Sunday, 17 January 2010

... Buying Our Companies & Marrying Our Women


By way of an update to Thursday's post on Mandelson railing against foreign ownership, we now read that Chiltern Railways are to invest £250 million in a new mainline route to Oxford and the Midlands, cutting journey times by 20%. Excellent say I, it's a journey I often make. And private investment in ageing UK infrastructure must always be music to the ears.

It's to be financed by Chiltern itself, in return for an extension to its franchise.

Now, remind us who owns Chiltern ? Ah yes, Mr Mandelson, it is Deutsche BundesBahn. To whom a franchise extension can rather safely be granted, in contrast to some of the dodgy indigenous operators thrown up by rail privatisation.

So, Mandy, what was that crap about foreign companies being resisted by UK institutional shareholders ?

ND


9:00 pm Sunday UPDATE: GDF bidding for International Power -
let's see what Mandy has to say about this one !

18 comments:

Mark Wadsworth said...

Foreign ownership of UK assets is A Good Thing - they won't have us over a barrel, we will have them over a barrel.

For example, once we get out of EU, France (the country) will immediately suggest imposing tarrif and regulatory barriers on British exports. So our Trade Minister will summon all the CEO's of all these foreign owned companies and explain that he doesn't believe in tit-for-tat, but he'd really appreciate it if those CEO's would lobby the French government to shut the f*** up.

Budgie said...

Whilst I accept that free trade between nations, including in some cases foreign ownership, is far better than any of the alternatives, it has to work both ways.

Firstly, countries like China with its currency pegged to the dollar, rather than floating, has an unfair trading advantage, selling products at below the cost price of the materials in the West. This must be stopped.

Secondly, it is easy to cite foreign businesses which invest in this country, but equally easy to cite those that not only do not invest but actually close down the businesses they've bought. They destroy jobs in this country in order to bolster their home country's production. The French are notorious for this. Not straightforward to police, but an open goal for the protectionists unless it is curbed.

Mark Wadsworth said...

@ Budgie:

"China [is] selling products at below the cost price of the materials in the West"

And that's bad for us, because ..?

"[Some foreign investors] actually close down the businesses they've bought. They destroy jobs in this country in order to bolster their home country's production."

So? We can take their money, let them close down the business and then just re-open the business ourselves. It would be like Danegeld in reverse.

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CityUnslicker said...

Great posts here the last few days ND - your on a roll!

Budgie said...

Mark Wadsworth said: "And that's bad for us, because ..?"

Because it destroys jobs and businesses. We end up with an economy dependent upon taking in each others washing. See below ...

Mark Wadsworth said: "So? We can take their money, let them close down the business and then just re-open the business ourselves. It would be like Danegeld in reverse."

Because it costs a lot in time (often decades) and money to rebuild competition to an established brand. For every Dyson that succeeds, there are 1000 who fail (figures from the Patent office).

What's the entry cost, for example, to compete with NSG-Pilkington? You would have to invent a new process to compete with Pilkington's float glass. Good luck - I might even buy a few shares in your company. Or is it easy just because you say so?

El-Kevo said...

You've a great business with a great brand ... flog it. FLOG IT !

Britain is 'best placed' in the global credit crunch due to this policy.

Nick Drew said...

budgie - but I go back to my point about the mass car-production industry, which only exists in UK thanks to foreign ownership

is there an example of an overseas buyer who promptly shut down the newly-acquired UK plant (and demolished it) in order to destroy a competitor ? (open question, on my part)

You've a great business with a great brand - oh yes, Kev, we've every intention of selling C@W at the first opportunity

Disneyworld (R) have indicated their interest, according to sources close to the matter

El-Kevo said...

Ha ha ! (at your response to me - made I laarf.)

Someone mentioned earlier that for every Dyson there are 1000 failures.

Thank fuck for that. I'm serious when I say that the only good thing about my Dyson is being able to watch the fluff going around inside it. Otherwise it is the most seriously over rated and over priced vacuum cleaner on the market. It makes me ashamed to be British.

Ever wondered why there are a dozen or so lined up at your local reclamation yard ? I'll give you a clue. It most certainly ain't because they're any good.

Anonymous said...

Made me laarf too.

Budgie said...

El Kevo: I got the 1 in 1000 figure from a rep from the Patent Office ("I'm from the Government, and I'm here to help you").

It went like this - "Out of 1000 patent applications, only 100 are finally patented; out of the 100 only 10 are put into production; out of the 10 only 1 is commercially successful."

Blue Eyes said...

That figure rather depends on the number of good business ideas as well as the prevailing economic environment...

Budgie said...

ND ...

Rootes Group, bought by Chrysler, bought by Peugeot, shut down. Redcar, owned by Corus, bought by Tata, shut down. Car parts factory in Cardiff, owned by Bosch, shut down recently. Packaging company, bought by South Africans, one plant shut down. UK TV production - forget it. Etc.

ND said: "budgie - but I go back to my point about the mass car-production industry, which only exists in UK thanks to foreign ownership."

Exactly. It is only here as long as the foreign owners wish it to exist here. It is under their control, not ours. Moreover the cars, and so many other products, are merely assembled here. They are not designed here, or financed here (except by bribes from the supine UK government), or hq managed from here. So the UK loses out on all the higher wage end of the business. Once we lose those skills it would take a generation, and a lot of hard work, to replace them.

And ND you seem to have overlooked the fact that I said: "Whilst I accept that free trade between nations, including in some cases foreign ownership, is far better than any of the alternatives, it has to work both ways." Go to Germany - all the cars are German; in France - all the cars are French; in Italy - Italian. 'All' is an exaggeration - but only slightly.

Budgie said...

Should be "UK TV SET production"

roym said...

personally, i have to agree with budgie.

this selling off of UK plc will in the long term result in leeching of high end management, engineering and design skills away from our country. how long will it take another chocolate company to build up a similar brand and product range as cadburys say? The acquisitions seem to only go one way, can you imagine anyone attempting to buy danone or similar?
plus theres another good quality entrant about to be delisted from the FTSE

Nick Drew said...

budgie - thanks for fulsome response. I don't know abt Rootes in enough detail to comment on that one: but as for UK loses out on all the higher wage end of the business. Once we lose those skills ... my question would be - what UK higher-end skills ?? in the motor business there were precious few such skills in evidence all through the '60s and '70s.

I do know abt Redcar which is closing because of a large-scale breach of contract by overseas buyers (not overseas owners), triggered by the recession, court action ongoing

a complex situation but cannot fairly be portrayed as Tata buying Corus in order to close it down: whomsoever the owners of Redcar had been, if they'd been dependent on exports in 2009 they'd have been up the creek

overall I think most people would say Tata is proving a good owner of UK assets

German cars in Germany etc ... well, (a) since more cars than ever are now being made (/assembled) in the UK, perhaps most of them are being bought here too ?

(b) you'll perhaps have noticed that many of my energy posts end up railing against German (& French) failure to open their markets. We suffer from this, I wholly agree. It's partly political, partly cultural, and it needs to be fought tirelessly

we are essentially on the same side methinks !

Nick Drew said...

roym - UK design skills ain't diminishing, vide the F1 racing industry: it's our large-scale industrial implementation that's often suspect

& UK companies own all sorts of stuff overseas, with plenty of success

I'll give another great example: the infrastructure skills of National Grid are the envy of the world and they are slowly buying up chunks of the USA power sector - as fast as their finances will allow, really, and they are welcome whenever they turn up because of their high reputation

it's a mixed bag; & that's life, hey ? free trade is the key - plenty of darwinian interaction so the best wins out & we all benefit

& to hell with distortions from state interventions !

roym said...

Nick,
F1 is a good point, but perhaps more pertinant is the example of losing rover and the designs for the new mini. now set to be a big hit in the US, but where will production be? tennessee more likely than oxford.

and for every N.Grid (i'd happily forgo my dividends for a year to allow them to build up the warchest) there are DOZENS of ex-UK companies.

http://www.guardian.co.uk/global/dan-roberts-on-business-blog/2010/jan/19/kraft-cadbury-takeover

i still have an uneasy feeling that we're going to end up as net losers if this carries on, and no doubt the tories will let it.