New Lynas Corp. CEO Amanda Lacaze fired the first salvo in her war on costs at the Australian rare earths miner this week, announcing a move to streamline staff and move the company’s headquarters to Kuala Lumpur, closer to the company’s two major mining operations. It makes sense financially.
The decision would bring Lacaze and the management team, currently headquartered in lovely Sydney, closer to its production and sales facilities in Western Australia and Malaysia. Included in the cost-cutting strategy are plans to fire contractual workers, improve use of assets, pursue better procurement practices and renegotiate contracts with suppliers.
In today’s connected world, the concept of necessary proximity to production can seem antiquated. Yahoo CEO Marissa Mayer was famously panned by the media for daring to tell Yahoo’s workers to come in to the office. Of course, the same policy at Mayer’s previous employer, Google, was never held to similar scrutiny. That’s because Google wisely hides its come-in-to-the-googleplex-everyday-and-stay-long-hours policy behind a cloak of free food, free rental cars, free dry cleaning and outdoor games as far as the eye can see. It’s more difficult for outsiders to criticize such perks for what they are, inducements to get workers to come to the office and stay longer, as they can a memo telling free range employees that they have to come in to the ranch. Especially a memo coming from on high by a big, Mean Mommy with her own in-office nursery. That Mommy is so mean to us poor workers!
Mayer’s CEO sister, Lacaze, is in a similar spot with Lynas Corp. Battered by the worst Rare Earths MMI ever (and we mean it this time!), Lynas must not only cut costs but shift production into balance so that prices won’t continue to fall. Letting managers on the ground monitor production is not really an option when they don’t need to worry nearly as much about balancing production with demand as she does. It’s the head of the CEO that rolls, not the middle manager’s, when prices and stock values don’t rise. MetalMiner Managing Editor Taras Berezowsky put it succinctly when he wrote: “The biggest issue is that the light REE market is still oversupplied, and demand is not rising enough to make prices follow.”
Lacaze and her management team need to at least be close enough to Lynas’ mines in Malaysia and Western Australia to know what is causing production hold-ups, what daily performance is like and how best to deal with activists who are attempting to kick Lynas out of Malaysia. The company’s serious issues, even in our connected society, are not the kind that can be dealt with from Darling Harbour. A former telecommunications executive who specializes in marketing, Lacaze is smart enough to realize that she is much more valuable to her company closer to the action.
That’s also why Lucy won’t be following Lynas to Kuala Lumpur. None of the Peanuts Gang will. Lynas’ costs are up 50% in Australia’s first quarter year-on-year, it’s easy to see that the company has to cut costs and there will be firings and elimination of duplicate positions associated with the move. More jobs will be lost at Lynas’ Perth office in addition to those who don’t make the move from Sydney to Kuala Lumpur. The total cost of the move and associated redundancies is about $5 million. This will be the first of many bitter pills Lacaze will have to get her Lynas co-workers to swallow on the way to profitability but, unlike her predecessors, she is taking steps to tackle her company’s structural problems. Hooray for Mean Mommy.