The untolerable ignorance and arrogance of Uber: the legal verdicts of Dutch and Spanish justices are treated as a motivation to further break the Dutch and Spanish taxi laws, instead of obeying them

I reject your reality and substitute my own

Adam Savage – The Mythbusters

Uber is an American online company, which offers taxi services through the internet in the United States and far beyond. Their services are  (partially) based on the deployment of amateur taxi-drivers, who bring their own car and are willing to transport passengers against a certain fee, but don’t have an official  taxi license.

A worldwide deployed app, called UberPop, is used to bring demand and supply for taxi-services together: initially in the United States and now all over the world, including EU countries like The Netherlands and Spain. For every taxi-trip, arranged by Uber(Pop), Uber gets a slice of the pie: a fee of 20% per trip, in order to cover its expenses and make a profit for the organization.

If you have to believe the internet community, Uber is ‘about the biggest thing since the invention of sliced, white bread’…, or something like that. The bold concept behind this organization, which liberates the official taxi market and arranges taxi-trips all over the world for millions and millions of travelers, as well as the impressive fees per trip, deliver unspoken promises of vast revenues and profits in years to come. Therefore the value of this company has been estimated to be in the billions of dollars and Uber seems well on its way to conquer the earth… and far beyond.

There is only one problem: in many countries – including The Netherlands and Spain – it is explicitely prohibited to offer taxi-trips, when these are executed by amateur taxi-drivers without a proper license and/or proper insurances. Taxi licenses have traditionally been a cash cow for many cities and communities, resulting in the fact that many taxi-drivers in The Netherlands have paid a small fortune to acquire such a license.

When a third party like Uber actively spurs drivers without a taxi license to deploy taxi services with their privately owned car in The Netherlands, this leads to an illegal activity called ‘snorren’ (roughly translated: purring (of a cat)).

‘Snorren’ can be penalized with a large fine of €1500 per offence. On top of that: especially in large cities like Amsterdam and Rotterdam, the legal taxi drivers have their own ways to deal with illegal taxi-drivers in their city…

The official penalties are for both illegal and uninsured person’s transport (most insurance companies have an explicit exclusion clause for illegal taxi-driving) and for spoiling the market for legal taxi-drivers, who often paid a massive amount for their license.

That is the law in The Netherlands and Spain and probably many other countries. And people and companies have to stick to the law. Except for… Uber!

Uber does not care that its actions and taxi-services – especially the usage of the UberPop application– are not allowed in many countries! “Well, who gives a rat’s behind about the opinion of those local, hillbilly judges?! We don’t!”

Ten days ago, a Dutch justice presented his verdict, with respect to the challenged legality of Uber and especially the UberPop app in The Netherlands. The verdict was crystal clear:  Uber offered illegal taxi-trips to Dutch customers via its UberPop application, while using illegal taxi-drivers without a proper license and insurance in the process. For future offences against the Dutch law, Uber had to pay a penalty per offence to a maximum amount of €100,000.

A clear and unambiguous verdict, I would say…

Still, Uber had a totally different view on this verdict, in one of the most flabbergasting interviews ever, between a reporter of BNR News Radio in The Netherlands and a representative of Uber’s European headquarters in Amsterdam, Niek van Leeuwen.

Because of the shocking ignorance and arrogance of Uber with respect to the Dutch law, I print this interview nearly integrally:

Voice-over of radio station: Uber stated that it would continue offering taxi-services in The Netherlands via UberPop, executed by taxi-drivers without a legal license. By doing so, the American company is violating a verdict of a Dutch justice of the Court of Appeal for Businesses. The service that Uber offers is violating the Dutch law, but the company accepts the fact that it is penalized for these violations with a fine of maximally €100,000. Uber will just continue offering taxi services in The Netherlands, by taxi-drivers without a proper license.

Laurens Boven, reporter of BNR: I am speaking from the European headquarters of Uber in Amsterdam. Niek van Leeuwen of Uber: Am I standing on the floor of a criminal organization?

Niek van Leeuwen, spokesperson of Uber: By no means. You are standing in the building of an organization, which tries to improve public transport, by making it better, cheaper and easier.

Laurens Boven: The justice of the Court of Appeal for Businesses had a different view about that. Let’s listen to him:

Justice: Taxi-drivers without a taxi license, who transport passengers via UberPop while receiving payments, are violating the People’s Transport Law. As Uber earns money with these transports, the company itself is violating this law.

Van Leeuwen: Today’s verdict says something about the penalty decree. However, the verdict does not say anything about the legal treatment with respect to the foundation of Uber and whether Uber is a legal transport option or not.

Boven: In my opinion the justice states very clearly that Uber, as well as its chauffeurs, have been violating the law, by offering taxi transport without a taxi license.

Van Leeuwen: That is a preliminary verdict. Now a legal procedure will follow with respect to the foundation of Uber. However, what is much more important for us, is the discussion in the Second Chamber of Dutch parliament. The MP’s there should recognize that Uber is working according to one of the pillars of the Dutch taxi law: more market-like circumstances, better quality and lower prices. That makes it so important that more modern legislation is introduced overhere.

Boven: That is a political story. In the meantime, the justice has spoken with respect to the current taxi law and he has decided that Uber violates this law.

Van Leeuwen: The justice has decided that the inspection service can deploy a penalty decree. The justice did not judge about the foundation of Uber and whether it is an illegal transport solution or not.

Boven: You have to pay a penalty. You already stated that you will continue with UberPop. Are you going to pay this penalty?

Van Leeuwen: When this non-compliance penalty is set for Uber, we will pay it. Eventually, the legal treatment regarding the foundations of Uber will point out, whether Uber is a legal transport solution or not. When it is indeed legal, the penalty money can be returned to us. Until then we persevere in our service delivery.

Boven: You want a political discussion in parliament about taxi services like Uber. How big will the support in the parliament be, now that a justice has judged that you are actually violating the Dutch laws?

Van Leeuwen: What we see is that in every city where we introduce UberPop, this causes both innovation and resistance. Eventually, all legislators see the advantages. Also in The Netherlands, the legislators will see that Uber takes care of the pillars of the taxi law: more market, beter quality and lower prices. Eventually, the legislation will follow.

Boven: So the legal road ahead is not so important?

Van Leeuwen: We find it much more important that the legislation, which originates from 2000 in The Netherlands, wil be modernized and that innovation is not halted, but endorsed.

Especially the answers of Uber’s Niek van Leeuwen, which I printed in red and bold, remind me of Mythbuster Adam Savage’s famous oneliner: I reject your reality and substitute my own.  

His words sounded like: I didn’t accept the verdict of the justice and I didn’t want to understand it at all. Instead, I am spinning his verdict around until it seems that it was just a simple, non-descript little rejection of a teeny-weeny offense of the taxi law by Uber and not a rockhard condemnation in response to deliberate violation of Dutch laws.

The justice did not say ANYTHING about Uber itself and I do believe that he is in fact a Uber-fan by heart, who is currently still in the closet, waiting for the right moment to come out. For his own good, I simply ignore this stupid justice and set my money on the Dutch MP’s instead, who are more willing to listen to my story.

And so Uber continued in the days after this interview…

The company is going to pay the penalties that its drivers receive and thus it deliberately takes the risk that its drivers will transport people uninsured, because of the exclusion clause that most insurance companies have for illegal,  paid transport of people. And when something goes terribly wrong? Well, sh*t happens!

Also in Spain, where the UberPop app and the Uber way of working have been explicitely forbidden by the Spanish justices, the company continues with its actions as if nothing has happened. The following snippets come from the newspaper Trouw:

Uber continues in Spain, in spite of prohibition

Taxi service Uber will continue to offer its services in Spain, in spite of a prohibition that a Spanish justice has set on Tuesday, 9 December. The American company announced this news tonight (December 9 - EL).

The justice in Madrid prohibited the UberPop app, which brings customers and taxi-drivers together. The taxi guild of Madrid asked the justice to prohibit Uber in a preliminary case, until a definitive verdict has been set with respect to the services of the company. Drivers without a taxi license can get in touch with customers, through the UberPop app. These customers often pay much less than in a regular taxi.

According to the justice, the problem is that these drivers don’t have a taxi license. This is regarded as false competition of these drivers with authorized, licensed drivers.

And that Uber means business in The Netherlands, became clear today. Uber is going to lure new drivers through a €100 starter’s premium for rookies. It also offered to pay all the €1500 penalties that its drivers collect, while violating the Dutch taxi law.

The whole article behind this last link is a clear demonstration of the ‘f*ck you’-culture that is maintained by Uber in the European countries and abroad; a blatant testimony of the fact that Uber does not care about legislation in these countries.

Of course, it is a fact that quite a lot of people have a couple of (justified) agonies against the official taxi services in the various Dutch and European cities and that not all taxi drivers maintain the best service and the best price possible towards their customers.

Nevertheless, these taxidrivers often invested heavily in their taxi license and in a luxury car (Mercedes or BMW) and they often needed to buy themselves in in a taxi organization, thus loading a lot of debt on their shoulders. Further, these taxi-drivers pay quite some taxes on their earnings.

These people don’t deserve a competition that does not play against the same rules as they do. That would mean that there is no level playing field for them.

Besides that: although I have some sympathy for the concept behind Uber and UberPop, I am disgusted by the idea that this company violates the Dutch and Spanish laws, simply because they can afford to do so. 

In answer to the aforementioned question of Laurens Boven, I would dare to say that Uber indeed operates as a criminal organization.

Economic sanctions against Russia, in combination with the plummeting oil prices, will not win the hearts and minds of the Russian people. Instead, they will probably reinforce the position of Vladimir Putin.

While the inflicted pain of the economic sanctions and the low oil price is mounting in Russia, the average ‘Igor Six-Pack’ has no understanding for the nature and reason of these sanctions. Consequently, the sanctions might reinforce position of Vladimir Putin, instead of weakening it.

Soon, I and my family will visit Russia once again. In spite of the fact that – with the 75th birthday of my mother-in-law – we have a merry motive for visiting this economically battered country, it will be a fully different visit than the last time I was there.

My last visit to Russia was a visit to a country, that slowly, but surely improved itself and turned into a more normal, more modern and almost western country, with recognizable problems and its normal share of growing pains. Not perfect, but definitely on its way to a better future. Especially, when you took into consideration where the country came from in the Nineties of last century, the changes seemed remarkable.

The inequality of the Russian population was still huge and the particular problems – alcoholism, corruption, bureaucracy, lack of genuine economic growth (growth not borne by the oil and gas industry), underdevelopedness and clientelism – were yet one-of-a-kind.

Nevertheless, it seemed that the mounting middle-class of normal Russians with normal, respectable jobs, as well as normal success and prosperity, would lead to more economic stability for the future.

Of course, there was always the bombastic exuberance and accompanying bad taste of the Russian ‘happy few’, who had unlimited amounts of money to spend and indeed did so in the numerous hyperexpensive shops of Moscow and St-Petersburg.

Still, the fact that the average Russian could afford himself his daily share of decent food of decent quality and in decent quantities, as well as some (durable) consumption goods and household appliances that we already take for granted in the western world, seemed a good omen.

The only truly worrisome things in Russia were the swelling political dynasty surrounding President Vladimir Putin, worshipping him and depending on him without the slightest form of objection and criticism (‘Putin Kith and Kin’, aka friends and family) and the enduring political quarrels of Russia with countries like Ukraine, Georgia and Moldova about gas deliveries and territorial interests of Russian minorities in those countries.

And last, but definitely not least, the increasing national dependence of Russia on oil, gas and other minerals for its prosperity, due to a lack of serious industrial / commercial development and other economic drivers, if we exclude the vast Russian weapon industry, which is very successful in its own right.

The following snippets come from my 2011 article, behind the aforementioned link (click the link to see the accompanying charts in the article):

[…] a further, limited weakening of the ruble is not very problematic, but further dropping oil prices are.

To show you how problematic these dropping oil prices could be for Russian GDP, I took a YTD chart on WTI Crude and multiplied the 2010 Russian production of 10,15 mln barrels with the four price levels that I point out in this chart.

Doing this, I understand that price levels are never stable and I use these therefore only for demonstrational purposes.

It becomes clear from this calculation that the difference between the highest and lowest oil price in 2011 is a theoretical yearly revenue of $126 bln. And it becomes also clear that when the oil price structurally drops under $79,32, Russia has a serious revenue problem.

And with these predictive words from this August 2011 article, we are back in December, 2014, after a year that became much darker and moodier than many people would have anticipated less than two years ago.

Where 2014 should have been Vladimir Putin’s finest hour, with a proud and self-confident Russia hosting spotless Olympic Winter Games in Sochi, the year has slowly turned into a nightmare for the ‘eternal president’ of the Russian Federation.

In the aftermath of the protests on Maidan Square and the regime change in Kiev, the atmosphere between Russia and the Ukraine/ European Union block soured quickly, leading to ‘the mother of all revenge actions’: the nearly bloodless, but nevertheless utterly shocking Russian conquest of Crimea.

This event was followed by the unspoken, but yet very real division of Ukraine in a EU-oriented Western Ukraine and the Eastern parts, which have been openly looking towards Moscow since then (without really wanting to be a part of Russia by the way).

The result? A nasty and bloody civil war in Ukraine with opaque, but probably all too real interventions from Moscow and a neo-cold war stance between the Western world and Russia. 

When the Malaysia Airways MH17 was shot down on 17 July 2014 – allegedly with a BUK surface-to-air missile coming from the rebels in the Donbass region – the conflict escalated in a stalemate of nasty economic sanctions between the two involved blocks and a truly poisoned political atmosphere, that set the world 25 years back in time to the last years of communism.

And then the unthinkable happened in the last quarter of the year: the oil price, which had hovered around $100 per barrel throughout the year (WTI Crude) until August, suddenly started to drop like a brick until a level of $55.93 was reached, as of today.

One year price development of WTI Crude
Chart courtesy of http://oil-price.net/
Click to enlarge

While the initial economic sanctions of the European Union and the United States were painful, but yet surmountable for the government and people of Russia, the oil price dropping to levels well below $60 isn’t. 

We will probably never know, whether this was an autonomous event (which you could call ‘the hand of God’) or an orchestrated manoeuvre of the United States and Saudi Arabia, in order to get Russia economically on its knees.

Nevertheless, the results of this sudden drop in oil prices – in combination with the simultaneously dropping Ruble – for Russia and the Russian population are devastating.

Where the official exchange rate of Rubles vs the Euro is now around 82Rs to €1 at the moment that I write this article, the bank shops in the streets of St Petersburg already calculate with rates of 120Rs to €1(!!!), making it nearly useless for Russians to exchange their hard-earned Rubles, in order to buy hard currency in return.

To name a few examples of the latest negative rate hikes of the Ruble: a Philips television set which costed 9,980 ₨ only a week ago, was today sold for 20,000 ₨. An electric shave of formerly 8000 Rs was now sold for 14000 Rs. Russian people complain that household appliances get more expensive ‘by the hour’ (litterally).

The whole Russian middle class – mostly honest and hardworking people with a respectable job – will be annihilated this way (not even to speak about the lower classes, who probably can’t afford their daily shoppings anymore soon), as their private wealth will blow skyhigh when this situation of near-hyperinflation lasts.

Consequently, when we speak with our Russian middle-class friends (people which you could call ‘Igor Six-Pack’), their stance is one of disbelief and misunderstanding:

What is going on? What are Europe and the US thinking at this moment? 

Why are these economic sanctions set against Russia? Where is the smoking gun that directly connects Russia to the MH17 plane crash? 

Why do we have to suffer for a battle that was not ours from the beginning?! 

And when the West want to impose sanctions to Russia, why not doing it in a way that hurts Putin, instead of hurting the whole Russian population?!

In my opinion, these are valid and justified questions, as it is an extremely unwise idea to sacrifice the politically moderate Russian middle class population in a hyperinflational extravaganza and thus spark a renewed envy and nationalistic hatred against the west, which might lead to further politicial escalation.

The concept behind these economic sanctions – that these will weaken the position of Vladimir Putin through the emergence of bottom-up unrest – is a mirage. 

Vladimir Putin might be not the most democratic leader in the world, but he is still very popular among the Russian population and the current situation will probably only reinforce his position in the Kremlin: us against them. 

So, if we are not careful, the whole situation might turn into a lose-lose situation that hurts both the West, Ukraine and Russia in a way that lies beyond belief.

The economy is growing (reputedly), but at many large companies it is the same ol’ same ol’ as in previous years: mass lay-offs are the name of the game. Perhaps now even more than in recent years.

You know that you are approaching the end of the year, when the leafs are falling from the trees, the company budgets are running on empty and the temporary jobs are disappearing like snow on a sunny day.

During the last six crisis years, many freelance workers and external consultants in the financial and insurance industry in The Netherlands started to get used to the ‘mandatory holiday season’: being sent off from their assignments around December 20th of the old year and not being allowed to return to their principals until January 6th (plus or minus a few days).

Even though the hiring contracts for freelancers and external consultants of such important principals do not disclose anything about this mandatory holiday leave, it has become a fact of life: ‘resistance is futile’ and protesting too loudly means that one could lose his contract for the next year. “Tough break, buddy!”

Unfortunately, however, many internal and external jobs in the financial and insurance industries will be skipped foregood, now that we reached the end of the year. This has been the case in the past years and it will also be the case this year.

In spite of the fact that the Dutch economy has reputedly been improving in 2014, end-of-year still means end-of-contract for many, many internal and external workers and freelancers. And not always because the insurance companies, large banks or other large companies and institutions did not make enough profits in 2014 or suffered from economic headwinds or acute liquidity problems.

Yes, of course there were jobs that have been skipped because of fierce economic headwinds: this happened for instance at companies which are very dependent from the oil and gas industry. The low oil prices of around $60 per barrel mean that a lot of industrial activities, which were very profitable at $100 per barrel, simply are not profitable anymore and must be skipped. These jobs will probably return, when the oil prices start to rise again and there is more leeway for investments.

Nevertheless, the simple truth is that many jobs just disappear because they are not needed anymore: for now and for the distant future. This has especially happened in the banking and insurance industry, where the stream of physical visitors to the brick-and-mortar bank and insurance stores has almost completely dried out, in favor of online visits and operations.

The employees of the bank and insurance stores – as well as these stores themselves – have been overtaken by time and technology and have now been declared obsolete by the highest management of the banks and insurance companies. Some lucky internal workers can keep their job at a different spot in the company, but many people were simply laid off: “Thank you for your efforts in the past and good luck at finding a new job!” 

What is especially sourish for many laid off workers, is the fact that the same banks are hiring other consultants and create other internal jobs in order to fulfil new and different targets within the company, while their own jobs have been annihilated.

Het Financieele Dagblad has written an article about this phenomenon of (service) jobs disappearing at the end of this year:

The X-mas dinner, which was served to the 19,000 Achmea workers and their family members last year, was spoilt in advance. Reason: on 4 December 2013, the insurance company declared that it would cut no less than 4,000 jobs.

This year, the workers at ABN Amro, ING and Vopak (oil and gas storage) are the sitting ducks. And since last week, also the workers at KPN (telecom), the Noordelijke Dagbladcombinatie (NDC; newspaper consortium for the north part of The Netherlands), Philips (lighting, household electronics and medical equipment), Wegener (newspaper consortium), Roto Smeets (paper production), the Jaarbeurs (organiser of trade fairs) and SBM Offshore (services for the oil industry)

After the falling of the leafs, it is traditionally raining lay off announcements. And this year there are even more of such announcements than in previous years. While this is very harsh for the workers involved, it is extremely difficult for companies to think of a better time. The budget for the next year is just finished, the plans are on paper.

According to accountancy regulations, companies can write off the costs of reorganizations in the profits and losses sheets of the old year; sometimes in combination with other financial drawbacks. The financial pain is endured at once, while the fruits of these actions will be picked in the new year.

“Still, it feels like a poor moment to declare job losses in December”, according to Karin Heynsdijk of FNV Finance (labour union). A year after Achmea, she still finds it hard to tell whether the insurance company should not have stepped forward at another time. “Every moment that you bring such a message is a poor moment. It is just a very harsh message for your loyal workers”.

Reinier Castelein of labour union “De Unie” rather emphasizes the scale of the current lay offs. “We should abolish our feelings that these are unconnected incidents. This is a structural thing”, he states with respect to the large amount of lay offs these weeks. Therefore the chairman of De Unie is suspicious regarding the recently published forecast of the Dutch Central Planning Bureau CPB, that employment will improve in The Netherlands next year. He himself expects further reorganizations and further mounting unemployment instead in 2015.

The list of companies in the article, which announced mass lay-offs during the last few weeks, as well as the magnitude of these lay-offs, is quite impressive, as these published lay-offs are probably only the tip of the iceberg:

List of announced lay-offs at large companies in The Netherlands
Data courtesy of: Het Financieele Dagblad (www.fd.nl)
Click to enlarge

These are serious numbers of lay-offs, that hit many people on the chin; as a matter of fact, I was one of those 1075 external consultants at ING, who had to leave as a consequence of these latest reorganizations.

Yet, I have mixed feelings about the conclusion of union man Reinier Castelein that the economy and employment will not improve during the next year (see red and bold text).

As an independent ICT consultant, I see currently a clear and undeniable increase in the amount of jobs being on offer in the ICT industry. Perhaps even more important is that the list of demands and knock-down criteria for the new employee or consultant seems to be decreasing, in comparison with previous years. This seems to point at a slow emergence of scarcity for personnel in the ICT industry.

While the ICT industry is probably not the most important industry in sheer numbers of jobs, it is definitely a barometer for the state of the economy. The involvement of companies in new ICT projects can give someone a clear idea about future investments and innovation within companies. Many companies kept 'the store open' during the crisis years and invested enough money to stay in course with their ICT infrastructure, but not a penny more.

The fact that the ICT investments seem to be mounting nowadays, tells me that the economy might have found the way up again, as ICT is a driver for new company services, profits and prosperity.

A more serious development for many workers, on the other hand, is that the internet, in combination with the robotization and the computerization of many industries in The Netherlands, will lead to the structural disappearance of ñumerous low-qualified and simple service-oriented jobs. When a robot can do your job 24-7 at a fraction of the cost price and against controllable investments, your job might be gone!

This is not a new development by itself, but it is definitely a paradigm shift at the labour market, which gains strong momentum at the moment. One, that could have far-stretching consequences for many jobs in The Netherlands and abroad. People, who are now doing such jobs, should try to educate themselves and learn new and different skills, in order to be employable in years to come, as their current jobs might disappear soon.

However, this paradigm shift is not a consequence of the economic crisis, but of the increasing ‘computerization’ and ‘internetization’ of society. Nevertheless, this enduring crisis has definitely reinforced this development, as it forces companies to save money, wherever they can. This can be very bad news for the workers and for the development of the Dutch economy as a whole.

So Reinier Castelein might be right and wrong at the same time: wrong in his pessimism about the economic crisis, but right in his pessimism about structural loss of jobs! The future will show the value of his predictions.

The ‘retail misery-o-meter’ in The Netherlands continues with more defaulting retail chains and 'the worst has yet to come' in my humble opinion.

Last week, the Dutch Central Bureau of Statistics wrote about the situation in the Dutch retail industry:

CBS: Lifestyle and interior shops are improving, while results of footwear and clothes boutiques deteriorate.

In 2014Q3, the sales within almost all non-food segments of the retail industry improved, in comparison with the same period last year. Even the lifestyle and interior shops recorded a sales increase for the first time in six years. However, the results of footwear and clothes boutiques have deteriorated during the last two quarters.

This year the footwear and clothes boutiques started positive, with higher sales numbers and a larger sales volume; the first growth since early 2012. Since Q2, however, the growth already diminished and sales dropped. This downward trend continued in Q3. On top of that, the prices have dropped with an increasing pace, since 2013, towards  a level of -2% y-o-y in 2014Q3.

In Q3, all distinguished segments in the clothing and footwear industry showed negative growth. During the first half of 2014, only customers of women’s clothing boutiques spent less money. Q3 was a two-faced period for the footwear and clothing boutiques. August was very successful with the largest sales growth since February 2013, while the relatively dry and sunny September month on the other hand showed the largest decline in over one-and-a-half year.

In Q3, the sales of the overall retail industry was slightly lower, year on year, after a 2nd quarter with slight positive growth.

For the retail industry, the current crisis is like the proverbial three-headed dragon: at the time we think that we have beaten the first two heads, the third head returns in order to start the fight all over again. Where there is definitely a ground for some very cautious optimism about the labour market and the general economy in The Netherlands, the Dutch consumers yet keep their hands firmly in their pockets.

People in The Netherlands should not be misled by the annually returning stories in the media about the massive sales and the record numbers of electronic transactions during Sinterklaas (Dutch forefather of Santa Claus) and X-Mas sales periods (both in December). These data might (or might not) be right, but the whole trend in the retail industry is hardly pointed upward, in spite of the greenshoots in the aforementioned CBS report.

About two months ago, I wrote an article about the dire situation in the retail industry in The Netherlands and in particular about the situation of the large retail store chains Halfords (bikes and automobile parts; 100+ stores) and D-Reizen (traveling agencies).

At that time, Halfords had already bankrupted, but it was nevertheless hoping for a second beginning, and D-Reizen was at the brink of abandoning 150 of its 500 subsidiaries. Here are a few snippets of this story:

Although there is still optimism among the executive management and they see ample opportunities to continue the store chain, which allegedly has ’12.5 million visitors per year’, I personally consider the chances of Halfords surviving this shakeout quite dim.

The stores are (in)famous for their cheap, Chinese bikes and further they are not specialized bike stores, not specialized car-part and car detailing stores and not specialized… in anything. It is a little bit of this and a little bit of that, but nothing special at all. To put it bluntly: the store sells nothing that numerous other store (chain)s don’t sell at the same or better prices.

Besides that, the formula has probably suffered from exhaustion, like many other store chains: simply too many stores at too many poor(?) locations.

The second store chain in dire straits is the aforementioned D-Reizen.

Of course, the internet has been a particularly massive factor in the traveling industry and in many more parts of the retail industry. Why would you f.i. visit a traveling agency, when you can order almost any trip from the comfort of your own chair. […]since the Mrs. started to live together with me, I totally stopped visiting travel agencies. My wife books our travels online and she always manages to get the best trip for the best price. She never failed at that yet.

Last week, I saw my opinion – about the very dim chances for Halfords for a successful second beginning– unfortunately being confirmed by reality: there will indeed not be a second beginning for Halfords. The bankruptcy of this company is irrevocable now.

On top of that, Halfords was not the only retail chain that bankrupted during the last few weeks. The large brand store chain of clothes label ‘Mexx’ – with over 300 stores – has bankrupted, including its overseas retail chains and its design department, and so has the store chain in writing tools and office stationery Winter. And there are several other store chains that seem to be in a bloody struggle for survival or – as you also may call it – they are firmly on their way to a certain death.

On my personal ‘hitlist’ of shops, which seem  on the road towards their demise, there are the eyewear and optics chains Pearle, Eyewish Groeneveld and Specsavers. These three chains are involved in a ‘Kamikaze’ battle to show to the world, who can give most free pairs of spectacles and/or single glasses away to their customers. Pearle wins on points with two free pairs of spectacles for every sold pair of spectacles, but Specsavers is trailing closely.

Other store chains under jeopardy are the store chains, which sell computers, household appliances, modern lighting systems and consumer electronics, like MediaMarkt, BCC, Scheer & Foppen and Dixons. Also these store chains are fighting eachother ‘till death does them part’ with crazy discounts, free gifts and lowest-price-guarantees.

And personally, I would not give a dime about the chances for survival of many of the numerous ‘telephone brand shops’ in The Netherlands – representing KPN, T-Mobile or Vodafone – as most people, who need a smartphone already have one and there are simply too much of these same shops already.

The same is true for lifestyle and interior magazines without a real face and purpose, like f.i. Jysk, and for the Dutch department stores and specialists in small and non-electric household appliances, like HEMA and Blokker.

The main reason for this are the excess numbers of shops, that store chains like Blokker, C&A and HEMA  and all the aforementioned other chains maintain in all the languishing, excess shopping areas all over the country. This turns most shopping centres and malls into monuments of monotonous boredom, without any kind of surprise and special attraction for consumers. The few independent specialty stores, with a fully different assortment and a surprising look-and-feel, cannot be the cork that keep such shopping malls afloat.

Although it is very bad for the franchise-holders – mostly very hardworking and enthusiastic people, who live their dream to own their own shop – it would be best when the Dutch retail landscape would go through a merciless shakeout.

Excess shopping space should be abandoned in The Netherlands and turned into something different, while the various shopping malls and shopping streets should maintain a radical and strict policy, with respect to the percentage of shops coming from ‘the usual suspects in the retail industry’. There is simply no need for yet another HEMA, Blokker, Primark,  H&M, Kruidvat, GAMMA, JYSK, C&A or for any other chain store, as a matter of fact.

Unsuccessful shopping space should be abandoned, while relatively successful shopping centres should focus even more on the stores that really make a difference, when it comes to diversity and elements of surprise. Unfortunately, I am afraid that many municipalities or exploration companies of shopping space, like Unibail/Rodamco, Corio and Wereldhave, dont dare to be so radical in their discrimination between shops and store chains, although especially Unibail/Rodamco has actually a reputation for very strict and discriminative shopping space management, as a key to their success.

I am certain that my ‘retail misery-o-meter’ will continue to show deep red figures in the coming years, when especially municipalities and aldermen continue to go for the quick bucks and golden promises of yet another shopping mall or feel pressured ‘to do something’ for project developers and building companies in dire straits. 

There is not a single problem in The Netherlands that will be solved by yet another shopping mall and such shopping malls will definitely not solve the ubiquitous consumer strike, which has The Netherlands still firmly in its grasp.

Back in Russia once again: what a difference an invasion makes.

What a difference a day made

And the difference is you

Dinah Washington – What a difference a day makes

In about a month I will visit Russia once again, because of the 75th birthday of my mother-in-law.

In spite of the mounting international tensions and the jawboning, warmongering and muscle-rolling of the former archenemies Russia and Europe/ US, it is a visit to which I look forward very much.

In my opinion, there is nothing that beats wintertime in St-Petersburg.

It is a time of intense cold weather and warm clothes; of being in a classic, beautiful city, lit up like an X-mas tree (check out my pictures in the article behind the next link - EL); of numerous visits to friends and family and of endless talking with a cup of tea or a bottle of vodka in hand.

And perhaps, when I’m lucky, a visit to a ‘Banya’: a Russian sauna, heated up to red-hot temperatures; it will yield a few hours of relaxing and talking with friends, eating whole (!) dried fish and drinking Russian beer, before jumping in a small, iced pond to get rid of the intense heat.

Still, at this moment I feel so intensely ‘how much difference an invasion made’.

My last visit took place in a time of relative optimism in Russia, in spite of the economic crisis. Of course, it were still the crisis years and the list of things that did not change for the better in Russia was undoubtedly longer than the list of things that did change. Yet, the middle-class Russian people I knew seemed quite optimistical and in a good mood.

In those days Russia still had the Olympic Games to look forward to and Putin seemed to work on his reputation of ‘enlightened despot’: far from a genuine democrat, but nevertheless someone who gave Russia self-confidence and a glimmer of hope for a better future. As the short-lived attack in Georgia was almost forgotten after 4.5 years, Russia was not considered to be a pariah state and an agressor against its neighbours anymore in those days.

And now? The reckless invasion of Crimea and the actions of the sponsored insurgents (most probably endorsed by Russia) in the rebellious East-Ukrainian regions, culminating in the terrible attack at the MH17 airplane of Malaysian Airways, seems to have changed everything for the worse in the relations between Russia and the Western world.

Europe, the US and Russia are fighting eachother in an economic war, which hurts themselves almost as much as it hurts the ‘enemy’. The tone-of-voice between these countries is becoming increasingly aggressive, spurred by the increasingly nationalistic national media, and listening to eachother seems definitely a virtue from the past among these now-archenemies and former trade partners.

Once again, gas has been used as a weapon of mass intimidation by Russia. This time by withdrawing the plans for the European South-Stream gas pipeline at a glance and by moving this gas pipeline to Turkey, as latest-best-friend-without-questions for Russia, (although I suspect that the diminishing rationale of the South-Stream pipeline, under pressure of the dropping oil prices, could also have something to do with this decision - EL) .

And in the background, China ponders about how to take as much advantage out of the Russian situation as possible. This is quite easy for a country with a history and national memory of dozens of centuries and an operational overview and patience that can last for decades, instead of weeks and months.

The NATO is increasingly banging the drums of Cold War, through its actions and through the speeches of its ‘leaders’, as this organization needs its former and current archenemy as a raison d’etre. It is putting a quick response-force at the Russian borders, to protect the new East-European member states and the Scandinavian countries against the mounting Russian aggression: a deed that itself can be and will be seen by the Russians as blatant NATO aggression. And all the time almost everybody is escalating and virtually nobody is de-escalating the situation.

Spurred by the continuing crisis and the mounting nationalism in all countries and in a blatant attempt to shout down the continuing political failures and drawbacks in the national and European economies, the politicians and media fire up the European/Russian crisis – in Europe, the Ukraine and the US, as well as in Russia itself – with the enthusiasm and drive of a kamikaze pilot.

And now the question is: who will pull the plug out of the mounting tensions? Who will take the initiative for straight and firm talks about de-escalating the crisis and solving the situation in the Ukraine once and for all.There is simply too much at stake in Europe and in the rest of the world to let the situation get out of hand completely. All involved parties know it, but everybody seems to forget about that.

Those are my ponderings in the eve of my visit to Russia’s second city St-Petersburg. It will be cold, when I go there; our friends and family will be as kind and heart-warming as ever, the city will be beautifully lit anyway and the shops will probably be a tiny bit emptier than two years ago. Summarized,  the country will be beautiful, heartwarming and (still) surprisingly different for me, as a visitor. 

Nevertheless, the thoughts that things could run out of hand so easily, still bug me at night, as I worry for the world and for the future of my wife and children and myself. These are not very heroic thoughts, but who needs a hero when heroes can do crazy stuff at exactly the wrong time. What a difference an invasion makes!

Problems for the large Dutch building companies remain considerable, as the overall performance is still poor; even when some parts of the Dutch construction market show signs of a cautious recovery. I think that the shakeout in the Dutch construction industry is far from over yet.

If one had to name one industry in The Netherlands, which has been hit extraordinarily hard by the credit crisis, it would be the building and construction industry. This industry went through something that you could describe as a perfect storm.

There was the emergence of the credit crisis in its full, terrifying grandeur in The Netherlands, in combination with the collapse of the Dutch housing bubble – after years and years of outrageous price increases – and the collapse of the commercial real estate bubble, as a consequence of a mindless building frenzy, which yielded much more commercial real estate (CRE) than The Netherlands would ever need in many years to come. 

Eventually, this accident-waiting-to-happen was topped off by the ubiquitous austerity measures of the central and local governments in The Netherlands. And suddenly, the whole house-of-cards fell down within the building and construction industry.

Combined, these events were of an unprecedented magnitude, which cost numerous construction companies their lives and put numerous others in deep financial trouble, of which very few construction companies yet recovered. 

However, not all building companies perform poorly, as you will see in the remainder of this article.

Last week, the Dutch Central Bureau of Statistics presented the quarterly data for the construction industry. Although there were some small greenshoots, the overall picture was still bleak:

CBS: Sales in construction drop again

In 2014Q3, the sales in the construction industry dropped by 1.5% Y-o-Y. This is the second quarter in a row that the construction industry retreats, after a good first quarter in 2014.

The deterioration of sales results in the building and construction industry is mainly caused by the poor achievements of ‘civil and utility building’, which is the largest part of the industry. In Q2 and Q3 sales dropped by 4% among the builders of houses and commercial real estate (CRE). The ground, roads and waterways part of the industry, on the other hand, is keeping its sales up to par in comparison with last year.

Sales in the building industry (% of change year on year)
Chart courtesy of Central Bureau of Statistics (www.cbs.nl)
Click to enlarge

In spite of these drops in sales in Q2 and Q3, the confidence of the construction industry has improved strongly in Q4. Although this confidence is still negative, it is yet at the highest level since 2009. 

Next to an order portfolio that shows an ascending trend, since the beginning of this year, the entrepreneurs see signals which point in the direction of future improvements. The perspectives for future production of buildings are especially favourable for the house building industry. In 2014, year-to-date, the total value of the granted building permits for houses has risen by 35% to €4 billion.

The mood on the housing market improved too: the prices of existing housing have risen since April 2014 and the numbers of sold houses have risen for already five consecutive quarters.

Regular readers of this blog know that I’m moderately positive about especially the house building industry: after five years of poor sales and dropping housing prices, there seems to be a slight return to better times. 

According to Wienke Bodewes, CEO  of project developer Amvest whom I spoke a few months ago, this was a logical development:

“It figures: in average the Dutch housing prices have dropped by no less than 20% - 30% during the crisis years and the interest is almost at an all-time low.

Although the maximum obtainable mortgage amount has definitely decreased under pressure of the Dutch banks and the new regulation of the AFM, the current reduced sales prices and historically low interest rates offer you so much ‘bang for your buck’ that it is worth your while to not wait any longer, with buying your dream house.

Besides that, it almost costs you money to save it at the bank, with the current minimal interest rates on savings' accounts. Especially when you have saved money during the crisis years, which you now use for partially buying your new house, you can get a very good deal at this moment.

Yet, the situation on especially the commercial real estate market is still utterly poor, due to the massive overproduction in CRE during the decade before and the first years of the crisis: an overproduction, which is yet far from being wiped out of the market.

And when it comes to the sales in the ground, roads and waterways industry and the other parts of the building industry; these are not so high and do not grow so considerably, that these can lift the performance for the industry as a whole.

This is the reason that eight out of the ten largest construction companies showed quite poor sales and profits (or even losses) in 2013 and only two showed really satisfactory sales results and profits: Boskalis and Van Oord. 

On top of that, little improvement can yet be expected for 2014. The following table, containing the sales and profits for 2013, has been printed courtesy of the ‘special interest organization’ for the building industry Cobouw:

The top ten of largest construction
companies in The Netherlands
Data courtesy of: Cobouw
Click to enlarge

Of the ten companies in that table, five companies have a quotation at the stock exchanges, while the others are privately funded. The following charts show the stock ratings of the five quoted construction companies:

BAM building company
Stock rates at the Amsterdam Exchanges
Data courtesy: IEX.nl
Click to enlarge

Boskalis Westminster
Stock rates at the Amsterdam Exchanges
Data courtesy: IEX.nl
Click to enlarge

Heijmans building company
Stock rates at the Amsterdam Exchanges
Data courtesy: IEX.nl
Click to enlarge

Oranjewoud (owner of Strukton building company)
Stock rates at the Amsterdam Exchanges
Data courtesy: IEX.nl
Click to enlarge

Ballast Nedam building company
Stock rates at the Amsterdam Exchanges
Data courtesy: IEX.nl
Click to enlarge

Except for the shares of Oranjewoud (fairly stable) and Boskalis (considerably up) –   which is mostly an offshore company, that earns a lot of its sales with atypical dredging-work – 2014 has been a terrible year for the construction companies with a quotation at the Amsterdam stock exchange. That is for a reason. 

The greenshoots in the CBS press release might look promising for the uninformed reader and especially the achievements of Boskalis and Van Oord seem to point towards better times for the building industry.

Still, unless the European Union decides at short notice to invest heavily in European infrastructure (i.e. Keynesian stimulus) and the Dutch housing market gets really up-to-speed fairly quickly, there is yet too much pain in the Dutch and European building and construction market to expect very dramatic improvements shortly.

Personally, I feel that the shakeout in the building and construction industry is far from over yet, so please hold your horses and be very careful in which construction companies you invest your hard-earnt money. In my opinion, the chance that a few of these companies go down further is bigger than the chance they go up again.