President and CEO, E. Thomas Curley, had barely learned the most efficient traffic routes to the office, when he was handed a check for $1.265 million, told not to come back, and, by the way, “don’t forget that you ‘resigned’”. Not a bad four month gig – I doubt that Lady Gaga does that well.
I believe that Mark Suwyn, Chairman and company Director, had been with NewPage from the “Cerberus” beginning. NewPage lost money every year under Suwyn, and was the worst managed company in the business. For that performance, Suwyn will walk away with a cool $2 million.
As an aside, it was reported that Suwyn engaged his son’s consulting firm in 2009, at a cost of $747,000, to provide training for “improving communications skills, consensus building and problem solving abilities.” (NewPage 2009 SEC Form 10-K, at 117). That is so disappointing, and in such bad taste. The program apparently didn’t work either.
The very good news is that there is no upper level management of NewPage. There is no Chairman. There is no President. There is no CEO. If this were allowed to continue for a few years, some real progress could be made.
Robert Nardelli, who has a big Cerberus title, is responsible for the NewPage performance, and is now the non-executive chairman of NewPage. That non-executive title is very important. It means he shouldn’t be in a position to make any decisions.
This entire mess was created, of course, by Cerberus mismanagement. They hired the wrong people, gave them impossible marching instructions, and have continue to play an expensive game of musical chairs at the highest levels of the company. The initial strategy of “pump and dump” didn’t work, and now Cerberus is relegated to actually operating a company. This is not their strength. But then, what is their strength?
We should not be worried though. Mr. Nardelli promises that, “This is a well positioned business”. The following report was offered to prove that (except for large severance packages paid on a regular basis) NewPage is the low cost operator. See NewPage June 2010. Just for the record, most coated producers believe that they are the low cost producer. Only one of them is correct.
Unfortunately for NewPage, however, debt is a fact of life. My understanding is that most of the company’s $3.35 billion of debt has an interest rate in double figures. In its 10K annual report, the company indicates that it expects to pay $323 million in interest in 2010. This equates to roughly $86/ton, if the company were to run full all year. (Estimate of 4.4 million tons of capacity at an 85% operating rate.) This estimate is likely on the conservative side, however. When the year is finished I would be surprised if interest paid in 2010 equates to less than $100/ton.
Interest repayments and debt repayment (2012-2014) will be very difficult challenges for the company. Our lead story in next week’s Reel Time will offer conjecture as to how all this might work out.
No joking, what is the management of Cerberus thinking? Are they giving up? Are they finally going to install a management team that understands the business? What changed in the last four months that required a new management team? How long will the next group last?