Cemex Case Study

Cemex Case Study

Course: IHRM

Student: Abraam Fahmy Zaky

Instructor: Prof. Abeer Bishr

1. Assess and discuss the extent that CEMEX may be in difficulty in 2009.
   

• CEMEX overpaid $15,3bn (including debt) for Rinker, which was unfortunately irreversible
• Because of the burst of the subprime mortgage bubble, which sent the world into a recession, the impact was high as the US was the country that CEMEX had more exposure to.
• CEMEX almost defaulted on its debt payments, risking bankruptcy.
• Sold part of Australian operations to Holcrim for $1,6bn to serve its payment.
• Credit rating downgrade.
• A decrease in equity value for the firm
• In 2009, the company took out a $15 billion loan to avoid bankruptcy, with conditions that total funded debt be significantly reduced.
• Stocks crumble as cement sales decline, company in huge debt crises trying to refinance.
• Significant reduction of staff.

1. What do you think CEMEX should do in 2010 in relation to the four following HRM and operational issues: (a) multi-skilling, (b) cost reduction, (c) talent management and retention, and (d) process improvement?

1. Cemex should depend on multiskilling by capable stuff and layoff other stuff to reduce cost.
2. The company should reduce cost to continue its operation. Such reduction includes mainly operation and staff as explained
3. Due to reduced work in 2010, Cemex should reduce staff to decrease cost yet the situation needs to be communicated carefully. In addition, some staff can choose to have open holiday till economic situation returns fine. Overall employee engagement is high, so employee would accept company decisions in crisis. There was a voluntary turnover of six percent. Unfortunately, we also have involuntary turnover of nine percent. The decision to reduce headcount was difficult, but necessary to ensure their continued competitiveness. All restructuring efforts were performed in accordance with local employment laws and applicable employment agreements. When significant operational changes required a notice period, they complied with local employment laws and collective agreements and provided an average of 30 days’ notice. In some business units, they also offered support services to help affected employees, including financial and recruiting advice and job-placement services.
4. Process should be optimized to reduce cost as much as possible. Some less used stuff should be sold. Also full time staff can be changed to part time to reduce cost. Other issues will be found below in business operation.

1. What should CEMEX do regarding its global business operations and in relation to future expansion into China and India?

• In 2009 our trading network continued to rapidly redirect excess capacity from our operations affected by reduced local demand. It also enabled us to promptly adjust our product purchases from third parties in light of declining cement and clinker import requirements.
• Freight rates, which have been extremely volatile in recent years, account for a large share of our total import supply cost. However, we have obtained significant savings by timely contracting maritime transportation and by using our own and chartered fleets—which transported approximately 31% of our cement and clinker import volume in 2009.
• In addition, we provide freight service to third parties when we have spare fleet capacity. This not only provides us with valuable shipping market information, but also generates additional profit for our operations.
• Cemex relied on joint venture instead of acquisition to enter China. In contrast, the entry to India was through acqustion.

Further questions

1. What during different stages of CEMEX's company history were the key success factors behind its growth and development through merger and acquisition?

• The CEMEX Way, also known as internal benchmarking, was the core set of best business practices with which CEMEX conducted business throughout all of its locations. More a corporate philosophy than a tangible process, the CEMEX Way was driven by five guidelines:

• Efficiently manage the global knowledge base;
• Identify and disseminate best practices;
• Standardize business processes;
• Implement key information and Internet-based technologies;
• Foster innovation.

• CEMEX put in place a systematic post-merger integration (PMI) process to promote best practices and learn from previous experiences. Overlapping teams of managers and functional specialists from different countries were sent to each newly acquired company so that knowledge and best practices would be passed on to the team responsible for each new acquisition.

1. What constitutes best practice in post-merger integration?

To manage more effectively the challenges of postmerger integration, most of the key management tasks are in the domain of HRM:

• Open and timely communication
• Choosing the right Management team
• Retaining key executives and leadership talent
• Facilitating the cultural integration process
• Managing the transition process.