AU government paid subsidies of $3 billion over the past decade to car makers Toyota, Ford Australia, and GM Holden. Manufacturing impacted by high dollar, expensive raw materials, and global competition. Government's $5.4 billion New Car Plan will run from 2011 to 2020. Other assistance to the car industry, such as tariffs, estimated at around $670 million a year. Manufacturing industry overall has shed 125,000 jobs over the past four years. [CR: From my seven years in manufacturing, I get this. Technology changes in digital requires learning new languages and updating hardware. By comparison, staying on top of technology in manufacturing requires millions in capital investment. It is easy to get left behind, and nearly impossible to remain competitive without assistance.]
Dick Smith plan: Sold by Woolworths to Anchorage Capital Partners for $20 million. Earnings before interest and tax last year was $24.6 million. Anchorage Capital Partners believes private equity is the way to turn around a business, "do it outside the day-to-day ASX-listed conventional board room environment and below the radar." Plan is to fix the business, make it perform better, then let the "exit [sale] take care of itself." CEO Nick Abboud's plan is to restock the "bibs and bobs" of electronics accessories. Says that is where the margins are and it will drive foot traffic, then get cross-selling across computers and televisions. Will maintain current store network, introduce more private label products (currently 14 percent of sales), improve markdown management, merchandise mix, online sales, marketing and store layouts. Before the sale, Woolworths "cleared the decks" with 44 store closures. Currently 325 stores achieving EBIDTA profit, no debt, and net assets of $290 million. [CR: I always like a clear strategy on the part of the equity firm and the CEO. "This is what we are going to do" and then they do it. Will be interesting to look back in 12 months and see how effective this was.]
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