Thread regarding McDermott International Inc. layoffs

“Allow me to retort”

Well said. 👍

Allow me too to retort. The A– Clown League went into this with the idea that they could cost-cut their way to profitability. Remember CPI? Cost control is a great pitch to soothe temperamental Ol' Mr. Market when you're just going into an acquisition, especially one like CBI that's way, WAY overvalued. But the market wants less risk, more certainty on expected returns. Not the broken promises of higher margins from reduced costs. Eventually, investors pull their head out of their a– and look beyond "CPI" and "One McDermott Way" and "A New Kind of Company" and cultural integration and realize these are b—s— slogans repeated over and over in earnings calls as a distraction.

Cost cutting matters in an industry that is in the late stages of an industrial life cycle when innovation doesn't matter, standardization becomes the norm, and all you can do is compete based on price. And all you can do to increase market share is merge. If that's where we are, McDermott is already one of the losers in an economically Darwinistic environment and will soon be extinct or devoured by the apex predator.

And if we are in a mature or declining industry, nothing we do matters, we are just prolonging the inevitable. There are no winners, except the monopoly that remains standing.

But that's not where we are. Innovation matters. Engineering matters. Big oil wants innovation, not just mopex. Regulation DEMANDS innovation. Why do you think Lummus, love 'em or hate 'em, has the highest margins and valuation in this company?

And regarding the new, new world order, our political leaders are elected to advocate our interests, not MNC's and not India's. Globalization has been driving US industry in a race to the bottom. Change the rules, change the market incentives, maybe create some economic stability for the electorate. The voters aren't going away. And this is a phenomenon across the western market economies. Not going away anywhere.

Once the political economy removes cost as the short term means to competition and market share and profits, something else needs to take its place. Like innovation and quality and service.

McDermott's failure is a failure of its management. And whoever they outsourced the CBI due diligence to. They fundamentally misunderstood the Onshore market and what they were buying. But at least they weren't stupid enough to fire all their engineers. Not yet.

But defend your thesis. How much are US engineering costs? How much can they be reduced by offshoring? How much predictable EBTDA (or as Stewie says "EBIT-D-A") will this generate? How much is field labor? Can we cost-cut to profitability?

Last time I checked, KBR and Jacobs employ some US engineering and seem to survive.

Hard to imagine “greedy engineers “ being the problem.

https://www.chron.com/business/energy/article/Comment-Cost-cutting-won-t-save-the-oil-and-14552662.php

Never see cost cutting effect "leadership" pay. Bridge loan retention is a case in point.