Wednesday, April 02, 2008

Sorry State of Turbo Spin

I understand the need for political and business leaders to frame things in the most positive light, but c'mon guys! On the political side, Iraq's Prime Minister Nouri al-Maliki described his military operation in Basra as a success. A military convoy rode into town as a show of force. His fight with followers of Muqtada al-Sadr was a tie until the renegade cleric ordered his fighters off the street. Without an opponent, P.M. Maliki's victory route is but a parade.

What's worse is Iraqi politicians went to Iran, the axis of evil, to broker the peace deal. Throughout the "bold act", American and British soldiers supported al-Maliki's stamping out his rival, at least enough to carry out and win those planned elections. The U.S. ended up looking heavy handed as usual, but who would've thought those crazy Persians could mediate an end to the fighting. I wonder if Nouri al-Maliki considered a large "Mission Accomplished" banner for the ride into Basra?

Things can be just as shameless in the business world. Boeing Corporation announced it would buy out Vought Aircraft Industries' stake in a joint venture to get production from that key supplier to the 787 back in line. Vought's major holder, 90% of the company, is The Carlyle Group, the politically connected private equity firm with a Pennsylvania Avenue address.

Carlye prides itself on its high level of managerial expertise and access to capital. Who better to own a key supplier to Boeing? Despite Vought's paying Carlyle $2.1 million a year for management services, their new joint venture had serious management problems, such that it became the bottleneck for Boeing's new Dreamliner. The 787's first delivery will come with at least an eight month delay. So what happened? Vought's CEO spoke to problems in the past.

Last October, CEO Elmer Doty acknowledged that Vought was the highest-risk supplier on the 787 industry team. At the time, Doty attributed Vought's struggles to an internal liquidity crisis in 2006 that prevented the company from ramping up investment in the 787 programme at a sufficient rate. Boeing had previously appointed vice-president Scott Strode to take over management responsibility for Vought's role in the 787 programme.

So the Carlyle sub had trouble accessing funds to ramp up production? Does that means they promised something to Boeing that they couldn't deliver? That doesn't sound like Carlyle's street cred, that of incredible operators. The private equity underwriter (PEU) failed to deliver and Boeing acted by taking control away from Vought and not the other partner, Alenia. How embarrassing! That's like taking your laundry back from the dry cleaners because they couldn't get your clothes clean. But Carlyle and Vought ran their spin cycle:

Vought spokeswoman Lynne Warne said “This was purely a financial transaction.”

Ms. Warne was virtually alone in this perspective. Industry experts attributed the purchase as a crisis intervention to revamp problems and not lengthen already concerning production delays.

CEO Elmer Doty spun through his Maxwell Smart Shoe Phone:

"This seamless transition of joint venture ownership will build upon the strong foundation already established within Global Aeronautica," he said. "Selling our interest has no impact on our adjacent facility, where the Vought 787 team remains focused on manufacturing composite fuselage sections for this incredible airplane.”

Would you believe "we're sorry we screwed up"? Nah, that's not Carlyle's style. Just ask those New Orleans LifeCare patients.

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