Nortel Insider – by Desk Jockey

The view from one Desk Jockey

Bailing out Nortel?

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bailout-governmentWith all the bad news that Nortel has faced during the past week, including the very real possibility of bankruptcy and an NYSE delisting notice, it’s perhaps no surprise that some are wondering (and perhaps hoping) that Nortel will receive a bailout from the Canadian government. 

Certainly this is a possibility.  With the big auto makers getting proportional help from the federal and Ontario governments (contingent on the approval of the US auto aid package – who said Canada doesn’t follow America?), it’s no wonder that other industries, including the tech sector, are also lining up to ask the government for their handouts.  

In particular, the tech industry, represented by the Canadian Advanced Technology Alliance (CATA) is asking for a “$60-billion stimulus package”.  One can only assume Nortel is a member of CATA, since there are some 33,000 “high-tech executives and their companies” represented, and a search for Nortel and CATA turns up numerous links between the two.

We are split on our feelings about a Nortel bailout.  On the one hand, bankruptcy is more than a just a legal condition for the company if you are one of the many employees who have spent their entire career at Nortel.  These loyal and dedicated citizens stand to lose a lot if their pensions cannot be guaranteed in the event of insolvency, something we covered in a previous blog post

On the other hand, we cannot and will not support handouts to a management team that has repeatedly shown ineptitude towards basic business practices and has played more than a mere bystander’s role in the events that have led to Nortel’s current precarious position.  A bailout to Nortel would only reward those that have hastened Nortel’s demise and personally profited from it.  This is not fair.

We would like to see a measured approach.  A bailout or a low-interest loan should only be given out if the recepient company agrees to controls and conditions.  This would include possible leadership or BoD replacement.  However even this is overly ambitious and some questions arise: Who in the government should oversee all of this? And isn’t this just one more step to transforming a public company into a government sponsored or even government-owned enterprise?  Is this really good in the long term?

A more tenable plan would be to just guarantee employees’ pensions.  We aren’t sure if this already covered by law, but nonetheless even this plan would be very unpopular to taxpayers, many of which have already lost money on Nortel due to its indefensible collapse in share price.  Judging from the quality of comments in news articles about Nortel, it is clear that its reputation is tarnished beyond repair and thus any public effort to help the company is likely to be met with severe resistance. 

Whatever the outcome, one thing is for certain: Those reponsible will suffer the least, while those who will suffer the most will have had no part in the cause.  Such a shame that history must repeat itself.

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Written by Desk Jockey

December 13, 2008 at 1:41 pm

Posted in Uncategorized

Tagged with , ,

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