Wake up and smell the roses

Fat cats and unions alike need to wake up and smell the roses…

I am tired of reading about and witnessing strikes and industrial action because, quite frankly, they seldom accomplish anything. They often lead to violence; they sometimes result in heartache (as breadwinners cannot support their families owing to lost earnings); they almost certainly lead to lost profits (which no one can afford).

The unions point to fat cats, saying that their members deserve an increase. They say that the fat cat bosses are living it up, while their hard-working members are subject to abject poverty.

Let’s face it, to a certain extent, they do have a point. It’s commonplace for company executives to arrive for meetings in brand new German cars, which is a bit of a slap in the face for workers who fear job losses. I don’t know about you, but I would be mightily peeved if I was about to lose my job and I looked out the window, only to see the boss arrive in his fancy set of wheels, his snappily dressed driver at the wheel…

So yes, the unions’ grievances are sometimes valid. But they are also living in gaga land. Lest they have not discovered this fact, allow me to point out that we are officially in a recession. And, while I don’t think we should all be sitting in a corner and crying, we do need to be realistic.

A board member at one of the companies within our industry was telling me just last week that his staff members, and their unions, were demanding a 7% increase. The company has already lost about R5 million this year. And we’re only in June.

Now that’s really not too bright. Any idiot will realise that the sums simply don’t add up. When you’re losing a bucket load of money, expenses have to be trimmed if the company is to survive. However, unions still insist that increases be awarded, otherwise they are promising “militant and extended
strike action”. The company will probably accede to their request, with two likely results: profits will diminish even further and retrenchments will be unavoidable. The worst-case scenario is that the company will simply close, and then everyone will lose their jobs. I just don’t get it.

MORE GOOD NEWS

I was inundated with responses to last month’s Steering Column, when I wrote about the fact that there is still some good news in this beleaguered industry of ours. We also received two good news items in the form of transport operators posting strong results. I know the pessimists out there will point out that their results related to the year ending February 2009 and that things have worsened considerably since then. That’s probably true. But I think this is good news, well worth sharing and celebrating, anyway.

The first came from Cargo Carriers. Earnings from normal operations, excluding the effect of the adjustment to the value of assets in the property segment, were up 48%.

Joint CEO, Murray Bolton, points out that, while the economic crisis is challenging Cargo Carriers’ business model in some respects, it is also providing opportunities. “We are already picking up contracts from poorly funded competitors, and expect that our combination of high service levels, the flexibility to cope with rapid declines and increases in volumes better than some of our competitors, and our financial strength will allow us to fund both organic and acquisitive growth. This puts us in an enviable position to be able to grow both market share and earnings in the difficult years ahead,” he predicts.

While conceding that the downturn in the South African economy is being felt at operational level, Value Group CEO Stephen Gottschalk is also upbeat. “The trend of reduced volumes in the second half of the financial year has continued into the new financial year, albeit to a lesser extent. However, the group is well positioned to benefit from an increase in consumer demand, and the growth in customer base subsequent to year-end has begun to yield positive results. “Substantial new accounts have been procured which will partially mitigate against volume decline. This, coupled with a continued focus on cost reduction and optimal resource utilisation, should lead to comparable earnings in the new financial year,” he says.

The Value Group produced an excellent set of results, announcing a 90% increase in headline earnings from 25.8 cents in 2008 to record earnings of 48.9 cents per share for the 12 months ending February 2009.