Is this an oxymoron? Of course profit leads to prosperity! Is the sole purpose of the business to generate profits for the shareholders? Does profit alone equate to increased shareholder value?
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VMCOTT operating at a loss
State-owned Vehicle Management Corporation of T&T (VMCOTT) is operating at a loss. In a bid to bail out the company, Government is moving to restructure or partially privatise the state enterprise. Confirming the plans on Friday was VMCOTT’s chairman Joe Pires and acting CEO Ramesh Lackhan. Pires said VMCOTT will soon award a contract to a company to come up with a strategic plan and identify business partners for them. On Thursday three companies were interviewed for this process.
They would be evaluated, Pires said, with one company being selected to seek a business partner or partners for VMCOTT. The partner/s, Pires said, must be able to provide financial backing, technical advice and generate new business for them. Cabinet would have the final say as to who the business parter/s should be. “We will hire the consultants to make it transparent and above board. But that does not mean that any local company would not be given the opportunity once they fill the criteria set out by the consultants.”
Pires: There will be no job cuts or favouritism
Established in 2000, VMCOTT offers a range of vehicle management and maintenance services in T&T and the Caribbean. Pires insists that VMCOTT, which has an asset base of $70 million was “not for sale” nor will its 60 employees face jobs cuts. “We are looking at aligning ourselves with a strategic partner that can carry us to the next level. VMCOTT needs technical assistance for it to survive in the future,” Pires said.
By September, Pires said, its partner/s should be charting a new way forward for VMCOTT. Pires also gave the assurance there would be no favouritism in selecting its partner/s, nor would there be any political interference by the People’s Partnership Government. He said if this should happen, he would resign. In the last five years, VMCOTT has not made a profit, even though it receives an annual subvention of $15 million, Pires said.
The $30 million VMCOTT generated last year from the maintenance and repairs of vehicles, Pires said, was not enough to break even because of overhead costs. Pires said among some of the problems he met at VMCOTT were lack of open tender, pilferage of spare parts, sourcing spare parts, monies being owed, and absence of a regular cash flow. Lackhan said VMCOTT has $3 million in obsolete spare parts which will soon be auctioned.
Cadiz: VMCOTT owed millions of $$
On Friday, Transport Minister Stephen Cadiz, under whose purview VMCOTT falls, confirmed that Government was looking to bring on board private companies at VMCOTT to make the company efficient and viable.
“It is very much in its exploratory stage now. VMCOTT has been operating at a loss. My job is to correct the negative that we have there. We are going through VMCOTT with a fine tooth comb to ensure that we cover our losses, expand, and make it profitable. We have to clean up the balance sheet. There is an aged receivable that we are trying to collect.” Asked how much VMCOTT is owned, Cadiz said, “millions of dollars.”
Cadiz said an audit was also being conducted at VMCOTT. He said VMCOTT should not go into any arrangement at a disadvantage or with cap in hand. “VMCOTT has been losing market share to other garages because they were not providing a high level of service. The goal is to build back its customer base.” Cadiz said he saw no reason why VMCOTT cannot make a profit. He also felt that the State should not subsidise VMCOTT.
Warner: Govt will bring in friends and family
The news of VMCOTT’s impending privatisation, however, did not go down well with former transport minister Jack Warner. “This would only open a can of worms, and the Government would bring on board their “friends and family” to manage it. I don’t think the country should allow them to get away with this. When VMCOTT was under my tenure, I had plans to make it more marketable.” Warner questioned why the public was being kept in the dark about VMCOTT’s new plans.
He said VMCOTT was underperforming because of lack of funding. “The police service had owed VMCOTT $17 million when I was national security minister. An arrangement was put in place to pay the money in tranches.” Warner said when he resigned as minister last year, the bill was reduced to $6 million.
Howai: No final decision yet
In response to an e-mail yesterday, Finance Minister Larry Howai said “no final decision has been made” about the company. Howai explained that in the 2013 budget, he named four companies that needed strategic partners, one of which was VMCOTT. “These partners could bring capital or could provide some form of franchising or technology/management capacity. We have not yet decided. Each case will have to be considered individually.”
The first phase, Howai said, would involve a detailed evaluation of the company, its needs and potential. “Then an appropriate approach regarding a potential partner would then be recommended for Cabinet’s consideration and approval, if Cabinet agrees. These potential partners would be considered where additional value can be added by such a partnership that would redound to the benefit of the citizen.”
Howai said, with the increase of vehicles on the roads, it was decided that VMCOTT should increase demand for the servicing of these vehicles. “It was felt that VMCOTT could be a company which, with sufficient support, could address this need by opening several repair/servicing centres throughout T&T. This would increase the earnings of the company while at the same time providing a much needed service to the public.”