In the brutal world of mergers and acquisitions, the key to success in gobbling up poorly managed firms is focusing on the core business and scaling back runaway costs.
That’s how Austin Beutner made his fortune at the giant Blackstone Group and later in his own boutique private equity firm Evercore Partners.
It’s a ruthless business and Beutner was one of the best at it. You get rid of failed managers, bring in smart, tough people, fire a lot of workers, demand wage concessions, eliminate unproductive functions and rebuild a lean and mean business that generates big profits. Then, you sell it for an even bigger profit.
So, now that he’s moved to the public sector, generously working for a buck a year, how is Beutner applying his method for success as he takes over as the ninth DWP general manager in 10 years?
“The first job is finding a permanent general
manager,” Beutner told RIck Orlov in the Daily News in a revealing interview on Sunday. “You cannot expect to have an agency
develop any stability when there is so much turnover at the top.”
OK, a good place to start no doubt, and hopefully the new boss will actually know something about running a utility unlike many of those who have been in charge in recent years. With people like David Freeman hanging around that has proven impossible but Beutner is no David Freeman so he will undoubtedly find a capable person from outside.
We also learn he is not a hands-on manager, interim or not, and will not operate from the lavish 15th floor office of the GM at the DWP building, preferring to stay at City Hall.
“Hire good people and hold them accountable…What I want to do is make sure the mayor, the commission and the City
council are all sharing the same information…and see what we can do to restore
trust.”
Wait just a minute, the mayor and DWP Commission are the problem as much as anyone. They are the cause of the loss of trust. And the Council doesn’t care about trust, its members are only concerned about the wrath of the public and business community because of DWP’s out-of-control costs, soaring rates, mismanagement, endless sweetheart deals, failure to plan, total lack of honesty and transparency — just to name a few problems.
But none of that is mentioned by Beutner — ratepayers aren’t even a phrase that enters his mind.
But Brian D’Arcy does. Beutner has already met with the IBEW union boss and made peace, guaranteeing him that his power and his inflated wage deals are not in jeopardy. 
“What people don’t realize is that at the DWP, labor is only
25 percent of its cost,” Beutner said. “And, they do a good job in their
work. What I want to do is look at the other three-quarters of the
agency and make sure costs are in line. People have made labor the issue
and I don’t think it’s the top issue facing the agency.”
So the people who “have made labor the issue” are obviously of no importance even though wages and benefits are 20 to 40 percent too high and hundreds of jobs are nothing but featherbedding and workplace discipline is lax.
And what does he mean by “costs are in line”? In line with what? In line with how the mayor wants to enrich his pals and portray himself as the greenest big mayor in America even if it bankrupts the city and many of its residents and businesses?
Beutner was hired to create jobs and is in charge of all the big pots of money in a dozen city agencies including the harbor, airport and planning. So is he being put directly in charge of the DWP to use his business skills to reduce costs and focus on the core business of supplying the city water and power or to use all the money the DWP can get its hands on for subsidies to buy jobs no matter how many jobs are killed by rate hikes?
Since he played a key role in the rate hike fiasco recently, let’s look at what the rubber-stamp for mayoral policy DWP Board is up to at its meeting on Tuesday.
First up is approval of contracts to keep the Scattergood power
line project moving despite widespread complaints from Westsiders
that it threatens their health and quality of life.
That’s
followed by giving vast amounts of water for the massive Grand
Avenue project, water that is available because we’ve cut our own
water use by nearly 20 percent even as we face soaring water bills and
bursting pipes thanks to DWP’s well-documented ineptitude. The developer
paid the $10,000 cost of DWP research into determining there’s enough
water and designing a long list of conservation measures. $10,000?
Then,
there are deals being cut with Inyo County
and Mammoth
Lakes that will help officials there with economic development in
exchange for letting the DWP cover Owens Lake with 80 square miles of
solar panels — a project the scale and cost of which is unlike anthing the has ever seen.
Don’t be impatient, it gets worst fast.
Item 13:
involves a $668,444 three-year contract with Huron Consulting for
“Strategic Plan and Competitive Intelligence Implementation Consulting
and Services.”
This is the same firm that was paid $150,000 for
an instant analysis that was used to promote Measure B by DWP officials
even as they were suppressing a comprehensive five-year study by PA
Consulting that showed the utility was badly managed and operating in
the dark without a strategic plan.
So if DWP wants to keep the
public ignorant, they hire Huron to fudge an uncritical strategic plan
to go with the $775,000: in contracts the firm already has for solar
energy projects and other schemes.
It is nothing but a blatant
payoff that will deepen public mistrust — something that ought to mean Beutner will
put a stop to it if the public trust counts in his calculus.
Will he object to Item 14’s
transfer of “11 substitute tree surgeon assistants” from Street
Services to be paid from DWP operating revenues or the payment of $123.7
million in subsidies for DWP workers and retirees health plans under Item 17?
And
how does Item
22 for buying a property with DWP funds so that the CRA can
subsidize private companies to cash in on “clean technology” fit into
the nation’s largest utility’s mission to provide water and power to the
city?
Or does this go to the heart of what Beutner’s real
mission is: Using his credibility to disarm the business community so he
can raise rates to buy jobs?
Or maybe the nearly $700 million a
year the mayor wants from increased rates right now is to buy wind power from
Oregon under a long-term contract at the astronomical price of
nearly $100 per megawatt/hour — five times the price of coal, twice the
price of gas — and for the DWP to own and install solar panels atop
city buildings under a 40-year deal with General Services, Item 23?
These,
of course, are all rhetorical questions. The answers are obvious. What
is going on is just a continuation of the ripping off the public to feed
the insatiable appetite of the IBEW and the mayor and his pals for our
money without regard to public costs and benefits.
Everything on
Tuesday’s agenda flies right in the face of Beutner’s own success based
on taking over failing businesses, cutting costs and focusing on the
core mission.
They are clearing the decks in advance of the
Council’s approval without objection or any serious questioning beyond
some posturing for their own self-aggrandizement.
This just sets
the stage for approval of the 20 to 30 percent rate hikes that will
actually be more like 50 percent for many businesses and homeowners
because they intend to provide massive subsidies to businesses and
residents facing “hardships” and subsidies to anyone who will bring jobs
to the city, even if most of them are in sweatshops or pay no more than
the living wage.