French lessons for Labour
THE dethroning of Carlos Ghosn as the global car industry’s most garlanded figure offers some lessons for the Labour Party and its nationalisation proposals.
No sooner had the details of the Nissan-Renault scandal emerged than French finance minister Bruno Le Maire called a press conference to say that France and Japan were keen to maintain the Nissan-Renault partnership.
As a 15pc shareholder in Renault, with 30pc of the votes, President Macron’s government felt it couldn’t stand back from a governance crisis affecting one of France’s main industrial employers without saying something. Labour’s Shadow Chancellor John McDonnell sounds reasonable when he talks of taking the water or railway companies back into public ownership and reinvesting dividends into infrastructure.
That is all hunky-dory but McDonnell forgets that the moment something goes wrong, as when South Western trains failed to run on Monday morning because of engineering works, it is he or Jeremy Corbyn who would be fending off the BBC’s Today show and opposition in the Commons about what went wrong.
Ownership also brings with it operational and governance responsibilities. Imagine the rows when the pay report for the ‘fat controller’ of publicly owned railways is disclosed. The best thing for the Macron government to do in order to escape from the embarrassment which comes in holding stakes in private companies would be to dispose of its Renault stake.
Nissan has been wanting to consolidate control of Renault for some time. Certainly, a full merger would end the overlapping board responsibilities and opportunities for regulatory arbitrage which comes from a labyrinthine structure in which Renault owns 43pc of Nissan and Renault owns 15pc of the Japanese firm.
One way of achieving more transparency would be for the French to place their Renault stake in the market allowing the two car makers to forge a merger of equals. As a former Rothschild investment banker, Macron should recognise the benefit of freeing up ownership and saving costs.
But that would almost certainly mean placing the interests of investors above those of car workers. Thatcherite labour market reforms mean such rationalisation in an industry with over-capacity is possible in the UK. In France it might be a case of calling for Boris’s scrapped water cannons.
If McDonnell and Corbyn don’t want to find themselves in a fight to the death with their union supporters, in the manner of the Wilson-Callaghan governments of the 1970s, they would be advised to back away from public ownership.
Sea legs
AS BRITAIN’S second-largest defence contractor, Babcock should at the very least be safe from an overseas takeover. And, as we know, Melrose Industries has its hands full with GKN, which, like Babcock, has the Spitfire running through its veins.
Babcock has been unsettled by a rogue report from an unidentified floating object, Boatman Capital, and some less than confident results. It has been required to write down the value of its oil and gas helicopter enterprise and close the Appledore shipyard at a cost of £120m.
Next year, revenues and profits will have to absorb a hit from the Magnox nuclear decommissioning contract. In spite of the heavy waters, including another 5pc downward shift in the share price, chief executive Archie Bethel was in battling form rejecting the Boatman analysis and declaring Babcock the most ‘undervalued’ stock at present. That does sound a trifle over-defensive.
Reality is that Babcock is not doing as well as it should but cannot be compared to outsourcing weaklings such as Interserve.
The underlying numbers are robust with profits before the nasty bits 2.5pc ahead at £245.5m, free cash flow at £140m, an order book valued at £32bn and net debt down £159m at £1.13bn.
Assuming no Carillion or Patisserie Valerie creative accounting, that looks like a safe platform from which Babcock can steam ahead.
National interest
THE proposed sale of medical concern BTG to Boston Scientific tells us just why the Government should reject lobbying from former Office of Fair Trading boss Sir John Vickers, the Universities Superannuation Scheme and others to step back from plans to toughen the UK’s scrutiny of takeovers.
It is in the national interest that research and intellectual property created in the UK stays here, as we seek to conquer new overseas markets.