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Daily Archives: April 1st, 2009

01 April 2009 8:30am

Employment growth is more stable than the mainstream media portrays, and Australia may well survive the global financial crisis without the big job losses seen in previous downturns, according to HSBC chief economist Dr John Edwards.

Edwards told a briefing hosted by recruitment firm Aequalis Consulting last week that while output growth is probably close to zero, Australia is likely to avoid a severe recession.

And, he says, “it’s still possible there won’t be a recession at all”.

Regardless of whether GDP growth is negative in the coming months, Edwards said that most people will keep their jobs. “It’s likely that only a very small proportion of current employees will be made redundant during that time.

“However, overall job growth is slowing rapidly. Between August of last year and February of this year Australia lost about 100,000 full-time jobs, and created 114,000 part-time jobs, so that job numbers overall increased at a time when other economies were losing jobs.

“While jobs are steady overall, full-time jobs are falling. People are working fewer hours but remaining employed.”

01 April 2009 8:54am

In a social media world where “anyone can publish”, managing the redundancy process to avoid online reputation damage is crucial, says HR technology consultant Michael Specht.

It can be impossible to keep layoffs a secret when everyone is a publisher, Specht told HR Daily. “It takes just a second after someone is walked out the door for them to post about it on Twitter or their blog, and it spreads from there.

“Blog posts, tweets and video content all remain in search engine caches for a very long time, if not forever,” he says, so the way employers handle their redundancy processes now can potentially have implications for them for years to come.

In his own blog, Specht recommends that employers:
Make cuts quickly. “This is always the case but even more so now. Use the old carpenter’s rule ‘measure twice, cut once’ – the last thing you want is people having multiple chances of publishing about the process.”

Remember to treat people with respect, but also remember that “humans do not make rational logical decisions based on information given to them… This usually means they will react poorly initially.”

Give employees advice about venting online. “Make sure if they do it will not lead to nasty legal battles down the track.”

Expect things to be blogged, tweeted, and generally discussed.

Monitor the internet to see what is being said. “Allow people to vent but if the messages are blatantly wrong, gently correct them.”

Don’t get into an online publishing war. When something small is published, sometimes ignoring it is the best option. “The more times search engines find a topic the higher they rank it in the results. Also, bloggers tend to react quickly and harshly – don’t give them additional fuel to write about.”

Establish a Facebook alumni group (if you don’t already have one) and automatically invite all of the employees who are leaving. Remember some will later become your “boomerangs”.

Set up an internal wiki to allow the people leaving to document their knowledge in a central location. “This way you might capture some of the knowledge that is leaving.”

Tell your customers, suppliers, media, analysts and blogosphere what is going on and why.

Make sure the rest of the organisation is also cutting back on expenses. “If you keep people flying first class while laying off employees this will also get people talking.”

Highlight the other cost-cutting measures that the organisation is making to show layoffs aren’t the only tactic.

Encourage the CEO to start a blog – this will show he/she is “a real person”.

Make sure you pay severance packages fairly and on time.

Jamie Freed
April 1, 2009

THE first of three high-profile applications by Chinese companies to buy Australian mining assets was approved last night when Federal Treasurer Wayne Swan allowed Hunan Valin Iron & Steel to purchase up to 17.55 per cent of Fortescue Metals.

The Treasurer approved the $1.2 billion investment subject to “formal and strict undertakings” in relation to the board seat Fortescue has allotted for the chairman of Valin.

Among the conditions was that the Valin nominee to the board would submit a notice of any potential conflict of interest relating to Fortescue’s “marketing, sales, customer profiles, price setting and cost structures for pricing and shipping”.

The Foreign Investment Review Board had extended its examination of the Valin application by 30 days, compared with the 90-day extensions for Chinalco’s investment in Rio Tinto and China Minmetals’ investment in OZ Minerals.

Unlike Chinalco and Minmetals, which are state-owned enterprises, Valin is controlled by the Hunan provincial government. Fortescue is separately seeking $3 billion in funds from the China Investment Corp to expand its iron ore operations.

“We are talking to Chinese capital providers with a view to continuing the steady march of Fortescue to be an even more meaningful player in the global iron ore industry,” Fortescue chief executive Andrew Forrest said last night.

Chinalco yesterday provided a window into the low cost of financing available to Chinese groups seeking to invest in Australian miners. In documents filed with the Securities and Exchange Commission, the loss-making Chinese aluminium maker revealed the $US21 billion ($A30 billion) of debt it had obtained to fund the deal was on terms better than those available to AAA-rated Australian banks.

Chinalco has obtained 15-year loans with principal payments not starting until year eight at the six-month London Inter Bank Offered Rate (now 1.74 per cent) plus 90 basis points.

“It’s an amazing deal,” said a banker who specialises in mining finance. “You can’t get that sort of money in this market. They are not commercial terms.”

Chinalco’s listed subsidiary, Chalco, has a BBB+ rating and China has an A+ sovereign rating. For comparison, Macquarie Bank, under the Government’s guarantee AAA rating, recently raised funds at 96.5 basis points above LIBOR over a five-year term. BHP Billiton, which has the strongest balance sheet in the mining industry, paid a 390-basis-point spread on a 10-year bond in a recent raising.

The credit default swaps on Rio’s debt are trading at 725 basis points, indicating the miner would face a hefty cost of debt if Western banks were willing to lend it funds.

China’s Exim Bank has agreed to help Rio obtain project financing if its deal with Chinalco proceeds, although the terms have not been made clear.