Former CMC CEO Martin Forster and Former Chairman Jeremiah Kiereini Response on the CMC Saga

CMC - THE REAL STORY

It has been one year since I was unceremoniously fired from CMC.

Jeremiah Kiereini and I have silently sat by as our names and reputations have been attacked by the press without ever asking for our side of the story - the truth.

I gave up reading the countless allegations with no substance in the newspapers many months ago.

Three expensive forensic audits have now been conducted with no charges brought for fraud or corruption yet will cost shareholders in excess of what is held in the Company's 'offshore' account

The boardroom 'wars' had been ongoing for many months before my summary dismissal.

One faction wanted me out so they could have an easy path to control the company. It was my discovery of Andy Forwarding's overcharges on containers that took away his vote of support before I was able to finish my investigation.

When I barged into the boardroom some weeks after my dismissal and was given five minutes to address the Board, I told them not to appoint Peter Muthoka as Chairman of the Board because of his conflict of interest. They didn't listen.

At that time, I was still unaware of the deals made by Muthoka with the sponsors of Bill Lay to move me out of my position of 33 years.

The real story is how this strong, profitable, honest, corporately responsible firm, that had regularly paid a dividend to shareholders each year, could be so quickly ruined by the mismanagement, sensationalism and greed of the current regime.

Now the shares cannot even be traded, the franchises are being pulled away, the experienced senior staff resigning, and the three banks used by CMC are becoming nervous enough to call in the directors for clarification.

Those who have created this dismal state of affairs are the ones who owe an explanation to the shareholders. They are using the press to turn attention away from the negative trading results of the company compared to my tenure with the company.

Market share in 2011 was 11.7% compared with between 17 to 19% in 2010. In January 2012, this dropped further to 10.4%. Agri tractors fell from 75% to just over 50% in the same period.

CMC was the market leader on large buses under my watch, but has now lost that position.

For the first time in over 30 years CMC in 2011 made a loss. In the five years prior to my departure (2006-2010) while I was CEO , CMC yearly average profit before tax was over Sh800 million a year with the record being 2008 with a profit of over Sh1.4 billion.

The top management of Land Rover Ltd, a franchise CMC has held for over 60 years, are discouraged.

The potential loss of this franchise, added to the loss of the Ford franchise in Northern Tanzania, plus the sharing of MAN heavy vehicles in Kenya and the loss of the Agri Tractor in South Sudan speak poorly of the present top management of CMC and their care for this valuable asset - Franchises.

The deal giving exclusive government sales to one man with a 6% commission is absurd.

I read with amusement that Lay's 'focus' is to build a stronger CMC. After a year in the job, I have to wonder, when is he going to start? When will the witch hunt stop covering up the truth that a good taxpaying company like CMC is being destroyed?

In order to set the record straight, we have bought this advert to ensure no editing or bias in reporting and hereby address a few key issues:

Offshore account:

This is an irrevocable trust that was set up over 40 years ago in the days of exchange control in order to provide extra remuneration to expatriate staff who had overseas payment commitments. The settlors Jack Benzimra and Bruce McKenzie are long dead.

Since I took over as CEO, PK Jani, J Kiereni, others and myself have all made efforts to have it dissolved and the funds repatriated to CMC Holdings in Kenya. We wanted to use the money to fund a training academy in Kenya at the time of my being fired. All this was fully explained to Lay in April of 2011, when I provided him full details of the account as well as information about the training academy.

The original file was purposely left in the safe as funds are company property. There was no "stumbling over a file" and the account was not a "secret."

South Sudan:

What a surprise to read that formation of this company was also a "secret" or "illegal".

All decisions regarding registration of this company were made by the full board and published in the 2010 CMC annual report and financial statement on page seven. The company remained dormant, as it was easier to trade with South Sudan customers directly through CMC Uganda and Kenya. This includes orders for several hundred tractors.

CMC Aviation:

I was told by the forensic auditors, whom I have met with several times and provided full disclosure and complete cooperation, as has Kierieni, that according to some directors CMC aviation was "sold for a song." This was insulting.

The board decided that Aviation should be sold as it was outside the CMC core business. An asset valuation was conducted to the tune of Sh86.3 million. After two years, no good offers were on the table and the board instructed that a lower sales price of Sh60 million would be acceptable, I kept trying and eventually sold at the full valuation price 86.3 million.

I have been deeply saddened by the constant bad press directed at my past chairman, Jerry Kiereini. This gentle respectable mzee, who served the government with distinction, does not deserve all this nonsense.

In CMC he was non executive and made no trading decisions. I was the one who ran the company and brought it to the level where CMC was admired by the public, its bankers, vehicle suppliers and proud staff.

I now share their disappointment to see CMC as fodder for the press.

I take the liberty of asking Jerry Kiereini to join me in signing this document.

God help CMC.

Martin Forster

CMC staff 1978-March 2011

Jerry Kiereini

CMC Chairman 1984 to 2011