580 Million Dollar oh crap moment at Caterpillar

580 Million Dollars, that was the total right down this last reporting quarter that Caterpillar Corp, of Peoria Ill announced.

This was after they had already purchased for 690 Million Dollars (475 Million of Cash) ERA Mining Machinery Ltd of Hong Kong, and more particularly their Zhengzhou Siwei Mechanical and Electrical Manufacturing Co subsidiary in China.  This was after allegedly performing their pre acquisition due diligence.

By my count there are at least 31 individual who to some extent on the Caterpillar Corp. side could have failed.  Since we really do not know which individual are to blame.  We must blame them all, and we should blame them equally.  Except for the Chairman and CEO, everyone of these individual owes the corporation $18,125,000.00 Dollars.  The Chairman and CEO is special he hold two title and therefore he should pay the corporation $36,250,000.00 Dollars (Twice what everyone else), it only fair, he fail twice, once as the CEO and once as the Chairman, rank has it privileges.

As a shareholder I for one am willing to vote for the corporation to accept from each and everyone either a certified check the amount or their resignations as settlement of the debt that they owe the corporations.  I will not name names you can go to the Caterpillar Corp web site for the Officers and and Board Members see for your self, but I will name positions.

Chairman and CEO, CFO, Group President Caterpillar, Group President Construction, Group President Resource, VP Earth Moving, VP Excavation, VP Manufacturing, VP China Operations, VP Mining Sales, VP Procurement, VP Asia Pacific, Chief Accounting Officer, Corporate Controller, Treasurer, Chief Audit Officer, Corporate Secretary, Board Member 1, Board Member 2, Board Member 3, Board Member 4, Board Member 5, Board Member 6, Board Member 7, Board Member 8, Board Member 9, Board Member 10, Board Member 11, Board Member 12, Board Member 13, Board Member 14, Board Member 15 (In order as shown on the corporate web site).

I know that when you have annual net revenue of approximately 5.0 Billion Dollars of net income a screw up of .5 Billion Dollars appears to be rather small, its only 10 percent of annual net revenue.  Some how after Caterpillar had purchased the puppy they were able in a rather short amount of time to figure out that not only did it have heart worms, but it had pin worms, or just about everything else short of schistosomiasis, but not for the lack of trying.

So when does the other shoe drop and the shareholders here from the board that not only did they agree to the purchase of sick puppy, but that the puppy was so sick that it did not survive.  Right now 84 percent of the purchase price has been written off, when do we hear about the other 16 percent.

A few more of these maneuvers and a company that prides it self on building equipment for moving dirt can it self be turned into dirt.

This certainly calls into question the competency of the Senior Management, and the Board of Directors.

What a Wonderful Open and Free Country, and soon it will be even better to Invest in.

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According to a Bloomberg article

http://www.bloomberg.com/news/2013-01-08/hong-kong-proposes-law-making-it-harder-to-identify-directors.html

It seems that someone, somehow, and somewhere proposed legislation in Hong Kong to amend the current laws and regulations to obscure the residential addresses and full identification numbers of company’s director.  This legislation would also block this information an any and all historical filings.  This was proposed back in November 2012, but it is just now seeing the light of day.

The various agencies and governmental departments are silent, as I expect them to be, and it would not be too much of a stretch for them to remain so, after all they know who butters their toast.

In the past this information has been used by member of the media and hedge funds to either show how the many and various off springs (Children, Grand Children and even Great Grand Children) of the “Immortals” have prospered and grown to become the uber rich of the Peoples Republic of China, or to show how various individual with less than sterling character are connected to various business with questionable reporting practices.

In both cases it has cause a great deal of embarrassment for these individuals as they have been asked to explain how they have achieved so much success.  Additionally it has caused much embarrassment to various government officials, as they have had to explain how such a thing could have happen on their watch.

The parties involved, the Communist Party and the uber rich want the spotlight turned off, and they want it turned off quickly.

Corruption has been an ongoing and increasing issue in China, especially as the stakes have become greater.  It has reached the point where it was even reported as a main topic of discussion at the recent 10-year party meetings.   Part of the party faithful are so concern that this issue may be the one item that will end their control of the country, and they are bring pressure on the party leadership to address the issue before the issue address them.

For at some point, at some time, Horton will hear a Who, and then there will be some significant portion of the 1.6 Billion Chinese’s that will be pissed off enough to change the system.  The Communist Party via the government should be able to keep a lid on this problem for a few years, but in the end I suspect that this will be one of the main issues that will tear the country apart, eventually the toothpaste will find the weak spot in the container.

Mean while all of this should give significant pause to any and all investors in China.  Yes it is true that there is a potential for great profits to be made in this country.  The question is does any body really believe that Mrs. McGillicutty of Sandusky Ohio, or for that matter Mrs. Feng Shui of Lijiang will make it.  It will be made by individuals on the inside, and not by some Laowai. (For those more familiar with Japanese the term is Gaijin, or those familiar with German it is Ausländer)

There have been several instances where the accounting practices in some of their companies has at best been or is questionable, at worst criminal, and the shareholders, at least those unlucky enough not to get out early have been financially wiped out, strange the Directors of the companies never seem to be in this group.  I guess the directors are a lucky lot.

With this proposed rule, now it will be even more difficult to track the various questionable players through their various companies.

It has been obvious that the Communist Party, and the Government of the Peoples Republic of China, would like to hide the problem, rather than deal with it in the light of day.  Why else would they even entertain such a change to the registration of Company Directors?

So as they say Caveat emptor.  Invest/Risk some money in China, but please do not bet the farm.  Invest only what you can afford to lose.  Take profits early and often.