Sympathy for Sokol
I have to weigh in here and explain why I can’t help being sympathetic toward David Sokol. One reason is simply because he is the presumptive successor to Warren Buffett, not the "heir apparent." An heir apparent can only be displaced by a cataclysmic and almost inconceivable event, such as dethronement of Buffett. An "heir presumptive" can be displaced at any time by any number of events, the main one being the arrival on the scene of new heirs.
Lately, Buffett's eyes have lit up whenever he mentions Matt Rose of BNSF and Steve Burke of Comcast. Worse, Burke just joined the Berkshire board. There is a long tradition at Berkshire of Buffett downgrading or discarding his past favorites when he gets fascinated with somebody new. Fortunately, like Ajit Jain, Sokol can remain a hero to Buffett as long as he makes Berkshire a ton of money.
That leads us to the second reason I feel so much sympathy for Sokol: he has to run NetJets. To Sokol, it probably seemed like a great opportunity at the time. It expanded his responsibilities to something that began to resemble the role of chief operating officer. Executing a successful turnaround could cement the CEO job.
But Sokol is now stuck in a highly unenviable position. The financial realities of NetJets in the current global economy are such that it’s going to be immensely hard to pull off a heroic turnaround and make Buffett a ton of money. Based on some research I have been doing this is probably true despite a recent statement by Buffett to the contrary. Some kind of limp-along solution that contains the damage may be the best that can be hoped for. NetJets' losses are bad enough already that it essentially is a zero-sum game, in which one way or another, someone must be blamed.
You can see why, under those circumstances, there would be incentive for Buffett to pin everything on Santulli. As happened with Salomon, the most convenient way to explain a mess is to blame departed management. That way, everybody who is still around can look like a hero. If it is not all Santulli's fault ... a chunk of the blame goes elsewhere.
It must have seemed like a godsend to Buffett that Sokol volunteered to step in and do the “turnaround,” which gave Buffett one more degree of separation from the unlovely mess.
I sincerely feel for Sokol. This cannot possibly be what he envisioned when he took on the job.
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Tail Between Leg
Sokol is going to get out of town soon and turn things over to someone in Columbus Ohio who has never made a payroll or run a business. This is not a very encouraging sign for the future. Such a decision shows the value Berkshire has placed on Netjets.
Not that any high caliber experienced super stars in the business world would ever consider working at NetJets now but the employees would have appreciated at least an attempt. If there was good news for NetJets and personal glory for Sokol coming down the pike in 2011 would he be high tailing out of town? What he knows and the rest of us don’t?
Whoop there it is
It's happened but a little later than you thought!
2nd Qtr
Spoke to a good person in finance who is looking to leave NetJets. I've known this person for a while. They wouldn't go in to any detail but said - the 2nd Qtr numbers are legal but bogus. Unsustainable. They also said the finance and analysis group has lost all confidence in DS and their CFO because - they are digging a hole.
NetJets has been a family for decades. Loyalty is rare but not uncommon for those who have been around. Most remain loyal to NetJets but don't care for DS.
Fly safe!
For what it is worth
I was on a vacation in Borneo last summer and got to know a Netjet pilot who was let go. He had been there quite some time, although he was only in his early thirties. We talked a bit about how great life had been there, and how he missed the job, but he admitted acceptingly that something needed to be done to bring the waste under control. He just wishes that he had been one of the survivors.
Throwing Water Bottles
Any good CEO would never resort to “ranting, raving and throwing water bottles” at his executives. These are not characteristics that define leadership excellence. This behavior is far more reminiscent of a school yard bully. CEOs are supposed to insure a work place free of such abuse, not be the cause of it. It is apparent now several people have witnessed or heard about the infamous event when Sokol threw a water bottle at his CFO.
What you should be clamoring for is an investigation of this incident by Berkshire Hathaway ethics committee. If the result of this investigation were to prove that David Sokol in fact did behave this way, then Warren Buffet and the Berkshire Hathaway Board of Directors should move to terminate him immediately. Losing control of your emotions to the extent that has been mentioned should disqualify anyone from a leadership position at Berkshire Hathaway or any other reputable company.
Does Warren Buffet rant, rave, and throw water bottles at his executive? It is incredible that you not only condone but further encourage this type of behavior from the NetJets CEO.
I actually heard about the
I actually heard about the water bottle incident but did not witness it. Depending what type of water bottle it was....it probably wasn't grounds for termination. However, since the incident is widely known it is embarrassing...
You Must Be Kidding...
As a BRK shareholder I am appalled at NJ's employee reaction to David Sokol. What did you expect to happen...you lost $700M in a year?
I saw the list of former management that left. What did you expect Sokol to do? These are the very individuals that drove this company into debt. Did they deserve to be rewarded with annual bonuses? Hugs and kisses with backslapping at the annual Christmas party? They did not do their jobs well. Same with Richard. They all were ineffective in their jobs. Plain and simple. They deserved to go. Put it another way: Would you retain the services of your stock broker if he/she invested poorly and you lost money? Hell no. But, for some strange reason you expect Sokol to keep things the same?
Buffett had a tough choice to make. He obviously dropped the ball on this one. So, he calls in the toughest guy he knows to fix things. Do you think that David Sokol woke up one morning and said "Gee Warren, why don't you send me to Ohio so I can put my life on hold for two years while I fix a company that the employees drove into the ground?"
Sokol is going to make mistakes...but are they any more egregious than the ones you made allowing this company to fail? I think not.
Sokol is there for a reason: Fix it. Save it. Make it grow. You are sadly mistaken if you think any decision is easy at this point. It takes critical thinking to save the mess you created. Sokol is a very critical thinker. At this point in time, aviation experience is second to business experience - of which Sokol is loaded. NONE of you has ever taken a single and very small power generation company and turned it into a $40B multinational energy giant. Sokol HAS to make very unpopular decisions. He is going to rant. He may yell. Apparently, he may even throw water bottles. Good for him. Keep it up. Does he have your attention now? Are you NOW going to do your jobs more efficiently, effectively, and earn a return - or do you want to be fired or have the company go bankrupt? If your child behaved badly I bet you would rant, yell, and act inappropriate at times too.
So the suppliers are complaining. Too bad. Seriously. I personally know David Sokol. I would do exactly what he did. I'd go after the pork and renegotiate everything. He went after the fattest part of the expenses. The suppliers got rich off overpriced contracts. Of course they are going to whine. Sokol is an excellent negotiator. This is who you want on your team. You want this experience. Remember, you are the very people who drove this company into the ground. It was all good until you started losing money. Were you paying attention??? Apparently not.
I strongly suggest you allow David to make mistakes but stay on his team. He will find a way to make NJ the company you expect and that makes a profit. It is in your best interest to help him be successful so that the company is successful.
Stunned in the Sun
eating your words now a little bit...maybe?
I guess someone shouldn't have jumped the gun on their rant about how David Sokol is someone people want "on their side"...looks like someone got caught with his hands in the cookie jar....uh oh...are you kidding me? YA, if I was a BRK shareholder right now I would be PISSED...front running by mr. fix it at berkshire is a BIG no-no...looks like David isn't the knight in shining armor you or old man warren thought he might be...guess maybe there might be a little truth into people's stories from NetJets...not so shocked now....looks like good old DS only looks out for himself and his "family's capital" when it comes to making some extra cash on the side at the expense of berkshire hathaway and private information only meant for Warren NOT David. Looks like David got a little too ahead of himself on this one...someone's not heir apparent just yet and now thanks to his shady/unethical/possibly illegal Lubrizol deals...will never be! HA! Guess, KARMA's a B*TCH...not only did he help destroy NetJets he has now successfully made a mockery of Warren Buffet and Berkshire's esteemed reputation for upholding the highest moral values. What a tarnish and embarassment he turned out to be...and who knows how many times he has done this before. I guess we will find out soon enough...when it comes to corruption like that, I doubt it's been his first rodeo....thoughts?? comments?? would love to get your take now after march 2011????
The only comment I would have
The only comment I would have would be, "Ya think?!!"
So much to read since my last
So much to read since my last comment!
I was a BRK shareholder also, until my untimely separation from the company in which I had invested a good deal of my life. I sold my shares that day, and I must say that although there was a profit, it ceratinly did not meet my expectations for the vaunted Berkshire Hathaway brand, a brand that includes a good deal more than NetJets!
I also would not hesitate to remove those responsible for NJ's 2009 loss, but to say that those persons that were removed were were "ineffective in their jobs" could not be farther from the truth.
In fact, office politics were involved with the layoffs in September of 2009. Many employees that performed a fine job were let go, while those who were partially responsible for those miserable 2009 numbers are still there. The term "partially" is used because market conditions at that time were ceratinly helped in bringing about NJ's loss. After all, if one wishes to obtain some quick cash, wouldn't it be prudent to sell back a share in something that was deemed by our nations' chief executive to be an exorbitant transportation mode? Ceratinly makes sense to me.
To state that the people who were removed from their jobs "deserved to go" merely tells me that someone does not know how NJ worked prior to the events in the summer and fall of 2009, or is merely venting some frustration at the mass of comments made about the current leader ship at NetJets.
Merely an opinion, of course!
Thank god for experienced aviation leadership! See below.
Clearly Sokol has been very dishonest with all NetJets employees. No company, especially aviation company, goes from "bankrupt" to hunderds of millions in profits in a matter of month. It is a lie. We all know NetJets has lost hundreds of owners, more than 200 airplanes worth of owners, during his leadership tenure. The salesmen tell us on the road we are losing owners and revenue generating planes each and every month.
Sokol ran a "FUD (fear, uncertainty, and doubt)" campaign to quote a previous union leader. He has made us just another aviation (charter) company that focuses on squeezing every ounce of blood out of a turnip.
NetJets was a success well before Sokol got here and Warren knows he screwed up. At least in every cockpit we know this isn't about NetJets, Warren messed up and now it's about saving face for HIS LEGACY.
FROM THE UNION PRESIDENT
Dear Crewmember,
Diligence and documentation paves the way to progress in three vital areas: operational safety, contract enforcement and dispute resolution. And the responsibility for enhancing flight safety, defending the 2007 Collective Bargaining Agreement (CBA), and positioning NJASAP to address deterrents to the same rests solely on the shoulders of this pilot group and its leaders. Each of us must take an active role in diligently performing our duties and documenting instances that threaten the safety of our operation and erode the CBA’s efficacy.
Let’s begin with a fundamental truth: The pilot group is operational safety’s bottom line at NetJets. Our job is not to manipulate flight controls; rather, it is to pilot our aircraft in accordance with the highest safety standards. Of course, doing so is littered with obstacles: Standing your ground – filing multiple write-ups, making the decision to call in fatigued, or addressing the variety of issues that arise during the duty day – is much more challenging than going with the flow. However, we are paid and, taking that one step further, our owners expect that we will safely transport them from one destination to the next, demanding a heightened state of vigilance. To repeat a mantra I introduced some months ago, professionalism, compliance and consistency are pivotal not only to job security, but also to operational safety.
Diligence and documentation go hand in hand. Again, doing what is right and expected while on tour will invariably result in any number of headaches and unanticipated delays; however, it is the first step toward progress. The going will get smoother when diligence is combined with documentation, and even greater progress will be made when this group, as a collective, arrives at the shared understanding of this combination’s power.
Every NJASAP member can rely on the Steward on Duty (SOD), who is available around the clock, to assist you in the documentation process. The SOD is not only able to provide guidance regarding day-of issues, but also to help you properly document situations that may constitute a contract violation. Even if an issue proves otherwise, it is certainly better to err on the side of caution. When the SOD is contacted, he or she will take notes that are stored on the Union’s data network. Once sufficient data is compiled regarding a certain event, NJASAP contract administrators will be positioned to argue the issue must be resolved or, at the very least, acknowledged.
Obviously, a reporting system that does not rely exclusively on the pilot force to bring every safety- and maintenance-related matters to the Company’s attention would be preferable. However, until that time, proper documentation is the best way to affect change within our system. Consider, for example, recent instances regarding the 14-hour rule, which is memorialized in CBA § 28.1: “Crewmembers will not be scheduled in excess of the duty period or flight time limitations contained in this Agreement.”
Although this issue was resolved in a mutually agreed upon manner in mid March, NetJets schedulers continue to place us on flights that will cause us to exceed the 14-hour threshold without providing sufficient guidance to determine whether to accept the assignment. Our best strategy for rectifying this practice rests in documentation because NJASAP cannot possibly hope to resolve this matter unless we hear from affected pilots. With that in mind, should you find yourself in this situation, please contact the SOD. Documenting these situations is critical to forcing the Company to develop and implement a standard that will allow us to make informed decisions. The SOD may be contacted via telephone, (866) 652-7271 or email, stewards@njasap.com.
Working as a professional pilot is certainly one of the best jobs in the world; but, it is also one of the most challenging. The responsibility is enormous, and many of us will be required to make pivotal decisions that set a chain of events in motion with an enduring impact. For this reason, we must diligently perform our duties and document those situations that give us pause. Doing so requires a commitment to professionalism, consistency and compliance as this offers us the best strategy for making the best decision regardless of the situation. I have no doubt if any pilot group understands the simple truth of this message it is ours.
Speaking the truth
FROM THE UNION PRESIDENT
Dear Crewmember,
Management philosophies and techniques appropriate for a small operation may share some similarities with those applicable to a significantly larger business; however, such similarities are typically limited to basic business principles and ethics. For example, one could reasonably expect the way in which ExecutiveJet, which employed fewer than 500 pilots, was managed to be quite different when compared to NetJets with a pilot force topping 2,500. In a smaller operation, it is not uncommon for individual efforts to be applauded; however, in a larger operation, clear and formally documented processes and procedures are vital to a smooth and consistent operation. This is especially true when a Company has restructured and those with institutional knowledge are no longer part of the organization.
More and more we are seeing select departments within flight operations focus on cost-control measures as opposed to ensuring an aircraft is moved from point A to point B safely and efficiently. This is not to say that cost containment isn’t important; however, this particular function should not fall on, for example, the scheduling department’s shoulders. Rather, Company money managers should put clear, concise policies in place that eliminate the need for those who support flight operations to worry about whether they may lose their job if they fail to book the cheapest airline ticket to position a crewmember. Ambiguity does nothing but put people in the position of making decisions outside their area of responsibility. Additionally, it pits employees against one another, and as we have learned, this is not conducive to a productive Company culture.
So long as cost-cutting remains a principal focus and clear guidance elusive, problems will persist: Consider our current situation with fatigue calls increasing, crews timing out, and morale slipping. The events of my last tour brought this sad reality sharply into focus. My duty brief included airline travel duty that would take me from Columbus to Orlando on a three-leg flight with stops in Baltimore and Norfolk. Generally, the only time a crewmember is scheduled for a three-leg flight is when no seats are available on another flight. In my particular instance, this was not the case; rather, this was a cost issue as the fare for this flight was cheaper than those for more direct flights.
What’s more, scheduling practices are becoming increasingly stringent. Crews, who are flying demanding schedules, are being released into rest periods that meet the minimal 10-hour requirement. Once released, pilots have reported receiving the next day’s duty brief, instructing them to report to the FBO at legal – even if their first trip is not scheduled to depart until several hours later. Although the brief may likely be changed by morning to reflect a show at hotel, the damage, as it were, has already been done: The pilot has gotten up much earlier than he or she would have if a proper brief had been issued the night before. Such an unnecessarily early report time does not reflect intelligent scheduling practices as proper briefs for the next duty day would give the Company increased flexibility during the evening hours and lessen the likelihood of a fatigue call.
To say the very least, these scenarios represent a change in the way our Company is doing business as well as how our colleagues are responding to the call to operate the business on the cheap. Allowing departments to wing it and their personnel to use their discretion in these instances will lead to inconsistency in our operation, which is certainly not conducive to offering a quality product or maintaining good morale amid the employees.
No one can deny cost cutting measures have been central to NetJets’s financial recovery and, thus far, they have been successful. And I continue to support a strategy defined by financial prudence. That said, we are very close to the point where these practices are being taken to the extreme, cultivating an environment of fear and frustration that destroys morale. Indeed, pitting pilots against schedulers and owner services against flight operations is not a good practice in the luxury services industry. Although NetJets accountants may be able to report additional savings at a quarter’s end, it is impossible to quantify how tremendously those savings undercut morale on an Excel spreadsheet, and that calculation is just as important. Finally, we fail to understand how a Company that is forecasting a $200 to $500 million profit for the year continues to focus on cost control instead of marketing and growth.
the union will destroy the
the union will destroy the company. Happened to the airlines, will happen to netjets too.
At pilot union meetings in
At pilot union meetings in CMH the leadership has expressed a lot of concerns over company culture safety prioritization and the increasing threat of an accident. It was stated that 50% of the safety department was fired by Sokol in 2009. More than any other department at NetJets.
Safety doesn't appear to be a balanced principle in practice!!!
I am pleased the union is standing up but not satisfied with Sokol's actions.
Sokol would have pulled the
Sokol would have pulled the rug out from under safety and crewmember wages and working conditions if not for effective leadership and a strong, well oiled, union machine.
It is my understanding Sokol hides from the union. I was told from one union leader "it looked like Sokol wanted to hide under the table." He has mistreated a lot of employees but knows this pilot group won't run from a bully.
Sokol has already mistreated
Sokol has already mistreated 495 of the pilots. A furlough might be temporary, but the after effects never go away.
Pro-Sokol
interesting read on Forbes today, SOkol finally defends his actions in a public forum. check it out
pro-David commentary
I'm very glad to see some more pro-David commentary on this site. While I have my own sources, the information here is being read by many people and it should be balanced by multiple points of view. Thanks for writing.
NetJets Europe
Alice I find your site quite interesting and informing. Would it be possible to create a NetJets Europe area? As you know we are part of NetJets and we have seen some interesting folklore on this side of the house. Thanks
yes however
Consider what you might prefer to tell me directly as well. Please email me if you have worthwhile information.
Pro-Sokol
the mentality that once was netjets will come back in the longterm. Poker events and celebrity endorsements did not cause the trouble netjets got into. Like the previous poster said, right the ship, position it correctly, then take care of the rest.
Reputation
“…lose a shred reputation for the firm and I will be ruthless.”
Warren Buffett, Sept 4, 1991
http://www.youtube.com/watch?v=O0R_9L_D2Yk
A must see on Sokol's ways...
**********
http://www.youtube.com/watch?v=x1D-Nfv4xEk&feature=youtube_gdata
A request Friday by
A request Friday by MidAmerican Energy for a new trial in a case that awarded millions to minority stockholders in a Philippines project was taken under advisement by Douglas County District Judge Gary Randall.
The Iowa-based subsidiary of Berkshire Hathaway Inc. argued that the case should have gone to the jury the first time it was heard earlier this year.
Rather than submit the case to a jury that heard two weeks of testimony, Randall ruled in April that MidAmerican acted “willfully and intentionally” when in 2002 it calculated profits that reduced minority shareholders’ interests in the project to zero.
“Reasonable minds could differ in this case,” said Bart McLeay of the Kutak Rock law firm in Omaha and an attorney for MidAmerican.
The company’s intent is critical in determining whether San Lorenzo Ruiz Builders & Developers Group of the Philippines should be awarded $32 million in past profits as well as future stock in the hydroelectric power and irrigation project, attorneys for MidAmerican said.
San Lorenzo, which sold most of its shares in the project in 1998 with the right to buy them back, said MidAmerican’s calculations eliminated their rights to the project.
MidAmerican argued that it was a complex project that experienced setbacks. The energy company acted in good faith in trying to project future profits, MidAmerican said.
In calculating the amount awarded to San Lorenzo Ruiz, Randall relied in part on a related California case.
The plaintiffs in that case, La Prairie Group Contractors of British Columbia, argued that Mid- American changed profit calculations to force them out of the project.
In a 2005 ruling that was upheld on appeal, a California judge found for La Prairie Group. He ordered MidAmerican to pay La Prairie Group about $20 million in past profits and stock in the Philippines project.
However, in a second phase of the California case, the judge ruled this week that MidAmerican did not willfully and intentionally defraud the minority owners. MidAmerican’s profit calculations were incorrect, the judge ruled, but they reflected decisions on inputs that were genuine business disputes, not an intention to defraud.
An attorney for San Lorenzo, James Kennedy, argued at Friday’s hearing that the cases differed in their burdens of proof.
Randall needed only to find that MidAmerican’s profit calculations breached the stockholders’ agreement, Kennedy said. The second phase of the California case, however, required proof that the calculations were “conjured” or “frivolous,” he said.
MidAmerican’s lawyers disagreed, saying there was little difference in the standards used in the California and Nebraska cases.
Randall did not indicate when he would rule on MidAmerican’s request for a new trial.
Paycheck
Working closely with Santulli and Sokol is quite the experience. But let there be no doubt or confusion, Sokol doesn't harbor half the vision, leadership, loyalty (to customers, partnerships and people in general), talent, compassion, self confidence, or ability to inspire as Santulli.
Everyone working under Sokol wakes up in the morning and asks 'why am I doing this?' In a brief moment of clarity we answer 'NetJets not Sokol' hoping and praying 'this to shall pass.' But in that morning moment of clarity we all know this sucks and its here to stay. But if we don't bury that reality we'll never make it to work, let alone through the day.
'NETJETS' is no more. Everyone from the leadership on down is in it purely for the paycheck now.
Sympathy
Warren Buffett has essentially preached to never put someone in charge of a company they know nothing about. A perfect example of this is what has happened to NetJets after David Sokol arrived and somehow took control.
Richard Santulli knew the business inside and out for obvious reasons. David Sokol was arrogant enough to think he also fully understood NetJets, which was a complex and one of a kind business right from the very first day he arrived.
He thought replacing Santulli would be a trivial act. In reality he could never hope to be a fraction of Richard Santulli, never mind repalce him.
Over a short period of time David Sokol chased away almost anyone who did understand the business and was executing capably. He then seriously harmed the company further by becoming unnecessarily adversarial with many critical people who NetJets needs to do business with.
Then to make matters much worse David Sokol changed the thought that would come to mind for many when NetJets was mentioned. While market share is very important "a nice share of mind" is even more so. It took NetJets many years of hard work to create that nice share of mind and only a short time for David Sokol to elimate it.
The result of this is now clear to even the casual observer. It would also seem David Sokol's quest to be the next Warren Buffett has ended badly. Now he has to try and be satisfied with being only David Sokol and for that he does deserve our sympathy.
Is our leadership cracking?
There is now a lot of chatter circulating throughout and from the 3rd and 4th floors at Easton that David is licking his wounds. He knows he is still here at NetJets because he recklessly threw the business model out of balance, destroyed employee morale, irreparably damaged critical vendor relationships, and is shattering customer confidence in the brand. This was all accomplished with in his first 5 months and by the end of 2009 and it continues to get worse and worse.
Letters from disappointed customers continue to flow in at a constant pace. Where NetJets share owners were historically 1/8 and larger now over 90 percent of NetJets share owners are maintain less than 1/8 share. It is widely known throughout that NetJets is no longer the preferred provider to our 2,800 customers. NetJets is now the back up alternative or supplemental charter lift solution.
FAccording to key people in finance and analysis this trend continues to climb and NetJets continues to go net negative in shares returned month after month. Also something about huge risk in taking on Marquis debt while trying to put Marquis out of business. Presumably because customers are downsizing their NetJets aircraft and/or share sizes. The customers seem to be looking for new solutions while keeping their big toe in the NetJets pool for a back up solution.
From the 4th floor and executive wing the reports are that David clearly has "vertigo" (aviation term punn intended as used) and has lost all sense of direction with no real solutions towards recovery. Essentially he's been throwing mud on the wall for nearly a year now. There are an endless number of issues David sets one course while vacillating back and forth yet he trying to convey confidence in his physical presence he is very unsure of the business when it comes to planning.
A guy with a massive ego (thinks he should be running Berkshire not NetJets) has to lead us without employee support and a continually eroding customer confidence in NetJets leadership, brand, and value proposition being that NetJets is far and away the highest cost provider.
when the kings men and poppers start talking, and not in a good way, it always gets more interesting. Hang on because NetJets will either implode or there will be more dramatic changes ahead. What I can say for certain is that employees have lost confidence in David's leadership and they are rapidly losing confidence in his team; from Easton, to Bridgeway, to the flight line it's becoming very clear there is no real leadership or plan, but rather a lot of empty suits.
Just say'n.
ps: Alice thank you for this blog otherwise David's misinformation, spin, and salesmanship may have people in the dark.
The P.S. statement you made
The P.S. statement you made about Alice was probably the most important sentence made in any posting so far.
I second the thanks you gave to Alice. All of us should be happy we have brave and fair minded people like her willing to insure people will not be kept in the dark or mislead.
Marquis
Marquis is the reason for NetJets increased flight demand. David Sokol's NetJets sales team is getting crushed by Marquis performance.
Marquis sold over 320 cards in June. Even with Sokol actively trying to undercut Marquis and reneging on Marquis exclusive 32nd share/25 hour market space. I know both NetJets co-founders would testify to this exclusivity.
Nonetheless, even with Marquis hitting out of the park numbers NetJets continues to shrink. Who let the energy guy run a luxury jet business?
320 cards sold in June
I heard that Marquis "celebrated" it's 10 year anniversary by drastically cutting prices for cards. It seems like this price reduction, and not the sales reps at Marquis, are the reason for the sale of 320 cards in June. My prediction is that card sales will drop about 20% from June to July and then another 20% from July to August. I also predict that Marquis will be bankrupt in 24-30 months. Time will tell my friends.
Marquis is still outselling
Marquis is still outselling the NetJets sales team by a large margin month over month.
Not to mention Marquis is bring in true net new customers, while NetJets is just poaching Marquis 25 hour cardholders to convert them to NetJets 25 hour leases. Then Sokol books that as a new sale when in fact it is the same 25 hours of flying and not NEW business.
IF Marquis goes under it is solely because Berkshire Hathaway/NetJets broke a very real and known commitment for Marquis to have the exclusive rights to the 25 hour customers. Marquis bought nearly $1 bill in aircraft with this understanding adding over 100 aircraft to the fleet and averaging more than 30% of NetJets total flying on a daily basis. NetJets opening the flood gates to the NetJets 25 hour lease is what caused so many existing owners to downgrade their shares (not smart guys). Marquis always offered 25 hours for a higher price per hour so it didn't open the fractional share owner flood gates and dilute the benefits/incentives to fractional ownership.
Now I can buy a NetJets 32nd share/lease for 25 hours at a time and I don't have to buy a plane with all the residual value risks and you want to offer that 25 hours at a comparable price per hour as my 1/16, 1/8, or 1/4 share? Seriously? Now I can have NetJets fleet as I choose during busy periods or when charter doesn't make sense and use 100 to 200 hours of charter the other 325 to 340 days a year for 40% less than NetJets. Now days many charter planes are newer and nicer than NetJets airplanes. As NetJets was started and growing quality charter was rare. But now I can charter a newer G450 for $5,500 - $6,000 an hour or fly a worn out NetJets Citation X for $7,500. Easy math. I use the charter solution every time it works best for me (approx 100 to 200 hours a year) and keep the 25 hour card as back up.
Sokol should have never sent so many customers out looking for new solutions because those customers found out the solutions were plentiful and in many cases offered a much greater value proposition to the customer.
This is the way Sokol does business and why NetJets is no longer the respected industry leader it once was. That's nothing to be proud of and this has damaged NetJets in many ways that will be realized for many years to come.
Marquis
Re: the final paragraph of your post.
I have been wondering the same thing for some time now! Thanks for your post.
This is an interesting
This is an interesting dynamic that I don't think many know about. I know NetJets started to actively push 32nds as the crisis struck out of desperation but Marquis is obviously pushing back now. Maybe the Marquis card is simply a better deal in terms of value because you avoid the long term commitment and residual risks in buying into the NetJets program. It seems to me that NetJets is simply becoming an overpriced charter operator...What do you you all think? Anybody here know more about the NetJets/Marquis dynamics?
These days Marquis is a much
These days Marquis is a much better lead customer-centric company than NetJets. Now if I want to fly on NetJets with all its change, uncertainty, and risks I go to Marquis. The Marquis team truly values the customer relationship and that means a lot to a customer who has endless options when it comes to private flying.
What has happened to NetJets is truly a shame. Marquis use to benefit most from the NetJets relationship. I am starting to believe Marquis brings more to the table these days. Marquis can do better without the new NetJets (like new Coke in the '80s) than NetJets can do without Marquis.
I can only hope the true builders of NetJets/Marquis Jet do it again, the way it was, and better than ever from the ground up.
Guess Marquis Jet didn't end
Guess Marquis Jet didn't end up working out so well as it was absorbed by NetJets to spare it going bankrupt and Berkshire Hathaway had to absorb hundreds of millions of dollars of debt in order to spare Warren the shame of having a company affillated with NetJets/Berkshire go under. Marquis had been hurting for awhile and NetJets by no means, had been doing great either, but poor Kenny didn't stand a chance against Warren/Sokol...Kenny must have really done something to piss off the old man upstairs because for years NetJets/Marquis had a deal and by all accounts a very good and profitable business relationship....ahh the good old days of the old management of NetJets before they brought in the black hole that is David Sokol who seems to turn almost everything he touchs lately into scandal...now instead many Marquis people were laid off and sent packing out of their NYC office on Park Ave only to be replaced by the new NetJet occupant DRIODS.
So financially the commitment
So financially the commitment to Marquis is less risky, but operationally it is still NetJets running the plane. Since Marquis buys the planes from NetJets won't they just be providing the same overpriced charter for an aging fleet?
You are correct in saying
You are correct in saying Marquis will suffer from the issues and problems facing NetJets including being overpriced. Even though Marquis is better at selling now than NetJets because of what Sokol has done the water is still being drawn from the same bath tub.
Sokol seems so helpless now with all this perhaps he will cave and give in to Marquis.
Yes. But in spite of the
Yes. But in spite of the hurdles Ken Dichter and crew are selling and increasing total revenue for Marquis while NetJets sales and revenue continue to decline.
Marquis is getting it done to the extent they can with Sokol undercutting them while Sokol and his team can't get it done.
Marquis is selling a lot more of the same product at a higher price.
On top
It's true they selling more than NetJets right now while facing the same big problems NetJets has created for both companies. NetJets might turn it around though and say what else could Marquis sell if not the NetJets fleet of airplanes?
NetJets made it possible in the past for Marquis to prosper by allowing exclusive access to their fleet. That has changed somehow for sure and Marquis is in serious trouble as a result. Their model depends on having airplanes to sell and company to fly them who does not compete at the same time or they are out of business.
Its clear they had to lower their prices considerably in order to make these sales lately so it would seem little or no money can be made now. I've heard there is real bad blood between Sokol and Dichter because of all this.
A big question is can NetJets let Marquis fail and the answer is most likely no. This is where Dichter may have the upper hand on Sokol.
Interesting to see who comes out on top.
Not the best place to strand a guy on the "short list."
You know Warren is past David Sokol when Warren leaves David at NetJets (this way it's still not "Warren's fault").
The two can play it how they want to, but in the Berkshire portfolio NetJets is about the worst place to be stuck (or to stick someone).
To Alice's point in starting this chain, David is removed from a lot of what's going on in Omaha these days. NetJets has done David as well as David has done NetJets.
chrushed
David Sokol came from a background where he had no respect for or and in most cases disliked customers, employees, providers or partners.
He has an intense distain for relationships because of an inability to maintain any, important as they are in almost any business. That Sokol
treated people in a terrible way, well beyond any possible business purpose is now an undisputed fact.
It was so sweet to see him bashed and humiliated by a combanation of these very people he thought were of no consequence to him. He was the great David Sokol who needed to know nothing from anyone ever right from day one.
I would like to ask him a question "how did that work out for you David"
I find it interesting to see
I find it interesting to see people talk about where David Sokol came from. Most of these people have no idea how MidAmerican funtions or the atmosphere at the MEHC companies. MidAmerican subsidiaries function as a business and are consistently rated among the highest in their industries in customer satisfaction. MEHC has many times the number of employees of NetJets, yet you don't see them trashing their CEO and one of their owners in public. So I would challenge the author of the above post to substantiate his rather outrageous claim that David disliked his customers and employees.
These posters act like David needed validation from NetJets, when in reality, they needed business discipline. I can appreciate loyalty to the former management, but all of the people complaining about the lack of new jets and layoffs need to answer the simple question of how do you pay for these things?
I also read all of the comments about owners leaving the company with a healthy dose of cynicism. If NetJets had all of the new planes in the world, a significant portion of these owners would have left anyway with the changes in the economy. Pinning all of the losses on David may make these people feel better, but it is not accurate.
who's list?
David obsessively wanted to be on Warren's short list. Too bad for him he never was. No matter how hard David tried to market himself that way he's just not part of the club. David Sokol is not even on the Berkshire Board. He is simpliy a hired hand and will never be more than that.
By sarting rumors and not discouraging others he thought maybe...?
Problem is he just does not have the goods. Warren gave him his shot with NetJets to shine,and show what he has. So what happens for the whole world to see? He goes "right down on the mat for an eight count knockout"
This man could never hope to replace even Richard Santulli Warren never mind Warren Buffett.
Always watch what Warren Buffett does, does not say, very carefully. Warren has not called David next in line for the throne or even that he is in consideration for such a historic,earth shattering,Berkshire event.
Many of us have seen this movie before. When someone tries to play Warren the eventual outcome is not pleasent for the "someone"
No need for you Sokol fans to worry though. There will never be anyone breaking down Berkshidoor's trying to hire David Sokol away.
True Dat
True: Buffett has never openly stated Sokol is in the running on the short list.
Especially since the judge found him guilty of financial/stock manipulation/corruption.
Moreover, an overwhelming majority of the Berkshire Board of Directors don't really know him and only a few that do care for him (but solely for Mid American profits not as much as a respected leader).
Maybe this is why Warren has parked him in Columbus Ohio, as a favor to the others... ha
NetJets employees like me wish he was in Siberia working on energy stuff.
Is NetJets a logo or is NetJets the people?
Warren does not want the details of this story/book out there. That's not good for Berkshire, Warren, or David. So far only one side of the story has been told and only from David's mouth. The other side(s) is/are standing by.
Unfortunately, because of David's actions this will all eventually see the light of day. People are digging deep and the facts are validating much of the content in this blog. In the end, it won't be pretty.
For NetJets and the people in it everyone was taking it on the chin and moving forward. But when David continually makes it personal and persists with malicious attacks publicly and behind the scenes, in a way that a very insecure and malicious individual can't resist, he compromised any possibility of success. He fails the enterprise.
How is this good for Berkshire, NetJets, Warren, and/or David? It shows very poor judgement and a failure to be a professional leader and manager who leads solely with the best interest of the business and the people in it in mind.
It is often said, there are people who lift others up, or people who tear others down. There is no better way to explain the difference between Santulli and Sokol. And Sokol is greatly miscalculating what others will endure simply due to their love and passion for what was NetJets.
David should wise up, shut his mouth, and do what's best for NetJets. Otherwise many will begin to make a life long project out of what has been happening at NetJets and why NetJets is headed to a dismal destination under present leadership.
From what I can tell, a lot of incredible people have been happy to sit stage left but they will make a point of being center stage again simply because they refuse to allow Sokol succeed; and more importantly, they will refuse to allow what was truly NetJets to fail the very loyal customers.
One must simply ask, are the customers loyal to NetJets or the people that are truly NetJets...
Why is Sokol so critical of Buffett?
Why is David Sokol so publicly critical of Warren Buffett?
http://www.dispatch.com/live/content/business/stories/2010/06/17/scaled-...
Once again David Sokol goes public in a way that expresses his apparent disappointment in Warren Beffett as a CEO. Effectively by continually criticizing NetJets prior to his arrival Sokol is criticizing both Richard Santulli AND Warren Buffett.
Warren was aware of everything NetJets prior to August 4, 2009, just as Warren is aware of everything NetJets after August 4, 2009. It is openly recognized that Buffett and Santulli spoke almost daily. It is commonly known within Berkshire that Warren’s affinity for Santulli has always bothered Sokol. What Sokol appears to miss is that his malicious public attacks on NetJets pre August 4, 2009 and Santulli is by all intents and purposes public attacks on Buffett’s leadership and shareholder obligations.
Buffett approved all NetJets aircraft purchase agreements. He approved of NetJets deal with the state of Ohio and the tax credits NetJets received to stay in Ohio. Buffett approved of those tax credits being reinvested to expand NetJets mote and operational capabilities. Rightly or wrongly a small portion of those tax credits went into community issues such as cancer research, but nonetheless Warren approved.
In late 2008 Warren knew NetJets would be significantly impacted by the “tsunami” that is the biggest financial crisis and economic downturn since the great depression. Warren absolutely understood the owner contracts, as an owner of both aircraft and company, and he understood there were a number of owners that were going to have to return shares. But, Warren also understood from earlier recessions that as the economy stabilized the aircraft returns should discontinue and low capital investment growth (prospects looking for a low cost entry into the NetJets program) would return; therefore increasing fixed and variable revenue on the upswing. This has happened to a “T” during and after every recession NetJets has experienced; except the recession Sokol is now leading.
Warren provided NetJets and Santulli an additional $400 mill in February 2009. And with contractually required 90 day repurchase clause in the owner contracts he understood NetJets, and by extension Berkshire Hathaway, would be required to pay fair market value for returned aircraft shares. Returns were heavy in the fourth quarter of 2008 and first quarter of 2009. Warren approved, in fact insisted on, the liquidation of free assets like some of the G550’s. The $400 mill jump in debt was soon after paid down by the same amount through the liquidation of said assets.
In summary, every malicious Sokol attack on Richard Santulli is an attack on Warren Buffett. Warren has the ultimate fiduciary responsibility for Berkshire Hathaway and all Berkshire’s operating companies. Sokol’s actions would imply Sokol strongly believes Warren not only fell short of a fiduciary responsibility with NetJets, but throughout Berkshire Hathaway. Because by Sokol’s statements, if Warren is going neglect his CEO obligations with one operating company then Warren is in some form or fassion with all Berkshire operating companies.
If there was a NetJets Taj it was figuratively and literally a Berkshire Taj and Sokol is blasting Warren’s Taj OR Sokol is directly calling calling out Warren as a CEO that neglected his shareholder obligations.
What the Dispatch article shows is that Sokol believes Buffett failed in his fiduciary obligations by putting his head in the sand on a major deal affecting two major Berkshire companies (NetJets and Flight Safety). Or, that Warren failed in his fiduciary obligations by approving all of NetJets plans. In either case Solol is publicly calling into question Warren Buffett more than Richard Santulli.
I would suggest Sokol wise up as he’s on the fast track to Warren’s “use to be a possible successor” list (although Warren has never named Sokol as a possible successor). You don’t get to the throne by throwing tar and feathers all over the guy whose throne you seek.
Warren approved the NetJets deal with the state of Ohio; or he was disconnected. Warren approved the $1.9 bill in debt; or someone else is running Berkshire Hathaway. Warren approved NetJets business plan; or he neglected his shareholder obligations. Warren approved of NetJets risk to Berkshire’s AAA rating (NetJets contractual exposure; or he wasn’t acting as the Berkshire risk manager looking for “financial weapons of mass destruction” Warren himself claims to be.
The more tar and feathers Sokol throws on NetJets pre August 4, 2009,and Santulli, the more the tar and feathers sticks on Warren Buffett.
I disagree that Sokol is
I disagree that Sokol is being critical of Buffett. I do not think that Sokol is attacking Buffett directly or indirectly. I agree that Sokol has been directly attacking Santulli on more than one occasion (on Bloomberg and the Dispatch and maybe elsewhere). You have to realize that Warren also used old management as a scapegoat (in the annual report and in the press). Is it inappropriate? I think so....But it seems like Buffett and Sokol are together on this one, for better or for worse.
You also have to remember that Warren is a hands-off guy in terms of managing his managers. He may have spoken to Santulli often but let's not forget that he let's his managers run their businesses as they deem fit. If Sokol were being critical of Buffett, he would have said things like, "nobody was watching", "lack of oversight", etc. Anyways, no point in beating this one any further but you twisted but I really think that news piece into something that it was not. However, I do agree that Sokol has been trying to put the screws to Santulli for whatever reason. It doesn't seem like it would benefit the company at all. Especially when it sounds like the workforce and owners would like to have Santulli back at the helm.
Buffett is not hands off when
Buffett is not hands off when it comes to $1.4 to $1.9 billion in BRK backed debt, signed agreements obligating BRK to significant government tax credits for community reinvestment (state and local governments gave hundreds of millions in tax credits to NetJets and in return the tax credits were to be reinvested in community development by the enterprise), and $200+ million in capital investments for a BRK Taj.
So in fact Sokol is saying Buffett was complicit or asleep at the switch.
And yes, overwhelmingly the customers and employees want Santulli back. And quite frankly in the end so will the shareholders.
I agree that Buffett cares
I agree that Buffett cares when such amounts of money are at stake and will take notice. However, he obviously continued to let Santulli run the show even though he must have seen problems coming before Sokol was brought in. Why he waited so long to do something about it, I do not know.
There is no way that Sokol is criticizing Buffett in any way. In fact, it seems to me that Sokol makes sure to praise Buffett in the majority of the air time I have seen him receive. Buffett does the same thing to Sokol when he is mentioned. The idea of Sokol attacking Buffett seems a bit far-fetched and misconstrued from simply one news article in which Sokol is throwing darts directly at Santulli. Buffett and Sokol have already separated themselves from Santulli so it's just not right to try to draw this connection between them.
Sokol may be somewhat naive when it comes to being a public figure (he's said some really stupid things lately) but I think he at least realizes that 99% of the world was asleep and not just Buffett (who has already admitted to his mistakes and not seeing the depth of the crisis as seen in his Moody's testimony). I don't think he is trying to point fingers at anybody else besides Santulli and and other former NetJets managers.
I'm Sorry
Did I miss the point you made about how jumping all over Santulli and the former NetJets management team that was removed so long ago advances NetJets interest currently?
Does the current CEO of GE jump all over the former one in such a distainfuly self serving manor? No professinoal CEO behaves so childish and insecure. Why can't david Sokol stand on his own accomplishments
and be proud to talk only about the bright prospects and the future good fourtune NetJets and its employees can expect from him and his very accomplished experienced leadership team. Possibly he should point to their stratigic plan for growth and prosperity as a way to offer the NetJets empolyees some comfort about their future.
This would be leadership, not talking cheap and cowardly shots at the distant past the vaildity of which is irrelvant. This man certainly still feels very threatened by the power of the "Santulli Brand" and loaths the close personal relationship Santulli enjoyed which Sokol never will.
Could someone ask David Sokol to get over his embarrasing self interests
and get on with building NetJets back to its former greatness for all our sakes. He's the CEO and should finaly start acting like one before its too late.
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