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No bailout for Nortel, industry minister says
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CTV.ca News Staff
Date: Thu. Jun. 18 2009 9:43 PM ET
Ottawa says there is no hope for an auto sector-like bailout for Nortel Networks, the once mighty tech giant.
Industry Minister Tony Clement said "there is no role for government" in sorting out Nortel's significant financial problems.
Nortel Networks CEO Mike Zafirovski, appearing before the Commons finance committee in Ottawa Thursday, admitted under questioning that he asked the government to intervene last year to keep them out of bankruptcy proceedings.
Zafirovski says he was so certain that the high-tech giant was on the rebound that he even invested his own money in the company.
Zafirovski said his family invested about $500,000 in Nortel because he was certain the company would recover.
He said some of the money he invested was to pay college tuitions for his three sons.
Zafirovski said the tech firm will be making an announcement within two weeks to announce plans to deal with Nortel's financial troubles.
During his testimony, Zafirovski said he's confident Nortel's plan moving forward will save the maximum number of Canadian jobs.
Zafirovski wouldn't provide details on the plan but said it could involve the sale of assets.
The committee is hearing complaints about Nortel's treatment of former employees after the fallen technology giant sought court protection from creditors last January.
Zafirovski said as the "world turned upside down" with the global financial crisis, Nortel "hit a wall."
"Frankly, we hit a wall and the global financial crisis and recession compounded our challenges and impacted our ability to complete our transformation," Zafirovski said.
Former Nortel employees are among witnesses set to appear before the committee.
Zafirovski, on the advice of Nortel lawyers, originally rejected the offer to appear before the committee. It is unclear why he changed his mind.
Last year, Nortel shares were worth $10 each, now they're worth about 20 cents.
The NDP plans to introduce a motion on Friday to call for emergency changes that would move pensioners and employees to the top of the list for creditors.
"Nortel is the AVRO Arrow of the 21st Century. It is a colossal mistake to let this company go," said NDP deputy leader Thomas Mulcair.
The NDP motion will be introduced on the last day the House of Commons sits before the summer break.
With files from CTV Ottawa and The Canadian Press
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I applaud the budget, even though Health Care and education may stay unscathed. Sadly this cannot last and I worry to later this year where cuts will become enviable. If anything, this provides the Wildrose Alliance plenty of ammo when an election is called.
Comments are now closed for this story
cr
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Anderson D
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JP
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If they don't fold altogether that is.
Steve the Pundit
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And there, in a nutshell, lies the problem with Nortel: run by greedy people insulated from the reality that was readily apparent to anyone else. Nortel has been a basket case for years; the kindest thing would have been an attempt to sell when there was still some shred of value there.
Now, all we have left are the memories of one hell of a ride. And the bitter pill of squandered stockholder equity and shattered pensions.
Steve in Montreal
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Just another person driving a good company into the ground along with loyal employees.
Andy Kanata
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The fact that it never became a player in the industry again shows that management made poor decisions year over year and deserve nothing. This guy and his sob story about investing his half million in his own company with some of it being tuition money for his kids is supposed to be some kind of excuse but is just another bad decision. Any company that rewards its' top executives for failure while denying severance to its' employees is morally bankrupt. How many of us have heard from our own companies the following: 'Our people are our greatest asset'. Now's their chance to prove it.
Bothered
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Z skaked around the questions and provided B.S. to the open ended questions with no problem.. He was on the spot a couple of times but wasn't pressed to give any details..
This hearing is a waste of time
Reg
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CCAA and BIA laws need to be changed to give “super-priority” to termination benefits and pension top up claims.
If Nortel gets away with using CCAA to do mass layoffs and avoid severances, other employers will also follow.
A Voice From the Wilderness
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Mike Z will eventually walk away with Millions $ and with his Nortel pension he will never have to work another day and will live like a King. He'll forget Nortel in a second. Many Nortel employees on the other hand who invested their pensions in Nortel will have to work definitely - No Freedom 75 for those poor people who were hoodwinked! I certainly hope Mike Z finds the money to send his kids to Ivy Universities, heaven forbid they have to get a job.
Congrats Nortel for treating your employees like worthless cattle.
Bob Ferchat if you are out there - please help these poor forgotten people before it's too late! Notice the Feds don't care. They'd rather throw Billions $ after dud car companies, which will eventually go BK. Nortel on the other hand, the biggest Can R&D spender, would be an investment in youth, hi-tech and in the future of technology in Canada. But I suppose this is not politically correct - Right Stephen?
BMIA
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How assinine!
What other kind of answer would the CEO give?
"I knew when I took this job that Nortel had no chance of survival so this really is no surprise."
Jim in Ottawa
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zwinky
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His golden handshake probably covered it nicely plus some gain.
LAC
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Narin
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Get Lost
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Somebody should be headed to prison for incompetence, but I guess all is fine since we are in Canada.
nathalie
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Aaron in Toronto
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We have so many examples lately that claims it is not okay to cut the severence payment to CEOs but its okay to do so for the regular employee.
Independently Minded
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Then they hired a nationalist Yankee CEO who moved all the profitable work down south.
They've never really recovered from that clown.
Message to Canadian businesses:
Don't import your execs from the U.S.!
They'll sell you out and then take a multi-million dollar golden parachute as they walk out the door...
anOldNortelFun
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He is not lying that "no severance" rule is applicable to managers, but no high level manager (directly or indirectly reporting to him) lost their job since this shameful rule is introduced. He is now uing bonuses to build "golden nest" for all of them if Nortel goes Chapter 7. Those high level managers will not need severance, they already milk this cow to death.
BIG-JIM
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Gee run by the same people as they both have money problems every time we turn around.
These people need courses in business management and math.
That might help BUT I doubt it!!
Kevin D- Calgary
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Say you make $45,000 as a family that's equivalent of you investing $1,500. Not exactly a huge amount. If he was so sure it was going to go up, he would have invested about 20% or 3 million.
CYL
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I'm thinking, the money and bonues this CEO is/was making, pay me some of it, I have thoughts too.
TM
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As for his comment about investing $500,000 of his sons' college funds into Nortel, the pensioners and laid off employees will find it difficult to sympathize. Half a million dollars for college is a nest egg that 99% of Nortel employees can only dream of, but many ex-employees now have to struggle just to put aside $2000 a year in an RESP which still won't cover their children's tuition completely when the time comes. Let's not even mention the day-to-day bills that need to be covered while searching for new employment...
Twinkie
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Equity investing involves taking a risk to get a reward. The risk is YOU CAN LOSE YOUR MONEY. The reward is YOU BUY AT A LOW PRICE AND SELL AT A HIGHER ONE. But...WAIT FOR IT...here's THE RISK: not ALL stocks INCREASE. Chosing stocks that will appreciate in value is a complicated process and even experts make mistakes. Not only do you have to accept the possibility of a loss - you have to accept the real world consequences WHEN a loss happens. Not just IF but WHEN.
So, if you want OR NEED a guarantee of your principal: buy a T-bill, or a GIC, or an insurance style product. EQUITIES ARENT FOR EVERYONE.
I guess it's easier for some people to blame the big bad greedy corporate executives rather than accept any personal responsibility.
Tired in Mississauga
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Nortel has very few Canadian workers left and very few assets in Canada. Even with a bailout there will still be massive layoffs. Is it worth bailing out for the few people left.
GM, Ford, Chrysler I can see. They have 10's of thousands of employees and many smaller companies that depend on them. If they go it's an economic disaster. Nortel would make barely a ripple in the economy as it goes under.
Let it go. Make sure pensioners are protected and employees get packages. Then let it go.
David Jones
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On the flip side, at least we know that there is no "funny business" happening with the stocks as he is about to lose $500,000!
Patricia
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INSIGHTS!
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WHERE IS MR. DUNNE & COMPANY?
Like it or not - NORTEL has a huge intellectual resource capacity in research and development that could be lost forever if government do not pay closer attention to the future of the tech sector as they have to support a redundant auto sector.
CS
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From there, it went from bad to worse, and the more American CEO's we aquired (I actually like Americans), the crazier it became.
The head honchos are the ones that took us down, all in the name of greed and more greed. Golden parachutes were a sign of the times, it was a sin to see what happened to a once profitable company, all in the name to look bigger than it really was. Greed and many power trips at the top was it's ultimate downfall, but the attitudes the top echelons had was the worst of all. They listened to no one but themselves with puffed out chests hammering out the messages that they were king of the hill and all would do as told.
My 40 years there left a bad taste, and even I saw they were no longer thinking and acting professionally. The lower status people were basically powerless, just told to keep doing their jobs while the company was run by supposed geniuses who knew what they were doing. And so called Dr Stern began the downslide many years ago...too bad they waited to long before they gave him his own Golden Parachute.
Jim in the West
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MurrayR
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Gordon in Sarnia
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Nortel
General Motors
Air Canada
AIG
Merrill Lynch
Enron options
Lehman Brothers
and CDN dollar puts @.67 due July 1,2009.
Patrick in Ottawa
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So many nortel employees got nothing when let go recently...by you!
ALH
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Maybe now he realizes it now, what he did was wrong.
Dan from Northern Ont
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KJ in Brampton
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pb
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I'm not Nortel. Where's my bailout?
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No, I don't want any home reno work deduction.
No, I don't what a loan made available.
Anonymous - For Obvious Reasons
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Recommended a complete, easy-to-execute strategy to penetrate new markets.
But, Nortel hto shots knew better. Wouldn't play. Everyone else was on board except the Nortel wunderkinds. Smug. Condescending. Arrogant. They knew ebtter!
These weremid to high level hotshots, not the execs. Perhaps arrogance pervaded at every level.
Funny. Took the same model to Nortel's US competitors. They could see the wisdom and ran with the idea.
Now I am still in business. The hot shots at Nortel? They're likely inflicting their 'brilliance' on some other unsuspecting high tech. It's a shame - fools never learn. Fools seldom differ.
L
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Dunny from Manotick
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Raymond Sarrasin
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The problem is everything is bought for by credit that was bought for with credit that was bought for by credit, if you ask me the problem is with the banking system. I'm not excusing any CEO of fault for either running a bad biz or for paying out gigantic bonuses while people are loosing their jobs but at the end of the day the money that you have, or better the money that you have earned one way or another is at the end of the day yours to do with, those who choose to invest risk, I don't think anyone who made lots of money investing is complaining and if this situation was reversed would be laughing all the way to the bank... literally, so be angry that it didn't work out fine, but that is the risk you take and I find it absolutely poetic that a CEO who invested in his own company lost money, since it was him who had all the power to change that outcome. For those who lost jobs or are waiting for money I hope things work out for you.
Bob
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Where is Iggy on this, isn't it time he threatened an election or is he for more un-employeed in Canada. He talks about caring for Canadians, where is he now?
Nortel employees are for the most part Conservatives voters but I think that is about to change. Harper better talk to Tony and straiting him out or it will be Harper who is out! I think Ottawa west will be painted Liberal red or NDP Orange next election.
Sorry Harper and team but we have to give you guys notice now.
I have to say that Mike Z looked just like another con on the hill today. I heard his nickname is Mike Zero.
KJ in Kingston Ontario
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Nortel probably deserved more consideration for tax payer funding than GM -- however GM didn't deserve as much as a single penny so they would still be out of luck based on my vote.
Adam, Montreal
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Jackie Chan
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kate
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Mark
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There should be NO bailouts of any kind for anyone with our hard earned tax dollars
and the debt this government is going to burden our children and grand children with is a sin.
The only good thing is that the conservatives are in,for I fear the spending would be out of control with the left and far left statists in Ottawa.
Craig
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His base salary with Nortel when he began was $1.2 Million US per year. He was also eligible to receive several million more in bonuses and stock options not to mention the bonus plan in addition to his salary.... which is a bonus of 150 percent of his base salary to three times his base salary.
Anyone worried that he won't be able to put his boys through school?
JB in Calgary
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These big companies come in and force a monopoly on the industry by buying all the smaller companies and stretch themselves so thin that when things go bad they can't survive.
Let them die and maybe we can have some variety again as consumers.
Guy in Ottawa
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They are a failure of monumental proportions.
If it were true that these executives might flee to competitors, would that not help Nortel in attracting suitors or buyers as they would act as ambassadors?
What Z is selling is disengenuous. They are profiting, once again, on the backs of those who preceeded them and whom they left behind.
Maybe they should let us eat cake...
Remarkable
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Should we have capital punishment for greedy executives such as these?
Well maybe not, however these people must be held to accountability and to a higher standard.
Bonsus should only be paid based on good performance, not a performance such as this.
Zafirovski should be ashamed of himself for even asking for taxpayers money to bail him out!
Ok, maybe there should be capital punishment for smart ass executives.
Jason in Kelowna
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Translation: You can't give us enough votes that we can buy before the next election, so good luck!
D J in Manitoba
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Prof. Pye Chartt
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That you're going to die.
When it comes to your livelihood, your financial security, and your health, trust neither the government that serves you nor the company that employs you. Trust neither family nor friends.
Try as you might to blame others for a misfortune, YOU are responsible for your money and your plight.
It wasn't long ago, folks, people didn't even trust banks...and kept their cash (their entire savings) under a mattress, which allowed them a good night's sleep.
Today, in a world that gives greater status and attention to spenders than savers, people need to mind their own "business"...because the management of YOUR money is primarily YOUR business.
Just another sensible and indisputable tidbit nobody wants to hear.
Frank from Calgary
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Besides too many companies making too many cars, too many are making electronic gadgets that no one wants as well.
I too bought 500 shares of Nortel at $.105 a couple of months ago just to say I had some. My co-worker bought 300 for $65, 7 years ago. A nice $19.5k mistake that he dumped for $2/share a couple of years later. That was of course pre 10-1 R/S.
Right now Nortel is up to .19 . If I cash out now, I get my money back plus a 2-4 of beer. Meanwhile my buddy Andy lost enough money on a turd stock that could have supplied me with beer for 10 years.
It seems to me that if there is money to waste, it should go to farmers. Food seems like the thing that everyone wants ahead of cars and wireless networks.
Mario Tbay
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Hopefully you sheeple are becoming wise!