New order after Blue Monday
20 January 2009
Yesterday was 'Blue Monday'; a date when post-Christmas gloom is at its worst and we’re feeling the misery of failed resolutions and mounting debts. But what’s so special about yesterday?
Despite an over-powering depressive air, today, inauguration day for President-elect Obama, is a day for a refreshing breath of optimism. However, the newest resident of the White House has declared that immediate action is needed. “Let's not only provide a jump-start to the economy and immediately create or save three million jobs, but let’s also put a down payment on some of the structural problems that we have in our economy,” said Obama.
And immediate action is needed, because whilst today our attention is taken by the swearing in of the new President, global industries are still soldiering on and falling down. Indeed, Nortel has recently posted a message on their website that reads:
Dear Friends of Nortel,
Today, Nortel is filing for creditor protection in Canada, the United States and Europe in order to undertake a comprehensive business and financial restructuring. I firmly believe these are the right steps toward a solution for our company. This process will enable Nortel to become the highly focused and financially sound communications leader it should be.
Most importantly, Nortel is still very much in business and our commitment to customers remains unwavering. We will continue to invest in leading edge R&D to deliver the value our customers expect from us.
To all our stakeholders - including customers, suppliers and employees - please know that this decision was not taken lightly. I can assure you we explored every possible alternative, sought a variety of solutions, and engaged in extensive consultation with our Board of Directors and many other experts.
I am convinced that by choosing this path at this time, we can put Nortel on sound financial footing once and for all. It will allow us to deal decisively with our cost and debt burden, restructure our business and narrow our strategic focus in an effective and timely manner.
Sincerely,
Mike Zafirovski,
President and CEO, Nortel
The Company also announced in a separate release that it has entered into an amendment to arrangements with its key supplier, Flextronics. “These amendments give NNL (Nortel Networks Limited) confidence that Flextronics will continue to maintain the supply chain following commencement of the proceedings. Under the terms of the amendment, NNL has agreed to purchase US$120 million of existing inventory by 1 July 2009 and to make quarterly purchases of other inventory and to terms relating to payment and pricing.” So what does this mean for Flextronics? Already affected by Dell’s decision to cut jobs in Ireland, the company has been forced to shed jobs too, but are more to go worldwide?
There are wider implications though. Nortel’s collapse has apparently triggered one of Britain’s biggest pension-fund problems, as the Nortel UK pension scheme, which has more than 43,000 members, is to be placed into the Pension Protection Fund (PPF) with an estimated deficit of £1 billion.
Giants are falling, debts are growing, and jobs are vanishing. Yesterday was just one of many days of doom and gloom. But perhaps some of that lingering malaise is behind us, and we can afford to look forward slightly more confidently given the change in American stewardship. People across the world are expecting a lot from one man; the 44th to take on the most powerful job in the world. Maybe he’ll be the one to breathe new life into global economics.
This week’s leader was written by Paul Wolfe, EMTww’s Assistant Editor.
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