What ails thee, O Com+Pane?

Dear Blog:

I don’t understand…what ails these big companies? How strong is their foundation, which cannot sustain a recessionary phase of even 6-12 months? The way some of the companies have been howling their throats hoarse in the last year, it seems as if they are made of paper! I mean, they have been in existence for decades now, their name comes among one of the best since a long time, they are highly respected by shareholders, customers, suppliers and the stock markets, their employees take pride in the company…so what is it that they cannot sustain a dull period for some time? Being in such a status for a long time, one would like to believe that these companies would have enough emergency ammunition (read: money) to ward off such temporary evils.

But no, it certainly doesn’t seem like it. The worst part is the way they take show reaction to these environmental factors and take so-called “corrective actions” – by laying off scores and scores of employees…I mean, Hello! What part of your total cost is employee cost, guys? And why can’t you choose any other way out? The name "company" originates out of the Latin - Com (with)+ Pane (bread)...i.e., to share bread together...If you’re closing down a certain division, at least re-assign those employees somewhere else. Some honorable companies have done this, others have not. True, some companies were even decent enough to help employees find another job…but the moot question is – how can the companies justify the fact that even after decades of profitable business; they are today unable to absorb this shock…why, by now they should have hundreds of crores in their coffers to fight off the lull. And if your exposure to a particular risky asset class was huge, reduce that...but why take such a drastic step? Sometimes, I think this is just another PR exercise by troubled companies to show to the world that they are taking action against this horrible recession! They know that when they want to hire, they will find talent aplenty, so theek hai na, aaj nikaalo aur duniya ke saamne apna chehra bachao, kal ki kal dekhenge…

I think the root cause of all this is their margins. If the intensity and magnitude of their troubles is really as much as they are showing, then it means that they don’t have the margins they are showing on the balance sheet. Otherwise, there is no way they can’t survive the recession on the basis of the past reserves. I can give examples of companies which have been doing great business in the past and have swam the tide gracefully, so I fail to understand how these guys can’t.

To put in plain XL words, they are giving just GAS. If one decodes everything that they are saying, it reduces to one sentence – “We don’t know why we were doing so well when the market was good, we don’t know what to do in the current situation, we are afraid we might get clobbered in the public and on the stock exchanges and are therefore taking any and all drastic steps to show to the world that we are working to manage the crisis”