Friday, August 07, 2009

At Committee Today

Well, the emergency committee meeting held today was really interesting. Really complex, but interesting none the less. What intrigued me the most though, was the interaction between all the players. The politicians and the witnesses.

Unlike other committee meetings I've followed, there was very little sniping. (Maybe because Mike Wallace wasn't there?) There was the occasional CPC member who asked the witnesses to regal all the wonderful things the government had done for their industry, which, really guys.... looks pathetic.

Michael Chong, someone whom I generally respect, (but don't always agree with) was the chair. He runs committees well and overall, stays out of the fray. He tipped his hand today though, or perhaps I should say, he tipped the governments hand in what I can only call a really strange move. So strange that I shook my head and said, 'what the hell?', aloud.

So let me back up here a moment to get to that point.

If you're not familiar with gentleman featured here, it's Mike Lazaridis, president and co-CEO of RIM. Of all the witnesses, he was the most interesting to me. He explained the process that he had been through with Nortel and unless you've followed this story really closely, you may not know that RIM began negotiating with Nortel, long before they declared bankruptcy. (Recall that Clement had given RIM a tip.)

RIM was of the impression that they were very close to a deal, to the point that they had spoken about issuing a press release. Then out of the blue, RIM learns that Nortel is filing for bankruptcy. Still, given some new parametres, RIM continued to negotiate with them and again believed they had a deal. Then, suddenly RIM learned that Nortel was discussing with other companies and the bidding process began. (Why RIM did not get involved in the bidding is complicated, so if you really want to know, I suggest you watch the mtg on CPAC or this will be a very long post.)

All of that to say, RIM believes that Nortel acted in bad faith, reneged on promises and Lazaridis believes that this whole process has been rushed and due diligence has not been done.

His ask? He would like the government, Clement specifically to convene a meeting with all parties, RIM, Nortel and Ericsson, to go over specific details, including a potential risk to national security, in an effort to be sure everything has been taken into account.

The opposition parties seemed open to that, though I've seen no official statement yet. The government? Not so much. Ericsson? Not even as much as the government.

Which brings me to Michael Chong.

As the segment featuring Larazidis was winding up and Chong was about to suspend, he first said he had something to say.

He then went into this bizarre rant on how odd he found it that Jim Balsillie (without naming him) is fighting for one type of process in court, dealing with foreign purchases etc, while Larazidis seemed to be fighting for the opposite?

The rant was longer than that, but that's the meat of it. As he finished it, he brought down the gavel, not even allowing Lazaridis an opportunity to respond. To be honest, I was surprised no one from the opposition called him on it, but the gavel was down.

Anyway, courtesy of Kady, Mike Lazaridis has responded and rather well I think.

August 7, 2009

The Honourable Michael Chong,
M.P.ChairStanding Committee on Industry, Science and TechnologyHouse of CommonsOttawa, Ontario

Dear Mr. Chong,

Thank you for allowing me to appear before the Industry Committee this morning. I appreciated the opportunity to make a statement, table a brief, and in particular to answer the questions posed to me. At the end of the session, as we ran out of time, you raised some important issues without giving me the chance to reply. As such, I would appreciate it if you could read this reply into the record before adjourning today.

First, I fully agree that foreign direct investment is extraordinarily important to Canada. I am a great believer in an open economy. Foreign direct investment cannot be totally unfettered and there are, and should, be limits for Canada, like there are for most countries. We have legislation in Canada that sets out the circumstances in which the government is required to review proposed foreign investments. As I stated in my opening remarks, I fully agree with what Minister Prentice said in May 2008 on behalf of the government:

“When it comes to decisions on whether foreign purchases represent a net benefit to Canada, my bottom line is this: Canada must retain jurisdiction and control over technologies that are vital to the future of our industry and the pursuit of our public policy objectives. We will not accept loss of jurisdictional control to another party.”

That is what today’s discussion is all about.

Second, you referred to proceedings in Arizona concerning the sale of a professional hockey team. With all due respect, the Ericsson -Nortel transaction and what it represents to Canada is in a very different league. I think we can all appreciate the importance of hockey to Canadians; however, the Arizona proceedings are irrelevant to the matters before this Committee today. We are here today to discuss Canada’s national security and national interests in relation to the knowledge economy of the 21 st century. The one parallel that can be made between the two bankruptcy court proceedings is that none of the bankruptcy courts in Arizona, Delaware or Ontario have the mandate or the authority to consider Canada’s national interests.

Third, in regard to your suggestion that RIM was looking to preclude other bidders and was seeking preferential pricing, I urge you to review and consider my earlier comments and submission. If RIM had been given a fair chance to participate in an auction, without being shut out of the opportunity to bid for other vital assets of primary importance to RIM, we would of course have accepted that the winner should be the one with the highest bid. To suggest otherwise is simply not true.

Having said all this, I remain of the view that Minister Clement’s stature is such that he can bring the parties together in good faith for a four-way discussion in order to fashion an outcome in the best interests of Canadians and of the companies involved.

Sincerely yours,

Mike Lazaridis
President and Co-Chief Executive Officer

cc – Members of the Standing Committee on Industry, Science and Technology

I do not know where this will go, but I have the distinct impression that the government is hell bent on doing nothing further.

Why you would ignore the problems pointed out by Lazaridis, which were substantial, is beyond me. It seems to me he has a bit of a record in reading things right, don't you think?


ottlib said...

When RIM made it public that they were being frozen out of the auction for the Nortel assets the subsequent polls showed the Conservatives dropping four points.

Coincidence? Perhaps.

However, if a foreign company is successful in buying Nortel over a Canadian company it is not going to go over well with many Canadians.

The government knows it too. Mr. Clement has been bobbing and weaving since the RIM media release a few weeks ago.

Their ideology says let the market decide. Their political instincts state they have to intervene because to not to is to risk a backlash at a time when an election can happen at any time.

I have seen the conflict on Mr. Clement's face and in his body language since this all broke.

If I were a betting man I would say they sacrifice their priniples once again, but not before they do themselves some damage by hesitating.

That seems to be the way of this government.

Karen said...

You make a good case ottlib, but there was one on the CPC side, VanKesteren maybe?, Lake?, can't remember, but his comment to Ericsson was something like, 'what signal do you think it would send to the Int'l community if if the gov't interferred?'

Ericsson of course said really bad.

Ericsson is not up for this mtg. So what if one was called and they didn't show?'s really interesting though.

I was going to say it's interesting to geeks, but you know, it should be interesting to all, complexity aside.

Anonymous said...

This is a complex issue, unfortunately many seem to have simplistic views on this. I generally believe in the free market and generally oppose blocking foreign investment, but I do believe there are some strategic sectors where it may be necessary. In this case, as long as the patents stay in Canada, I am fine with Ericsson buying the rest as the reality is the patents is what matters most, Nortel Networks as a company is pretty much destroyed. Also if RIM was shut out of the bid, I think it is reasonable for the government to ask for a re-bid and let whoever has the highest bid buy it.

As for what the Tories will do, I suspect they won't block this since as much as it might be good politics, the type who will make the biggest issue on this would never vote Tory anyways. As for a parliamentary motion to block it, I am not sure this would work, since I believe the Bloc Quebecois supports this, after all most of Ericsson's employees are in Quebec, whereas most for RIM and Nortel are in Ontario.

Tomm said...

I hope Ottlib is right.

We are being surrounded by protectionism from the EU, China, Japan, and now the new US administration. This may be the one time where it makes sense to intervene.

Plus, correct me if I am wrong, but I don't recall ever seeing Harper and Bettman in the same room.


Karen said...

Anon, that was a huge part of the mtg...patents.

There is no guarantee in this deal that goes to all patents, yet to be 'bought' is still a mystery. The licensing is a huge issue. Nortel still holds that, but, Ericsson can expand on said license, develop their own patent and either sell or license.

Oh, complex is not the word.

Interesting what you say about the Bloc. They sounded nuts today...k, keep it down.

Seriously, they supported the Ericsson deal and supported what RIM said.

Did I say nuts? Oh yeah.

Karen said...

Tomm, lol to your last point.

The US admin doesn't seem to be on side with protectionism...their brethren and opponents maybe.

Truth will be told when Harper makes his big photo op in a few days.

Because I'm like that...I'm hoping it will be on the lawn, with the puppy roaming free, nipping at Harper's heels at strategic moments.

I know...just me.:)