Wishful Thinking

If Agriculture Minister Gerry Ritz seriously thinks that the recent tainted meat scandal linked to the deaths of fifteen people from listeriosis isn’t going to be an election issue, then he’s really got another thing coming.

“That’s the nature of the politics of this type of situation and it’s unfortunate, but we’ve been focused on getting to the bottom of this and we continue to be that focused,” said Ritz, dismissing the notion that it would be a problem for the Conservatives.

Yeah, well a lot of other people aside from Ritz and Health Minister Tony “Try the Veal” Clement have been “getting to the bottom of this,” and it isn’t looking good for either the government or Maple Leaf Foods. It’s precisely the sort of wishful thinking that motivates people like Ritz and Clement to offload government responsibility for public health and safety by cutting corners on regulatory inspection and compliance enforcement in favour of industry self-regulation out of some misguided ideological principle that appears to have been one of the contributing factors involved in the listeriosis outbreak.

I was quite willing to give the government the benefit of the doubt until I read this story last week in the Globe & Mail about Team Harper opposing tougher US rules to prevent listeria, even to the point of lobbying the Bush administration in 2006 to accept Canada’s more lenient standards. Now, I ask you, what’s outrageously wrong with that picture?

Update: If you don’t think this is indicative of a trend on the part of the corner- cutting, penny-pinching, “in business we trust” Harper government, well just lookee here. “Transport Canada is eliminating many of the checks and balances it needs in order to ensure safety, at a time when the department is relying on the industry police itself…”

Putting air safety at risk — another absolutely stellar idea!

8 Replies to “Wishful Thinking”

  1. Isn’t this the same Air Canada whose Jazz subsidiary eliminated inflatable life vests from their payloads, in order to reduce weight and save on fuel?

    P’haps AC isn’t the best example of a stable decision-making body. 😛

  2. So which party will have the courage to campaign against privatization of key services such as food inspections, transportation safety inspections, nuclear facilities, health care delivery, public broadcasting, postal services, etc?

    From what I understand, the downloading of inspections to the air industry was first introduced in 2005. So attacking changes to Transport Canada’s regulatory and safety inspection role could come back to bite the Liberals. The listeriosis outbreak should be an election issue but it will fall flat unless it’s tied to a strong platform position re: privatization and public services.

    Personally I think that all opposition parties are reluctant to strongly endorse rolling back or ending the privatization trend.

  3. Wilson – give it a rest…..perhaps McGuinty is waiting for reports, etc. – even if you don’t like him, at least give the guy a break.

    Ritz cracker thinks the listeria outbreak is a meat and potatoes issue – well, duh – ya – poison meat and potatoes. Hey, death and sickness are a family thing.

  4. I thought this “investment review” was interesting given that the Harper government wants the meat industry to do their own inspections …

    Issue Brief
    28 August 2008
    Innovest Warned of Maple Leaf Safety Concerns in March
    Jill Mills, Analyst
    mailto:abruno@innovestgroup.com
    +1 905 707 0876

    New York, 28 August 2008

    Innovest’s March 2008 profile of Maple Leaf Foods specifically warned clients: “MLF has not developed a robust safety policy that addresses the food safety risks of meat packaging.”

    Maple Leaf Foods Inc. (MFI-TO) has issued a massive recall in response to a Listeria bacteria outbreak linked to its products. The outbreak has already resulted in 15 deaths and 29 other confirmed cases across Canada, with 31 more cases under investigation. These numbers are expected to rise. The recall covers an enormous range of 220 different MLF products. The recall and shutdown of the company’s Toronto plant are the first steps in a large scale investigation into MLF by the Canadian Food Inspection Agency. MLF is a bottom-tier company within its sector.

    The company is expected to take a CND 20 million charge, or 1 cent per share, loss as a result. MLF shares have plunged 10% in the days following the recall announcement. The company has been struggling all year with the closure of three processing plants and its shares have sunk 34% since January.

    Class action lawsuits over the outbreak have already been launched. Four suits have been filed so far and the total potential liability could be on the order of hundreds of millions of dollars. MLF’s 2007 net revenue was CND 207 million.

    The profitability of meat packing as a business activity hardly compensates for the rare but devastating damage of a food safety malfeasance. As demonstrated by this case, accidents, food safety violations, contamination, and recalls can strike at any time and cause serious financial harm. Innovest has long cited meat packing as a high risk activity in the food sector.

    We have specifically called out MLF on its inadequate safety strategy before. Our March 2008 profile warned: “MLF has not developed a robust safety policy that addresses the food safety risks of meat packaging. Sector peers have incorporated food safety management programs, implemented cleaning practices, and are protecting its breeding stock from diseases through biosecurity methods.”

    The financial wound of this outbreak will not heal quickly. The company’s brands have suffered a serious tarnish; litigation battles are just beginning; and the Canadian Food Inspection Agency is likely to conclude its investigation with deleterious consequences for the company.

    MLF now hopes to shift towards higher profit pre-cooked meals and meat products that are less vulnerable to swings in commodity prices. We recommend clients reevaluate their holdings in other meat packing companies with low Innovest ratings, including: Nippon Meat Packers (BB) and Tyson Foods (B). Innovest has suspended coverage of Hormel Foods but when last rated the company received a CCC.

    Innovest Strategic Value Advisors is an internationally recognized investment research and advisory firm specializing in analyzing companies’ performance on environmental, social, and strategic governance issues, with a particular focus on their impact on competitiveness, profitability, and share price performance. By assessing differentials typically not identified by traditional securities analysis, Innovest’s IVA ratings uncover hidden risks and value potential for investors. Thomson Extel has ranked Innovest #1 for the provision of extra-financial research to the investment community for the past two years.

    If you should have any questions about this issue brief, please contact:

    Heather Langsner, Director of Research
    Call +1 212 421 2000
    Email hlangsner@innovestgroup.com
    or
    Jill Mills
    Call +1 905 707 0876
    E-mail jmills@innovestgroup.com

    New York
    Mr. Peter Wilkes
    Managing Director
    +1 212 421 2000 x 216
    Tokyo
    Mr. Hiromichi Soma
    Director
    +81-3-5976-8337
    San Francisco
    Mr. Pierre Trevet
    Managing Director
    +1 415 332 3506
    Toronto
    Ms. Michelle McCulloch
    Director
    +1 905 707 0876 x 217

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    Mrs. Perrine Dutronc
    Managing Director
    +33 (0)1 44 54 04 89
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    Mr. Andy White
    Managing Director
    +44 (0) 20 7073 0469
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    Mr. Bill Hartnett
    Managing Director
    +61 2 9940 2688
    Helping clients identify strategic investment opportunities

    Innovest Group

    The information herein has been obtained from sources which we believe to be reliable, but we do not guarantee its accuracy or completeness. All opinions expressed herein are subject to change without notice. Innovest Strategic Value Advisors, Inc., its affiliated companies, or their respective shareholders, directors, officers and/or employees, may have a position in the securities discussed herein. The securities mentioned in this document may not be eligible for sale in some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates.

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