Stock Market News Recap

Nationalism and Business Stock Market Contradictions

The stock market loves synergy. The profit potentials of combining revenues over a common base of costs are attractive indeed. A demonstrative example would be the case of companies in copper and nickel. The same mines do not contain both metals, but the technologies of safe and sustainable extraction from the earth are common. More importantly, many key customers such as mints use both substances, with tremendous marketing advantages as a result.

Phelps Dodge Corporation, a major copper company from Phoenix, Arizona, warmed many stock market hearts with a visionary proposal to take over two linked Canadian corporations, Inco and Falconbridge. The proposed new entity has the potential to emerge as a world beater with heir combined rights to mining on the North American continent. Unfortunately, there are voices of dissent within the 13, yes 13 unions in which workers of the Canadian companies are organized in terms of their rights!

Canadian voices have raised issues of nationalism in this purely commercial proposal. There is talk of losing ownership to the U.S. which is rather surprising considering the ingrained cultural similarities between the nations. The Swiss company Xstrata, which has a minor stake in Inco must be chuckling up its European sleeve! One can only hope that good financial sense will prevail soon, and that Phelps Dodge will be able to make its plans see the light of day.

The incident shows that while the stock market is impersonal and judges proposals purely on numbers, people in companies have fears and hopes with which managements must deal. It does not suffice to see the powerful business logic of alliances, but the huge communication effort involved is always worthwhile keeping the long term pay off in view.