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Matthew Franklin and Nicola Berkovic | February 19, 2009

Article from:  The Australian

THE Australian Workers Union has attacked mining giant Rio Tinto as a blackmailer threatening mass sackings to pressure the Rudd Government into backing its plans to sell up to China.

AWU national secretary Paul Howes said yesterday he was sickened Rio executives, led by chairman Paul Skinner, had told the Government they would scrap nearly 3000 jobs if Wayne Swan did not approve a $30billion rescue package from Chinese company Chinalco.

He said he could see no reason why Mr Swan would block the deal, and accused Rio of callously holding an axe over workers and putting itself above “civil society”.

Malcolm Turnbull said the deal must be carefully scrutinised, while former Howard government ministers Peter Costello and Ian Macfarlane said Chinese government ownership presented real problems. Share market analysts have accused Rio management of acting in their own interest rather than that of shareholders. They claim the board is more interested in preventing arch-rival BHP gaining its assets than considering how best to raise cash to cut debt, giving Chinese interests the chance of a preferential deal.

Rio’s shares have collapsed in recent months amid sharp falls in commodity values sparked by the global financial crisis.

Rio last year rejected a merger proposal from BHP-Billiton, but now wants to accept a $30 billion bailout from Chinalco, owned by the Chinese Government, which would give it control of many of its Australian assets and an 18 per cent stake in the company.

The massive deal must be ticked off by Mr Swan, who receives advice from the Foreign Investment Review Board, based on tests of the effect of the deal on the national interest.

While unions do not oppose the sale, the AWU reacted with disgust to Rio’s suggestion on Tuesday that if the deal was not approved it would slash 2150 jobs and abandon plans to create another 750 – mostly in Queensland.

Mr Howes attacked Rio while conceding the deal would probably go ahead.

“Gambling with the lives of working people who are already feeling very vulnerable at the moment in the mining sector is, to be honest, sickening.

“Rio Tinto’s board and management have demonstrated conclusively over the last couple of weeks their incompetence in running their own company and now they’re just demonstrating their incompetence in communicating their concerns with government and with the media”

Mr Howes said Rio’s “aggressive union-busting style” spoke of a poor corporate philosophy that put itself above the community.

“That’s been demonstrated in the way they are blackmailing the Government … in this Chinalco deal,” he said. “They seem to be more interested in playing politics than … running a decent resources company, which is why they are in the shape they are in.”

Mr Howes also said that while he had some concerns about aspects of the takeover, no one was opposing it outright and he could see no technical or political reason why it should be blocked.

“Realistically, I can’t imagine the deal being blocked. So why would you need to put that threat out there?”

Another key mining union, the Construction Forestry Mining and Energy Union, backed the Chinalco deal, with mining division president Tony Maher saying allowing the Chinese to haul Rio out of debt was “probably a good thing for the workforce”.

“There’s no doubt a debt-ridden company is more prone to cutting jobs,” Mr Maher said.

But he warned Mr Swan to carefully weigh the risk of Chinalco using its mining interests to drive down prices by lifting production.

Mr Costello also urged caution. He said when he was in office, the Treasury had never rejected a foreign investment and when he blocked a Shell investment in Woodside in 2001, he set a precedent. Asked if he had any for advice for Mr Swan, Mr Costello said: “You better look through this Chinalco deal – look through the price of commodities today and the value of the dollar today.”

But his leader was not so emphatic when asked about Mr Costello’s view. Malcolm Turnbull said the transaction was very substantial and raised important issues of national interest.

“We will be looking at all of that very carefully, seeking detailed briefings both from the Government and the company, and then we will express an opinion, collectively, after we’ve done that.”

The key, the Opposition Leader said, was to extract strong and enforceable assurances from overseas investors to ensure the national interest was protected.

Opposition resources spokesman Ian Macfarlane called for careful scrutiny of the deal and said there were genuine concerns about the Chinese Government’s ownership of Chinalco.

Mr Macfarlane said any foreign government ownership of significant equity stakes in major companies presented a concern because there was potential for sensitive information to make its way through the government to other commercial players.

This was particularly important in the case of Rio because of its strategic iron ore and coal holdings in Australia and copper resources internationally.

“In that situation, you have got to view them very differently than in a normal commercial situation,” Mr Macfarlane said.

“You’ve got to hope that Wayne Swan can handle this one … it needs very stringent examination.”

Mr Swan played a straight bat on the issue, saying he would deal with the proposal “in the normal way”.

“We will analyse these proposals seriously and in a considered way and take our decision in the Australian national interest.”

In Queensland, where company workers’ jobs are threatened, Premier Anna Bligh said the deal was vital to the strength of the state economy and should proceed. Concept Economics executive director Brian Fisher said concerns about the deal were misplaced because Chinalco planned to take a relatively small stake in Rio, and the investment would support jobs.

“It’s perfectly clear that without this sort of capital injection, we willhave less projects going ahead,” Dr Fisher said.

He said it was crucial for Australia to develop strategic links with China, which would be the engine room for the world’s growth over the next 30 years.

He also said there was little point in Australians owning assets that were stuck in the ground – it was more important to develop them, so the nation could benefit from increased exports, royalties and tax revenue.

Peter Arden, an analyst at Ord Minnett in Melbourne, said Rio simply wanted to shed debt.

“They haven’t really bothered how they did it, except they didn’t want anything to do with an alternative that would let BHP get in the door,” Mr Arden said.

He said he thought the deal would probably be approved by both the Government and by shareholders.

“I think management has acted in self-interest, wanting to protect their collective position as a big player with the opportunity to still do things at a time when they couldn’t afford to,” he said.

“They really are fantastic assets and to be selling them at this time, even if they get a small premium on notional price at the bottom of the market, that’s not a good outcome.

“It’s poor management to be selling your best assets at any time for a poor price, but especially when you’re in a distressed state.

Additional reporting: Sean Parnell, Matt Chambers

http://www.theaustralian.news.com.au/business/story/0,28124,25075670-5005200,00.html

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