Lopez Holdings

 

Fellow members of the Lopez Family and of the Lopez Corporate Family, Honored Guests, Friends, Ladies and Gentlemen:

Needless to say, I am overwhelmed by the show that you have put on in celebration of my 75th birthday. I must, however, also admit that I am enjoying every moment of it. After all, not everybody has the good fortune to reach the age of 75 in good health, and very few have the privilege of reaching that age at the helm of such a prominent business group as ours.

Come to think of it, however --“ WHAT AM I DOING HERE AT THE RIPE OLD AGE OF 75?

Well, three quarters of a century is as good a milestone as any for anyone to look back upon a lifetime of striving. And as I look back, I find that, like almost everything else in life, there are high points and low points.

I was fortunate enough to have been an eyewitness and active participant in the golden years of this venerable institution, Meralco. And what heady years they were! In order to keep up with the power demand of its customers, in ten short years, Meralco's generating capacity grew by a multiple of 6.5 times, including the Malaya plants that were still under construction when martial law was declared. By 1972, Meralco was generating close to 96% of its own power and maintained one of the lowest power rate structures in Asia. I was part of this golden era as a senior vice president in charge of Research & Development in Meralco Securities Corp. or MSC, the holding company of Meralco. Some of the companies we started in MSC are still going strong almost forty years later --“ Philippine Electric Corporation and First Philippine Industrial Corporation, and Ecco-Asia to name but three. Meralco represented excellence and it was the dream of every young professional in the 60's to work in Meralco. But then, came the martial law years. Those of you here beyond fifty probably felt your civil liberties curtailed in one way or other during those years. We suffered more than mere curtailment of our liberties. We were stripped of our business interests because my father's newspaper, Manila Chronicle, was very critical of the Marcoses. My brother was imprisoned on trumped up charges. My father died in exile, away from the life and country he loved. My prime, the most vigorous and productive years of my working life, were taken from me during those 14 years of martial law. And while I did not spend those years in the idleness of self-pity, I will always wonder how much more we could have accomplished during the 1970's in a free and progressive Philippines. And yet, there were those who suffered even worse, our very own desaparecidos of that era.

Fate did smile and give me a second chance, although I am not sure I thought of it in precisely that manner when in 1986 I came back to First Holdings. I found a company that was effectively bankrupt, with total debts of Php. 1.2 billion, with a courageous but demoralized organization numbering no more than 20 or so individuals. And yet, we were somehow able to convince our creditors to stay with us. And slowly, little by little, we paid the company debts and brought the company back to life.

By the mid-1990's the Lopez businesses had returned to their accustomed prominence. Each of the brothers, Geny at ABS-CBN, Manolo in Meralco and I in First Holdings, had succeeded in leading their respective charges to a recognized level of operating and financial success. And, therefore, if we were following a fairy tale script, I suppose that as the millennium drew to a close, my brother Geny and I should have been turning over the day-to-day control of the businesses to our successors and we would have eased ourselves into roles as the senior statesmen of the Lopez Group.

Unfortunately, the fates had something far different planned for us. First of all, Geny was not content with just making ABS-CBN number 1 in the broadcast industry once more. As successor to my father as CEO of the Lopez Group, he sought to extend the scope of the family business into many new fields, the first was in banking when he and John Gokongwei teamed up to take control of PCIBank. Then he set up Benpres Holdings Corporation as the family holding company and he took Benpres public in 1993. then he went into Cable TV with Sky Cable, into a land line telecommunications system with Bayantel. Then he went after the water distribution business in the Metro Manila area with Maynilad and into property development with Rockwell Center, finally he took on the tollroad business with Manila North Tollroad Corporation.

But not all the responsibility for the tremendous expansion of the Lopez group during the 1990s can be traced solely to Geny. . I share part of this burden also, since FPHC expanded during this period of the 90's into the power business on the generation side, first with a BOT project with National Power Corporation with a 225 MW diesel power plant in Bauang, La Union. Then the government through Energy Secretary Sonny Viray encouraged us in the Lopez Group to invest in clean natural gas-fired power plants in order for Shell and its partners to develop the indigenous Malampaya natural gas deposits. We eventually set up 2 power plants with a combined capacity of 1,500 MW in Batangas which became operational by the years 2000 and 2003. FPHC also took a 25% stake in the Rockwell project and eventually a controlling 51% interest in FPIDC, which in turn controls the North Luzon tollroad project. It also expanded into the industrial park business with First Philippine Industrial Park in Sto. Tomas, Batangas with Sumitomo Corp. as partners; and into electronic manufacturing with First Sumiden Circuits, in partnership with Sumitomo Electric Inc.

As the country begun to feel the full force of the Asian financial crisis from 1997 onward, cracks began to appear in our business façade. I am sure Geny sensed the threat, because he sought the help of McKinsey & Co. to help rationalize and re-organize our businesses for longer term survival. He also liquidated our investment in PCIBank in order to shore up Benpres' over-extended finances. Unfortunately, in the midst of this transition, Geny's cancer had metastasized into his brain and spine and we lost him in mid-1999. Thus, to me passed the mantle of leadership of the Lopez Group and the responsibility of navigating us through our financial crisis and entanglements.

Well, all I can say is, the past five years have been quite an odyssey: The Group as a whole went through very trying times in these past 5 years due to huge foreign and local debts incurred at the mother company and subsidiary and affiliate levels. Financial restructuring and rehabilitation were resorted to and in some cases are still being pursued by Benpres, Maynilad, Bayantel, Beyond Cable and Meralco. In the case of Meralco, it was the Supreme Court's decision to give back to its customers a refund amounting close to Php. 30 billion. That caused Meralco to undergo a financial restructuring with its creditors. It is important that we resolve the Maynilad problem soon because of the 0M guarantees of Benpres on that water company's debt, which would in turn adversely affect the viability of the Benpres restructuring plan with its creditors.

But when I came in as Lopez Group CEO in 1999, I found the problem to be not only financial but organizational as well. I found this highly entrepreneurial group lacking an effective system to manage, control and coordinate the activities of all its affiliates. There was no good internal audit and management information system. There was also no venue for all the different CEOs in the Group to meet regularly and discuss common problems with each other and with top management. There was also no central committee that could pass on policies and investments for the Group. There was also no formal budgeting presentation and review process in place for the entire Group. All these processes on the other hand were already operative in FPHC, so I merely extended this entire system to the Lopez Group. One of the objectives in taking all these measures was to bring about a closer more cohesive group where all executives and employees could feel a greater sense of identity and belonging to a much larger entity than their own individual companies.

I also felt that the Lopez Group also had to look beyond its immediate financial restructuring problems to the longer term perspective of its viability and competitiveness in the future. One of the demands of competing with other companies is the ability to measure oneself against the best in the world. This is the rationale for selecting standards that are globally recognized and accepted.

One such standard is the ISO. Since the mid-90's we have identified ISO certification as a means to being on par with the international standards of quality management. By 2002, FPHC had the distinction of being the first Filipino-owned conglomerate to have its parent company and all its subsidiaries and affiliates certified against the ISO 9000 standards; while 4 from the rest of the Lopez Group have also been ISO 9000 certified. The Group Companies also adopted the ISO 14000 and OHSAS 18000 standards on Environment and Occupational Health and Safety Management, eventually achieving certification against these as well. To date, 11 First Holdings companies have achieved triple ISO certification, better known as the IMS certification

The second global standard we have implemented is the Environment, Safety & Health System adopted from the multinational business association, the Conference Board. From 11 members in 1999, the Group's ESH network has grown to 30. Today, our ESH experts are fielded to various companies under a Network Assistance Program. 4 of our experts have been presentors in international fora and one from First Gas has received the Labor Secretary's Award for Gawad Kalusugan at Kaligtasan. Two of our companies --“ First Balfour and First Sumiden have surpassed the 10 million man-hours with no lost time accidents mark in 2004.

The fact that we are into manufacturing , oil pipeline, transport and energy businesses, we are very keen in insuring that the Group's ESH systems are up to international standards.

While ISO and ESH seem an ideal entry point to performance excellence, we do not stop there. We have pursued other programs that can accelerate our progress toward business excellence. These additional programs are Six Sigma and Malcolm Baldrige National Quality Awards in the U.S. The latter is the dominant reference model for national business excellence award worldwide. The award was quickly coined our "Oscar Award" by our Business Excellence Team. No company within the Lopez Group has yet won this ultimate award, but striving for it imposes on us the disciplined, systematic approach to improvement; one that allows us to compare ourselves directly with the best performing companies in the world.

The closest we have to an Oscar awardee is First Sumiden who was conferred the Level II Recognition of the Philippine Quality Award for Proficiency in Quality Management by the Dept. of Trade & Industry in February of this year at ceremonies held in Malacanang. First Sumiden expects to win the top PQA Award, which is the Philippine equivalent to the Malcolm Baldrige Award, two years from now, when the next awarding is due by DTI.

Since 2002, we have also implemented a yearly Lopez Achievement Award, that recognizes outstanding team or individual achievements for the year. This Award has served to inspire employees and their heads alike to surpass themselves, and to learn from the success of others. This yearly Lopez Achievement Award is a great unifying factor among employees in the Lopez Group.

All of these business excellence initiatives are grouped under a separate sector headed by Dr. Arthur de Guia and Bunny Gerochi in FPHC. There are 2 other corporate initiatives we are pursuing in the Group, namely Corporate Social Responsibility and Corporate Wellness. CSR as a program was started by my father in Meralco during the premarital law years. The program then was partly directed at giving the Meralco employees the best benefits in the country in terms of a company hospital, sports center and a cultural theater; and secondly, in the area of education and culture my father gave a big cash donation that made possible the establishment of the Asian Institute of Management and he also funded the Lopez Museum that houses a priceless collection of rare Filipiniana books as well as paintings of the 19th and 20th centuries . After his time, each son in charge of their respective fiefdom in Meralco, ABS and First Holdings developed their own distinctive CSR programs. But last year, I decided to establish a Lopez Group Foundation to coordinate the activities of 7 Lopez Foundations doing CSR work.

Finally, we have also established a corporate wellness program initially in FPHC but spreading to the other Lopez companies as well. This program was instigated by the death of our 2 executives, Tato Diaz and Luis --˜Jojo' Mirasol, who died prematurely because they somehow neglected to take good care of their health.

It's such a big loss not only to their families but to the companies they work for when they die at a relatively young age before reaching their full potential.

In the long term, I believe a healthier workforce can mean not only lower direct health care costs but also reduced absenteeism and higher productivity in our group of companies.

At this point I would like to answer the one basic question that is in all your minds, "when am I going to retire? Am I going to make an announcement today to retire this year, next year, or perhaps never! Well, I will not keep you guessing any more. Lately, when I am asked this question, I usually smile first and then say, " we Lopezes never retire. We die with our boots on." Although it sounds like a joke, it is the actual truth. My father never retired from his job as head of the Lopez group. He died in 1975 at the age of 74 in San Francisco, where he lived in self-imposed exile because he refused to come to terms with the Marcos dictatorship. The same was true of my brother who succeeded him. Geny never retired from his job as head of the Lopez Group, not even when he was already very sick. He died with his boots on on June 28, 1999, at a relatively younger age of 70, or about 4 months short of his 71st birthday.

As you can see, I have already outlived both of them, my father by almost 1 year and Geny by 4 years. And frankly, I don't have any plans of joining them for quite a while yet. There is still so much I have to do, especially with regard the Lopez Group, that I can't afford to quit now.

This is also the reason why I have kept myself in good physical and mental condition all these years, but especially since my brother died in 1999. Let me give you an idea how I have kept fit all these years. So that if you follow my plan, you will also look and feel 10 years younger. First of all, I quit smoking more than 20 years ago. My diet is low-fat consisting mainly of fish, vegetables and fruits, brown rice, whole grain bread and oatmeal and lots of fruit juices and green tea and also a lot of vitamins and mineral supplements.

For exercise, I do a daily routine of 20 to 30 minutes on the treadmill in my house, and every day I walk up 6 flights of stairs to my office in the Benpres Building. Beginning this year, I have improved the building staircase so that it is now a joy walking up and down these stairs for our office employees. The walls have been repainted with bright colors, there's a thick rug to cushion your every step, there are reproduction of paintings and prints of old Manila and Philippine flora and fauna on all the stairway walls, compliments of the Lopez Museum and finally there is the sound of classical and light music throughout the whole day.

Part of my physical regimen includes a periodic hike up a mountain or into a wooded. I have climbed Mt. Pinatubo with most members of my family including my wife, 2 years ago. I have also done Taal volcano; I have also spent an overnight stay in lean-to shack in the Sierra Madre Mountains, in a Conservation International field observation site near Palanan in Isabela province.

Together with many of my executives, we have walked some of the trails in Tagaytay Highlands and in the mountains of the Subic Bay area.

But last week takes the cake, because I decided to take a sentimental hike commemorating an event that took place 60 years ago, an event that I have never been able to forget. This happening took place in April of 1945, the Americans had already landed in Lingayen Gulf and had already retaken Manila from the Japanese. But my father's and mother's combined families, we were all stuck up in Baguio and running short of food and constantly subjected to shelling and bombing by the Americans. My father decided that we should all walk down to the American lines in La Union. There was about 70 or 80 altogether in our entourage. It took us 2 nights and 3 days to walk across several mountains, skirting the Japanese lines and finally reaching the American troops in Tubao, La Union. My brother Manolo, chairman of this venerable institution where we are holding this affair today, was only 2 years old then Geny and I took turns carrying him on our backs because he could not walk any longer after the first day. Geny was 16 years old and I was 15. We were not however the only ones who accomplished this feat. There were literally thousands of civilians who either went ahead or followed us in this trek especially after the carpet bombing of Baguio City by American planes in March of 1945 which devastated the City and killing many of its residents. Some of the survivors of that trek --“ let's call it a trek to freedom and not a death march --“ are here with us today. One is Rusty Cacho, CEO of Panay Electric Co. which is the counterpart of Meralco in Iloilo City. First Holdings is a 30% owner of Panay Electric and Rusty and I have talked many times about that event in our lives. Rusty was also 15 years old at the time. The other person in this theater who also took part in that trek to freedom is Margot Fragante, my father's executive secretary, then Geny's and now mine. Don't ask me how old she is, I don't know. All I know, she is ageless, priceless, part of our family treasure and heritage.

Well, on Thursday last week, I brought my 8 children and their spouses and 10 grandchildren to experience at least partly what I had gone through 60 years ago. This was my way of celebrating my birthday ahead of schedule. This time however, we did not follow the exact route of the 1945 trek because frankly I did not have the time or the stamina of younger years to endure such an ordeal. We were content instead on a strenuous 5 ½ hour 10 kilometer hike starting from Irisan on the outskirts of Baguio at 5:45 a.m. descending approximately 4,000 ft. over very steep mountain trails requiring the use of ropes to hold on to at times, crossing a suspension footbridge and 2 old tunnels to reach finally the town of Asin , where we had lunch in a new resort with running cold and hot water, swimming pools, supplied by natural springs in the vicinity. The resort's name is River View Water Park. But all along the trail our Ibaloi girl guide would point to some nearby mountain peaks and say that was where you passed on your way to Tubao. After lunch and some rest, we proceeded in several SUVs through an unfinished road for another 20 kilometers and then crossed a shallow river called Anduyan to Tubao, La Union, which was the terminal point of our 1945 trek to freedom.

All told it was a 12 hour trip (from 6 a.m. to 6 p.m.) from Baguio and back to Baguio that day, and believe me for the next few days, our legs, knees and thighs were very sore from that strenuous hike.

Aside from my relatively good state of health, what impels me to continue in my job as CEO of the Lopez Group is a strong sense of duty to family and to all you employees to set things right again in our group of companies . Call it a sense of stewardship that moves me on my present course. As a good steward, we must not only preserve the assets we have, but we must take steps to enhance the value of these assets during our tenure in office. When I finally leave my job as Lopez Group CEO, I want to feel that the Group is in a much better shape than when I found it in 1999.

I may sound pretentious, but I feel there is also some sense of destiny involved in all this. I feel that my whole business career, especially since I was successful in revitalizing a nearly bankrupt FPHC in 1986, has been but a preparation for my bigger role in saving the Lopez Group from collapse and putting it in the road to recovery and long term prosperity and business excellence.

But least I be accused by my brother Manolo of wanting to stay on indefinitely and thus deprive him of the opportunity to make his own mark as head of the Lopez group, let me spell out the conditions under which I will retire as head of the Lopez Group.

These conditions are :

1. we put closure to the Maynilad story.
2. The Benpres rehabilitation is successfully carried out
3. The Supreme Court renders a favorable decision on the Meralco case before it and Meralco is on the road to full growth once more.
4. ABS-CBN regains its no. 1 position once more
5. All major Lopez group companies adopt the global standards of business excellence, efficiency and productivity namely the integrated management system : ISO-9000 --“ ISO 1400 and OHSAS 18000, Six Sigma, and the Malcolm Baldrige System

Hopefully all these conditions can be met in the next 3 years, but certainly by my 80th birthday in 2010.

What I am saying is that like it or not, God willing, all of you will have to put up with me as your CEO for the next few years. Besides, retirement is a very relative term. Look at my friend Wash Sycip. He said he retired at the age of 75, but I think he is doing more work and more traveling today than when he was 75 or less. I don't know where he gets his inexhaustible energy . I don't think he is into climbing mountains as I do. Perhaps from some old Chinese herbs he is drinking. But I believe his real secret is he continues to work hard at 85, Wash?. That is what keeps him younger and I share that same passion for hard work with him.

George Burns of showbiz fame who lived to be a hundred, had a nice way of saying the same thing. He said :

"Age to me means nothing. I can't get old; I'm working. I was old when I was twenty-one and out of work. As long as you're working, you stay young. When I'm in front of an audience, all that love and vitality sweeps over and I forget my age."

I find wisdom in his words. Age really means nothing provided you are healthy and busy. And even when I step down as head of the Lopez Group, I will not be idle. I will probably continue as chairman emeritus of FPHC, that is if Nonoy Ibanez will still have me. There on my home ground in FPHC, I can die with my boots on, like all the other Lopezes before me.

At this point I would like to thank the Good Lord for having showered me with so many blessings all the years of my life, for loving and faithful wife Connie who is with me through thick or thin and in all my hikes up and down the mountains and valleys of my life, for my 8 wonderful children with their respective spouses and for my growing brood of grandchildren ---- all 26 of them who are here today except for the newly born twins of my son Jay and his wife Georgina. But among the 24 here today are my son Cary's triplet boys Jaime, Joseph and Javier, who will turn 6 years in a few months and finally all of you present here today for sharing and celebrating my birthday with me, I say again

Thank you and God bless.

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CONTACT US

Lopez Holdings Corporation (formerly Benpres Holdings Corporation)
4/F Benpres Building, Exchange Road, 1605 Pasig City, Philippines

  • Trunkline: (632) 449-2345
  • Fax: (632) 634-3009