Bay play part of global game
Feb. 28, 2006. 06:56 AM
DAVID OLIVE
BUSINESS COLUMNIST
From outward appearances, a proud G-8 economy is being hollowed out. Many of its best-paying jobs are being outsourced to low-wage nations, turning one-industry communities into ghost towns. Iconic local enterprises are being snapped up by foreigners, and entire sectors of the economy are falling under the control of interlopers from abroad.
We're talking about the United States — something to keep in mind with South Carolina billionaire Jerry Zucker's successful deal to take over Hudson's Bay Co. But HBC's agreement to the takeover last month has prompted dismay in some quarters over the loss of an enterprise rightly identified with the creation of Canada itself.
"The Bay's demise as a touchstone Canadian institution sends an uncomfortable message," says HBC historian Peter C. Newman, mindful of the foreign takeovers in recent years of Molson Cos., Dofasco Inc., Future Shop and many Western Canadian energy firms.
"If we continue to cast adrift all of our historic anchors and become mere squatters on our own land, it will be too late."
When the HBC deal was first announced in January, retail consultant Wendy Evans told the Toronto Star that a blend of consumer cultures across the continent was a good thing, but "I don't think we want to have a total Americanization of Canadian retail."
Yet a glance to the south reveals a "de-Americanization" of stateside industry as pronounced as events in the Great White North, if not more so. The Bush administration recently approved the takeover by state-owned Dubai Ports World of several major U.S. ports, including terminals in New York, Philadelphia and Baltimore, dismissing concerns on Capitol Hill about the implications for national security. The company has asked U.S. federal authorities to review the deal again for potential security risks.
The White House is hamstrung in its efforts to censure the rabid Bush-hater Hugo Chavez, president of Venezuela, because Chavez could play havoc with U.S. fuel supplies, given the dominance on the U.S. Eastern Seaboard of Venezuela's state-owned Citgo Petroleum Corp.
British utility giant National Grid is seeking to expand its U.S. assets as one of the two bidders for KeySpan Corp., the fifth-largest U.S. natural gas distributor. British grocery giant Tesco PLC this week unveiled plans for a chain of U.S. mini-marts, joining Japan (7-Eleven), Canada (Circle K convenience stores and Eckerd drugstores), Sweden (Ikea) and Holland (Giant and Stop `n' Shop grocery stores) among foreign firms crowding the U.S. retail scene.
Canadians control the Illinois Central and Wisconsin Central railways; the Number 2 U.S. auto-parts maker, Magna International Inc.; John Hancock Financial, the biggest insurer in New England, which competes for business in the American market with the U.S. operations of Canada's Sun Life Financial and Great-West Lifeco Inc.; the U.S. Number 2 discount broker, Ameritrade; and one of Chicago's three biggest local lenders, Harris Bank (another of the three, LaSalle Bank Corp., is Dutch-owned). Puerto Rico's banking industry is effectively a branch plant of the Bank of Nova Scotia.
There are no American players in the burgeoning U.S. market for regional commuter jets, a sector dominated by Bombardier Inc. and Brazil's Embraer SA, soon to be joined by Russian aerospace giant United Aircraft Corp.; and Bombardier's lineup of corporate jets has displaced Savannah, Ga.-based Gulfstream Aerospace Corp. as the most popular private jet of choice for Fortune 500 CEOs, who long ago traded in their Cadillacs and Lincolns in favour of a Mercedes, Lexus or BMW.
The BlackBerry instant email device, a product of Waterloo-based Research In Motion Ltd., is so indispensable among U.S. decision-makers in Congress, on Wall Street and in Hollywood that the U.S. government has repeatedly intervened in the current patent dispute that threatens to shut down an addictive service with 3.2 million U.S. users.
American consumers enrich foreign companies with every purchase of Wild Turkey bourbon, Vaseline, Harlequin books, Allegra antihistamine, Dixie Chicks CDs, PlayStation game consoles, Kit Kat bars, Perrier sparkling water, Sunlight detergent, Hellmann's mayonnaise, Ben & Jerry's Chunky Monkey, Gerber baby food, Nicoderm tobacco-cessation patches and Ciba contact lenses.
As recently as two decades ago, America's biggest companies had mostly themselves to compete with. Today, non-American firms control more than half the U.S. market for autos, steel, beverage alcohol, nickel, newsprint, rubber, gold production and civilian aircraft.
Three of the Big Four global oil giants are European, as are three of the Big Five pharmaceutical houses. America has only two domestic auto makers; while Germany and France, with a combined population less than half that of the U.S., boast five major ones.
At least three Chinese auto brands — Geely, Chery Automotive and Lifan Group — are preparing U.S. rollouts of fuel-efficient, modestly priced ($10,000 U.S.) passenger cars. IBM personal computers are now made by a Chinese firm, Lenovo Group Ltd. And production of Play-Doh and the Etch-a-Sketch, 46-year-old flagship of the Ohio Art Co., has for the most part shifted to China.
Yet America remains the dominant global economy, whose stature won't come under serious challenge — principally from China and India — until mid-century at the earliest. Indeed, the stupendous buying power of U.S. consumers is the lifeblood of the world's leading non-American firms, which would shrivel or perish if denied access to the U.S. market. As for Canada, its economy has never been stronger, in job creation, wealth generation and fiscal surplus. And despite the new absentee ownership of several famous firms, Canada punches above its weight in the multinational game.
Global business is, to some extent, a game — one of musical chairs. Shoppers Drug Mart, to pick an example, has passed from Canadian to British to American and back to Canadian hands since the late 1970s.
And at this moment, an Indian steel maker headquartered in London, incorporated in Holland and boasting extensive U.S. operations including the former Bethlehem and LTV steel firms, is seeking control through a hostile takeover of a French rival that itself just bought Canada's Dofasco, which the Indian firm proposes to spin off to Germany's ThyssenKrupp AG if its acquisition gambit succeeds.
Unlike the asset shuffling and "asset stripping" that reached its zenith in the late-1980s, today's industrial consolidation — in theory, and usually in practice — enhances productivity and innovation, and, in the long term, job and wealth creation.
Japanese auto makers now employ almost as many workers in Cambridge and Alliston, Ont., and in U.S. communities as they do in Toyota City and Hamamatsu. European drug makers are increasingly concentrating their R&D activities in New Jersey, still the world capital of the pharmaceutical sector; Houston remains the leading centre of global oil and gas exploration and production technology; and Toronto keeps its role as a leader in global mine financing.
In a proper order of events, HBC would have been acquired by Target Corp. of Minneapolis, a well-managed retailer that has withstood the threat from Wal-Mart Stores Inc., and not by a financier, Jerry Zucker, with no background in merchandising. That the 335-year-old HBC has fallen into the hands of an investor whose resumé includes the bankruptcy-protection filing of a textile conglomerate he assembled in the 1980s says less about Canada's vulnerability to a plague of absentee owners than to the chronically risk-averse, unimaginative corporate culture of HBC for most of the 20th century.
"Despite its historical significance," says HBC historian Newman, the firm "turned out to be the most stunningly unsuccessful monopoly in Canadian history," failing to parlay its founding fur-trading empire into a business that could indefinitely outlive the obsolescence of beaver coats.
Here and there, one finds Bay customers who mourn HBC's change of ownership. But realistically, a radical change at HBC is long overdue.
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