Rule #1 for investing after the bridge: Don’t forget the survivors
A sharp 25% drop in Atlantia’s stock price – since partly reversed - testifies to the interest international investors have in Italy’s systemic response to the Genoa bridge collapse.
Major disasters typically have such effects. BP’s shares fell more than 15% after the major oil spill in the Gulf of Mexico in 2010; Exxon’s shares fell after the 1998 Valdez oil spill and Carnival’s share fell almost 20% after the Costa Concordia shipwreck in 2012 off the coast of Tuscany.
Each of those events became case studies in how corporations should or should not react, and a common verdict was that efforts to play a blame game rather than focus on clearing up and helping the survivors ended up exacerbating reputational risks and ultimately were pointless. All the companies are robustly still in business today.
The concern of Atlantia’s investors are clearly related to the risk of litigation costs, but in particular to fears that Autostrade per l’Italia’s toll road concessions – the source of 90% of the business’s EBITDA – could be revoked or drastically revised.
Standard and Poor’s put Atlantia’s credit rating on CreditWatch with negative implications for just those reasons. Fitch did the same, while Moody’s also announced a review for a potential downgrade. The prospect of Autostrade being stripped of its concession would be unprecedented and have ramifications across the Italian investment landscape. As Standard and Poor’s analysts put it: “Such actions might impair foreign investments in the country if the rule of law and control of disputes become unpredictable.”
Blame is not the pressing issue for the real stakeholders of the Morandi Bridge.
The main issue – for the country, for Autostrade, and for people – is to fix Genoa. A secondary issue is how to fix the company’s reputation. Being clear-minded about the difference between causality and practicality is essential for both. The former is no simple matter; more than a hundred years later there is still a fierce debate over just what went wrong with the Quebec Bridge collapse that killed dozens in 1907. Practicality, meanwhile, is about what to do right now.
For Atlantia, the order of the day is to communicate with integrity. That means find ways to work out actual recriminations in private rather than public, and accepting responsibility without blindly accepting blame, a formula in line with the canonical suggestions of Timothy Coombs, the doyen of crisis communications experts. It’s no time for splitting hairs.
In fact, rebuilding the bridge is not an imperative for the company, but offering to do so is optimal, as Atlantia is well-equipped to do so and in particular doing so quickly. On top of that, corporate self-interest alone would generate a spare-no-cost high-quality construction effort, presumably the best outcome for the country and the government. It would also introduce an element of ownership to what is a concessionary arrangement.
The Morandi bridge was, after all, commissioned, designed and built in the 1960s by the Italian state, and only upon completion transferred to Autostrade, which at the time was a state enterprise itself. That’s quite a contrast with the Valico Bypass in central Italy, a recently-completed huge tunnel project the company fully engineered on its own at a cost at least six times greater than that of a new bridge, or indeed with the EUR4.2 billion Bypass project that Atlantia is starting – after a long wait for approvals – in Genoa itself.
Retrospective views on the Exxon and BP oil spill disasters suggest such a path is perhaps inevitably the way forward. In both cases the companies struggled with poor communications and in both – after media hostilities were tamed and key stakeholders realized that a rush to demonize solvent, fiscally healthy firms would lead not to any solutions but to more distrust and inaction - ended up footing the bill for broad reparation and cleanup efforts.
It’s worth noting that calamities are a poor time for tricky maneuvers, as the public – like the chorus in a Greek tragedy – are quick to sniff out sanctimony. As pointed out by Daniel de Wolf, a management professor in France, BP’s efforts to spin the Deepwater oil spill facts on social media, resulted in a fake twitter handle parodying its efforts which ended up having 10 times more followers than the corporate account. Less self-serving tactics – such as Exxon’s promotion of tourism in Alaska – end up demonstrating real good will and offering higher returns.
Navigare necesse est, vivere non necesse est. “We have to sail, we don’t have to live,” the Roman commander Pompey once told the crew of a ship carrying food to Rome.
Back then, the necessity to have a functional supply network outweighed the fears and interests of individuals. That’s likely as true in Rome today as it was in ancient times.