the times | Wednesday January 26 2022 37
Business
ever, providing that the group clears
certain hurdles relating to its financial
performance and market value. He has
already hit seven of these targets.
Tesla, founded in 2003, is the world’s
most valuable carmaker. Shares in the
group surged and its market value
fleetingly scaled $1 trillion as it boosted
production and as the wider auto-
motive sector pivoted towards electric
vehicles. Its stock has fallen sharply
since then and has retreated by almost
a quarter so far in 2022. The company
is due to release its latest earnings
figures today.
Under each tranche of options,
Musk can purchase 8.4 million shares
in Tesla for $70.01 each. The present
value of the group’s shares, which
closed at $930 on Monday, indicate
that each tranch would be worth in ex-
cess of $7 billion.
Dan Ives, an analyst at Wedbush
Securities, told CNN: “With Tesla’s
growth trajectory, I’d be surprised if he
doesn’t get all five tranches this year.”
Shares in Tesla closed down $11.60, or
1.3 per cent, at $918.40 in New York last
night.
Manufacturers responding to
soaring costs with price rises
The manufacturing sector is shoulder-
ing the steepest cost rises in more than
four decades because of shortages in
skilled workers and raw materials.
Companies are facing “intense” pres-
sure from suppliers and have reported
the highest growth in input costs since
April 1980, according to the CBI’s latest
industrial trends survey. Businesses
polled by the employers’ federation are
braced for their overheads to grow at a
similar pace in the next three months.
In response, manufacturers are rais-
ing domestic prices at a record pace,
while export prices are growing at rates
not seen in four decades, the CBI said.
The proportion of companies citing
skilled labour shortages as a factor
curbing output rose in the last quarter
to its highest level since 1973, with diffi-
culties securing materials and compo-
nents remaining “elevated” by histori-
cal standards. Manufacturing volumesgrew at a slower pace in the quarter to
January, compared with the month
before, although they remained “firm”,
according to the survey of 236 compa-
nies.
Total new orders in the quarter to
January grew faster than in the previ-
ous period, driven by growth in domes-
tic and export orders. Manufacturers
expect total new orders growth to slow
in the next quarter, reflecting an easing
in domestic and export categories.
Investment plans also strengthened,
with plant and machinery investment
intentions at their highest since April
1988, possibly reflecting temporary tax
incentives for such investment, as well
as strong underlying demand. Rain
Newton-Smith, CBI chief economist,
said: “Global supply chain challenges
are continuing to impact UK firms,
with our survey showing intense and
escalating cost and price pressures.”Watchdog finally
learning to bark
A
nother day, another
stable-door-bolting-
horse routine from the
Financial Conduct
Authority. This time it’s
over the wheezes companies use to
“limit their liabilities” on the
customer compensation front
(report, page 43).
Apparently, the regulator’s spotted
that more companies are using
“schemes of arrangement” and
other tricks to cut the redress due to
customers from mis-selling and
similar scandals. Even better, the
FCA’s up for a nice bit of “assertive
action”, including objecting to rip-
off proposals “in court”. It’s a
welcome stance, too. Even so, isn’t it
a bit late? And not least for the
four million customers fleeced last
year by Provident Financial.
Who can forget that farrago? The
sub-prime lender’s boss, Malcolm Le
May, came up with a delightful bit
of hardball: a scheme to cap
liabilities at just £50 million for
customers, going back to 2007, who
were mis-sold pricey loans by its
doorstep lending wing. Worse, as
even the FCA noticed, Le May’s
proposal amounted to a “take it or
leave it” option — either vote in
favour of the scheme or he’d dump
the doorstep unit into insolvency,
leaving punters with nothing.
As the regulator noted at the
time, it had “serious concerns”. Here
was a ruse designed to “circumvent
paying customers their full redress”:
a carry-on “inconsistent with the
FCA’s rules, principles and
objectives”. So what did it do about
it, you ask? Jack all — apart from
penning a 12-page letter last July
overflowing with excuses. The best
one? That because Le May was
winding down the doorstep
operation anyway, “the group and
its stakeholders” would “not be
retaining a valuable stake in a
continuing profitable business at the
expense of redress creditors”.
No, they just retained a stake in a
group happily shorn of liabilities for
past mis-selling: a point proved by
the Provvy’s market cap rocketing
from £635 million to £805 million
since the regulator’s letter. The idea
that here was a business that could
not afford more than £50 million
was evidently baloney: a point
spotted by everyone but the FCA
and a High Court judge.
True, the regulator is not in the
easiest position: argue against a
scheme in court and there’s a risk
that a company fails and customers
get less — or nothing. Guarantor
loans outfit Amigo Holdings is a
case in point. There, the FCA did
object, with the judge throwing out
Amigo’s scheme. The good news?
It’s now come up with a new plan to
raise compo from a max £35 million
— plus four-year profit share — to
at least £97 million. The bad? It’s
contingent on a heroic capital-
raising from a group now valued at
only £9.5 million. Fail to raise fresh
equity and Amigo gets wound down:
not a great outcome for mistreated
customers or the regulator.
Clearly, the FCA must be
pragmatic, assessing each proposal
on a “case-by-case basis”, as it puts
it. Still, there’s no excuse for its
hopelessly sub-prime efforts with
the soaraway Provvy.Unilever clean-out
W
hat better way to cheer up
an under-fire boss: sacking
1,500 of his managerial
minions (report, page 40). It’s the
latest job-protection scheme from
Unilever boss Alan Jope. And all
part of what the Domestos-to-Dove
outfit calls “making sustainable
living commonplace” — at least for
those in charge.
It’s true, too, that Unilever has a
lot of managers among its 149,000
workers. The cull accounts for only
15 per cent of senior bods and 5 per
cent of juniors. All the same, the
timing looks off. It’s straight after
the board goofed-up its £50 billion
tilt at GlaxoSmithKline’s consumer
health wing: a blooper followed by
activist investor Half-Nelson Peltz
turning up on the share register.
It’s not a great look, even if Jope’s
revamp isn’t all knee-jerk. He says
he’s been working on it “over the
last year”. And, apart from the job
cuts, he’s also doing away with the
Unilever “matrix”: some spider’s
web of regional and product
responsibilities where no one was
really on the hook for missed sales
and profits targets.
Instead, there’ll be five “business
groups”: beauty, personal care,
homecare and nutrition — all
topped off with ice cream. Plus
“crystal-clear accountability for
delivery”. Naturally that’s involved a
reshuffle of the “leadership team”,
with only Peter ter Kulve continuing
in his role — no big surprise, either,
given the homecare chief is
somehow in charge of “water & air”.
Over at nutrition, someone else is
head chef for “scratch cooking”: a
technical term, apparently, for
making a quality meal out of
Marmite, Pot Noodle and Magnum.
The shares, at £39.36, barely
budged, which was no surprise. The
Jope shake-up has all the hallmarks
of Unilever’s jumpy response to
2017’s assault from Kraft Heinz.
Sacking other people will only get
him so far.Royal Mail sack
P
rovocative stuff, too, from
Royal Mail. It’s just declared
that there’s been “a structural
shift in parcel volumes” since the
pandemic, with chairman Keith
Williams pointing to UK volumes
up “around a third over two years”.
So why, the posties ask, does it need
to lay off 700 of its 8,000 managers
at a cost of £70 million?
The short answer is to add
£40 million of annual savings, boost
profits and make local staff more
accountable — so giving regulator
Ofcom fewer grounds to criticise
performance (report, page 41). And
the shares rose 1 per cent to 442¼p.
But you can see why the Unite
union says it’ll be “fighting these
unjust job cuts”, including possible
“industrial action”. Yes, total staff are
up this year by 3,000 to 140,000,
including more frontliners. But
Royal Mail was a pandemic winner.
A post-Omicron jobs cut is no way
to get a stamp of approval.[email protected]business commentary Alistair Osborne
reserved for how the bank has overseen
the scheme; for example, he was incred-
ulous at the lack of a single dashboard
to scrutinise lenders’ recovery per-
formance.
For all that his resignation provides
fresh embarrassment for the govern-
ment and civil service officials, Lord
Agnew’s most pressing concern
appears to be that failures of oversight
are allowing certain banks to get away
with a shoddy approach to recoveries.
The state guarantee can be claimed
upon only after recovery action has
been attempted by lenders, but there is
little clarity over the standards that
lenders must meet, or if their own
errors will be held against them.
Three unnamed banks are said by
Lord Agnew to be responsible for the
vast majority of loans handed out to
companies that were no longer trading,
while only two banks are to blame for
most of the cases where money was
paid out to businesses set up after the
pandemic began, a big red flag.
Lenders and the government rightly
point to how rapidly the scheme was set
up, with banks told to forego the usual
checks on borrowers in order to quickly
get cash out of the door to companies
hit by Covid-19 restrictions. Thatdoesn’t explain why there seem to be in-
consistencies in lender performance.
Until there is more transparency in
the scheme, questions about bank lia-
bility after negligence will be hard to
answer: when asked yesterday which
banks he was referring to, Lord Agnew
said he didn’t know, because the British
Business Bank wouldn’t share the data.
The bank said that it did not
recognise Lord Agnew’s numbers, but
pressure will now build for it to release
performance data, including a bank-
by-bank breakdown value of claims on
the guarantee so that lenders and
officials alike can be held to account.he had 48 convictions. Inset, two men were jailed for laundering £70 million, of which £10 million came from Covid loans