I've lifted this from Mineweb....provides another insight/perspective, from another continent, into Gilbertson's untimely departure (with his bicky tin overflowing). Cheers, Carl.
JOHANNESBURG - Just why the Boytjie from Bothaville resigned from his position on Sunday isn’t known. It will probably be some months before it all comes out in the wash – if even then. But there’s certainly been plenty of speculation, notably in the Australian press which, as usual, has entrenched its already famous reputation for uneven-handedness. I do not know precisely why Brian Gilbertson resigned – he’s on holiday and is incommunicado which, from his perspective, is certainly sensible. But, since every Australian business commentator has been impelled to advance one or several theories, this is as good a time as any to throw up some South African thoughts.
Gilbertson’s background is that of a physicist and his first job was with the old CSIR (actually with National Institute for Defence Research where he experimented in applying multispectral pattern recognition to missile guidance and proximity detection). He was closely associated with early NASA developments, notably its ERTS-1 project. Soon after he joined JCI he came to the attention of the house’s chairman at the time, Gordon Waddell, who became his unofficial sponsor. One of the truisms about corporate life everywhere is that the support of senior executives is an essential if success is to come your way – it matters as least as much as individual brilliance and managerial efficiency.
As things turned out, Gilbertson’s march was as impressive as it appeared unstoppable. He became MD of Rustenburg Platinum and later a JCI director and it seemed that, in time, he might have stood an even chance of becoming JCI’s chairman. That was until he ran into Pat Retief who, for whatever reason, didn’t care for him. The result was that Gilbertson left, only to walk over the road to Gencor (at the time regarded by many, me too, as tin-horn and wobbly) and whose chairman, the legendary Derek Keys, thought him much too good a proposition to ignore. After a short period running Gencor’s coal operations, Gilbertson moved on to Impala and it was there, it seems, that he developed a penchant for swooping by helicopter onto the company’s mining operations. It was there, too, that the mining legend “The Ego has landed” was born, whether fairly or not.
After he succeeded Keys as Gencor chairman in 1992, Gilbertson executed the apparently unthinkable for a SA mining house. He decided core operations were paramount. That meant mining. The corollary was to embark on a programme of selling off Gencor’s many industrial assets (including Sappi and Malbak); by the time he’d finished, Gencor’s balance sheet had fallen by about a third.
That was when those who’d been given by Royal Dutch Shell the remit to sell off its non-core assets assembled crudely under the banner of metals trading house Billiton walked through Gilbertson’s door. The company had already been hawked around Europe with a singular lack of success and, given Gencor’s foreign exchange poverty, it seemed unlikely the house would be able to string together a deal. But it did, largely due to the efforts made by then financial director Mick Davis and Gilbertson’s deputy, Bernard Smith, contributions cheerfully and fulsomely acknowledged by Gilbertson.
At a stroke, Gencor’s balance sheet was restored. The timing turned out better than perfect – Billiton was largely concentrated in the aluminium chain and those were good years for its products. Its profits enabled Gencor to repay the borrowings made to buy it, much of these from Shell itself, well within the period scheduled. Along the way, Gilbertson also structured the deal that effectively saw Gencor take control of GFSA by merging Gencor’s ageing gold mines with vastly superior assets and then allowing the resuscitated house, Gold Fields, to float away by itself.
Then came the breathtaking news that cabinet had agreed to Gencor’s translocation to the UK. Reincarnated as Billiton plc the company earned a reputation for delivering good results but it was too small by UK standards to attract much attention from the big fish institutions. That was when Gilbertson and BHP CEO Paul Anderson hatched the plan (in Gilbertson’s Plettenberg Bay holiday home) that merged the two companies to create the world’s biggest mining combine.
By prior agreement, Gilbertson replaced Anderson in July last year as BHP Billiton’s CEO. The terse statement from the company that he resigned after just six months in the job because of “irreconcilable differences” with the board has, pretty naturally, fuelled intense speculation as to the nature of the arguments.
All sorts of theories abound. One is that his “reputation for abrasiveness” contributed to repeated clashes with the board, led by chairman Don Argus, “about the formation and execution of decisions.” The Australian Financial Review said there’d been “simmering differences” over Gilbertson’s management style and relationships with directors. Argus was reported as saying there were several issues between Gilbertson and directors (but denied his exit was caused by rifts with himself).
So, is Gilbertson really abrasive? My own experience of him is just the opposite. He can certainly come across as being cold, formidable even, and rather remote. But, and as I’ve commented before, I think that may be the mark of a man who is intensely shy and struggles to overcome it. He is intellectually bright and is possessed of great energy. And I think he is probably overly demanding of the people around him. He tolerates fools poorly and expects the best from his executives. Nothing wrong with any of that. He can also – and unexpectedly perhaps – display unusual depths of warmth and solicitude to those in trouble and he can be fiercely loyal.
My own guess is that a complex mix of reasons has contributed to Gilbertson’s departure. The choice of Chip Goodyear, an Anderson acolyte, to succeed Gilbertson may be key to these. Goodyear was the company’s chief development officer, critical to a major world company that was presumably back in the growth stakes. He is described by the Financial Review as being “well regarded by the market for his focus on financial disciplines rather than for any deal-making flair.”
HSBC’s CIO Paul Kasian was less complimentary. He said bluntly that “Chip Goodyear has no operational experience.” And that feeds neatly into an independent commentary out of London that had this to say: “Whatever they may think, Australia is not the ideal place to run a global mining company, and caging up a talented executive is asking for trouble, even when the cage is Australia. Gilbertson was not irreplaceable but he is highly regarded in a tough industry. If BHP Billiton cannot be taken over [thanks to Government protection], and cannot keep high-quality executives, it’s likely that yesterday’s 11p fall to 325p will not be the worst damage to the share price.”
It is also clear from a reading of the Australian press that both Anderson and Gilbertson experienced problems with the BHP board, notably with Argus. Gilbertson has a strong record for making assets deliver, so suggestions that Goodyear will do better are phantasmagoria. He also had powerfully developed views on what BHP Billiton needed to do if it was to become truly competitive with the US behemoths. In a world economy that’s been doing badly for a couple of years, and seems set to continue on this course for a while longer, the time to buy good assets is now – not when the train is accelerating from the station.
So it’s noticeable that Gilbertson’s departure comes as the company was poised to move on a raft of potential acquisitions – WMC Resources, Alumina, Woodside Petroleum and India’s National Aluminium. Merrill Lynch analyst Russell Skirrow is quoted in the London Telegraph as saying “I get the feeling transactions may have been taken to the board and turned down. A sports car performs differently depending on the driver and Gilbertson probably wanted to exceed the speed limit. That limit was set by the board.” Another unnamed source close to the company told the Telegraph that the board split was very much along “Australian and non-Australian lines.” Australians are xenophobic at the best of times but if this story is true then kiss BHP Billiton goodbye as a world player.
Nor has it passed attention that Goodyear, who sat in London apparently to superintend business development, had been undercut by the appointment of a Gilbertson favourite, Dave Munro, to lead a resuscitated M&A team. It may be that Gilbertson had grown tired of waiting to cross the penultimate t and dot the last i.
Two other curiosities relating to Goodyear’s appointment arise. The first is that, immediately after he arrived in Melbourne to take command, the company issued a statement saying “Gilbertson’s resignation will not result in any change in the company’s strategy nor in initiatives previously announced.” If that does anything it confirms the view that Gilbertson’s departure was the result of a growing antagonism between himself and Argus.
The second is that Goodyear, who is undoubtedly bright and intelligent, is only 44, rather young to be leading a major mining and resources group. According to Argus he has the support of the board which Gilbertson didn’t enjoy. Interpret that as meaning Argus likes Goodyear whom he may consider, at 44, to be rather more biddable than Gilbertson. Now some Australian commentators have been crowing about how brave the BHP Billiton board has been, putting Gilbertson in his place. But the new construction may be that the real boss is Argus and that, in time, we may find this to be case of a non-executive chairman wielding authority without accepting responsibility. I hope for Goodyear’s sake his tenure is not defined by the extent to which he has become a fall guy.
BHP, the Big Australian as it used to be known, is a company in the process of being rescued, first by Anderson, an American, and then through the Billiton merger. It has a record of unusually high casualties. All you need do is look at Beanup (titanium, closed) and Hartley Platinum (now doing rather well under SA managers) to arrive at the conclusion that BHP needed Billiton and Billiton management rather more than the other way around.
There is now speculation that other South Africans may also depart. They include Mike Salamon, Marius Kloppers and Dave Munro (apparently now aboard a yacht in the Cape-to-Rio race).
In my book, this is a counter to sell and watch. Who knows, Goodyear may do well. Another American, he has an impressive cv. Apparently related to the Goodyear family, he was at one stage President of Goodyear Capital and was earlier CFO of Freeport McMoran. He has a BSc from Yale and an MBA from Wharton.
But, in these circumstances and with a board clearly divided and dominated to what may be an unhealthy degree by its chairman, I would need a more convincing track record before I took the bet.
BHP Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
(20min delay)
