people new to me. People new to the debate, people worth taking time to talk to in the coffee break.


Myth 4: We shouldn't compete with other regions/cities.
The hell we shouldn't. Place is crucial in all this. You think we're not crying into our consultants' reports that Salford are getting a big chunk of the BBC and we get Doctors? We're really not in this for UK plc. We're here to shore up the West Midlands' rather frightening £15bn productivity gap and the high-value bits of the creative industries can help do that. If that means stealing companies away from elsewhere let's do it.

Myth 5: All this sniping is bad for Birmingham
No it isn't. You think creative cultures emerge from everybody being nice to each other? Everything on the scale from bad-mouthing to name-calling to a good punch-up is fine with me. It shows a sector alive with passion; creatives who care enough to challenge authority and their peers. We really don't all have to sing from the same hymn sheet.

Myth 6: We keep saying digital when we mean creative.
The 'Creative Industries' is a term that Labour invented circa 1998 to pull together miscellaneous bits of craft, manufacturing and creative content sub-sectors so Tony Blair could point at them and hope some glimmer of cool reflected back on him. The Creative Industries are whatever bit of them you feel comfortable in, digital, antiques, design, whatever. If you focus on definitions you're just focusing on the construct that government created for counting purposes. Your bit of this sector is defined by the people you know doing similar stuff. If you're the only one doing it at the moment then welcome to the party, the others will be along shortly.

Obviously, this list could be longer. But once you get past the re-telling of the myths there were a couple of really interesting points that I hadn't heard so clearly stated before. One a warning for future debates. The other a glimpse of what our regional strength could be.

The Warning: We confuse cultural needs with industrial needs.
Said the man who was proud to have had a hand in imprisoning some file-sharers. But he had a point, a good point. Clarity over the nature of the discussion is important. The debate nationally confuses these two issues so we're not alone.

The regional USP: Our Creative Industries can save the world.
In the rounding-up Leadbetter said that we should look into the city. Use it as a template to see how new creative ideas can solve 'problems'. In the queue for registration at the beginning of the day someone said to me that it's strange that the creative/cultural sector hasn't made its presence felt on the sustainability agenda and was in danger of being ignored as a result.

Social cohesion and environmental sustainability. Imagine being the best there is at tackling the two things at the top of the world's agenda. Now that would be fun wouldn't it.

]]> General Motors Board of Directors to decide at last on sale of GM Europe tag:blogs.birminghampost.net,2009:/business//33.178077 2009-11-03T14:05:44Z 2009-11-03T14:22:12Z After six month of haggling, the board of GM gets its fourth chance today to decide on the fate of GM Europe (including Opel and Vauxhall). The board itself was created after the firm left Chapter 11 bankruptcy back in... David Bailey After six month of haggling, the board of GM gets its fourth chance today to decide on the fate of GM Europe (including Opel and Vauxhall).

The board itself was created after the firm left Chapter 11 bankruptcy back in July, and will be asked by GM's management team to OK a letter drafted to address concerns raised by the European Commission over the sale of a 55% stake to Magna.

So far the board has - reluctantly at times it seems - backed management's decision to sell to Magna; the question is will it continue to do so?

Probably, is the answer, although the board may yet pull a rabbit out of the hat and either keep the firm or find another buyer. That's unlikely, though, for a number of reasons, not least being the fact that GM probably can't afford to keep Opel.

]]> For those of us who thought this was all sorted out months ago, GM has yet to confirm the sale to Magna in part because the European Commission raised concerns over the terms of the German government's 4.5 billion support package for Opel, in particular whether it undermined the Single Market.

The German government was said to favour strongly a sale to Magna as the latter had promised the fewest number of job cuts in Germany. The key issue for the European Commission is whether Germany only made the support package available to a Magna deal, effectively denying RHJ - a Belgian based firm - the chance of a takeover. If so, that could contravene the rules of the Single Market.

Under some intense European Commission scrutiny, the German government has reacted by stating in a letter to GM that there were no conditions attached to the loans, and that funding would be available to another firm acquiring Opel.

That's all very well, but meanwhile RHJ - which was thought by many to be GM's preferred bidder - has driven off into the sunset looking for other deals and has said that it isn't resurrecting a GM deal.

The long delays have, however, given GM plenty of time to consider other options.

Meanwhile, Magna has been under pressure from governments around Europe - including in the UK - to reduce job losses in return for financial support. A key deal between Unite the union and Magna in the UK would see only 600 job cuts in return for a pay freeze by the workers and a financial support package from the UK government.

In addition, two large customers of Magna (which is currently both an auto parts supplier and a contract manufacturer) - namely BMW and VW - have stated that they will look again at their relationship with the firm if it goes ahead with the Opel purchase (Opel after all competes with VW in some key markets).

And the Russian bank Sberbank (which is channeling Russian state money into the deal) has been looking at how Opel might support Russian auto giants VAZ and GAZ. One is near bankrupt and the other has been bailed out.

That Russian angle has worried some on the GM board who fear that Opel might compete with the GM brand Chevrolet which is doing well in Russia, and that it could lose control of key technology that Opel is developing. The latter is critical to GM's need to develop smaller, energy efficient cars.

Magna wouldn't be GM's first choice of partner but with it's probably too late, politically too difficult and too expensive for GM to find another partner now. At the end of this month a €1.5 billion bridge loan expires, for example. Delays will mean that all parties involved further costs - something GM can't afford.

So, we're likely to see the deal finally agreed by the GM board today, although whether it is really the right move for GM long-term is another issue.

In terms of Vauxhall workers in the UK, the union Unite has moved quickly to offer a deal to save jobs and the government has indicated its willingness to act in terms of a financial support package for Vauxhall. It will need to.

Footnote: An interesting report by the US Government Accounting Office (GAO) suggests that under the deal with the government to get aid, GM agreed to "use its commercially reasonable best efforts" to keep its US manufacturing within 90% of the level in its business plans. The report also questions the ability of the US Treasury to effectively monitor GM.

Professor David Bailey works at Coventry University Business School.

]]> Move over Darling. Your Banking break up doesn't go far enough. We need econo-diversity to ensure real competition and choice. tag:blogs.birminghampost.net,2009:/business//33.177888 2009-11-02T17:01:45Z 2009-11-02T17:13:19Z Blogged by David Bailey and John Clancy So, it seems that Lloyds, RBS and Northern Rock will be broken up and parts of them will be sold to new entrants to the banking sector. Remember that the government now holds... David Bailey Blogged by David Bailey and John Clancy

So, it seems that Lloyds, RBS and Northern Rock will be broken up and parts of them will be sold to new entrants to the banking sector. Remember that the government now holds a 70% stake in RBS and a 43% stake in Lloyds after last October's 'Great Banking Bail-Out' (or GBO - not so much GBH but rather a smash-and-grab by the banks themselves).

This is in effect Brussels' sanction for the break-up of Northern Rock into a "good" and "bad" bank, and could lead to three new players emerging in the UK. Indeed, Chancellor Alistair Darling said yesterday that there could be new players on the High Street when "the time is right", so that taxpayers get their money back.

Banks' assets will only be sold to new entrants to the UK banking market and not to existing financial institutions, in order to ensure "proper competition and choice".

The chancellor also said that the government will split up Northern Rock into two parts by the end of the year, and will aim to sell off one part within the next three to four years.

This is all very well, but the 'plan' risks being a missed opportunity both to do something more radical in breaking up the utility function of banks from their casino capitalism arms which caused the financial mayhem in the first place, and indeed in terms of giving customers real choice.

]]> One also wonders how much this will cost the taxpayer after yet another cash infusion of billions into the state owned banks last week (another £8 billion to Northern Rock and £5 billion to Lloyds). Quite why that £13 billion couldn't be spent on supporting business directly escapes us.

Meanwhile there seems to something of a battle going on in government over the future of Northern Rock in particular, with some figures in the PM's camp suggesting that the Treasury's planned sell-off should be stopped so that Rock can instead be turned into a building society owned by its customers.

The move would mean forgoing a potential 'windfall' (perhaps 'repayment' is a better term) for taxpayers but in many ways could be preferable to a straight sell off as it would leave the bank less prone to instability and financial risk and offer consumers some real choice about the sort of bank they want to do business with.

As usual, there are concerns within the Treasury, which aims to reduce public debt and get back some of the £25bn of taxpayers' money which was spent on rescuing Rock.

It has been thought the government would time the sale of the 'good Rock bank' to a newcomer to the industry, such as Virgin Money, ahead of the general election so as to raise cash and to get a political bounce by claiming that the Rock rescue was the 'right thing'.

But if Northern Rock was instead made a mutual, one of its founding mutual principles could be to deliver services to all sections of the community, especially the least well-off. It could also be set up to offer services via the Post Office which would help the latter's branch network.

Over the summer John McFall, the respected chairman of the Commons' Treasury select committee, backed a report written by Prof Bailey's ex boss at Birmingham Professor Jonathan Michie (now at Oxford) and commissioned by the Building Societies Association, which urged the government to shelve plans to sell Northern Rock and instead become a mutual again.

Michie's report 'Converting failed financial institutions into mutual organisations' made four key arguments in support of this approach: bio-diversity (what we call 'econo-diversity'), risk appetite, competition and as the best means of repaying the taxpayer.
The report argues the more diversified a financial system is in terms of ownership and governance structures and portfolio make-up, the better it is able to weather the strains produced by the normal business cycle.

Mutuals, which are not owned by investing institutions, can counter-balance the short-termist pressure of the City as long as management doesn't do a 'West Brom' and copy the high risk lending of PLCs. We would add that state run providers could also add to the mix, and could help avoid 'rip-off Britain' in the banking system.

Mutuals can also play a role in reducing the concentration of financial sector resources and employment in the City, dispersing wealth and welfare to regional and local economies, the report says.

Professor Michie said: 'We must not allow the UK's financial services sector to return to the 'business as usual' model that has proved so costly to the economy and public finances. Already we are seeing a return to the bonus culture. This is fuelled by profits boosted by the increased market power of banks. It is vital that the banks face competition from mutual building societies. That would also reduce the risk of the credit crunch being repeated. Remutualising Northern Rock would thus deliver to consumers and taxpayers.'

He's right, of course. It could certainly help consumers as well. There's a pretty large gap now between the biggest mutual Nationwide and the rest of the building society sector, so adding Rock would bring a sizeable lender and enhance the market.

Forget the carpet-bagging of the 1990s and the de-mutualisation that went with it - look where that got us. Now, mutuals' (renewed) attitude to risk and the lack of shareholder pressure is arguably more in tune with public sentiment.

Overall, there needs to econo-diversity in the banking system to give consumers choice about where to bank, and to offer low-risk, high-quality services. That should include PLCs, mutuals like a renewed Northern Rock, as well as state-owned banks which would lend at competitive rates and help keep the sector competitive.

As John Lewis and Cooperative Financial Services have both shown, a cooperative philosophy can also be good for the bottom line. And for Labour, they could challenge Tory leader David Cameron on what he sees as the way forward for the banking system - afterall he has said of late that 'we're all in it together'. Well, prove it.

Labour, meanwhile, have to come up with a set of basic principles on which to base the banking restructuring, something they have so far failed to deliver. More on that tomorrow, after the statement on breaking up Lloyds and RBS.

Professor David Bailey works at Coventry University Business School and John Clancy runs two SMEs including MediaFuturesAlert.com

]]> When the Irish Tiger stopped roaring... tag:blogs.birminghampost.net,2009:/business//33.173270 2009-10-28T12:26:43Z 2009-10-28T12:36:10Z Blogged by Prof David Bailey and Dr Helena Lenihan News that the European Globalisation Adjustment Fund (EGF) will release some €15 million in November to assist laid-off Dell workers in Ireland is welcome news for the workers who will potentially... David Bailey Blogged by Prof David Bailey and Dr Helena Lenihan

News that the European Globalisation Adjustment Fund (EGF) will release some €15 million in November to assist laid-off Dell workers in Ireland is welcome news for the workers who will potentially benefit (I'm still scratching my head as to why we haven't bid for this money here in the UK - see an earlier blog here).

With unemployment rising rapidly in Ireland, prospects for such workers look bleak. Recent estimates suggest that Irish unemployment could be heading towards 14-15%, with it peaking in the Mid West region as high as 20%.

In fact the Mid West - like our region the West Midlands - has been especially hard hit: both regions are suffering rapidly rising unemployment as manufacturing has been hard hit by the downturn.

But before Ireland forks out up to €23 million (including the EGF money) on responding to the Dell shock, perhaps policy makers could pause for a moment to see how neighbours like the West Midlands have responded in similar situations.

]]> Useful lessons might learned from here the West Midlands in its dealings with plant closures like MG Rover, Peugeot and van maker LDV. As with Dell, task forces were set up to respond to the closures.

Recent reports have highlighted the fact that Ireland's competitiveness has been eroded of late. Dell, for example, is moving its labour intensive assembly operations to Poland, where wages are much lower. This move was no great surprise; the firm had been reviewing its global operations for months, aiming to cut costs by $5bn a year by 2011.

The warning signals went back as far as 2006 and should have been picked up by development agencies. That time could have been used to prepare the wider economy for a Dell downsizing. It doesn't seem that this was done.

Several waves of redundancies at Dell will ultimately see some 2,000 jobs cut out of Dell's 3,000 employees. As with other manufacturing plant closures, there will be knock on effects, with as many as 2,600 jobs lost in the wider Irish economy, including at suppliers such as Flextronics and RR Donnelly. The latter is entirely dependent on Dell and is making 477 workers redundant.

A key problem here is that suppliers such as these had not diversified beyond Dell, so were especially vulnerable to a cut-back.

Things were rather different in the MG Rover case in the West Midlands. Well before the firm shut down, the Regional Development Agency - Advantage West Midlands - was working with suppliers to help them diversify away from MG Rover and into other industries.

This advanced action over five years helped save as many as 12,000 jobs in the local supply chain. Local suppliers found new markets in the auto industry but also other sectors like medical instruments.

There will be other cases like Dell in the future which Irish agencies will need to anticipate and plan for. The failure to act in advance to diversify the regional economy away from over-reliance on a few large, foreign firms like Dell was a key policy 'error', despite the warning signals.

In the UK, the MG Rover case suggests the need for some sort of 'permanent capacity' to deal with restructuring - with local, regional and national agencies using a mix of policies.

It is hoped that workers laid off at Dell will set up in business, as happened after a previous wave of job losses in the IT sector, especially at Digital in Galway. But hoping is not enough. This time round the economic environment is much tougher. Finding any jobs, or successfully setting up in business, will be much harder.

The other key difference is that over a third of Digital workers laid off had a Third Level qualification (equal to degree/diploma level in the UK), whereas with Dell the figure is much lower. Here the European funds will be useful if used intelligently and if there is the capacity to deliver re-training to a higher level.

In the MG Rover case, policy intervention was again critical. By 3 years after the closure, some 60% of ex-workers had engaged in some form of re-training or education. Two thirds took up the offer of free training places offered by local agencies and many others underwent training by their new employers.

The types of assistance and support that people found most helpful were free travel to a training course or job interview; a free place on a training course; being sent on a training course by a new employer; and help with setting up a business.

In other words, agencies need to make sure that employees have the necessary skills to cope as industries change, with access to high quality, flexible education and training programmes, backed up with support for mobility programmes. There are such interventions taking place in the wake of Dell, and these need to be extended.

Indeed Dell is hardly alone, with a wave of redundancies being announced in recent months by foreign affiliates, including those at Amann, Georgia-Pacific, Tecnotree, Teva, Element Six and many more.

As the Irish economy has contracted, it seems that low skilled workers have been the worst affected by the downturn. Their jobs - particularly in construction and low skilled manufacturing - are unlikely to return as the economy recovers.

Education and re-training thus have key roles to play, so that when the economy does improve such people are positioned to come back into sectors where the new jobs will be.

Longer-term, Ireland cannot compete on low-end manufacturing. Yet as we have found, shifting into higher-value added services requires putting in place local policies to help workers and firms move into growth areas.

The MG Rover and West Midlands case suggests that is not easy but requires carefully tailored policies which fit local needs, with a long term plan for how to help the economy restructure.

That was a very different economic climate, of course. In 2005 the UK economy was growing. Nevertheless, lessons from the MG Rover Task Force offer some interesting insights in preparing for, and dealing with redundancies and plant closures.

That success is seen in the fact that three years after the closure some 90% of ex- MG Rover workers who lost their jobs had found new employment.

Lessons can be learned from this by those charged with dealing with Irish layoffs and closures, now that the Tiger has stopped roaring. The same could also be said for regions in Belgium, Germany and possibly Austria, with the Magna takeover of Opel and the prospect of job cuts and plant closures.

Professor David Bailey works at Coventry University Business School and Dr. Helena Lenihan is a Senior Lecturer in Economics at the Kemmy Business School at the University of Limerick, Ireland.

]]> Data is what we want - but why? tag:blogs.birminghampost.net,2009:/business//33.173188 2009-10-27T14:36:33Z 2009-10-27T16:08:32Z By Paul Bradshaw The question is 'Can West Midlands creative industries revolutionise the UK Economy?' The answer is 'Yes, but'. And the 'but' is 'if we have the data to do it'. What is data? Data can be anything from... the_big_debate By Paul Bradshaw

The question is 'Can West Midlands creative industries revolutionise the UK Economy?' The answer is 'Yes, but'. And the 'but' is 'if we have the data to do it'.

What is data? Data can be anything from how many people are dying from a particular medical condition every year, to what your council spends their money on, or what time the number 33 passes your house.

Why is it important? Because it can create a new marketplace. And it's a marketplace that the West Midlands is already well positioned to benefit from.

]]> The best analogy I can think of is polymers. When the technology behind polymers was developed in the last century, it created a whole new market - innovative producers could create new products, and cheaper ways of producing old products.

Similar opportunities are available with the release of data - release postcodes for businesses to use cheaply or for free, and you have the opportunity for new businesses creating applications based on location. Release transport data and others can tell you which direction to head in for the next bus.

The more data is made available - assuming it is in a flexible format - the more valuable all those other parts of data become - because you can 'mash' different pieces of data together to produce interesting results. For one great example, see Mapumental, a 4iP-funded project which tells you the best place to live based on a combination of transport data, property prices and 'scenicness'.

But this isn't just a commercial plea - it's an ethical one too. The more data we have, the better we can engage with our democracies, with our health and with our environment.

Recently, for example, the Royal Mail stopped companies accessing its postcode data, meaning the closure of two very important civic services: PlanningAlerts - which told you when a planning application was made near your house - and Ernest Marples - which alerted you to job vacancies in your area. Both also save taxpayers money.

In the Midlands we already have an international reputation for doing interesting things with data - from BCCDIY to BeVocal, and my own project: Help Me Investigate. There is a passion to be involved in local issues, and to make the region better - preferably in a creative, fun way. As people around the country talk about data they often point to Birmingham projects as examples of good practice.

If we're to continue to innovate and to attract people to our city we need to support that - with data. From the minutes of council meetings to feeds of planning applications; from West Midlands Travel timetables to live traffic information. We need the people who control information in our city to let it go - and reap the benefits.

Paul Bradshaw is senior lecturer in online journalism at Birmingham City University
http://onlinejournalismblog.com

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