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• Is Brian Cowen’s pessimist another man’s realist?

  November 27, 2009 @ 8:22 pm | by Laura Slattery

  “Optimism” and “potential” are  words “we need to hear more of”, Brian Cowen told the Irish Exporters Association (IEA) last night, and he didn’t mean in a sentence such as “optimism and potential are no longer words that apply to the Irish economy, thanks to a series of serious policy errors by a person not standing a million miles away from you right now”.

  What he actually said was: “We should not let others talk us down, nor should we do it ourselves. We should not forget that our Irishness gives us a distinct selling point in the world today.”

  Unfortunately for the Taoiseach, it hasn’t been a cheery week for news, economic and otherwise. On the jobs front, the redundancies piled up as the week progressed. Aviva began the week by saying it was to wind down its Dublin fund management unit, with the loss of 30 jobs. On Wednesday, car dealer EP Mooney went into provisional liquidation with the potential loss of 95 jobs. That same day, the iconic travel operator Budget Travel also hit the wall. Countless babies have been born as a result of Budget Travel’s cheap packages in the sun. Now 172 livelihoods will be lost.

  Yesterday, some 310 jobs in Cork and Sligo evaporated. Option Wireless declared that it was making 150 people redundant in Cork, less than a year after Mary Coughlan said the wireless technology company would create 145 jobs , while Tiscali chipped into the north-west’s misery by announcing that it was to close a contact centre in Sligo, with the loss of 160 jobs.

  Is it any wonder that fears of redundancy are at a 10-year-high, according to an Ipsos MORI poll?

  In the interest of balance, there was at least one job creation announcement this week: Penneys is to create 60 new jobs in Waterford. Otherwise, it was slim pickings, unless you count plans for a job-spinning all-weather ski and casino tourism complex in Co Louth. The prospect of slaloming in the Dundalk area sounds like fun, sure, but it’s all rather speculative at this stage of the game.

  To be fair, it’s not just Ireland that’s stuck in this labour market malaise. In the UK, Borders fell into administration, putting 1,150 jobs in doubt. Lloyds Banking Group joined in by signalling the loss of a further 800 jobs; while airline BMI said it planned to axe 600 jobs. Meanwhile, General Motors said it would shed 9,000 jobs across Europe, most of them in Germany, and the economic ramifications of the emerging Dubai debt crisis are yet to be properly calculated.

  But whatever the problems that exist elsewhere, claiming “Irishness” as the USP that will get us out of trouble is political waffle of the most galling kind – exactly the type of thing that makes it so hard to be upbeat.

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• Corporate memory at Cadbury is short and selective

  November 16, 2009 @ 11:17 am | by John Collins

  As Fiona Walsh wrote in her London Briefing column last week, after an eight week phoney war the battle between Kraft and Cadbury over the American conglomerate’s £10 billion (€ billion) hostile takeover bid for the British chocolate maker, now becomes a formal three month battle of wits.

  Following the move into the formal takeover period Cadbury chairman Roger Carr wasted no time in dismissing the Kraft bid as derisory and labelling its American suitor as a “low growth conglomerate”. There is of course a slight undertone of snobbery here. On its corporate website 185-year old Cadbury trumpets its Quaker roots, its commitment to fair-trade and the wholesome milk that goes into its flagship chocolate product. Clearly the approaches from the maker of Capri Sun, Handi Snacks and Kraft Easy Mac Cups (don’t ask) are unwanted.

  Watching one of those Saturday night top 50 shows on Channel 4 I was reminded just how short the corporate memory at Cadbury must be. Anyone remember Cadbury’s Smash from the 70s?

  

  Cadbury and Kraft may have more in common than one side wants to admit. This is going to be a long and interesting battle.

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• From bad eggs and black gums to “AA-”, outlook stable

  November 5, 2009 @ 5:07 pm | by Laura Slattery

  Credit ratings agency Fitch has downgraded Ireland’s sovereign debt two notches from “AA+” to “AA-”, issuing a press release that made use of such charming finance-speak as ”fiscal consolidation”, “dynamism in the large, high value added and diverse export sector” and “the outlook on the long-term IDR is stable”. But it wasn’t always this way.

  Back in 19th century, credit reports were a lot more interesting to read, as the historian Scott A. Sandage recounts in his 2005 book Born Losers: A History of Failure in America. “Not worth the powder to kill him,” read one early report on an Alabama trader. Meanwhile, a Philadelphia business owner is deemed “rather too magnificent in his plans and projects” and later becomes a lowly clerk , while another Manhattan entrepreneur is branded “as tight as the bark on a black gum”.

  According to Sandage, few cases were as clear-cut as this 1862 report: “The whole lot of Weatherbys are Bad Eggs.” Bad egg was newly hatched American slang in 1862, “typical of the commodity talk that made credit reports both understandable and concise”. Because goods were delivered by railroads, telling fresh from stale was not easy. ”A bad egg was a market commodity that turned out to be worthless, an apt metaphor for gauging a trader’s current and future value,” he writes.

  Eventually, all-purpose epithets like “good for nothing” were replaced with something akin to the current system. “Rated A no. I”, derived from naval and insurance classifications, meant the person was good for unlimited credit. But these “big red books” still loved nothing more than swipes and quips. The owner of the Black Bear Tavern in Cincinnati, according to an 1854 credit report, “has prop[erty], ought to make money, but is dissipated, vacillating, wasteful at times…” Some men were too fickle to be bankable commodities.

  A century and a half before the likes of Fitch, Standard & Poor’s and Moody’s were busy giving ”AAA” ratings to the toxic confections that were securitised subprime mortgages, their predecessors were never shy about giving potential business failures the “worthless” tag: “worthless and always will be”, “worthless and contemptible”, “worthless cuss, never was worth anything” and “worthless but still here” were among the choice insults. If only Fitch’s earlier decrees about the creditworthiness of the Irish economy had reflected this 1856 entry from Georgia: “in good credit now but hard times might blow them over.”

  Sandage’s book notes that the early credit ledgers introduced “new vocabularies” of success and failure to railroad-era America. “Loser was once a neutral word for anybody who lost property, often by theft or natural disaster,” he says. By acting like moral policemen, the credit ratings agencies changed that. These days, it seems like we’ve come full circle. The rewards-for-failure culture means there are no real losers among the financial services elite. Why bother indulging in a sense of personal shame when you can keep bonuses for executives and lay off junior staff instead?

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• Who is Bank of Ireland lending to?

  November 4, 2009 @ 3:19 pm | by John Collins

  Bank of Ireland reported its interim results this morning, announcing a hefty €979 million pre-tax loss. For the sake of rounding lets call it a billion euro. The markets have reacted well pushing Bank of Ireland shares up about 18 per cent at the time of writing. Effectively a pre-tax loss in this range had been expected.

  More interesting Bank is refusing to do any media interviews on “legal advice” so the media are left to wade through the 81 page “Interim Statement for the 6 months ended 30 September 2009” for details on the bank’s performance.

  Most Irish business owners will be interested on the statement’s about the bank’s business lending:

  “Gross new lending to SMEs in the first 6 months of our financial year was over €1.5 billion, with overall SME overdraft / working capital facilities / limits available to customers up 18% on 2008 levels. We continue to process over 6,000 credit applications each month with consistently high levels of approvals maintained over the period. We have opened 12,000 business current accounts since April 2009. Bank of Ireland is very much open for business and committed to supporting our customers.”

  I have no doubt that if the bank says it has lent  €1.5 billion to businesses it has. But I wonder just what proportion of its lending is in private equity deals overseas. As we reported in August Bank of Ireland was part of a syndicate of banks that supported the €133 million acquisition of German company Kalle by Silverfleet Capital, a buyout firm. A bank spokesperson said each of the banks contributed about €25 million, so that’s a fair chunk of the €125 million.

  Given the €3.5 billion in Government support Bank of Ireland has received (not to mention the bank guarantee) taxpayers might expect some more explicit detail and evidence that it is supporting the real Irish economy.

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