This is a long post
I sent an e-mail to Perth a couple of days ago with concerns about the Synerject situation. I received an immediate reply back from Michael Aspinall, OE’s public affairs coordinator, who asked for my phone number so that he could call me back. He did call me back (after extensive effort), and we had a half-hour conversation. I specifically asked him if anything that he told me was not for public disclosure, and he told me that he had been careful not to tell me anything that was confidential, and, in effect, the conversation was on the record. I did not take detailed notes, and what I relate here is based on my recollection, and of course my hopes as a five-year holder of OE shares.
I questioned Mr. Aspinall about the apparent difference between American corporate culture and its Australian counterpart. He was well aware of the American custom of paying American corporate management with stock or stock options, and having them grow extremely wealthy if the Corporation prospers. This is apparently much less common in Australia, and definitely not part of the OE corporate culture. I asked him what it is that motivates Mr. Schlunke and the rest of the OE management, as many of them own fewer shares then I do. His answer, greatly paraphrased, is that they enjoy doing what they do, and they have a great deal of pride in meeting the challenges of perfecting the product and then selling it to the best of their ability. I got the distinct impression that, while they would be thrilled to have OE adopted worldwide as the standard for fuel distribution, they will be perfectly happy if OE continues to bring in only enough income to make a small profit and maintain OE as a continuing enterprise. IMO, this corresponds very well with the concerns expressed here and on other boards that the management is tipped far too much to engineering rather than marketing to maximize shareholder's interests. I asked Mr. Aspinall if OE has a definite program of maximizing share price. He replied that they really don't know of any way to do this in the long run, as early on the they naively thought then all they would have to do is demonstrate the superiority of their product and it would be adopted without question by the world's car manufacturers. They now realize that many factors other than the quality of their product determine whether or not it is adopted and used. As is well discussed on these boards and elsewhere, the automobile manufacturing community is extremely conservative, and even a large powerful corporation is reluctant to be the first one to adopt a new technology, especially if it was developed by a small company such as OE. Mr. Aspinall told me that they expect that soon after the technology is adopted by one company, all the rest will fall into line, much in the same way as when ABS was first adopted by one company and then became standard in virtually all cars. He insisted that of the multiple companies which have investigated OE, most of them have been skeptical about OE's claims but they were confirmed on their independent testing, and the failure to adopt OE's technology is in no way due to any concerns about the effectiveness or reliability of the system. (His words were, "they can't believe how good it [OE] is.") I asked about the Mercedes fiasco. Mr. Aspinall stated in that Mercedes was extremely close to adopting OE, but then one of their senior management people felt extremely strongly about not going ahead (for reasons that we did not explore), and Mercedes remains interested but did not appear to have wanted to be the first adopter.
One of the more intriguing things that he said was in response to my suggestion that the Saab adoption is critical to OE's subsequent success, and that it is very important that this goes smoothly. Mr. Aspinall agreed with this, but then stated that he would not be surprised if another major auto company is actually the first to enter commercial production with the OE system. I asked him if he could tell me which car company this is, but he stated that that was information that he could not disclose
We discussed the Honda/Sundiro/OE relationship. Mr. Aspinall stated that OE had not yet figured out whether this will be good or bad for us in the long run, but he did confirm that Sundiro has produced and marketed 500 machines in Shanghai. They will use these as a test run, to see how they are received on the market, see how they hold up in retail use, and for training of their sales and service staff. It is their expectation that much larger numbers will be produced and sold in the near future. He pointed out that even though Honda does not manufacture 2 stroke engines under their own name, they remain heavily involved in joint ventures with other companies that sell 2 strokes.
On a few miscellaneous topics, Mr. Aspinall did confirm that any Ficht motor sold will result in payment of a royalty to OE. He also stated that Mitsubishi had tried to sell high-pressure DI engines, and then they had difficulties with their fuel pumps seizing in areas where low sulfur gasoline was being used. In response to my original reason for contacting him, he insisted that the Siemens/Synerject deal was exactly as stated, namely that Siemens remains interest in automotive applications of OE, but is divesting themselves of nonautomotive areas in order to concentrate on their VDO acquisition. He appeared to insist that the there is no good reason for the recent price decline, and that the Bombardier/OMC deal would likely be good for OE in the long run, as they will either use the OCP of find a way to make Ficht work and pay royalties to OE for that.
My overall impression is that OE will continue to plug away as they have, secure in the knowledge that they have a superior system, continuing to market it to the degree that they are capable, and that it is just a matter of time before the rest of the world wakes up to its greatness. It is true, as JMC and others point out, that they are first and foremost engineers, and their marketing skills are secondary (to put it in the most subtle fashion). No matter what the business textbooks (and the law) say, it is their company, not ours, and we are welcome to come along for the ride. They seem fully capable and willing to press on regardless of what the shareholders or the rest of the world may say. As for me, I’m going along for the ride, and I’m going to quit wasting my time reading the Yahoo boards. This stock will make us money whether we believe in the management or not. |
