July 22, 2009 / 9:32 AM / 10 years ago

Q+A-Temasek: Bruised, or battered by Goodyear's exit?

* Exit may reignite concerns about Temasek’s image

* May not create leadership vacuum as Ho Ching, team intact

* Firm may continue to diversify portfolio, eye emerging mkts

By Saeed Azhar

SINGAPORE, July 22 (Reuters) - Singapore state investor Temasek’s plan to bring in its first foreign CEO lies in tatters as CEO-designate Chip Goodyear walked out less than six months after he was named to the top post.

The departure of American Goodyear, a former BHP Billiton (BHP.AX) head, is a setback for Temasek as it tries to present a more international image, after its close government links meant its investments in Southeast Asia and the West drew fire from the public, regulators and lawmakers outside the city-state.

His exit may not create a leadership vacuum, given CEO Ho Ching, the wife of Singapore’s prime minister, and her management team are still intact, and may continue to pursue an investment strategy focused on emerging markets. [ID:nSIN435934]

But as the company searches for a new CEO, top talent of Goodyear’s calibre would be wary of moving to the hot seat after his dramatic departure.

WHY DID GOODYEAR LEAVE?

Goodyear’s decision to leave likely was made after a board meeting last week when he put in a list of proposals and changes he wanted to make after taking the helm on Oct. 1, sources with knowledge of the meeting told Reuters.

But the proposals ran into trouble with the board, the sources said. It must have become clear to Goodyear then that running a state-linked firm is a much bigger challenge than running a privately-held company.

Goodyear was expected to diversify the portfolio, currently loaded with banks, by moving more into commodities and energy. He was also expected to improve risk management after Temasek lost over $4 billion in Bank of America (BAC.N) and Barclays (BARC.L) due to early exits. He was widely expected to make management changes.

“With Goodyear widely expected to implement significant changes to Temasek’s investment strategy, the failure in reaching agreement between him and the board suggests that the fund is not ready for a big shift in direction,” said Sherman Chan, an economist at Moody’s.

Temasek declined to comment for this story and Goodyear was not available to comment.

WILL IT HAVE ANY MATERIAL IMPACT ON TEMASEK?

His exit is not seen having any financial impact on Temasek or on markets given he had still not assumed charge at the company. Temasek owns large stakes in Singapore companies such as DBS (DBSM.SI) and Singapore Telecommunications (STEL.SI).

Shares of both DBS and SingTel were unaffected by the news and were either slightly higher or flat on Wednesday.

WILL TEMASEK’S STRATEGY CHANGE?

Goodyear’s leaving may slow the company’s drive toward resources, which he would have spearheaded with his strong mining experience at BHP.

Recently, Temasek took a 14 percent stake in Olam International (OLAM.SI), which investors saw as a sign of the firm’s move into commodities.

Temasek, with $84 billion of assets as of November, is likely to continue to be aggressive in emerging markets, notably in China, where it recently poured $600 million into China Construction Bank (601939.SS) and is in talks to start a $1-$2 billion infrastructure fund.

A few months after Goodyear was named CEO-designate, Temasek’s Ho stated the company was rebalancing its portfolio towards emerging markets and Asia and cutting exposure to developed markets.

Temasek is also likely to trim its exposure to financials on concerns returns from the banking sector will be affected by tighter regulation and curbs on excessive risk-taking.

“We believe Temasek’s broader strategy will continue in line with the geographical allocation mix announced by Ms Ho in May,” said Jit Soon Lim, a Nomura analyst.

With Ho at the helm, there will be continuity although Temasek may need to address the issue of its sectoral diversification given that it has a large 40 percent asset allocation in financials, he said.

WHAT NOW FOR GOODYEAR?

It is unclear what he will do next, but at age 51 Goodyear still has time on his side and could end up at a top position in a global mining or energy firm. Goodyear is currently believed to be on vacation. (Additional reporting by George Chen in HONG KONG; Editing by Neil Chatterjee and Muralikumar Anantharaman)

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