THE CURMUDGEON CHRONICLE ©
AN IRREVERENT VIEW
Time Line: September 23rd 2007
Date Line: Flemington New Jersey
We taught those foreigners a lesson when we refused to let them buy control of our ports and our oil companies. The lesson they learned is that a frontal attack is more expensive than an oblique maneuver into a position of control.
Thus, we note, (with alarm in some quarters), that Sheikdoms have bought minority positions in major hedge funds and buyout firms. One Middle East potentate now owns a substantial minority position in NASDAQ (our major stock trading platform), and may have the largest single shareholding. Incidentally, that potentate is in the midst of putting together an International stock trading operation in Dubai.
Hedge Funds and Buyout Firms are unregulated and constantly seek substantial investors to fund their shenanigans. That is a frightening combination of factors if unregulated except by the P&L Statements of those operations. The potential for damage is enormous if unregulated. Transactions that would be barred would slip under the tent, shoved along by the camel’s nose. Who could possibly worry about Dubai holding 7.5% ownership in a Buyout Firm? Certainly not the Congressmen who are looking to those same people for campaign funds; certainly not the public who kept in the dark about the workings of those enterprises.
Control without liability is the best part of hiding behind your “partner” while you have your hand in the cookie jar. Why buy a company when you can get all the benefits and pull all the strings by taking an important but far less expensive “minority” investment position? If you are smart and have enough oil revenue, you take indirect control through a partner (acceptable to the US) who has an insatiable thirst for your money. Soon enough your partner becomes your flunky.
On the front page of the Financial Times this morning, I note that Mattel has just apologized to China for “misleading” the public into thinking the Chinese make shoddy goods. That show stopper is a taste of what Messers Blackstone and the other buyout firms are going to face when the boss in Dubai gets upset.
Mattel, no longer in control of the manufacture of 65% of its goods, is forced to say that products were recalled because of faulty designs: i.e. problems created by Mattel. Mattel now says China has been maligned, never made any mistakes, and the fault was Mattel’s for not exercising proper care and in making faulty specifications. Maybe so, but I doubt it.
If I had 65% of my sales controlled by China I would say whatever I had to, to get deliveries and not be put out of business. Mattel might find that China has a long memory and that this apology is not enough. If I were Mattel I would be looking for another product source starting yesterday.
In business here at home, I found most substantial US contractors maintained quality control departments for the purpose of catching design flaws and client error. In the manufacturing operations I know of personally, that was the rule. Unlike the Chinese, we were as legally and morally responsible as our customer for faulty merchandise entering the stream of commerce.
While Chinese manufacturing standards may be better now but this vignette tells a story. My friend was making gloves and sent one to the Chinese as a sample, specifying that if they could make the product in accordance with the sample he would order 14,000 pairs. The sample came back, was approved and the order and letters of credit were issued. The goods arrived and were just like the original sample. He got 28,000 left handed gloves packaged as pairs.
Mattel has apologized because they need China to stay in business. They have lost the capacity to make toys and thereby lost the power to tell China that “we will make it here”. Most of American industry is in the same position. Until we get back to the unglobalized, protected and sensible position of being self-sufficient, we are the patsies of the universe. Our wonder-boy financiers will learn the same lesson.
Unless stringent regulation is applied to the activities of Hedge Funds and Buyout Firms, our country will suffer the consequences of “minority” ownership by foreign masters. Can you picture the typical buyout firm or hedge fund operator, always mindful of capital sources and needs, saying “NO” to a request from Dubai for information or preferment? I cannot.
HELP!!
Howard Stamer
1 comment:
Methinks the dander from the Flemington Fur Company is effecting your brain synapses. Protectionism is a wonderful thing, I suppose. Ports of the World / Dubai investment in Nasdaq, Chinese ownership of a second tier oil company.... Good God No!! Dont forget about Arab ownership in Citicorp! Ifor one have no problem with Ports of the World managing our ports. Security is after all the responsibility of customs and the Coast Guard. Likewise, I have no issue with CNOOC or any other chinese company buying US firms. Thats capitalism. As for Mattel, yes they exposed their own stupidity by not having a QC program in place to insure products were being made to specification. Just as your friend that sent only one left handed glove to be knocked off, they were naive. (By the way vinyl gloves are neither left nor right handed). And I can assure you that Mattel prototypes are in India, Bangladesh, Vietnam, and Borneo as we speak. But for a company the size of Mattel, to not have a standardized quality testing prior to export is plain stupid. To then blame the problem on the Chinese, is equally as stupid. What they should have done is make a recall with an apology that read "Mattel's system of Quality Control and product testing failed. We haved revamped our entire procurement and testing procedures. We have terminated those within our organization that have let down you the consumers. Mattel will spare no expense to insure all of our products are of the highest quality and safety levels in the marketplace".
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