:00:03. > :00:13.Obama said there was no room for complacency.
:00:13. > :00:15.
:00:15. > :00:20.It sounds stupid, but we talk about the advantages and disadvantages of
:00:20. > :00:29.salary today. People work expect to get one. But we will ask whether it
:00:29. > :00:35.is better to be paid in shares a profits. And we will talk on cars.
:00:35. > :00:45.Each week, influential business leaders gather to talk on Bottom
:00:45. > :00:52.
:00:52. > :00:59.Line. Now you can see it as well as Now we will spend a few minutes
:00:59. > :01:07.meeting each of my guests. This is the managing partner of a venture
:01:07. > :01:10.capital firm. It is also Private Equity. It is not just about
:01:10. > :01:16.financing start-up businesses. It is about helping existing
:01:16. > :01:26.businesses. Exactly right. We have venture-capital which helps people
:01:26. > :01:29.
:01:29. > :01:36.start-up. On the other hand you have got the assisting of large
:01:36. > :01:42.businesses. In the middle you have an ecosystem of a lot of the small
:01:42. > :01:46.enterprises being helped to develop and restructure. So you would have
:01:46. > :01:52.been venture capital, but it is not just about the start up, it is
:01:52. > :01:59.about the next stage. Absolutely. It is to help profitable companies
:01:59. > :02:06.develop. You might want to expand overseas or be bought out. So the
:02:06. > :02:14.company has shareholders and you will help them. And so lewdly.
:02:14. > :02:19.second guest is the managing director of a UK company. You have
:02:19. > :02:28.been on the company -- show the four. It is an import business.
:02:28. > :02:38.it is. We help them until they're reached the shores of the United
:02:38. > :02:39.
:02:39. > :02:49.Kingdom. Who are you come to -- customers ques? To nobody can sell
:02:49. > :02:54.anything unless they truck sent it somewhere. The other 50% for the
:02:54. > :03:02.business is a one-man builder from north London. We go right across
:03:02. > :03:12.the pages. My fellow guest is the president of European honour. It is
:03:12. > :03:12.
:03:12. > :03:22.not all Japanese manufacturing. so lewdly. We have been producing
:03:22. > :03:25.
:03:25. > :03:35.for over 20 years. We produce bikes in Italy and that sort of thing.
:03:35. > :03:36.
:03:36. > :03:44.You ran a European Honda a sickly? -- basically. Last year was tragic
:03:44. > :03:50.for the business because of the floods and tsunami. We have gone
:03:51. > :03:57.through the toughest year imaginable. We also had the
:03:57. > :04:05.Thailand floods. We did not appreciate that it would affect
:04:05. > :04:12.British manufacturing businesses. Absolutely. There was a lot of news
:04:12. > :04:16.coming out of Japan. Horrible circumstances. It was fascinating
:04:16. > :04:24.that Thailand do not get a mention in Europe. Dealers were asking why
:04:24. > :04:31.not. Production dropped Ray number of weeks. We could not get the
:04:31. > :04:35.parts. Public knowledge was different for two very dramatic
:04:35. > :04:45.natural disasters. Time to talk more generally about the automated
:04:45. > :04:46.
:04:46. > :04:55.business. The automated business has endured a lot of turbulent
:04:55. > :05:00.years. What is wrong with the motor industry? There is a lot of emotion.
:05:00. > :05:04.The man -- the reality is that we're offering pupil mobility.
:05:04. > :05:14.There is a massive amount of science in the evaluation of what
:05:14. > :05:14.
:05:14. > :05:19.the customer or wants. I am not talking about car yards, and
:05:20. > :05:25.talking about size, use of space, everything. You can take three
:05:25. > :05:31.years of evolution before it gets close to manufacturing. The life
:05:31. > :05:39.cycle is generally 5-6 years. Too many people inside the business the
:05:39. > :05:45.life cycle is actually approaching anything up to ten years. There are
:05:45. > :05:49.people who will have lived with this product. It is quite
:05:49. > :05:58.interesting that the emotion is always there. It is a passionate
:05:58. > :06:04.industry. The reality is more clinical in thinking. One more
:06:04. > :06:08.before the others come in. The notion of the platform. The public
:06:08. > :06:17.does not necessarily understand the importance of minimising the number
:06:17. > :06:26.of platforms. In simple terms, the car is structured around a platform.
:06:26. > :06:30.You can quote various parts on top of that an internal figurations. We
:06:30. > :06:37.have the opportunity of Configuring for many customers from a single
:06:37. > :06:41.basic product. That offers you an opportunity for economies of scale.
:06:41. > :06:47.On a geographical basis it gives us an opportunity of having a single
:06:47. > :06:53.platform. But effectively there will be two different cars that can
:06:53. > :07:03.service different markets. Are you a fan of the car industry ques mac
:07:03. > :07:06.not necessarily. I have got a lot to thank the car industry for. It
:07:06. > :07:16.has been centred around Birmingham for forming a strategy. The way the
:07:16. > :07:26.industry used to were was to back in metal-bashing company in
:07:26. > :07:27.
:07:27. > :07:34.Birmingham. I love walking around them. You can see these machines.
:07:34. > :07:40.There are immense. The trouble is that they made no money. The end
:07:40. > :07:50.customer would save, good news, you are the model for the next eight
:07:50. > :07:51.
:07:51. > :08:01.years. In that sense and not a fan in the business of supply. There
:08:01. > :08:02.
:08:02. > :08:11.are some forces or dual problems. - - structural. That might explain
:08:11. > :08:21.why the margins are so low. It is quite interesting logic if we take
:08:21. > :08:22.
:08:22. > :08:31.your ideas. You have got to look at the total world. You cannot take
:08:31. > :08:38.just the designed product. You also have to take the supply Bays
:08:38. > :08:46.policies. It has got to be looked at on a global basis. It is quite
:08:46. > :08:56.an interesting challenge. In our case because of the exchange rate
:08:56. > :09:03.we want to encourage suppliers. To get economies of scale through you
:09:03. > :09:12.need big investment in suppliers. You were in a car dealership at one
:09:12. > :09:17.point. How does it break down, what is the thing everyone gets?
:09:17. > :09:26.Contrary to popular belief, the margins are quite small. They rely
:09:27. > :09:33.on lifetime value customers. delays are not making money? They
:09:33. > :09:40.do in the United Kingdom. But depending on the franchise, the
:09:40. > :09:50.total franchise might be phrasing even or at best getting to the cent
:09:50. > :09:57.
:09:57. > :10:02.return. -- breaking even. Is this true? There are very competitive.
:10:02. > :10:12.In truck, it is likely that you'll be only getting �25 per hour.
:10:12. > :10:14.
:10:14. > :10:22.is getting the money? All of us are getting some of it. The point on
:10:22. > :10:30.interference is that if you have a car plant in your home country, you
:10:30. > :10:35.will have one, it is not necessarily the best place to have
:10:35. > :10:44.one. They will and fly a lot of people. There is a centre of wealth
:10:44. > :10:50.attached to it. -- they will employ. The whole structure could make
:10:50. > :11:00.sense. But it will not if you have this external focus from
:11:00. > :11:00.
:11:00. > :11:06.politicians and trade unions. an interesting observation. There
:11:06. > :11:15.are many manufacturers in history who have survived because of local
:11:15. > :11:22.and national emotion. I will not name names. However, this capacity
:11:22. > :11:29.is not necessarily the future challenge. There are massive
:11:29. > :11:34.markets like South America, India and China. Their opening up to the
:11:34. > :11:41.point where there is a real opportunity. There may not be a
:11:41. > :11:48.global capacity. There will not be making cars in Europe to sell to
:11:48. > :11:58.Brazil. We make cars in the UK that are sent to Australia. There is no
:11:58. > :12:05.reason we cannot send them to Brazil. The global situation is
:12:05. > :12:15.very important. In the truck industry we are looking at 140
:12:15. > :12:15.
:12:15. > :12:22.countries. Exchange rate is very poor at the moment. In real terms
:12:22. > :12:30.our trucks are double the cost they were five years ago. They are
:12:30. > :12:39.subsidising that in Europe. We're doing very well in the Far East and
:12:39. > :12:48.Africa. Before we move on it, time to look ahead. Cars in 20 years'
:12:48. > :12:58.time. Ali going to see cars significantly different's new fuel
:12:58. > :13:01.
:13:01. > :13:07.sources? New ideas? I love cars despite knotting wanting to invest
:13:07. > :13:16.in the motor industry. The idea that cars changing fills me with
:13:16. > :13:26.horror. I know it has to happen. I like cars that sound like cars. The
:13:26. > :13:33.thought that it could become Give us some experience of what is
:13:33. > :13:38.happening in trucks. I think that the truck manufacturers by going to
:13:39. > :13:45.have to combine. The technology and engine emissions is so complex and
:13:45. > :13:49.trucks are so complex that to go- it-alone for the smaller
:13:49. > :13:56.manufacturers will be very difficult. We will have to look for
:13:56. > :14:02.in a partner to work with. We have electric trucks, their range is
:14:02. > :14:07.around 100 miles. It is reasonable for running around London. They now
:14:07. > :14:13.hugely expensive. Double the cost of a standard trier. It will be
:14:13. > :14:21.difficult to get businesses to invest in that. My experiences that
:14:22. > :14:26.companies will buy one. End the managing director, but an engineer.
:14:26. > :14:32.I think that fuel cells would be the way bigger. For people who have
:14:33. > :14:40.not followed this, the fuel cell is a ticklish technology to batteries.
:14:40. > :14:45.But optimistic it is electric be powered. I had to do everything I
:14:45. > :14:53.know about fuel cells. In Japan they are talking about fuel cells
:14:53. > :15:00.for the future. Can, can you give us any more? The honest position I
:15:00. > :15:10.have is that all manufacturers are developing. But we have to ask what
:15:10. > :15:15.the customer wants. Ivied the customer will end up going with
:15:15. > :15:20.wooden or unit he wishes. The power which unit will become less
:15:20. > :15:26.important, provide the the product does what the customer wants.
:15:26. > :15:30.talk about salaries and renumeration. A topic that has been
:15:30. > :15:37.discussed heavily in recent months. Let's talk about the population as
:15:37. > :15:45.a whole. A phrase has emerged of the John Lewis economy. Chunnel
:15:45. > :15:50.this was a successful department store that was owned by employees.
:15:50. > :15:58.It has become quite popular, employees having a stake in the
:15:58. > :16:06.business. Wol Kolade I wanted start with you. Private equity people do
:16:06. > :16:11.not get paid into the regular way. There is paid in shares? We invest
:16:11. > :16:19.alongside Alphonse in the businesses we are backing. When
:16:19. > :16:28.they do well, we get paid. Alongside of that we have our
:16:28. > :16:32.salary. For me it is a wider question and entrepreneurship. Do
:16:32. > :16:41.what they celery, what you want to be someone who create something
:16:41. > :16:46.different and gets rewarded for it. I was encouraged by a colleague to
:16:46. > :16:55.go and talk to some 14-year-olds about Private Equity. These were
:16:55. > :17:00.the kids who were the most badly behaved. Private equity and 14-
:17:00. > :17:05.year-olds, you can imagine. Some this intense and did not. The thing
:17:05. > :17:13.they put them away at the end, was when I asked how many of the one to
:17:13. > :17:18.start the grim business. More than half did. I asked them why. They
:17:18. > :17:24.said they wanted to control their run destiny. That is what having
:17:24. > :17:34.capital Ventures allows you to do. If you have a salary he were
:17:34. > :17:35.
:17:35. > :17:41.controlled by someone else. Nikki King had you take your salary?
:17:41. > :17:44.have had different thing. In 2004 we had a management buyout. It was
:17:44. > :17:50.a passion of mine that everybody who worked for us should become a
:17:50. > :17:57.shareholder. It was messy because it and with so many shareholders
:17:58. > :18:05.there was not room to rent a company. Everybody who worked for
:18:05. > :18:11.us had share options. We're almost a John there was, everybody is a
:18:11. > :18:17.shareholder. It has made a big difference to the way people view
:18:17. > :18:25.the company. We have a salary and a bonus, the bonus is proportionate
:18:25. > :18:29.to everybody. It summer it will work in the company gets a salary
:18:29. > :18:35.that is a much bigger proportion of their income. They get a bonus, 50
:18:35. > :18:41.% is for personal objectives and the other 50 % is the overall
:18:41. > :18:45.performance of the company. We didn't have departmental budgets.
:18:45. > :18:50.Everything goes into a pot which stops the ridiculous walls coming
:18:50. > :18:58.up stopping customers getting service. If we do work as a company,
:18:58. > :19:03.they could take full bonus. It is very different. When I was managing
:19:03. > :19:10.director of a different company, I had a lot more authority and had to
:19:11. > :19:15.change by management style. Can you take us through that? Now wider not
:19:16. > :19:21.to state to which, I say please to which, this is why I am doing it.
:19:21. > :19:27.Then people vote on it. It's changed the dynamics. It is closer
:19:27. > :19:37.to the jungle this model. Not quite a Corbridge, but it has an element
:19:37. > :19:40.
:19:40. > :19:45.of that. By minority shareholders have to pay that back to not give
:19:45. > :19:55.the entrepreneur's relief. They have worked for us for 14 years
:19:55. > :20:04.building the business loving they. If you have shares in a company,
:20:04. > :20:11.provided you have more than 5% you get to pay a lower rate. Up to a
:20:11. > :20:14.maximum gain of �10 million. There are two factors. One is the
:20:14. > :20:24.difference between entrepreneurship and managing an international
:20:24. > :20:25.
:20:25. > :20:30.business. That is the first aspect of it. The second element of it is
:20:30. > :20:40.the philosophy and the culture of the business is part of the
:20:40. > :20:47.renumeration package. In terms of management style and respect for
:20:47. > :20:57.the individual it is almost identical to John Lewis. What we
:20:57. > :20:58.
:20:58. > :21:07.don't have is the share options. The driving force of the business
:21:07. > :21:12.in John Lewis is maybe not necessarily the financial structure,
:21:12. > :21:16.it is a factor and maybe in a mindset, but it is also the
:21:16. > :21:26.philosophy of the company. The philosophy of Arab business is very
:21:26. > :21:27.
:21:27. > :21:37.similar. It is of equality, trusts and it moves to a Honda, worldwide.
:21:37. > :21:37.
:21:37. > :21:42.It comes from the Japanese? There is a different culture for this
:21:42. > :21:52.appear. Importantly, there is a different mindset in the managing
:21:52. > :21:58.and conducting business. I am not sure what the celery -- salary is
:21:58. > :22:04.less interesting than any other form of option. I wonder if things
:22:04. > :22:09.can get to performance related. You can get more at of people because
:22:09. > :22:15.they're doing the job if they feel that is worthwhile. If they do not
:22:15. > :22:25.understand what the future is, performance becomes meaningless.
:22:25. > :22:26.
:22:26. > :22:31.People want to know they have - people make a business work. They
:22:31. > :22:38.want a sense of security and value. And something that it's the know
:22:38. > :22:44.paint a picture of the future and underline it to performance, then
:22:44. > :22:51.you have something. It seems as though he lot of it is based on
:22:51. > :23:01.performance in isolation. It is too short-term. During the tough times
:23:01. > :23:02.
:23:02. > :23:10.like in 2008, we did not take a pay rise rather than making dances. The
:23:10. > :23:14.senior management team that took pay cuts. If you're making lots of
:23:15. > :23:24.redundancies in order to improve shareholder value and get a big
:23:24. > :23:31.salary, it is immoral. It happens a lot. In our case, for two years we
:23:31. > :23:38.did not go to a salary increase. The senior management took a slight
:23:38. > :23:44.reduction. Directors took a significantly bigger reduction. We
:23:44. > :23:51.did not announce it, but like all these things, everybody got to know.
:23:51. > :23:55.It was accepted during these times. We had the opposite case this week.
:23:55. > :23:59.It is such a difficult job to sack people that you deserve a bonus for
:23:59. > :24:09.doing the work. I do not think the people found themselves very
:24:09. > :24:16.convinced. We need to draw to be close. You will all be rewarded in
:24:16. > :24:26.the usual way, but the feeling of having done something worthwhile.