The Fable Of Frank Stronach

He has an image many politicians would die for: Small town boy who goes off to make his fortune and comes back a wealthy and successful man; he invests, he flourishes, and now in his golden years, he wants to "give back" through public service.

"I’m a man of the people," billionaire Frank Stronach proclaimed at the press conference introducing "Team Stronach" in September. "I come from a working class family, and I’ll never forget that." A politician who remembers the little guy, and has his concerns at heart. Stronach doesn’t take, he gives.

"I don’t need anything from anybody," he promised. He is the working-class hero of Austria’s 2013 parliamentary election, introduced as "the man who will end cronyism" – Austria’s famed Freunderlwirtschaft.

If only it were true. A look into Frank Stronach’s business dealings in Austria and North America reveals a man who is not always what he seems, a man who looks down on "the people" with near feudal paternalism, and at the government as a ready source of insider dealing. It turns out that the man who would end cronyism has himself been its beneficiary. Being "a man of the people" is one thing; actually listening to them is something quite different.

 

Success is relative

The myth is almost irresistible: A 21-year-old Austrian mechanic name Franz Strohsack emigrates to Canada, now Frank Stronach, he launches a car parts business. One thing leads to another and in 1973 he merges with an electronics firm to form Magna International. Fast forward to Sept 2012: Back in Austria, Stronach has taken over the famed Steyr Motors, built a racetrack and now, he founded a political party. It’s the Austro-Canadian Dream.

The truth is more complex, and like many dreamers and entrepreneurs, involves many false starts. His horse breeding and racing investments have been an expensive hobby, losing him $500 million in 2009 alone, in part from the €100 million he spent building the underused Magna Racino racetrack in Ebreichsdorf in 2004. Also his flirt with Franks Energy Drink ended in 2008, never making it to the international market.

"I always set myself very high goals," Stronach told the ORF in September. In fact Stronach’s ventures seem to increasingly disconnect from reality.

After Hurricane Katrina, for example, he built a temporary community dubbed "Magnaville" (later changed to "Canadaville"), 230km northwest of New Orleans. The theory: community service in exchange for rent. Stronach’s dream for Magnaville was a self-sufficient organic farm, with tenants tending to animals and garden plots. It was utopian and Canadaville went bust in 2010.

Particularly troubling is Stronach’s claim to be outside the Freundlwirtschaft, where recent extremes have brought a parade of famous names before a parliamentary corruption inquiry. But Stronach has been very much on the inside.

When Magna International was struggling under crippling debt in 1990, Stronach was able to persuade the Austrian state-owned Voest Alpine Stahl AG to form a joint venture, thus saving half of Magna’s European factories. In 1999 Stronach bought the shares back, but according to Wolfgang Zwander of the Viennese weekly Falter, the stiff purchase price included silence on the terms. Stronach also took a number of senior politicians onto the Magna payroll – Karl Heinz Grasser (FPÖ), Waltraud Klasnic (ÖVP), Peter Westenthaler (BZÖ), and even former Chancellor Franz Vranitzky (SPÖ) who served on the board – some who stayed on permanently.

Frankie goes to Florida

Also troubling are Stronach’s land ventures in Florida that may have crippling environmental and social consequences.

At the beginning of 2012, the Styrian émigré bought up large plots of land in Levy, Putnam, and Marion counties, in northern Florida. There he is clear-cutting over 70,000 acres to create space for a cattle ranch, the Adena Springs and beef processing operations, an $80 million project.

Residents have voiced concern that the clearing of the land will displace wildlife, and that manure from the 17,000 cows planned for the farm will pollute a nearby lake.

Attention spiked in May when 150 demonstrators showed up at the dedication of the Frank Stronach Plant Science Center at the University of Florida. At issue was Stronach’s bid for unrestricted rights to pump 13.27 million gallons of groundwater per day. Director Robert Knight of the Florida Springs Institute in Gainesville explained the concern.

"We’ve got a [groundwater] deficit here," he said, "one that we’re not going to make up if we keep issuing permits." By September, the ranch reduced its application to 5.3 million gallons, down from an original 27 million. Stronach "felt a bit bad", according to The Gainesville Sun and pledged to be a "good corporate citizen."

"When it finally comes, the people which live around here will say, ‘This processing plant will have no negative effect on the environment’," Stronach said at the dedication.

In October, Stronach bought another 200 acres for $7.1 million, with plans to build a steak house on the property. A revised application for water rights will be finalised in November.

Stronach’s "beef cattle business will dwarf any other ranch in sight," wrote journalist Fred Hiers of Ocala.com. But Marion County Commissioner Charlie Stone is less concerned about the water use or that one man should own so much acreage: "It actually makes it easier for us, because we don’t have to deal with multiple landowners, just the one," he said. With 12% unemployment, the county’s interest in the project is clear. As Stone put it: "The economy... that is our priority number one".

But Stronach’s American ambitions have allies. A proposed law exempting fruit farmers from electricity taxes has been amended by the Florida State Senate to include slaughterhouses, in a bid to encourage Stronach to expand his activities. However, he needs no encouragement.

After the May protests, Stronach told the media he doesn’t "want to have any confrontations" over the ranch project. He told The Gainesville Sun that his reputation was more important than money; he didn’t want to be known for harming the environment. Still, buying friends as a businessman in America has different implications than doing so as a politician in Austria.

 

Complaints of ‘negative media’

On 4 October, at Magna Racino, Stronach said "I invested €2 billion in Austria, created 13,000 jobs, and still when I come to the ORF, there are always only negative questions." He seemed puzzled that the media here are not as celebratory of his willingness to invest as Florida politicians.

The coverage of this man’s "rise" to leader of a new Austrian party has been highly partisan, with close confederates like the Austrian tabloid daily the Kronen Zeitung (where Stronach once had a column) plugging his upcoming book Frank’s Bible of Success; the sub-heading reads, "In it he shows how anyone can make it." Written in Stronach’s simple German, the excerpt was his life story in five columns: "The most important thing for me now, is to give other people an example," he wrote in closing, "and thereby, an opportunity to take the path to economic independence."

Some 10% of Austrians seem to buy his story, according to a recent survey by Der Standard of 400 Austrians, 8% of whom said they could imagine him as chancellor.

Independence is one of the values that resonates with crowds here. The way he frames it, his success overseas means he doesn’t "owe" Austria anything; no corrupt politician pushed this self-made-man to succeed. Seriously?

It seems Voest Alpine is ancient history.

For more on Frank Stronach, see also "World Champions at Getting in the Way", a Voices of Others feature by Andreas Koller in Nov 2012 TVR.