The two days that I spent in the factory have revealed few more things of which I was not aware so far. The finance manager who is one of the cartel member is a complex personality. I have noticed his closeness to CEO. CEO considers him his man in the factory. I saw his different side this time.
On the first day evening, he joined us for dinner. CEO was at his usual self uttering stupidity after stupidity in the name of humour. When we went to the restaurant, we found one corner and was sitting there. While the server was giving us the drinks, the CEO had a glimpse of a woman on the opposite corner holding a beer glass in her hands. “wow..the lady with a drinks” -The CEO muttered and then said to us “I think we are sitting in a wrong corner…might feel suffocated soon…let us shift places”. We moved over to adjacent table where “the lady with the drink” was sitting.
Strange are the ways of CEO’s thinking. Just because the lady consumes Beer or alcoholic drinks, she is looked at as glamour woman. The poor lady with the Drink had come with a small boy who would not be older than ten years. I did hear the lady uttering some rhyme to this boy while the CEO was continuing his stupid talks with the finance manager.
The talks slowly got diverted to official matters. The Finance Manager started bitching about the VP and then about B himself. He kept harping on the continued depreciation of Euro these days. Most of the volume of exports that we do are denominated in Euros. The prolonged depreciation has been hitting our bottom line. While the export contracts are done on an annual basis with a fixed price, the currency depreciation that may happen later will cut the price realisations.
While the currency management is a matter of financial department, our finance manager kept blaming B for not re-negotiating the contracts with the customers and get price increases.
CEO : “B was telling me that he has managed 1 euro increase from one of the customers…is it not helping us?”
FM :”no sir, it is not so. It was earlier a FOB shipment, now it is changed to Cost and Freight terms with some nominal increase. whatever increase we got will be nullified by the marine freight we would be paying”
CEO : “is it? I did not know this. Raise this topic in tomorrow’s meeting…I shalk ask B for explanations”
The above conversation was a complete surprise to me. I always had thought that the Cartel is closely knit. It seemed there are ambitions and competition among the Cartel also. In my view, Finance Manager is just cribbing about B and the customers without doing anything using financial instruments such as Forward Contracts.
I do know that B has been giving monthly shipping schedules to the finance department for planning cash flows. Finance Manager does not seem to be interested in managing currency risks using hedging instruments, but more interested in blaming B.
Next day, when I reached the factory, I entered into B’s chamber. We discussed about sales related matters for a while. Thereafter, B asked me about the dinner yesterday. Usually B does not speak these topics. I said to him that the Finance manager (Let us call him FM for convenience) joined us for the dinner. He said he was aware. I wondered aloud how.
B : “FM himself came to me this morning and told me about it”
me : …
B : “did he complain to CEO about the price increase that I got with Danish customer?”
me : “he did….but how did you know”
B : “he came and told me about it”
me : “that’s strange….but why did he back-bite first with CEO and then inform to you as well?”
B : “because he knows very well that I would anyway come to know about his complaining…he is scared, that’s why he informed me in advance”
Then B explained about the formula of price increase he got. Actually B did the right thing and acted like a shrewd commercial guy. The customer wanted to convert the FOB delivery terms to CFR (Cost and freight). At that time, B had used the pretext of higher logistics cost to get a price increase which is more than the real freight component itself.
In the meeting, FM raised the issue as planned. CEO uttered irrelevancies and then asked for explanation. B was ready for it and he had carried the workings and correspondence copies with him for the meeting. Appropriate explanations were exchanged. Every one was satisfied.
The observer in me had a hearty laugh. what is this called? A well-orchestrated and pre-scripted meeting…just like the popular reality shows!