SHOULD THE GOVERNMENT OF CANADA HAVE BAILED OUT NORTEL RATHER THAN ALLOWING IT TO GO BANKRUPT

Should the Government of Canada Have Bailed Out Nortel Rather Than Allowing It to Go Bankrupt

Should the government of Canada have bailed out Nortel rather than allowing it to go bankrupt?

Purpose of the Writing

The main purpose of this study is to discuss that whether the Nortel should be bailed out or it should go bankrupt by the Canadian government.

Discussion

The mobile infrastructure market may be eagerly awaiting Alcatel-Lucent's turnaround plan, to be revealed tomorrow, but the French vendor's biggest CDMA competitor has troubles that make ALU chief Ben Verwaayen's job look like a walk in the park(CBC News, 2009). Nortel has been considering full break-up and an 'ecosystem' model that would dramatically reduce its own investment in product development and sales, but now it is being forced to mull even more radical options, including bankruptcy or bail-out (Ivison, 2009).

Nortel told The Wall Street Journal that "no bankruptcy filing is imminent", but the markets are buzzing with fears that, by even exploring the possibility, Nortel is preparing for its current restructuring plan to fail (CBC News, 2009). In particular, its stated intention to sell its metro area Ethernet business has come to nothing because of market conditions, and the downturn will also make it hard to find buyers or joint venture partners for other businesses like wireless infrastructure (Evans, 2009).

The WSJ report, citing people familiar with the situation, claimed Nortel was seeking legal counsel regarding bankruptcy court protection from its creditors, plus the possibility of aid from the Canadian government (Ivison, 2009). This comes a month after the vendor announced plans to reduce annual gross costs by US$400m next year, with 1,300 job cuts, and a salary and hiring freeze until 2010. This came after Nortel's biggest net loss for seven years, US$3.4bn in the third quarter.

Nortel said in a statement that it was still executing on its plan, and that two weeks ago, debt rating agency Standards & Poor's had written: "Nortel should be able to maintain adequate levels of liquidity in the next 12-18 months(CBC News, 2009)."

It's obvious that Harry Pearce is the one that runs the board and hired Zafirovski (Evans, 2009). If a Canadian were in charge and reached out to the government they likely would have helped a little more. The Canadian government should seize control of Nortel and throw these guys out (Ivison, 2009). Its ashame that one of the largest research and development outfits in Canada should go under. Instead the Canadian government appears to be copying up to the banking and auto industries and willing to just let Nortel go (Ivison, 2009).

When a company like Nortel that had so much leverage and history behind it one has to ask themselves what in the world where the managers and executives doing to keep Nortel ahead of the pack(Evans, 2009)?

After all when considering the fact that Nortel had a long standing history with their clients (Ivison, 2009), I could only imagine that ...