LOSS & FIRING Amtech reports loss on SunPass, fires Mortenson

LOSS & FIRING

Amtech reports loss on SunPass, fires Mortenson

The Amtech board fired its president and CEO Russell Mortenson Feb 27, 10 days after the company had revealed another loss and admitted it will lose serious money on the SunPass electronic toll conversion in Florida. The new chairman and CEO is David Cook, a founder of the company and former CEO who also founded the highly successful Blockbuster video rental chain. Mortenson was in charge of Amtech for nearly six years.

People associated with Amtech said that losses under Mortenson forced it to seek increasing outside investors. These gained seats on the board but steadily lost faith in Mortenson’s ability to return the company to profitability, and moved successfully to oust him in a surprise move late February.

Cook was not part of the coup against Mortenson, we understand, but the coup leaders quickly persuaded him to come back to the company he founded after they had expelled Mortenson.

A press statement from Amtech said Feb 17 that it was reporting a $7m loss in the calender year. It was taking a $5.7m charge in its 1997 accounts on account of anticipated losses on the ETC contract in Florida. Amtech Transportation Group’s head John E Wilson said that for strategic reasons the company had originally bid with a “very low” expected profit margin, but with the project 10% complete it is apparent there will be losses.

These, he attributes to “schedule delays and increased design and installation costs.”

Amtech bid $38.6m to get the job, for which the next two bids were around $60m, and a fourth much higher. Amtech made little financial provision for product development, even though the project was planned around a more economical-to-manufacture version of its top-of-the-line Intellitag transponder. The per lane price of the roadside equipment is extraordinarily low given that 458 lanes have to be equipped for electronic toll collection. The job is complicated too because the various turnpikes in Florida have different systems to cope with, including both trip and point tolling. The toll plazas are quite diverse. Some highway speed open road tolling is required.

It has been widely bruited around in the industry that someone at Amtech made a simple arithmetical error in finalizing the bid price — that $10m was dropped from a bid that correct addition would have made $48.6m. This cannot be confirmed.

Florida DOT which runs the Turnpike has the reputation for insisting on getting exactly what it contracted for at not a cent over the contract price.

One industry veteran told us: “There are some agencies you might be able to work with to get yourselves out of a fix like this, but Florida is a very tough customer. You don’t do it with them.”

Wilson says the company believes it has the cashflow and working capital ($35m) to meet its capital requirements. Its low share price and recent track record makes it difficult for it to raise new capital.

Wilson’s predecessor Jeffrey Wetherell was fired by Mortenson late 1996. He told us he was delighted to hear of Mortenson’s ouster since Mortenson was running the company into the ground. He says Amtech has “good people and good technology” and that Cook should be able to turn it around though a lot of damage was done. (Couldn’t track down Mortenson to get his views.)

Amtech was a pioneer of modulated backscatter tag technology used initially for cattle and wildlife tracking. In the late 1980s-early 90s the company made large sales of the electronic tags to US railroads for tracking freight cars. It made the bold decision at the turn of the decade to offer to install an electronic toll system on the Dallas North Toll Road at its own expense and to operate it for a per transaction fee. The project was so successful everyone made money and the technology was given the credibility it needed to spread. For a couple of years Amtech got the lion’s share of the new ETC business.

It is widely said that Amtech rested on its laurels, failing to upgrade its technology, which led to the loss of the NY/NJ/PA/DE Inter-Agency Group competition to the then outsider Mark IV in March 1994. Amtech developed the Intellitag, regarded as an excellent product, but it was too late to gain a large order — until Florida. Meanwhile Mark IV has shot away to become the dominant ETC supplier in North America.

Amtech remains strong in the US south but it missed an opportunity to buy the Texas Instruments business in California, which would have made a good match with its established business. It is strong internationally, in South America and Asia. And it works alongside the Amtech Electronic Security Group which is a major world supplier of electronic access tags under the Cotag and Cardkey brand names. (Contact Beverly Fuortes Amtech 972 733 6059)