Telecom giant Nortel files for bankruptcy protection, victim of credit

[jdobbin]

http://ca.news.yahoo.com/s/capress/090114/business/nortel

Telecom equipment giant Nortel Networks Corp. (TSX:NT) and several of its units have filed for bankruptcy protection from creditors, a victim of the global credit crunch that has devastated the Canadian company's markets.

Looks like we will see more lay-offs.

[M.Dancer]

A Trilogy of IR Best Practices

Don't miss the 3 CIRI events on November 20, 2008. Register now for the full day and receive a 10% discount.

<snip>

Janet Craig , Vice President of Investor Relations at Nortel Networks will take you through her IR program and show you how to set the benchmark for investor relations. Come prepared to discuss your own IR strategy and tactics in a roundtable with your peers.

Gosh I wish I had gone to see her...definately a once in a lifetime opportunity, learning how Nortel sets benchmarks for IR....

Hello, Caisse? Nortel here.....I think you will agree we are a strong buy and hold...

[OddSox]

It seems to be a bit of a stretch to jump on the 'global credit crisis' bandwagon. Credit may be the "straw that broke the camel's back" but Nortel has been in big trouble for a lot longer than that.

[Wild Bill]

It seems to be a bit of a stretch to jump on the 'global credit crisis' bandwagon. Credit may be the "straw that broke the camel's back" but Nortel has been in big trouble for a lot longer than that.

Quite true. My career was in the electronic parts industry and I and my peer group watched the whole process over nearly two decades.

The glory years for Nortel were the early 80's. They made a HUGE number of phones and telephone equipment, mostly in Kanata, Ontario and also in metro Toronto. Then, in the early 90's, Chretien and the Liberals began to beat a 'trade with China' drum. Nortel was involved. The idea was that since China was a country that at the time had zillions of people and only a primitive telephone network it was a golden market opportunity for trade between our countries.

Now the ordinary citizen reading this over his morning paper assumed this mean that Nortel would be selling a BIG number of phones to China. This would be a great trade deal for Canada! However, it wasn't quite like that.

The Chinese weren't stupid. They insisted that Nortel set up factories in China so they could make their own phones. Nortel would be paid to do so, of course. They would still be a partner in the factories. However, this meant no new phone market for Kanata and Mississauga.

A couple of years later, production IN CANADA for Nortel phones began to wind down. They were sourcing them from the Chinese factories. A lot of Canadian manufacturing jobs disappeared.

It probably wasn't some political conspiracy, where Chretien traded Canadian jobs for diplomatic glamour in trading with China. Rather, it seemed that no one really knew what was going on or why it happened! As suppliers we noticed that there was no point to supporting Nortel's engineers with samples and data sheets on whizbang new electronic parts. Why would we when we were shut out of any production volume orders? All Nortel's parts were being bought in China from far East suppliers. We no longer had any opportunity for payback!. So engineering began to move to China. There was still a bit left in Canada but nothing like before. Yet Nortel seemed totally blindsided by the loss of supplier support. This is why we thought it unplanned. It was such an obvious thing that if Nortel had known what it was doing they would have done a better job at compensating for it.

At one time Nortel in Canada was so huge that it bought perhaps a solid third of ALL electronic parts in Canada. Around the time of 9/11 that had totally dried up. The impact on the supply industry was enormous. Companies that had been around for decades began layoffs and then folding up. I hit the street, along with literally thousands of others just like me. If a job opening was announced somewhere there was over 500 people applying! If you were over 50 like me it was next to impossible to get hired in a different line of work. That's what pushed me into starting my own business. Nortel wasn't the only hit to that industry. Much of the other contract volume manufacturing was also moved out of Canada. Some went to China for the cheap yuan and the labour. Others went to Ireland, where there was lower business taxes and perhaps even more important, far less government red tape to inflate your overhead with employees to handle it. It appears the changes to that industry are permanent.

There are still a few big players left, like Research in Motion in Kitchener/Waterloo, Ontario. They're here for a number of reasons, with patriotism perhaps being one of them. Still, they are feeling enormous competitive pressures from countries like China. It's really not just the difference in labour costs. In that industry the number of automated robot production lines swamps that out. It's political factors like dollar difference, government red tape and perhaps the biggest, a total absence of anti-pollution costs to manufacturing in China.

Many of us have never understood why our governments allow this disparity. How is it truly free trade when our competitor hasn't got the extra anti-pollution costs that we have in Canada? Should there not be some kind of equalizing tariff or duty? We're not talking trivial amounts here. The difference is considerable.

Yet we've never heard anyone in Ottawa even acknowledge the problem exists, let alone attempt to deal with it.

Look for more big names to go under, in the near future.

Edited January 14, 2009 by Wild Bill

[krazy kanuck]

Chalk up another victory for corporate greed. The list is getting longer.

[M.Dancer]

Chalk up another victory for corporate greed. The list is getting longer.

Actually corporate mismanagement. Management lost a bundle of their own money misreading the size of the semi conducter market. The market was saturated in the early 2000s but they kept on expanding as if there would be no end in sight...

[August1991]

Ah yes. Those rapacious, psychopathic corporations that make their own laws, rule the world and control our lives.

----

Government managers can tax at will - and if you don't pay your taxes, governments will send you to prison. Because of this power, governments can easily borrow money, at very low interest rates.

Corporations OTOH have no such coercive method to get money. They must rely on people voluntarily giving money to them. Nortel is a good example of what happens when people voluntarily choose to stop giving money to a corporation.

[jdobbin]

Corporations OTOH have no such coercive method to get money. They must rely on people voluntarily giving money to them. Nortel is a good example of what happens when people voluntarily choose to stop giving money to a corporation.

I think you forget about the fraud that their execs committed.

[August1991]

I think you forget about the fraud that their execs committed.

Fraud is only a (small) part of the story of Nortel's demise.

I think you miss the point, Dobbin, about how corporations and governments get their money.

As Nortel shows, incompetent (or fraudulent) managers in corporations face bankruptcy. The same does not apply to such managers in government (including politicians).

[jdobbin]

Fraud is only a (small) part of the story of Nortel's demise.

Oh, they had a host of problems to be sure. Just pointing out that fraud played a big part in covering up incompetency.

I think you miss the point, Dobbin, about how corporations and governments get their money.

As Nortel shows, incompetent (or fraudulent) managers in corporations face bankruptcy. The same does not apply to such managers in government (including politicians).

What would like governments to face?

Edited January 15, 2009 by jdobbin

[August1991]

What would like governments to face?

I suppose some politicians face losing an election but that's hardly the same as bankruptcy.

One could argue that the RCMP has been as badly managed as Nortel (including claims of fraud and nepotism) but I don't know how the RCMP would go bankrupt. In any case, as I noted above, the managers of the RCMP and managers at Nortel get their money in entirely different ways. The RCMP gets its money through taxes. Nortel gets (got) its money through voluntary customers, shareholders or lenders.

----

Do you remember that movie The Corporation? (The movie would have made a lot more sense if it had been called The Government.) The movie missed the fundamental question of how governments and corporations get their money. By missing this question, the movie passed aside making what could have been a fascinating documentary about why corporations exist and how they operate.

I'm not expecting Michael Moore to make a documentary on evil Nortel and its machinations to destroy ordinary people.

Edited January 15, 2009 by August1991