Sunday, September 9, 2012

Rio Tinto Blackmail Tactics



I don't know how many times I have heard about the imminent demise of the Tiwai Point smelter and it generally occurs at the time that their power agreement needs to be renegotiated or the ETS threatens profits. Even our local MP Eric Roy has questioned the sincerity of their claims that their profitability is under threat and suggests that it is "a case of brinkmanship from the multinational commodities giant".
One of the roles of government is to protect our country from exploitation by powerful multinationals and ensure we maintain sovereignty over our resources. While such companies provide useful capital and employment we must always make sure the cost of the relationship does not outweigh the benefits. When one considers the resources that we have made available to the smelter and the supporting infrastructure that we continue to maintain (at tax payer cost), do we really get a good return from our ongoing investment?
The smelter has averaged around $1 billion a year in export income and given the quality of the aluminum being produced and the efficiency of the plant, any downturn has generally been followed by a strong recovery. When Rio Tinto suggests it is considering withdrawing its $200,000 support to the Kakapo Recovery Programme it is stooping to an appalling level of manipulation to gain public sympathy.     
Jeanette Fitzsimons has some experience of the way Rio Tinto operates and her Herald opinion piece  provides some alternatives if the government is prepared to stand its ground.



25 comments:

Shane Pleasance said...

Dave, If you are basing your premise on:

"The smelter has averaged around $1 billion a year in export profits"

you ought to let them and their accountants know, I am sure the smelter will be delighted to hear of their silly mistake that only you seem to have discovered.

bsprout said...

And to think I got the information from their own website, too (check the link on my post). They mustn't read their own publicity.

Anonymous said...

Spot the difference competition.

bsprout - "The smelter has averaged around $1 billion a year in export profits....."

Rio Tinto - "Export revenue is around $1 billion each year."

rogerguyford said...

One is a pricipled green Party activist.
The other is a multinational capitalist polluter.

bsprout said...

Well spotted, Anonymous, it was a good thing that I linked to the source so that you could correct me. While the $1 billion may not have been actual profits from the smelter the parent company hasn't been doing that badly considering the dismal forecasts, more than enough to handle the odd fluctuation in the commodities market: http://www.smh.com.au/business/earnings-season/rio-tinto-profit-soars-above-estimates-20120808-23u3u.html


rogerguyford said...

I'm stalking you, bsprout.

bsprout said...

Stalk away, rogerguyford, keep me honest.

Anonymous said...

Results for Spot the Difference Competition.

Clear winner for "difference" is Roger Guyford. Wins the "life long gratitude award for perceptive creative thinking in the deep south, and related fora."

bsprout wins the Greg Boyed Supreme Journalistic Award for "predetermined conclusions despite the facts changing materially".

Shane Pleasance for "outstanding prescience in predicting the answers before the exam questions have been set". This award recognises all the smarmy unctuous behaviour normally attributed to independent thought in an alien setting.

bsprout said...

Anonymous, how about an award for Rio Tinto? I was thinking about the Poor Rich Award (in reference to the 50% if new Zealand's wealthiest who managed to declare their taxable income as less than $70,000).

http://www.stuff.co.nz/business/money/7549236/Half-NZs-super-rich-dodge-tax

Anonymous said...

Presumably Rio Tinto pays out profits to shareholders who pay taxes on their dividends. Rio Tinto itself probably is not liable for any tax. All of Rio Tinto's employees would also be paying tax on wages/salaries

For instance, if you were to buy shares in AirNZ, or one of the upcoming SOE's, you would pay one third of any return back to the Government in personal taxation.

I read the link that you thoughtfully provided. The final sentence said this:
"Revenue Minister Peter Dunne said the figures did not include tax that may have been paid on income from trusts and dividends."

Shane Pleasance said...

Always smarmy - rarely unctious! Thanks for the award, fellow independent thinker.

Still chuckling.

Shane Pleasance said...

Ok, so if not based on erroneous profit assumptions, you are critical of the smelter why exactly, Dave?

bsprout said...

Shane, I guess it is part of the bargaining process to exaggerate their vulnerability to progress a good deal for power supply, but it is a little callous to treat their workers so badly and use the kakapo project as a pawn in their strategy.

Shane Pleasance said...

It is good business to try to get a good power deal. I spoke to their CEO a few years back about the power deal, and they are perfectly capable of generating their own power. Maybe they should.

I know many people who work at the smelter, and as yet have not heard a bad word said about how they treat their staff, so from a culture pespective, 'treating their workers so badly' would be completely out of character.

If their is ever an incentive for private enterprise to never act benevolently (and there are many), you have just provided it Dave.
Perhaps you would wish they had NEVER 'supported the kakapo"?

bsprout said...

Shane, the smelter has a very mixed record in dealing with staff and there were some shocking health statistics with pot line asthma in the early years and there are still some health concerns now. The smelter also managed to deunionise their workforce by offering attractive conditions and then over time cut back on those same conditions to the extent that the workers are rejoining the union. The way that they have kept workers informed regarding their job security has also been substandard. http://www.stuff.co.nz/business/industries/7629343/Smelter-workers-afraid-to-speak-out

You are right about it being good business to push for a good deal, I am only questioning their tactics. From their past record of negotiation there have generally been threats of closure, layoffs etc, then after the deal has been made the threats turned out to be hollow. Given the parent company has made strong profits despite the economic downturn, do they have an obligation to absorb some of the ups and downs to provide secure jobs and certainty for their workforce (as long as the business remains viable), or should workers be treated like commodities?

The $200,000 they provide for the Kakapo Project is substantial for the kakapo but chicken feed for Rio Tinto. I am not ungrateful for their support but think it's appalling to use it to lever public sympathy.

We really have no way of knowing how bad things really are for the smelter so I guess if they are still going strong in a years time my concerns will be vindicated and if they turn belly up, I guess others will be gloating in future comments. Who really knows?

Shane Pleasance said...

The smelter has an obligation to its shareholders first and foremost.

bsprout said...

I know you are a black and white guy, Shane, but I would have thought there should be some consideration given to the workforce that has some part in creating their profits. It is interesting to note that the productivity of workers tends to increase well above the rate of wage increases. How ethical is it to continually minimize wage costs to maximize profits? Should the human costs of this never be considered?

Shane Pleasance said...

A good board of directors understands, rationally - in directing the best returns to shareholders - that where human resources are important, they ought to be treated with appropriate reverence.

As a grey unionist man, one suggests you will make the argument that they are not.

You may well be correct.

bsprout said...

So why, Shane, did the world's banking and financial systems implode? You can't tell me that unrestrained greed isn't a factor that drives many business decisions.

You often appear really trusting that those in positions of power will generally do the right thing. While many probably do, just as many (if not more) probably don't in reality.

A tobacco executive was asked this question by an MP in a select committee:
"Do you consider what you do moral or ethical?"
The reply:
"It's legal."

Shane Pleasance said...

Greed is good. Force is not.

Anonymous said...

Hyperbole?

I know you are a black and white guy, Shane,
How do you know that?

but I would have thought there should be some consideration given to the workforce..
You don't know that it isn't.

It is interesting to note that the productivity of workers tends to increase well above the rate of wage increases.
Where do we note this rule of thumb?
And "well above" demonstrated across the board in every instance where?

How ethical is it to continually minimize wage costs to maximize profits?
Where is this happening? At Rio Tinto?

Should the human costs of this never be considered?
How do you know they are never considered?

bsprout said...

Anonymous:
1. He told me, himself!
2. This goes both ways, what do you think their priorities are?
3. http://www.nzae.org.nz/wp-content/uploads/2012/06/Tipper-productivity-real-wages-and-workforce-age-structure-final.pdf
And the fact that productivity has increased by 52% since 1989 and wages (adjusted for inflation) have only increased by 16% http://www.stuff.co.nz/dominion-post/comment/5824465/New-Zealanders-get-low-wages
4. It was a general question and Shane answered it be saying "greed is good"
5. They probably are but I was suggesting the weight given to it isn't as great as it should be.

Anonymous said...

It is interesting to note that the productivity of workers tends to increase well above the rate of wage increases.
I appear to have been mistaken as to what you meant by that. I read that to mean that with every wage increase workers increased productivity well beyond the dollar value of the increase.

Whereas I take this
And the fact that productivity has increased by 52% since 1989 and wages (adjusted for inflation) have only increased by 16%....
to mean that productivity increases have outstripped any ensuing increase in wages.

My conclusion is that you have assumed that all productivity increases are due solely to an increase in the output of workers, who are working increasingly swiftly.

bsprout said...

I assumed that it referred to worker productivity, but even if it didn't the relationship between overall productivity and and the contribution of workers would still be substantial. The fact that the increase in productivity is over three times greater than the increases in real income is concerning. We also know that the real value of the median wage has fallen since the 1980s
http://www.victoria.ac.nz/vms/industrial-relations-centre/irc-events/lew-conference-welcome/lew-papers/M11_Rosenberg_LEW_final_2_.pdf

bsprout said...

Also one of the concerning elements of the POAL dispute was the Port workers had substantially improved efficiencies and productivity and yet were rewarded with greatly reduced working conditions.
http://www.poal.co.nz/about_us/performance.htm