Firestone Liberia For Sale?

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Firestone Liberia's sprawling nursery is a key part of the company's plan to complete the re-planting of the entire farm by the year 2033.

The Daily Observer has reliably learnt that, prior to the unfolding issue of pending redundancies at Firestone Liberia, the company had been put up for sale and there are intense ongoing negotiations with a European firm that is currently engaged in natural rubber production in Liberia. When contacted for confirmation, the Firestone Liberia public affairs manager, Patrick Honnah, told the Daily Observer, “I cannot speak further than what has already been announced in our statement.”

Firestone Liberia has for several years stated that it is “bleeding” — operating at a loss, that is, citing what it claims are the dismal prices of natural rubber on the world market, which declined by about 80 percent between 2011 and 2016.

In an exclusive visit extended the Daily Observer to the concession area in 2018, the outgoing General Manger of Firestone Liberia, Eduardo Garcia, noted that Liberia currently produces about 0.6 percent of the world’s rubber supply.

According to him, Firestone Liberia’s pre-war production was around 100 million pounds of natural rubber. “Because there was no new planting due to the Liberian civil war,” he added, “current production remains low.”

However the company is currently running an ambitious nursery project that is expected to speed up production through new nursery technology. Referred to as “root trainers”, which produce a higher success rate for new trees, the nursery aims to produce tree maturity in seven years and optimize productive life up to 30 years.

Moreover, this sprawling nursery is a key part of the company’s plan to complete the re-planting of the entire plantation by the year 2033.

Mr. Garcia told the Daily Observer that, between 2004 and 2017, Firestone Liberia had directly injected US$1.3 billion cash into the Liberian economy, through its provision of employment, education, housing and healthcare, among other benefits to the country. However, he said, such benefits have been provided at a loss, with the company incurring debt financing approaching US$200 million — all just to keep the company running — and that it was “questionable if Firestone will survive.”

According to Mr. Yanqui Zaza, a financial expert, he sees Firestone Liberia’s financial picture quite differently.

“Let us remember, tire, which is made from latex, generates about 80 percent of the revenue of Bridgestone,” he said. “Now let us review Bridgestone’s numbers of 2018 and 2019 posted in February of 2019:

ACTUAL ESTIMATE (Amounts are in Japanese Currency)
Year: 2018 2019
SALES: 3,650,111 3,701,461
PRE-TAX PROFIT: 427,768 415,716
NET INCOME: 291,642 300,429
DIVIDEND PER SHARE: 160 163

The financial statements of the parent company do not suggest that it is reducing its operational activities. I based my comment on the sales numbers and profit numbers. The 2019 estimates of both the sales and net income are higher than the 2018 numbers.

Interestingly, the Liberian administration does not provide any information to the public to indicate what price Bridgestone is using to buy latex from the Liberian Firestone Rubber Plantation. Note, legally, these two companies are separate. Therefore, each company should receive a reasonable price, meaning, the parent company should not give the subsidiary whatever price it prefers.

If the parent is not using a reasonable price to buy the latex from the Liberian Firestone Rubber Plantation, then the subsidiary might end up operating at a loss. This is because the subsidiary is not receiving reasonable price for its latex to calculate its sales, but it is paying wages and other expenses based on market value.

‘Firestone Decision Unfair’ Says AAIWUL President

The President of the Agricultural, Agro-Processing and Industrial Workers Union of Liberia, (AAIWUL), Mr. Abraham Dugbe Nimene, says the decision by Firestone Liberia to cut down its workforce is unfair, unilateral and is not in the best interest of the entire workforce of the country.

Mr. Nimene said Firestone Liberia’s policy proposal that it intends to implement was very untimely and also runs contrary to the many discussions that have not been concluded before coming up with such a decision to cut its workforce by 13% (approximately 800 workers), which will take effect during the second quarter of this year.

Abraham Dugbe Nimene, President, AAIWULSpeaking in an interview with the Liberia News Agency via mobile phone yesterday from Monrovia, Mr. Nimene said they were caught unaware of the decision taken by Firestone and it totally runs contrary to ongoing discussions between the concerned parties.

“Before the implementation of those policies, the parties should have met to discuss the terms and conditions but unfortunately, the company just went ahead without due regard and respect for anyone and issued a unilateral statement,” Mr. Nimene said.

The union president’s statement comes in the wake of a policy statement issued by Firestone Liberia, stating that it will cut its workforce by 13%, which will affect about 800 of its current employees by the second quarter of 2019. “Headcount reductions will take place throughout the company’s operations and will include retirements, discontinuation of certain work contracts, and redundancies,” the Firestone Liberia statement said.

The statement further stated that its action was necessary due to continued and unsustainable losses resulting from the high overhead cost associated with the company’s concession agreement with the Liberian government, low natural rubber production because of the country’s prolonged civil war and continued low natural rubber prices. The company, however, said these measures alone will not be enough to restore profitability and, as a result, the company will continue to evaluate all aspects of its businesses to ensure a long- term competitiveness and determine the best allocation of its resources to optimize its portfolio, processes, and culture.

However, Nimene said such a decision is counterproductive to the current state of the economy which creates more difficulties for Liberians and has urged the Liberian government to do the needful thing by swiftly acting to avert the situation. “We currently have a total membership of over ten thousand and the Firestone workforce is our local number one in our structure of the Agriculture, Agro-Processing and Industrial Workers Union of Liberia,” he said.

He also stated that the current pension scheme introduced by Firestone’s management is also a major component of the discussion, which was also not finalized before they came up with such a unilateral decision to only thwart every effort that will promote industrial harmony in the country. “What will happen to those employees who have not attained the age of retirement and others who will be reaching retirement age? And not even due regard given the union’s leadership, the company acted as though there is not any union in existence with the company,” he said.

He warned that the leadership of the AAIWUL will not be a signatory to any document that will not address the current situation at Firestone Liberia until there can be a full investigation and or discussion with the immediate involvement of the Government of Liberia’s labor regulatory agency, the Ministry of Labor.

He, however, cautioned that the situation is beyond politics and called on the government to do the needful thing to address the situation.

According to Mr. Garcia, Firestone Liberia employs well over 6,800 persons, though the plantation is host to around 80,000. The 800 pending layoffs would amount to one percent of the entire population of the concession area. And with an average household of over eight persons, the amount of people that would be affected by the job cuts could easily run into double-digits.

 

10 COMMENTS

  1. If the company is losing money then it has to cut costs to get back to profitability. It’s the ABC of business. Return on capital takes a long time in the rubber farming business because trees can take an average of 4-5 years to maturity. I find it interesting that the price of rubber on the global market is so low because demand for tires is pretty strong I would think. All vehicles use tires so what’s the underlying problem? Is it related to the oversupply of natural rubber from Asia? Something drastic has changed in the supply chain. I think the war seriously damaged Liberia’s rubber industry because during the war, nobody was growing rubber much less rehabilitating existing plantations. While Liberians were destroying their country, other countries took over Liberia’s market share and that was it. It will take years to come back if ever.

  2. I believe the decline in the price of rubber on the international market is due in large part to the invention of synthetic rubber, which is about 60% of the natural resources for making rubber tires.

  3. Mr. Phil George,

    You indicated in yuor comment that the price of rubber has declined.
    Could you please provide the source of your view?

    What is the price of rubber?
    Rubber Monthly Price – US Dollars per Kilogram
    Month Price Change
    Oct 2018 1.43 -0.69 %
    Nov 2018 1.35 -5.59 %
    Dec 2018 1.44 6.67 %
    Jan 2019 1.59 10.42 %
    3 more rows

    Thanks,
    J. Yanqui Zaza

    • Mr. Zaza – Go and do your own research…it’s right there on Google. What I know for sure is the price of rubber declined substantially after the global recession starting in 2008. For example, before the global market crash, a metric ton of rubber in Liberia was over $2,500. Farmers made lots of money and Liberian farmers were growing rubber like there was no tomorrow. Last time I talked to someone in Liberia, the price of a metric ton was $850. Typically after a global recession, price of commodities come back but rubber has not, compared to metals like gold, etc. There is something going on but I’m sorry I don’t have the time nor the interest research it because I’m not a rubber farmer or sector analyst.

      • why you embarrass the man like that Phil. you are right he was looking at the monthly index and not the longitudinal data. You have to remember Phil that not everyone on this website is as astute as you. thanks for the clarification. You did it in a classy manner

  4. Mr. Phil George,

    I posted the information which indicates that the price of rubber in 2019 was 1.59 per kilogram versus 1.44 in 2018.

    Sir, please review your comment. ” If the company is losing money then it has to cut costs to get back to profitability. It’s the ABC of business. Return on capital takes a long time in the rubber farming business because trees can take an average of 4-5 years to maturity. I find it interesting that the price of rubber on the global market is so low because demand for tires is pretty strong I would think. All vehicles use tires so what’s the underlying problem?”

    I don’t think that management’s explanation to dismiss 800 workers is supported by the 2018 financial statements, 2019 estimates, and the increase in rubber price from 2018 to 2019. So, instead of asking me to search, I should appeal to you to revisit your comment.

    May I ask you to kindly educate on your theory? You stated that “…I find it interesting that the price of rubber on the global market is so low because demand for tires is pretty strong…” Sir, when will the price of rubber go up, if it is declining at a time tire is in demand? Would you agree with me that rubber is in demand because manufacturing companies use rubber to make tires?

    • Mr. Dodo bird. there is synthetic rubber, dummy, which replaces much of the actual real rubber. Reading is fundamental and you lack the sophistication.

  5. Liberia problems had been people not valuing the country Resources….If the gov. was demanding Financial Statements from these raskas…crooks our nation will be better off…

    Firestone needs a local competitor to buy rubber from our people…and manufacture them in Liberia.. then one will see where that will lead to…And it is eventually going to happen soon…

    Imagine how much this company had benefited from Liberia up to present. ..and yet they come up with that Stupid lies….The commudity price is low on the world market. ..But they still Carry on productions..

    We want our legislatures to pass bills so that companies operating in Liberia should present their Financial Statements, so that the ordinary citizens will know how much these companies are making out of us Liberians….

    It is time, we are too learnt now for us to continue to be robbed like this…

    It is time for Financial Statements from all companies that hired more than 5 persons..

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