Winnipeg Free Press

Winnipeg Free Press (Newspaper) - February 14, 1975, Winnipeg, Manitoba Our people can be your people anytime office Call overload a Drake International company 775-0151 business report Winnipeg free press Friday february 14, 1975 13 City wide paging National Industrial sound 355 Sherbrook pm. 786-6611 flyer industries Ltd. Has had a total who were disgusted with what they of million poured into it since Jan termed poor management and bad wages. Uary 1970 by the Manitoba development but the Mac continues to pour Money corporation. The beleaguered government backed bus company has endured rapid into the operation. In this analysis re port on business writer Mike Ward invest reaped but at what Cost unexplained and frequent changes in its tic ates the Dollar value of what has Board of directors As Well As a happened so far tothe Manitoba tax pay three month Long strike by employees or s Money invested in flyer industries. Mac s flyer leap ends in bottomless financial pit q flyer industries has been Given an other million loan to keep the govern ment owned com Pany s Assembly Iines moving at Transcona. By Mike Ward when the Manitoba government turned the privately owned bus manufacturing company Western flyer coach 1964 limited into a Crown Corpora Tion by investing Mil lion tax dollars in the firm a shroud of secrecy descended on its activities and or. John Public was kept out of the picture. The secrecy to a certain extent is still maintained and it is Only after ques t i o n s in legislature or from the news Media that the Public gets a glimpse of the truth. It is ironic almost poetic that one member of the Ordinary working class Public a or. Bill Kowalchuk one time flyer employee does know what is going on. He s at tended every flyer meet ing. He owns 320 common shares one per cent and has turned Down All offers to sell them because of sentimental the Manitoba development corporation owns the remain ing 99 per cent. So much for sentimentality far removed from the likes of government and corporations decisions. Today s news that the Manitoba development corporation has approved a million loan hard on the heels of a ?4 million loan towards the end of last year virtually Means that the Public is going to prop up flyer for Many years to come. The monthly loan inter est flyer pays Back to the Mac fluctuates currently Between and what happens when the firm starts pay ing Back the principal it does have orders from at least three american firms to Supply electric trolley buses and a Deal to Supply shells to am Gener Al corporation which should net the firm s40 Mil lion plus Over the next three years. But the american customers Are going to pay As each bus or buses arrives so there is absolutely no doubt at All that the government has to approve a countless number of Loans before the company can Start showing a profit. And however much the opposition in the legislature Calls upon the government to sell the Plain fact of the matter is it can t. Who can afford to buy a. Company particularly in these depressed times which has an impressive order Book and if flyer does go bust then at the moment the government is committee to an Mil lion guarantee a Quarter of the insurance covered b y Canadian indemnity payable Over 10 years Start ing july 1, 1975. 8% per cent interest to Start immediately. July 22 to March 31, 1971 interest 11 Viper cent yearly. 18-month term. Described As a Flat fee with one month term. Loan inter est Lovi per cent per annul on demand. June 19, 1971 investment Pur Chase of non Vot ing five per cent redeem Able preferred shares. Investment Purchase of common shares. March 1973 Mil lion at 9v2 per cent per annul. Mac annual re port states the terms and conditions Are to be finalized at 10% per cent per annul. At per cent per annul. April june 1973 million. 10m per cent per annul. General manager of the Mac Sydney Par sons out that the Money represented a performance Bond to am general corporation for failure to deliver 152 sub assemblies and assemblies with a penalty of per Day per bus however it was listed in the Manitoba Gazette As a loan. Or. Par sons says it can be deducted from the total Mac fee no term is the explanation under Mac published 1 o a n financing report in the Manitoba Gazette. July sept 1974 Mil lion. 13 per cent interest per annul payable on demand. Oct. Dec. 1974 million. Similar terms to previous loan. 1975 million ear and the sum total adds up to accept ing or. Parson s explanation of a million Contin gency liability which was never used but still listed As a loan Between april and june 1973, then the total sum invested by the Mac in Loans Purchase of shares and equity is reduced to million. The present financial Structure of flyer from a share Point of View is that the Mac owns 99 per cent of the common shares and 85 per cent of the preferred shares. The remaining redeem Able shares Are held according to the Mac by at least eight people. Three of the shareholders Are known. They Are Abram j. Thiessen Arthur c h i p m a n and Henry Borger All former directors of flyer. This is not a working line pictures always make a news Story More interesting. With this in mind the free press called flyer industries to see if they had any photographs in their files of the flyer Assembly line. The phone number listed in the Telephone directory resulted in a recorded this is not a working two phone numbers obtained from directory information were not the present flyer numbers. A Call Back to directory information resulted in a third number which worked but was t the right department. The caller was told to Call Back the first number obtained from the directory. This time it worked but the Public relations representative was not in. Two More Calls later he was contacted and asked if he could Supply some photographs. The Public relations officer did t know if he could and was t sure who he had to ask in the organization to find out if he could. The free press sent a photographer out to take some pictures. From the special municipal and general emergency fund. In this unlikely event the government would have spent Well Over million. The flyer background Story has several avenues Worth looking at first the government sanctioned Loans in detail All of which Are confirmed either in the annual reports of the com Pany and the Mac quarterly reports or govern ment announcement. Jan. 1970 million for 25 per cent of flyer common shares. Re Loans because it was never needed. Oct. Dec. 1973 investment Pur Chase of flyer shares Par value of is. Jan. March 1974 12 per cent pay Able on demand. S2 million. 12 per cent six month term. Million equity re places Mac financing. ,83 million debenture interest per cent per annul 15-y ear term replaces Mac financing. April june 1974 s3 lion performance Bond the Chipman and Borger families Are associated with Standard finance corporation and Brathwaite limited. Or. Thiessen is president of Grey Goose lines Ltd. All attend flyer share Holder meetings and have voting rights. Their Posi Tion financially and quite simply is that if the firm was to be wound up today they would get nothing. They share Between them preferred shares 15 per cent Worth each but until the com Pany starts making Money their investment is Worth less. Only or. Thiessen was contactable. He said the agreement was that he and other preferential share holders were to be paid out in 1972. He said he was still waiting and had Little Hope of Ever getting Money from his investment. How All this came about is another flyer Avenue which involves to a Small extent the previous government. It surrounds american businessman Thomas j. Ault who came on the scene describing himself in a 1969 interview As a healer of inefficient and Money losing business flyer s 1972 loss was helped by a 1971 deficit of it began 1973 with a Defi c i t and ended with a deficit. 1974 s deficit has yet to be announced. In the Middle 1960 s the former Western flyer coach 1964 limited was hopefully knocking on the then Manitoba develop ment fund s doors for a financial injection to help the ailing company. The Mfd at first made a few refusals but after commissioning or. Ault several times As a consultant the former government s lend ing Agency appeared to soften. It was encouraged by an other report solicited from a Well known London eng land firm of consultants who concluded their letter dated dec. 10, 1969, by this time the nip was in Power by writing general conclusion emerging from this examination loan applications is that the fund is a Well organized and administered organization which has proved to be an effective instrument for stimulating economic development in the province. The report covers the period april 1, 1968 to March flyer was one of the loan applications examined and in december 1968 the Mfd agreed in principle to loan ing the company a figure not exceeding Money required for work ing capital. A condition was that or. Ault be hired As a consultant and in february 1969, he submitted his report and recommendations. Continued on Page 14 by Philip Anwyl free press business editor As minister for the department of re g i o n a 1 economic expansion former broadcaster Don Jamieson will never be lost for words when it comes to airing the role Dree has played in promoting economic growth across Canada and reducing the country s regional disparities. The minister from St. Johns nfld., who has brought relatively speaking peace and Calm to a department swamped by troubled Waters when ruled by a fellow Cabinet colleague Jean Marchand visited Winnipeg this week and naturally did t let the Opportunity of promoting the cause of Dree slip. Or. Jamieson is proud of the achieve ment of Dree since it was launched by the Trudeau government in 1969. In that time the minister will Tell you that his department has poured More than billion into Canadian business and Indus trial development in the form of incentive Grants creating thousands upon thousands of jobs. Dree undoubtedly has a plethora of statistics that tabulate the benefits it be stows. Unfortunately calculating the Cost in terms of lost efficiency and eco nomic discipline in business viability guidelines is impossible to gauge. In Many respects government incentive Grants take on a Jekyll and Hyde appearance for businessmen. They Are hardly Likely to turn Down the Opportunity of receiving a kindly helpful loan from the government. Yet they must know of the Adverse implications of such funding. The drawback to government Assis Tance programs like Dree is that they tend to distort Many of the conventional measures of competitive efficiency in business. For want of a better description let us resort to that tried and trusted Industry of widget manufacturing. A company in Transcona has been getting along quite Well thank you without the need of government assistance. There have been Tough times but the business is basically sound and the economies introduced by its disciplined efficient management team assure the company a reasonably healthy future. The same cannot be said for its chief competitor in East Kildonan. Prospects Aren t so Good for this Enterprise. But along comes government with a subsidy which finally results in the other com Pany which previously had no need of corporate welfare being forced to seek Dree funding merely in order to re main competitive. Critics of Dree Loans and similar assistance programs run by various provincial governments fear that the basis for business expansion is leaning to wards what one can get out of govern ment rather than the traditional Yard Sticks of product Quality production efficiency and Market potential. In Short the whole concept of govern ment incentive programs is slowly creat ing an artificial Economy that lacks a truly Strong competitive foundation. What is the alternative then for spreading Industry across the nation in a More evenly balanced Way unfortunately there Are no Pat answers. Busi Ness generally would favor incentives in the Field of taxation a move which has explosive political implications As finance minister John Turner knows when he lowered corporate taxes two years ago. Cd its a system that other countries find appealing. In particular the United states and Ireland give what Are called tax holidays to new companies concentrating on the Export Market the most valuable form of economic activity for Strong trading nations like Canada. As one leading Winnipeg businessman said regional development should be encouraged through lower corporate taxes not Grants. In some cases Grants promote Industrial growth that should have been started. And Many industries would have started even if the Grant had not been available. If a firm is started it should be because there is justification of a reasonable rate of return. If it is a Good investment it will be made without the however there can be no doubt that Dree is Here to stay. It s a pet project of the Trudeau administration that has become almost a sacred cow. The very thought that the Federal government should de emphasize this concept of assistance to business would bring a look of horror from the provinces. Criticizing the Dree vehicle of Aid is a Little like shutting the barn door after the horse has bolted. So Long As govern ment places social priority before eco nomic efficiency Dree programs and the like will play an even greater role in Industrial development. The department is completing a Mas Sive overhaul program which emphasizes decentralization. Its personnel Are being moved away from Ottawa to the provincial capitals and four regional offices. In Manitoba alone the Dree staff has doubled from 25 to More than 50. 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