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Sakmongkol ak 47

ariff.sabri@gmail.com

Saturday, 15 May 2010

Initial thoughts on Sime Darby


This is a preliminary assessment. Only two words to describe the financial debacle at Slime err, I mean Sime Darby. Losses and weaknesses.
The PM was being prescient when he stated that the government will not cover up losses and weaknesses. That is a signal that something massive will take place over Sime Darby in days to come. Do a mama Bell or Papa Bell as the immediate step. Break them up into smaller, nimble and controllable business units or Bell children. It's a jungle out there and such a Byzantium and serpentine labyrinth, where tricksters and corporate thieves hide and make hay while the sun shines. In that jungle, Musa Hitam is probably, the anaconda.
The losses could only have come through some malfunction in management. And malfunction is a gross understatement- it must necessarily include elements of some gross negligence, outright fraud, deliberate cost over estimates. It does not stop at the CEO's desk. While he makes the decision, those decisions are tabled at board meetings seeking their counsel, deliberations etc. this is not your bloody money. You have caused a loss- a massive financial hemorrhage of more than RM1.5 billion and you can only respond, by asking the CEO to go on an indefinite leave? We may be fools but we are no bloody fools.
So what does extended or indefinite leave mean? A sabbatical for the CEO to atone, maybe go perform the Umrah or something like that? Suddenly, the great Sime Darby suffers a loss for words and seems to have contracted tongue-gilitis? It has always been the norm of sinners, fornicators, aspirants for higher office, those who think they are about to be dropped from government appointments, those wishing to be selected another term to perform this mini Haj pilgrimage. I think, Sime Darby just cant wash away this hemorrhage by asking Mr Zubir to go for an extended leave.
In China, people like MR Zubir will be arrested and made to spill the beans. So why don't we don't we do the same instead of asking M Zubir to go for this euphemism of 'extended leave"
Musa Hitam and the entire board of bloody directors should be made to resign. Or he if has any moral compunctions, or any sense of honor, he should offer his and the entire board of directors immediate resignation.
But hark- I can inaudibly hear the word- elegant silent!

26 comments:

Anonymous,  15 May 2010 at 11:04  

lagi bullshit, if you ask them only to resign... return back all the money la baru betul..tak cukup duit, rampas semua yang dia ada, declare bankcrupt and dok dalam dendiam.. amacam.. ada berani? Korek sampai peringkat yang tertinggi, freeze semua harta diorang selagi kes tak selesai.. ini u cerita, go for umra' ... alahai... tuhan boleh dibeli dengan umra'... jadi suci bersih macam baby lepas balik umrah... then sambung merompak dan menyangak.. atas tiket "Degree" dari oversea or local university... or maybe from tok guru @ tok dalang bertopengkan ugama... hmm please la bro.. tuhan tu dah jadi tuhan untuk perompak dan penyangak sahaja.... langsung tak membantu menyelesaikan masalah lorr... tambah masalah lagi ada..

...adioss...

sakmongkol AK47 15 May 2010 at 11:21  

adios,

lu ada faham ka itu para on going to umrah? ada faham juga mahu bikin macam cina? rampas semua harta, hukum bunuh lagi, tak cukup family pula kena bayar.
adios amigos

Anonymous,  15 May 2010 at 11:40  

Silence is Golden for those who walk the corridors of Power.Plus there will be a smokescreen for the "biasa la" crowd in a few days to come.Its a tried and tested modus operandi in Bolehland.
My uncle retired as a MAS staff during the tenure of the "million Dollar"guy from 'utara" who plundered the national carrier as everyone stood aside and looked.
My uncle questioned why wasnt that guy and his plundering gang hauled up to face the music?
So, in turn, i am asking you dato sak, why NO FURTHER ACTION?
Eventually the sime darby fiasco will be leading down the path most taken and not less taken.

sakmongkol AK47 15 May 2010 at 11:43  

anon at 11:40
let us aks SD to publish in detail explaining how it lost 1 over billion. and explain why Zubir got the axe alone.
we shall also ask the govt to publish a white paper on this. at least i shall be writing and harping on this from now on.

PH Chin 15 May 2010 at 11:53  

Dato,

Surprisingly for the loss of 1 billion, no one in Sime Darby accepted full responsibility.

Even for Zubir, the bug was passed to him.

Where does the bug stop next ?

Who is accountable for the 'rakyat's money ?

kuldeep 15 May 2010 at 12:07  

SD lost money on "contracts"..secured on competitive bid terms against local and foreign contractors.Many other M'sian companies have similar experience eg UEM,Ranhill,WCT,NamFatt,Peremba.In the case of UEM..the CEO of its construction unit got an early retirement whereas the head honcho (Zubir's equivalent)remained unscathed and went on to collect a huge farewell gift.
Contracts are risky ventures..there will always be cost over runs,variations,price escalations of materials,adverse site conditions etc..and can only be accurately estimated in "hindsight"by the bean counters.
At tender stage..the process is a battle between recognising the right "risk" and putting in a bid that stands a good chance of winning.
During the course of the work..there will be costs that will be in dispute >clients says its in the price whereas contractors says its not covered.So,there will be lots and lots of paperwork n discussions to establish the claims.
As a rule..10-15 % of the original contract sum remains unresolved at any time.And if not resolved will go on to arbitration.
SD is in that particular situation..the issues/claims are pending and I would think serious discussions with clients are ongoing to resolve them (part and parcel of any contract)
However...I believe someone decided a change in game plan >>take a hit NOW...and if the claims works well..let the pleasures come later.
This is NORMALLY the signal of the entry of a new party i.e the old guard have lost favor and the cleaning up is for a new party to begin his "turnaround"..

Now,lets look at MAS..under Mr Idris they decided to buy oil based on crude oil priced at above USD 100..and locked it in for few years ahead.Since then..oil came down to USD 40 and now seems stable at USD 80.There is a big LOSS there..simply cos ur buying at 100 for sumting that cost 80 >>and MAS uses tons of avtur.So why is Mr Jala not asked to leave?
Why was Pardas who was CEO UEM during the Qatar debacle given a good n happy farewell?Wat about the CEO at POS who didn't sell the Transmile shares?

Simply..its not professionalism that matters;for all the multi color books of khazanah.Wats important is to be in the good books of one.

Hang Jebat 2010,  15 May 2010 at 12:46  

Aiyoh, Dato'. Jangan so hard on Musa Hitam lah. Dia bukan orang Jepun. Dia orang Melayu. Orang Jepun boleh say, "I sorry, I resign." Orang Melayu ada banyak muka lah, tak boleh hilang muka. So tak boleh say, "I sorry, I resign."

d'enricher 15 May 2010 at 13:41  

Yes dato,

Can we request for all the Board Member to be held responsible?

Once upon the time in Malaysia ... there were three (3) companies big enough to be successfull on their own, but no ... someone big somewhere wants a "GIANT" conglomerate to face the world. So suddenly ... we have Synergy Drive ... oops sorry its Sime Darby.

Now a BIG GIANT ... COST us more than 1600,000,000.00. Wow that is a lot of zero's.

Really only one person ...

A.Alshukor

Anonymous,  15 May 2010 at 14:02  

Those in the known know that the PRINCIPAL basic cause of this SD fiasco is PEOPLE!

Why were these people allowed to run wild with SD's money, either knowingly (in the case of those in-for-the-take) or unknowingly (too small a head trying to wear multiple big hats, just to syiok sendiri) should be the QUESTION! & yet can one expect to see the light of it?

Example - the Chinese partner in Bakun has been raising many questions about the 'preliminary studies' done by the earlier experts. & yet nobody WANT to take them seriously, SD project team especially! In fact their complaints has since been silenced since the first few complaints filtered through to the medias. Politics &/or to cover someone's ass?

Example - The problems of QP & MOQ were once again people (do check out Big Dog's posting on this subject).

So, the circular argument repeats itself.

U dont have the capable people & yet u want to syiok-sendiri to claim the 5sec fame to be somebody of substance.

End result - red ink all over! But then never mind it's not his money & some other people will likely to be the fall guy!

This scenario has been repeated umpteen time since the BMF scandal in HK!

Some people never learn - that call to mind that either they r too dump or for the sake of Alif Ba Ta, let squeeze the 'pendatang' for some more taxes to cover the ever flowing red ink.

Perhaps these people should take a trip to Greece to learn what they can expect further down the timeline.

But then what do I said about learning skill that these people have....

Anonymous,  15 May 2010 at 14:19  

It's only RM1 Billion compared to PKFZ RM15 Billion !!!

Accountability and Transparent are not the work ethic in Malaysia GLC !!

walla 15 May 2010 at 15:53  

It makes for another interesting case study of how the mighty can fall.

The group's businesses are in plantations, automotive, property, offshore fabrications and other industrials.

The core competency and major revenue earner of this GLC is plantations. To be precise, palm oil. Since that's a cyclical business, they diversified into new defensive income streams. Probably thinking that if they're good with palm oil, they can't be too bad with petroleum oil, they expanded into O&G fabrication. Their engineering arm SDE has a steel fabrication plant in Pasir Gudang and they were eyeing Ramunia as well last year. Although having a big book order, SDE has been suffering cost overruns since way back in '04-05; alarm bells should have been raised since it had happened consecutively in one stretch in a division of a conglomerate.

In any case, the group's judgment might have been clouded by their vision of being a global deepwater player with big vessels plying the platforms in the high seas. Landlubbers should be careful about wanting to be seafarers as well.

This gargantuan loss isn't the first for them. Didn't they suffer another huge loss before in the 90s when they ventured into banking through Sime Bank which incidentally also caused its CEO to be ejected?

That was attributed to weak internal controls which might well be the same cause of the present fiasco, apart from rational-sucking office politics and, certainly, poor project financial risk management.

That the current acting head has to be appointed from plantations is indicative they don't have a backup in the same lines of business. Which also indicates the diversifications were forays not based on real core competencies.

After all, if A in core competency a acquires B in core competency b, then A(a) cannot be expected to run the financial risk management of B(b), and vice versa. Growing plants, forging steel pipes and damming a big wall are three different things with different cost dynamics. One takes time, the others are dependent on steel price or geological studies.

And no amount of civil works experience in building double-storey link houses can substitute for building a giant dam, or buying a barge to ship welded steel pipes, for that matter.


The present losses are booked to their energy and utilities division. There have been some estimates:

Project Losses(estimated total/2H10)
million's

Bakun rm1625/rm450
Qatar Petroleum rm500/rm200
Maersk Qatar rm526/rm159
Marine vessels rm155/rm155

Total rm2806/rm964

So, notice what's released in the media is the rm964 million of additional losses but not the rm2,806 million in estimated total losses. They will say some have been provided before but how come the rakyat didn't know until now? Was there anything suspicious put in the drinking water?

walla 15 May 2010 at 15:54  

4/4

In a similar vein, Sheth had also written about the self-destructive habits of good companies, and how to get out of them:

The cocoon of denial
Find it, admit it, assess it, and escape it

The stigma of arrogance
Escape this fault that "breeds in a dark, closed room"

The virus of complacency
Six warning signs and five solutions

The curse of incumbency
Stop your core competencies from blinding you to new opportunities

The threat of myopia
Widen your view of your competitors -and the dangers they pose

The obsession of volume
Get beyond "rising volumes and shrinking margins"

The territorial impulse
Break down the silos, factions, fiefdoms, and ivory towers

(http://is.gd/c9Pez)

What is important to note here is that the habits must ALL be changed at the SAME time, not by piecemeal effort.

That however, even Umno is too silo to admit. It has been a very costly political party running a very blinkered and hemorrhaging government-linked network of we-can-do-too players.

Meanwhile as the magnitude of this slimey loss sinks in, the rakyat are supposed to hurray rm18 million to sixty seven primary schools after fifty three years of independence?

There are more financial disasters coming up. Just give them some time to run into their last corners. The blogger may need a bigger server.
......................................

Other references:

http://is.gd/c9P6b
http://is.gd/c9P7j

walla 15 May 2010 at 15:54  

3

We started with 'how the mighty fall'.

Collins identified the five causes of conglomerate failures. He said they invariably did it in stages (http://is.gd/c9P1K):

1. Hubris born of success
2. Undisciplined pursuit of more
3. Denial of risk and peril
4. Grasping for salvation
5. Capitulation to irrelevance or death

Stage 1 kicks in when people become arrogant, and regard success virtually as an entitlement. They lose sight of the true underlying factors that created success in the first place.

Hubris from Stage 1 ("We're so great we can do anything!") leads right into Stage 2, the undisciplined pursuit of more - more scale, more growth, more acclaim, more of whatever those in power see as "success."

Companies in Stage 2 stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas
where they cannot be great and growing faster than they can maintain.

As companies move into Stage 3, internal warning signs begin to mount, yet external results remain strong enough to "explain away" disturbing data or to suggest that the difficulties are "temporary" or "cyclical" or "not that bad," and
"nothing is fundamentally wrong."

In Stage 3, leaders discount negative data, amplify positive data and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility.

The cumulative peril and/or risks-gone-bad of Stage 3 assert themselves, throwing the enterprise into a sharp decline that's visible to all.

The critical question is, how does its leadership respond? By lurching for a quick salvation or by getting back to the discipline that brought about greatness in the first place?

Those who grasp for salvation have fallen into Stage 4. Common "saviors" include a charismatic visionary leader, a bold but untested strategy, a dramatic cultural revolution, a hoped-for blockbuster product, a "game-changing" acquisition, or any number of other silver-bullet solutions. Initial results from taking dramatic action may appear positive but they don't last.

The longer a company remains in Stage 4, repeatedly grasping for silver bullets, the more likely it will spiral
downward. In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future.

In some cases, their leaders just sell out. In other cases, the institution atrophies into utter insignificance. In the most extreme cases, the enterprise simply dies.

.............

walla 15 May 2010 at 15:54  

2

There's some murmuring of writebacks and government reimbursement; of the four, they may be able to wrangle a morsel back from Bakun, and something like rm700 million from treasury. That's your money, folks, unless the dam's owner nullifies the claim for reimbursement owing to delays.

Sime has one more project amounting to rm500, an oil platform for ONGC India. Since the Maersk Qatar project was also about building oil platforms, they will have to be careful with this one as well. Since it's due by this November, will it also too late?

So it looks like Bakun has been a financial black hole for this country. Didn't we also have to compensate ABB back then? So if that was because of the Asian crisis, what excuse of a crisis shall we use this time? Subprime scorpion?

It is understood that the Bakun cost overruns this round were only revealed towards the end of the project as they had been refuted earlier. What happened to their cost management? In any case, the civil works of the Bakun project may end up rising from rm1.8 Billion to rm3.2 Billion so that we will soon be able to launch balloons at the site of this rm8 billion mega-dam.

The owner of the Bakun dam is Sarawak Hidro which in turn is owned by MOF Inc (see reimbursement puzzle above). The dam was supposed to have been completed by end-2007 but apparently the soil studies were wrong to say there would be good rocks at the bottom to make the wall.

Since the contractors had to go elsewhere in that jungle to look for rocks to build the dam, that caused a delay, further worsened by the face of the dam being changed (why, no SK-II essence?)

And because of the civil works delay, the mechanical turbines suppliers slammed in their claims for delays. Don't we know how to write purchase contracts more favorably to us?

So the cascade of claims will fall on Sime which will ask from MOF which is its parent and MOF will ask from Sarawak Hidro - which hits one of Umno's vote base. Is rambut putih around to grin through this one?

Summary

The government must not think the rakyat are thick to fall for the fall guy routine.

First UTKs, now Zubir. He doesn't look like someone who could drive through four projects on his own and override the entire board so it must be this board ....or perhaps the previous management.

It behooves all sensible governments running big-buck GLCs to start tackling transparency, internal financial and project risk controls, aptitude problems and real talent management challenges.

In this Sime case, what was committed by its previous management? Who were they and how were the commercial terms made out that is now sinking this conglomerate?

They must also learn how to write more realistic and market-sensible commercial contracts. But then again, this is one macabre weakness in all GLCs. Just cursorily trace all their big losses - start with the EPU and the toll agreements, and work down to TNB and CSFB, and the rest, including InventqJaya.

Meanwhile, let's have a small respite and enjoy what's left of the fine art of the hyperbole:

http://is.gd/c9Ocu
.....................................

Anonymous,  15 May 2010 at 16:52  

latuk wa paham apa lu punya cerita.. tapi cerita umrah tu baik toksah cakap.. wa tak suruh bunuh itu orang.. tak guna la.. dia buat salah, let him tanggung lorr... why mention his family.. unless his give his share to his family, then declare bancrupt lorr.. sekarang lu sinang2 kasi diorang curik harta rakyat(duit cukai yang rakyat bayar) then senang2 resign belah camtu... patot lar ramai sanggup offer diri jadi pengarah alias penyamun dalam GLC.. stop ur wallap la latuk... just accept the fact, harta rakyat bukan boleh buat sesuka hati. Terang2 jadi munafik, atas dunia pun tuhan boleh balas arr kalo dia nak... tapi semua tahu, balasan dia datang bila tidak diperlukan lorr.. cuma untuk tontonan dan dijadikan iktibar oleh khalayak...

...adioss....

Anonymous,  15 May 2010 at 17:43  

Salam Dato' SAK,

Ini Malaysia: Untong Sama - sama Claim, pengurusan bagus, good governant, banyak pandai dan cekap. Rugi seorang kena angkat tanggung jawab, seperti Zubir di SD. Pokok nya Zubir seorang je kebuat keputusan?, apakah cadangan pelaburan juta-juta tidak di bentang kepada BOD?. Patutnya Sama - sama angkat tanggungjawab baru gentlemen nama nya. Bila budaya macam ini akan berubah. Tak faham aku kalu lagu ini!.


TQ

Anonymous,  15 May 2010 at 17:51  

Can U trust the management board of GLCs? The Lingam video tape has brought shamed to the nation,PKFZ was unbearable dan siklang Sime Darby pula. Semua dibawah gomen UMNO!!

Well....Malaysian lets vote BN/UMNO lagi and let them balun habisan2 khazanah negara.

Ibrahim Ali & Mahathir selalu sebut "HIDUP MELAYU" tapi depa terlupa sambung sikit,iaitu penyamun dan kawaq!!!!

hoooray!!!!!

Anonymous,  15 May 2010 at 18:32  

why is it not surprising, this is the syiok sendiri Jaguh kampung losing money again. Orang Umno, so biasa no action will be taken. Rakyat's money will be used to bail out S.D. and the rest is called SOP. Standard Operating Procedures of Malays in business they have no bloody idea about. This is what happens when you have incompetent fools trying to play big boys. In any other country in the world the CEO and board of Directors would be investigated till their lobang cacing terbongkar, but with UMNO cronies nothing will happen. Now the investors who bought S.D. shares will bear the burden. HOW TO TRUST CORPORATE GOVERNANCE IN MALAYSIA if you let monkeys to run the show? Musa and his ilk should all pay through their nose> pockets, strip them of all their assets to pay back for the losses. Let that be a lesson to all in GLCs, screwup and you pay. When will this govt. learn. With the dawning of the internet age, this news of sheer incompetence would be resounding around the world in seconds. Leave the incompetent and cronies out of big business.

Baharudin 15 May 2010 at 18:49  

Dato',
The who’s-who on the BOD are “jokers”… what are their functions/KPIs other than looking at the results of a mess? You put monkeys there pun no issue… with such high profile & supposedly vast corporate experience jokers the least they could do is to smell the rotting fish BEFORE it got really rotten! Ni dah meletup baru nak bising and started to remove people for accountability! Remove yourselves first la for not doing good job… kalau just to sit on board meetings and look at numbers after the facts… sapa pun boleh buat… no need for vast corporate experience la… jerk-heads semua nya… headed by none other than Musa “elegant silence”… poorah! The gomen should go for the head of asshole responsible for the “brilliant agglomeration strategy” of Sime Darby and the other plantation co’s for creating this mess in the 1st place… maybe Khazanah should answer this as well!?

Anonymous,  15 May 2010 at 19:13  

This whole country need an overhaul! If we don't do something there will be nothing left for our children. UMNO must reform and nurture leaders that are relevent in this day and age.

Anonymous,  16 May 2010 at 07:13  

Too many MUSANGS around:
MUSAng Aman- Sabah Chief Minister
MUSAng Hasan-IGP
MUSAng Hitam- Sime Darby Chairman

Anonymous,  16 May 2010 at 10:07  

Yes. Totally agree with you. All board members led by MUSA HITAM should resign and the whole scandal should be investigated. But in this country there is no such institution left that can be trusted to lead the investigations. Yes, seriously, there is no body that is left to do a clear investigation that can probe the truth. Either all the good people are dead or have migrated knowing that there is no future in this country where transparency is concerned.
The justice, you can call it 'Palace Of Justice', it's definitely a palace of NO Justice for ANYONE. If one were to watch the proceedings in the opposition leaders trial, it proves that it's a sham. Under normal circumstances no charge would be instigated against an accused if the Investigation officer (IO) finds no prove of guilt. Good example, a woman lodges a police report against A for allegations of RAPE. The woman would be sent to a doctor for investigations and once the report from the dr confirms that there is no 'penetration', the IO would cease all investigations because the Public prosecutor would declare that it's a waste of public funds to bring the matter to court as the SENSIBLE JUDGE would throw out the case due to lack of evidence. But, look at this case against the leader of an opposition party that has to go through all channels knowing very well that there is no evidence to warrant such a charge. True enough the High court Insensible judge rules that theaccused did not lie and it's up to DPP to frame charges. I am no lawyer,BUT plainly I would say that this is a case of conspiracy and the stupid and heartless and braveless 'pondan' civil servants allow themseleves to be 'RAPED' by the politicians from the ruling elite for their own interest.
So, tell me where is justice??
So, the same applies to the case above. Who is left to investigate?
Who is left to serve Justice.? As a layman I can see how the UMNO/BN govt is doing great injustice to the people of Malaysia. Infact, I would say all MUSLIM regimes in the world today don't GIVE JUSTICE to the people as it's accuquired by QURAN. The foremost Fundamentals of he Quran is not being adhered to. What else can one expect. Politicians are selling their souls for money and positions. May Allah forgive them for they not know what they are doing to mankind. Where is the Mufti's. Can't hear a thing from them. Living in their luxuries, I guess. But not for long. God is watching them. Beware, all wealth gain from the wrong path will be gone one day.

Anonymous,  16 May 2010 at 10:25  

Hey friend...

No need to ask anything anymore lah. Only those with cow brains want to be honest and just work for salaries when the reward of doing a bad job worth millions is sooooo much more attractive.

In the end, can you tell us ONE guy got punished for losing billions of tax payers' money? No some of the guys are still holding high posts. Imagine.

Who cares.. it is people's money and people has no faces nor say in these. They just faithfully pay their income taxes and pay more if need be when many companies this year are in the red unable to pay taxes.

Hey.. if I am the CEO....

Wow.. getting leave and enjoy for the rest of my life and my children's life is good life.

Cheers for more such cases...

The current rule is the one who controls the government is the one who owns your money. The kitty is getting smaller now.

Ever think we have a chance to be developed? Fat hopes.

bugis 16 May 2010 at 12:34  

panjang cerita dato dan panjang juga comment2. satu senario dari saya ialah selagi politician pegang chairman koporat, badan2 sukan dan sebagainya, selagi itu kita lihat betapa rosaknya ahlak politician ni....yg secara langsung merosak kan masyarakat kita.

Anonymous,  16 May 2010 at 12:44  

Dear Dato., I agreed with you 100%. The whole bunch of BOD should resign en mass. Typo case of GLC run by UMNO
just like the MAS scandal. This time around another smart guy the like of Idris Jala will surface to put things right. Orang Asli perhaps.

Anonymous,  16 May 2010 at 21:56  

Dato
Business should be led by business people not politician and retired civil servants. I don't think we lack this kind of people. Give them opportuinities to lead. Get professionals with integrity to be in the board.

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