Wednesday, 15 August 2007

Private equity starves AA of IT investment says GMB

Very interesting report out from the GMB, produced as part of their ongoing punch-up with the AA's private equity owners. This research piece looks at the (lack of) investment in IT and systems. Interesting development as it shows the increasing sophistication of the TU critique of private equity. You can only get so far by attacking PE people for earning too much and paying too little tax, but if unions get into some of the, dare I say it, business arguments they will find quite a lot of peoplpe share their concerns.

For example, have a look at some of the analysis of private equity's claims on the website of former Redland PLC director Don Young. Here and here.

GMB release below...

14 Aug 2007

GMB today publishes a technical report, by an independent computer systems company, on the computer hardware and software that the AA are using in their fleet of patrol recovery vehicles. The report was commissioned by GMB following myriad complaints from GMB members employed by the AA that the current IT systems do not work very well and lead to long delays in responding to breakdown calls from motorists.

The report concludes "There are two words that can describe this setup; slow and unreliable." The report goes on to say that, "The AA has allowed this Solution to be run down and starve it of investment. The lack of investment also has other serious implications such as on the morale of The AA engineers in the field trying to work with a solution that is unworkable.

The AA has to invest in order to solve this urgent problem, and they have to invest soon. The modern and efficient way of servicing this type of industry is with proper use of technology. Technologies needs investment. Updating technology solutions also need significant financial commitments. The AA appears they are trying to solve "a new problem with old technology" and it will not work. The AA need to make a significant investment on improving their technology, and they need to start investing now."

The report makes the following recommendations,

"For the AA to start servicing their paying customers again they need to take drastic investment decisions towards improving their existing system.

The aging Panasonic CF-28 rugged notebook PC will need to be replaced with a newer generation type hardware that is significantly faster and with more RAM installed. This will have to be a major investment by The AA when the unit price is considered (£3,000 - £3,500).
New development of a new Application Software (VixEN) - Redevelopment (Major cost involved)
Installation in each vehicle (Deployment)
Software installation and configuration for each notebook
Training all drivers on the new system
Stocking of spare parts for servicing the equipment.
With only such a significant investment The AA will meet the levels of service they promise their customers. An investment that will run into millions of pounds.

Paul Kenny, GMB General Secretary said, "I told the House of Commons Treasury Select Committee that the private equity owners of the AA were asset stripping the business to feather their own nest to the detriment of their customers and their employees. This report bears this out.

Meanwhile back on the frontline in the recovery patrol vehicles helping paying customers who are broken down, the frontline staff do not have the best tools to respond to the customers needs in the most efficient manner. With private equity the necessary investment in customer services comes a poor second to looking after the interests of the multi-millionaire elite owners.

Total borrowings on the AA/SAGA balance sheet are now £4.8 billion. This is £400,000 per employee. The annual interest payments are in excess of £30,000 per employee which is more than double the annual wages of the AA's call centre employees. Almost £2 billion of these borrowings have been used by the private equity multi-millionaire elite to pay to themselves vast sums when they walked away."

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