‘Thank God I diversified’: An Alberta business leader reflects on the province’s future
This is the second in a series of columns about the new Alberta economy.
I had over-interpreted the chairman’s message.
Murray Mullen, leader of Mullen Group Ltd., the Okotoks, Alta.-based trucking and logistics company that generated about $1 billion in revenue in 2018, said in his annual letter to shareholders that he “will continue to invest in the strength of our business,” specifically, “our business units, our people, and technology.” Mullen reported that he had set aside a capital budget of $75 million for the purpose.
Sounded good to this correspondent, who has experienced the rush of piloting a Freightliner FLC120 on the TransCanada Highway, but who otherwise knows nothing about the trucking business. However, the Bank of Canada has been holding out for a surge in business investment, and here was an example of just that — or not.
“Compared to where we’ve been, we are really, really cautious,” Mullen said in an interview at his company’s Calgary office. “The deals I do today are only for our shareholders. If I do a deal, I consolidate this company and that company and I get rid of jobs because there is no growth in the economy.”
Imagine what it must be like running an Alberta-based trucking company in 2019? Talk about a perfect storm: the oil industry is stuck in a prolonged slump; the North American Free Trade Agreement is now the United States-Mexico-Canada Agreement, maybe, if the new Democratic majority in the House of Representatives decides to vote for it; more and more consumers want stuff shipped directly to their homes, not the local box store, meaning an industry built around pallets has to learn to how move individual packages; everyone seems ready to hand over the global trucking business to Silicon Valley and its army of robot drivers.
Mullen Group’s share price is down about 70 per cent since mid-2014.
“It’s been absolutely the most stressful time of my career,” said Mullen, who took his company public 25 years ago.
The stress was apparent in Mullen’s latest official communication with his shareholders. His 2018-19 chairman’s message is an extraordinary document; part business outlook, part cri de coeur. The wealthy owner of a big company was knocked off kilter by the same economic, political, and technological forces that drove most of the rest of us to despair and distraction.
“We continue to see trends emerging that will undoubtedly alter the way we view the world, the way we see each other and the way we interact,” Mullen wrote. “It was an unforgettable year, one which seemed to consume me all too often, leaving precious little time to focus on those things that well, or for those that matter most.”
I have encountered three types of people since I pushed most everything else aside to focus on Alberta earlier this month. There are the angry ones, who blame the province’s economic morass on the federal government’s refusal to unilaterally build pipelines across the backyards of provinces and First Nations reserves that don’t want them. There also are the cautiously optimistic ones, who see the bust as an opportunity to channel the province’s entrepreneurial verve into areas that have nothing to do with bitumen.
And there is Murray Mullen, a charter member of the Alberta business establishment, who is neither enthralled by the promise of the new economy, nor captured by the glories of the old one. Bound by a fiduciary responsibility to his shareholders, he looks dispassionately at the world as it is, not as he wishes it to be, nor as it could be a decade from now if dozens of variables break the right way.
In 2012, when Alberta still was riding “this beautiful wave” caused by the post-crisis commodity boom an ultra-low interest rates, Mullen decided to reduce his company’s exposure to his home province’s dominant industry. Oil now accounts for about 30 per cent of business, compared with about 70 per cent not so long ago. The transition meant giving up on hundreds of millions of dollars in revenue and eliminating positions held by some 1,500 people.
“Half is that I lost the business (as investment in the oilpatch collapsed), and half of it is strategically, I said, I’ve got to get the hell out of this mess, this is a disaster waiting to happen,” Mullen said. “Thank God I diversified. It would be too late now.”
The action in transportation is moving small packages around big cities in electric-powered cargo vans, not hauling steel pipes on trailers pulled by diesel-fume-spewing Freightliners.
Mullen’s focus is on acquisitions that will allow him to expand his logistics business. Canada’s economy will come to rely on services, and the opportunity for growth in the trucking business will be in delivering the stuff that the people who work in service-based industries order online. Mullen sees some hope for natural gas because China will want a diverse group of energy suppliers as it moves away from coal. He thinks oil production has peaked because it doesn’t make sense to spend hundreds of billions of dollars to generate more supply when everyone’s outlook suggests the world is producing all of the the oil that it needs.
“I have to figure out how to position this company for five years down the road,” Mullen said. “Canada is going to preserve its natural-resource norm, it’s not going to capitalize on it. I might not like that, but that becomes irrelevant when I’m running a business. I have to park my personal views and make a good business decision.”
He added: “That’s different than being so passionate about something that you don’t pay attention to how the world is changing.”