Wednesday, January 24, 2018

TCL strike a big union mistake

I am a cost accountant by profession and especially qualified in managerial accounting, which includes strategic decision-making processes.

I am also a shareholder of TCL (Trinidad Cement Ltd) and am hurt to see that several years after OWTU (Oilfields Workers’ Trade Union) joined hands with TCL’s management to repel CEMEX from hijacking our valuable TCL company and, thus, preserve our national industry and heritage that the union is now operating in such a belligerent, unfair and hostile manner with its absurd claims. As an example, the proposed rate for a labourer at TCL of $13,675.26 per month, which the union is not satisfied with, staggers the imagination while not being beneficial for our economy, also.

From a shareholder’s point of view, it may be reasonable to postulate that if this strike continues to the end of this year, I may be able to finally look forward to a healthy TCL profit for 2012, for reasons herein after explained.

Perhaps then, I would receive a welcomed dividend denied to me after some six years or more of waiting patiently while my shares, which were derived from hard work in my life, have plummeted from about $12 to $1.80, a mammoth decrease of about 85 per cent. What about me? I have to ask the OWTU president, Mr Ancel Roget.

In my profession, there is a term called “dynamic incremental analysis” or “sequential marginal accounting” where variables are mainly used for decision-making calculus. I wish to now explain this, especially for Mr Roget and the workers’ educational benefit.

In the case of TCL, the Trinidad company is overloaded with “unneeded”, unused capacity that contributes to a loss of value of its running fixed costs. This refers to a share of factory overheads that is not fully utilised or absorbed for maximum production volume. Essentially, this means paying or carrying excessive fixed costs, including “ labour”, that make no contribution to profit. In cost accounting variance analysis, these losses are identified as volume losses.

In the absence of true data, I can only conjure that it is quite possible that once the two external plants in Jamaica and Barbados can produce the required local sales volume, or most of it, then a combined TCL group may not incur huge losses from decreased local production volume as Mr Roget is wont to believe. The saving of such volume losses added to the savings of recurring expensive local labour and other local costs may actually be welcomed by TCL.

In fact, the decreased Trinidad plant volume caused by the strike will be produced on an incremental variable cost basis outside Trinidad, and this will be far cheaper than an existing grassroots operation here while the TCL workers will remain unpaid outside the TCL gate.

In this possible scenario, TCL may actually not need Mr Roget’s prized workforce, and so it seems that they may be badly misled by possibly believing that their success at Petrotrin could be easily duplicated in Claxton Bay, through an unjustifiable and unwarranted attempt to bring the company to its knees.

I am of the view that the strike will not hurt TCL as much as Mr Roget would believe because TCL may be able to deliver its Trinidad market needs while not having to pay a good part of its huge fixed costs, including labour, while its labour force stupidly expects a massive windfall and, thus, prefers to play rummy when the cards are stacked against them,TCL having all the trumps.

Therefore, given the volume crisis that TCL has been facing for some years because of the international economic slowdown, a temporary shutdown might actually be welcomed; the TCL plant volume not being essential for the time being.

Roget, boy, I real feeling sorry for you and, particularly, the misled workers who know not better and are only seeing a mirage—I think you bounce your head bad this time because you will see cement and more cement selling from the Trinidad jetties and meeting the local demand—millions of tonnes of bags produced at only marginal incremental costs that will help the economy of our very intelligent Caribbean neighbours, instead.

Get smart fast, Mr Roget—put your tail under and between your legs and start thinking of negotiating some mercy, instead. It seems like yuh loss before yuh start.

PS Moralles