Has Quebecor benefited from government money?

To many Canadians, it appears Pierre Karl Peladeau has declared war on the CBC, attacking the government supported broadcaster with a vicious campaign of disinformation. But this is not the only battle Peladeau is fighting. There are others, just not as well publicized.

For instance if you believe the reporting in Montreal's La Presse, Peladeau is using Quebecor Media to attack the Montreal paper and its owners, the Desmarais family, with a vicious campaign of disinformation. Sound familiar?

I read a recent column by Andre Pratte in La Presse in which he went on the attack. Pratte claimed  Quebecor was the formidable media power that it is today thanks, in part, to the financial support of a Quebec investment fund with strong Quebec government ties --- support that in retrospect seems to have been badly misplaced, at least when it comes to financially benefiting the fund.

I admit I know very little about fund in question: The Caisse de dépôt et placement du Québec. But, a quick look at the fund's website seems to substantiate Andre Pratte's position.

The Caisse de dépôt et placement du Québec was established on July 15, 1965 by an Act of Québec’s National Assembly to manage the funds of the Quebec pension plan, a public pension plan also created by the Québec government. (In the following years, the Caisse was entrusted with managing the funds of other public pension and insurance plans.)

At that time, it was described by Jean Lesage, Premier of Québec, as “an instrument of growth, the most powerful economic lever ever seen in the province.” Future events would prove him right.

Canoe, the Sun Media online arm, reported that for an original investment of $3.2 billion Caisse got 45 percent of the Videotron deal concluded Oct. 23, 2000. Quebecor took the remaining 55 percent.

Why was Caisse so interested in climbing in bed with Quebecor over the Videotron purchase? Jean Laporte, the former president of Rogers in Quebec, is quoted by Canoe as believing, "It was a political decision. The (Quebec) government and the Caisse didn’t want Videotron falling into the hands of an Ontario company."

Ten years later the Caisse investment in Videotron had lost 1.5 billion dollars. Despite the large losses incurred, the former Quebec Premier Bernard Landry maintained the Caisse made the right call. Canoe quotes Landry, "It would have been a catastrophe to sell Videotron and TVA to Rogers. If the U.S. bought the BBC, there would have been an outcry in Britain."

La Presse columnist Pratte reports that even Peladeau admits the financial assistance Quebecor got from the Caisse in purchasing Videotron, prevented the cable company from passing into than Ontario hands of Rogers.

It does appear Peladeau has managed to subsidize the growth of his media empire thanks, in part, to a big infusion of money carrying more than a hint of government involvement.

Who's overpaid?

First, the unionized Electro-Motive Diesel workers in London were locked out; Now, they are simply out --- out of work --- the plant is closing. I believe most people sympathize with these workers but I know many see the workers as having brought their economic problems on themselves. I read comments on The London Free Press site like:

• The gravy train has passed. You have learned a lesson in humility.
• Companies cannot afford high union wages.
• Your greedy refusal of $16 an hour cost you your jobs.
• Companies are asking workers for better job performance for less money. Refuse and lose.
• Child care workers make $10 per hour, office workers maybe $15. Caterpillar offered a fair wage.

The other common argument doesn't so much attack EMD workers as defend Caterpillar. The argument goes like this: Despite all the condemnation of Caterpillar for enormous greed, it is doing what all large corporations are required to do in law: act in their own self interest. A corollary to the above is that corporations must first worry about delivering profits to their shareholders. CEOs worry more about shareholder profits than workers salaries, and this is as it should be.

The folk prattling on like this are at best naive. I could find other suitable adjectives but I'll stop with naive.

As I retired fellow, I follow the markets. I have a number of self-directed RSP plans in two banks. I bought my first stock when I was around ten or twelve --- I still have my Richardson Securities receipts misplaced somewhere in my hoarder's basement. In my years of investing, I have come across lots of examples of stuff that flies in the face of the above naive beliefs.

The gravy train hasn't passed. It is just stopping in far more upscale neighbourhoods. Check out the massive increases in the annual pay to CEOs. Companies seem to have no problem paying shockingly high salaries, plus bonuses, even to CEOs of money losing companies. Even the threat of impending bankruptcy does not knock all the zeroes off many a CEO's wage. And performance does not seem to be demanded of CEOs. When a company is going down the tubes, how can a CEO call his performance worthy of a seven or ten figure income?

Let's take a look at some recent CEO pay and how the companies they managed, managed. My favorite in this list is Yellow Media. I owned this for a time. It came highly recommended by Scotia McLeod as a core investment in an income portfolio. Luckily, my ScotiaBank adviser encouraged me to dump it. Accept my losses and run, he said. I did.

Yellow Media

The worst shareholder reward for the highest CEO pay may be Yellow Media (YLO). CEO Marc Tellier took home $8.9 million despite constantly declining profits and stock price. YLO racked up recent total annual return number greater than negative 90 percent! A company that just a few years ago was set to hit $20 a share is selling today for 20-cents.

A few years ago Amanda Lang interviewed Tellier for a ROB report. She caught up with the CEO on the ski slopes outside Montreal in the middle of the week. Lang tells us: "This interview is taking place on a Monday — technically speaking, it's work, even though Tellier is wearing ski goggles and mustard yellow ski boots."

Read the story, One good run, and ponder the question: "Just who is riding the gravy train?"

Air Canada

The CEO of Air Canada (AC.B), Calvin Rovinescu, earned $4.5 million while the Canadian airline racked up frequent annual losses. While Rovinescu basked in the glow of a seven figure income, investors suffered the pain of a very rough landing. Air Canada delivered a five-year return of negative 43.5 percent.

Nordion

According to How To Invest Online, the source of this CEO pay info, it is a mystery why Stephen DeFalco, CEO of Nordion (NDN), merited pay of $13.1 million. The small company under his leadership, he has since been replaced, made large losses and shrunk considerably taking investors on a steep downhill ride.

CEO pay and bonuses are wildly out of line. One need look no further than the daily paper to know this. Recently it was learned that CEO Cliff Nordal, while heading the two hospitals in London, pocketed about $730,000 a year, plus another $100,000 in taxable benefits, a $1.17-million bonus and a pile of privileges like a leased Lexus and country club membership.

During Nordal's tenure at St. Joe's my daughter gave birth there. The washroom adjoining her room was dirty. There were drops of blood on the floor. The staff were informed but because of staff shortages, no one was available to clean the bathroom for hours. My daughter didn't need the bathroom, she was busy delivering a baby, all went smoothly, the staff was excellent.

Still, I have to think that a hospital that cannot find the staff to clean a patient's bathroom before they are admitted should not be paying bonuses to its CEO for his superior performance in running the place.

I can help!

Fiona is now a full 29 months old. I'm amazed at her fast developing abilities and her enthusiasm for life. She has a great can-do, oh-so positive outlook. She pushes herself boldly into every activity that she can.

"Pick me up! Pick me up!" is her constant refrain. She desperately wants to be a part of absolutely everything. She is no longer content to be just a spectator; She insists on participating.

When dinner is being made, her favourite spot is the kitchen counter. She's actually quite good at stirring stuff. She can pour both liquids and powders without spilling. Grating cheese was a bit beyond her nascent abilities, but don't try and tell her that. She is not quite oblivious to her failures but she doesn't want to dwell on them. She wants to overcome them.

Take scissors. Fiona has a small pair of child's scissors. Her first attempt at cutting paper was a disaster. It was very slow going. She asked for more paper, sat down and set to work cutting that paper into small pieces. She wasn't too proud; She asked for help now and then. She watched us use her scissors, she listened to our instructions, and she practised.

She's pretty good with scissors now. I don't think it will be long before she can grate cheese.

__________________________________________________

I like to keep an eye on Fiona's development and how it compares to that of other children her age. I discovered that two-year-olds "like to imitate the behavior of adults and others. They want to help with household tasks. . . . They follow simple directions."

Yes, that's my little granddaughter.

Sun Media serves baby boom bunkum

My local paper, The London Free Press, is not so local anymore. It carries a lot of bunkum from the QMI Agency run by Quebecor and fed into the paper from the Sun Media chain. One big bit of wasted paper was a recent article by Thane Burnett.

The moment I read the headline, I knew I should move on. Nothing to see here, as they say. The red flag on the story was the phrase "baby boomers." Burnett tells us that he is a baby boomer.

"We've come up with some great advances," he tells us: non-dairy creamer, computer games, soft contact lenses, the ATM, Hacky Sack and even liposuction. I thought non-dairy creamer was created in the '50s by Robert Rich of Coffee Rich fame. Rich died in his 90s a few years ago. He was not a baby boomer.

I checked and my memory is better than Mr. Burnett's. The New York Times agrees with me. I decided to check the rest of the great advances the Sun Media reporter claims for baby boomers.

William Higinbotham

Computer games: one of the first was Tennis for Two developed by William Higinbotham and introduced on October 18, 1958, at one of the Brookhaven National Laboratory's annual visitors’ days. Two people played the electronic tennis game with separate controllers that connected to an analog computer and used an oscilloscope for a screen. Higinbotham was not a baby boomer.

Soft contact lenses: According to All About Vision, Czech chemists Otto Wichterle and Drahoslav Lím are credited with creating the first soft contact lens material in 1959. Their discovery led to the 1971 launch in the U.S. of Bausch & Lomb's "SofLens" contacts. Neither Wichterle nor Lim were boomers.

ATMs: Don Wetzel, an executive at Docutel of Dallas company, is credited with conceiving the modern ATM. A Chemical Bank advertisement in 1969 announced the first ATM in everyday: “On Sept. 2, our bank will open at 9:00 and never close again!” Don was not a baby boomer.

Liposuction: This is a tough one. A french model in the '20s had her legs reshaped. It resulted in her death. Not an auspicious start for a rather invasive medical procedure. Decades later an Italian father and son team are credited with preforming the first successful liposuction. But it is Dr. Yves-Gérard Illouz of France many call the father of today's technique. Illouz was born in 1939. Not a baby boomer.

Which brings us to Hacky Sack: Finally, a baby boomer creation. Hacky Sack was created by two young Americans, John Stalberger and Mike Marshall. Sadly, Marshall died of a heart attack in 1975 at the age of 28.

I'm one of those who believe that treating an entire group of people born over a period of about two decades as one monolithic block is foolish. Life is a continuum. Even those who grew up in the '50s were not all influenced by the same music. Those born in 1946, spent the better part of their first decade without Rock 'n' Roll.

I know boomers whose first memories of pop music is stuff like Rosemary Clooney's  Come On-a My House, David Whitfield's Cara Mia, Mario Lanza's Be My Love, Lee Lawrence's Crying In The Chapel . . . Boomers born just five years later were influenced by Chuck Berry, Buddy Holly, Jerry Lee Lewis, Little Richard. If five years can make such a big difference, just think of the difference  twenty years can make.

Look at anything deeply and you will find that just a few years can make a big difference in what influences folk. Take education. Think math. If you are an early boomer you missed New Math. If you were a late boomer you got nailed.

Exactly what can boomers accept credit for? Boomers listened to early rock but they didn't write it. Nor did they perform it. Mick Jagger was born in 1943, Paul McCartney in 1942, and Jimmy Page in 1944. Not a boomer among them.

You want some real boomer music? Think bubble gum. I've posted some music written and performed by boomers. Co-writer was Joey Levine, born in 1947 in New York City. He also fronted the Ohio Express famous, or infamous, for Levine's Yummy Yummy Yummy, I've Got Love in My Tummy. Yes, we've come up with some great advances, Thane Burnett.



Of course, this post is somewhat tongue in cheek. Folks born during the baby boom years have been responsible for a lot more than just bad music. There were lot's of incredible people born in the period from 1946 to 1965, and many of these folk have achieved a great deal.

That said, the only thing all boomers share is the bulge they represent on population charts. And now, approaching their senior years, they will most certainly be responsible for a big deflection. As Jim Morrison warned: "Nobody gets out of here alive."

Oh, and Jim Morrison of the Doors wasn't a baby boomer.

MP Susan Truppe is being silly

MP Susan Truppe refused to stand with the locked out London workers.

Saw a tweet calling attention to a survey posted by MP Susan Truppe. The tweet called the survey silly. Truppe defended her survey tweeting back, "I don't see how its silly to ask if constituents feel its important or not."

Once attracted to her site, I noticed the MP had posted a statement on the labour dispute at Electro-Motive Diesel.Talk about silly. Why quibble over a survey when you've got a messed up statement clearly showing that the MP doesn't know much about the EMD operation in London.

She tells us, "It is important to note that, since the 1930’s, the EMD plant has been under American ownership." Huh? EMD is an American company and always has been. It was incorporated in Cleveland, Ohio in 1922 and bought by General Motors Corporation in late 1930. There was no facility in London until 1950 when GM opened the London EMD branch plant.

The EMD story gets interesting, with a strong feeling of deja vue, when we get to 1993. Read part of the story carried by the Chicago Tribune at the time.

"World's Largest Locomotive Builders" reads the sign outside the United Auto Workers Local 719 in southwest suburban La Grange. For more than 50 years, workers at the massive General Motors Corp. Electro-Motive Division plant down the street could claim the title without controversy.

Then last month the last two blue, orange and black diesel locomotives rolled out of the plant and into service for Metra, the Chicago area commuter rail system. The sign became a depressing reminder of past glories.

Only a dozen years ago, the sprawling, 3.6-million-square-foot factory was filled with the clang of metal presses, the hiss of welders, the cacophony of 13,000 skilled workers, and celebratory bell-ringing as they finished each of up to six locomotives a day. These 180-ton, 3,800-horsepower machines selling for more than $1 million apiece were not only industrial behemoths but also computerized, precision-finished, high-tech products.

Now fewer than 3,000 people are on the rolls, including 1,600 active production workers. The main bay where locomotives were assembled, a vast work space covering several football fields and rising nearly six stories, stands empty and silent like an abandoned cathedral.

The remaining workers still build diesel engines and components for locomotives that Electro-Motive now assembles at its Canadian factory. But management is busy shrinking the plant's size and work force and sending work to outside contractors.

It is also shrinking the hopes of union leaders who gambled on working with General Motors to save the plant."

The work that was shifted to London about two decades ago has now been reclaimed.

MP Susan Truppe wrote, "I remain hopeful that both the Canadian Auto Workers (CAW) and EMD can return to the bargaining table and find an amicable solution as soon as possible." This isn't just silly, it's insulting.

London has been losing its grip on the production of EMD locomotives for years. As early as 2000 at least, in order to meet the delivery schedule for 1,000 SD70Ms for Union Pacific, EMD spread workload among:

• GMLG in London, Ontario, Canada (assembly and paint)
• Bombardier-Concarril, Sahagun, Mexico (assembly and paint)
• SuperSteel Schenectady, Inc. (SSSI), Glenville, N.Y. (assembly and paint)
• Alstom at Hornell, N.Y. (final finishing and final paint, after assembly by SSI)

Long before Caterpillar entered the picture, EMD was one tough employer. Despite union efforts to prove the La Grange workers could compete, the workforce continued to shrink even after locomotive assembly went to London. The union worked hard for a year and a half to meet a company production goal for electrical coils, after the goals were met, the company shipped the production out anyway.

The move to open a new assembly plant in the States was underway while EMD was still under the control of the private equity groups. When Muncie opened last October, the writing was on the wall. Muncie was closer to suppliers, 50 percent larger and somewhat more modern than London. Assembly in Indiana skirts currency risk and the new workers are non-union. They will work for working-poor wages.

MP Truppe may have believed CAT would return to the bargaining table, but maybe Truppe also believes in Santa Claus and the Tooth Fairy. The last two beliefs are not as silly as the first.

The discreet charms of the bourgeoisie investments

 

Last Friday (Feb. 3, 20120 the Electro-Motive Diesel plant in London, Ontario was closed. A day earlier the Veyance Technologies plant in Owen Sound, Ontario was closed. These two closures threw hundreds of workers out of work and left two communities to deal with the fallout.

These two closings, separated by about 225 km., had at least one thing in common: John S. Hamilton. Hamilton is the present CEO and president of Veyance Technologies and from 2003 to 2010 he was CEO and president of Electro-Motive Diesel.

I found this interesting and decided to learn a little more about Mr. Hamilton.

I learned that this gentleman is also, or I should say was also, the CEO of the Tokheim Corporation. He took over the helm of Tokheim in 2001, and by November 2002 the company had filed voluntary petitions for relief under Chapter 11 in the U.S. Bankruptcy Court.

Hamilton said at the time: "We are working through the bankruptcy process with our various constituencies to complete this sales process as quickly as possible. Our goal is to smoothly transition our businesses into the hands of new owners."

In 1898 John Tokheim, an Iowa hardware store owner, invented a pump to dispense kerosene and gasoline. It was such a fine pump that the business was purchased in 1918 and moved to Ford Wayne, Ind. from Cedar Rapids, Iowa.

Today, Tokheim still brags it's a world leader in fuel dispensing technology. It also brags it's French.

The French didn't get all the Tokheim operation. Back in 1986 Tokheim acquired the business they operated as Gasboy International, Inc. until March, 2003, at which time they sold their prize to the Danaher Corporation.

And how has that sale worked out? Well, on a bulletin board I read:

"Gasboy was a great company that myself and 249 other people use to work for until Danaher acquired us and shipped part of our plant to North Carolina to consolidate us with Gilbarco and of course they sent the rest of it to Mexico.

"Thank you Danaher."

There's a sad network of closures associated with the closure of the London EMD plant. And, contrary to what some like to argue, business closures of this nature do not always result in gains for the shareholders of the companies involved. But, in all the wheeling and dealing, there are most certainly winners and losers. The winners may not be long time owners, but johnny-come-lately private equity investors, and the losers are all too often the long time workers, and in some cases long term shareholders.

For a little more info, let me hand you off to a linked Economist article.

Light shows aren't cheap

Getting London, Ontario, to enliven the city core with a 600 thousand dollar plus light show celebrating the World Figure Skating Championships was a tough sell. Mayor Joe Fontana and Tourism London both made strong appeals and in the end the city council signed on to the dream. The price tag, the original sticking point, was shared by various companies and levels of government.

Screen grab from London videographer Rael Wienburg's work.

Years ago during a visit to Paris my wife and I were fortune enough to be in the City of Lights during a festival which saw major buildings throughout the city artfully illuminated. The show was memorable, very imaginative. The projected light transformed Greek columns at the front of one building into giant barber poles or animated candy canes. Neat.

Since first experiencing that festival of lights, I've been quite interested in the various light shows presented in cities around the world. There is no doubt light shows are totally cool. I can't see anyone disputing that. But, they are expensive and that is not in dispute either.

I did a lot of searching of the Internet, and except for London, I never did find posts detailing the total cost of presenting a complex light show. But from what I have read, I'm quite sure $600,000 would not cover the cost of some of the amazing light shows that have been presented around the world. London may well have gotten a bargain

For the National Capital Commission just to update Mosaika, the light show beamed onto the parliament buildings in Ottawa, the commission was willing to pay up to $260,000, or a bit over $14,000 a minute.

A light show for Ralph Lauren back in 2010 reportedly cost in the millions. Watch the You Tube video revealing some of what was done to make the dream a reality and a cost well into seven digits is easier to see than the floating, revolving red purse featured in the show -- and we all see the floating purse.

And light shows are not always videos projected onto buildings. Recently Ghent, in Belgium, made headlines around the world with a massive 55,000 LED creation, a cathedral in lights. Even in pictures, the immediate reaction is, "Wow!"

The light show in London, Ontario, was created by the Moment Factory out of Montreal. Going outside of one's own community to find folk with the talent and expertise to produce a 21st century light show is common. These presentations are not the simple, liquid light shows of the psychedelic '60s.

Technology used in Lyon can be found an hour from London.

A show in Lyon, France, was put together by Christie Digital Systems, Inc. Originally an American company, I believe, this company was taken over by Japanese interests and headed by Kenji Hamashima.

Hamashima was also head of Christie Digital Systems Canada. Christie Canada was the company responsible for handling the visuals at Tedx Waterloo. Yes that Waterloo, London's nemesis an hour east along 401.

Christie itself is located in Kitchener, London's other urban foe. It is interesting that London felt it necessary to go out of province to find a company to produce its show when help was so near at hand. (Who knows, maybe some of the artistic computer geaks in London could have assisted in this project if the production company had been located an hour away instead of eight.)

And while London traveled to Montreal to find a producer, Quebec City traveled to Kitchener. Christie produced the magnificent light show celebrating the French Canadian community's 400th anniversary.





To see more images from light shows from around the word google this: Festival of Lights

Let me start you off with a link to the BBC slideshow featuring the Lyon Fete des Lumieres.