In a glass of water for a dying man the desert, Robert Gottleibsen of Business Spectator today tackles the unfolding LNG debacle and puts the blame squarely where it belongs, on the shoulders of the executives that blew their bubble:
I start my blame for the project price escalation not with the unions or the government – where most blame is usually targeted – but rather with the chief executive officers of the companies involved in the gas, iron ore and coal expansions….I believe our CEOs made three fundamental errors, and as each CEO announces a cost over run they should be held accountable. The CEO mistakes vary from project to project but they fall into three or four baskets:
– Mistake one was to try to bring their resources into production at a time when there were too many projects being developed and there was no where near enough labour. Inevitably that would cause chaos and vastly escalate the costs so making the projects very vulnerable to any price down turn. How the unions responded was totally predictable given the CEO error.
– CEO mistake two was to enter too many projects in haste and not plan them properly. This particularly applies to some of the Queensland gas projects and possibly Gorgon.
– CEO mistake three was to either agree to or allow subcontractors to agree to hopeless labour agreements that gave unions power over the projects. That not only hit the projects but the desire for union management control spread around the country and the unions now want this to be a permanent part of the Australian construction industry fabric. If successful, this means the nation will suffer inflated construction costs for decades as a result of the mining CEOs’ foolishness.
There are more mistakes. Over-paying for assets, assuming endless demand, I could go on. Well done to Gotti for breaking out of the business cheerleading that’s come out of the AFR on this issue (and keep on reading MB & MI!)
Just one point of contention, Gotti was a lead figure in the destruction (as opposed to adaptation) of the RSPT which was in part designed to prevent just this kind of malinvestment. Just sayin!
