Liquidating public property
After a valuation of Australian National Lines found that the government-owned company could not be privatised, minister for transport Laurie Brereton is looking at ANL's liquidation.
The study by merchant bank Salomon Bros and accountants Price Waterhouse gave a market value of between negative $74.8 million and negative $117.8 million. "You couldn't give it away, that's the reality ... it's a pretty dismal picture", Brereton said. The government had expected to sell ANL for around $150 million.
Brereton sacked the board of directors and appointed a new four-person squad assigned to "downsize" the ANL into a viable commercial operation within six months. ANL has three core operations: shipping, land-based operations and joint ventures (mainly stevedoring).
Neville Wran, who will head the operation, is to be paid $150,000. Also on the board are merchant banker Malcolm Turnbull, company reconstruction specialist John Spark of Ferrier Hodgson and a senior Canberra bureaucrat, Paul Merner. They are to be paid $133,000.
The "downsizing" will include reducing the number of international routes, substantial staff redundancies and selling off parts of the company. The most likely scenario, also recommended by the report, is a "managed trade-down" — an informal liquidation by the gradual selling off of assets.
The ideological justification for the government's privatisation plan is that publicly owned entities are inefficient because they are not exposed to market forces. But usually they are bureaucratic and inefficient because they are not democratically run, so there is no input by taxpayers — "the owners".
More fundamentally, the point of entities such as the ANL should not be to make profits, but to get the job done. What use are yardsticks such as profitability if they actually mean the job is done in a worse fashion or not at all?
The reason ANL is unprofitable is not because of excessive labour costs, as many claim. The August issue of Australian Business Monthly notes, "... labour is only a small component of shipping costs. The capital costs of having a modern fleet, maintenance, training and safety, and, above all, the huge imposts of government taxes are what drive up the operating costs of Australian shipping." Competitors overseas are profitable because they "are rust buckets. Many have untrained crews. And some owners behave as if they have a licence to kill when they ignore elementary safety standards."
The "problem" is ANL's high standards and service.
The poor shape of the container shipping industry generally is confirmed by a paper presented at an Australian Chamber of Shipping seminar held earlier this year, which said there is 15-20% oversupply of capacity on some routes.
This has already led to "rationalisation" and redundancies. In April 1993 ANL laid off 60 staff from its head office in Melbourne. Then ANL merged its 50% interest in Australian Stevedoring, shedding 300-400 out of 2000 jobs.
The federal government has raised $3.3 billion from its privatisation program since 1987 and expects to raise $6.8 billion over the next four years.
ANL and the Federal Airports Corporation privatisation are key issues for the ALP's September national conference. The debate so far has been over the percentage of the sell-down (the left advocating 49% and the right 100%) and so whether the privatised ANL would remain "an Australian flagged, crewed and owned" line.
The important aim for the right is to win agreement with its program over the "left" faction and the unions, especially after the failed Tabcorp privatisation. That float yielded $675 million for the Victorian government versus a hoped-for $810 million. For the privatisation agenda to continue, there have to be some "successful" privatisations in the near future.