Money Market Services in person……With Jeannot Jonas, Assistant Treasurer, Carrier Global Corporation______

Ed Lopez, Chief Revenue Officer

All corporate treasurers face the challenge of implementing new technologies against a background of fast-changing markets. They all experience the pressures on liquidity and on returns from investments whether long-term or ultra-short. But for Jeannot Jonas of Carrier the workload comes with the added challenge of completing a corporate spin-off from the former parent group UTC, with all the systems change that implies. Jeannot joined us in one of our regular treasurer Q&A sessions to talk through this and many other current issues for the global corporate treasurer.

What takes up the majority of your time these days?

Well, I’m actually responsible for all the cash-pool operations North America cash, plus capital markets, and pension and retirement benefits. But as we have operations in many countries, and deal in so many currencies, I guess the cash-pool operation counts as the big responsibility.

What is your rationale for cash pooling?

First, we want to have cash in large pools, so we pool it in the US, in Hong Kong and in Europe. Smaller cash totals in separate accounts only have so much leverage. If you put it all in one pot, that boosts your leverage with banks and helps you negotiate better terms and conditions. Or if we need to borrow in one place yet have cash in an external account in another place, that means cost and friction. So we use the pools to allow the treasury at Carrier to function as an in-house bank. If a Carrier entity needs to borrow, it comes to treasury first.

Do you use money market funds (MMFs) as short-term cash investment vehicles?

We are not actually using MMFs at the moment to manage our cash sweeps. Our investment policy would allow it, but the fact is that MMFs are only offering something between zero and five basis points (hundredths of one per cent), depending on the provider and the term. All our country entities invest cash with the Carrier intercompany lending entity where possible. We pay them one basis point rather than have them getting nothing or even ending up paying just to place their cash externally.

We convert everything to US dollars and surplus cash is invested in straightforward term banking accounts in the US – although as it happens these are often accounts that are offered by foreign banks with US operations.

The decision not to use MMFs for excess cash is driven by market conditions, the lack of yield. But the practice of investing and lending centrally in-house is not a market decision, that is policy.

Do you have the digital technology you need for cash pooling and other treasury operations?

I think we do. We use SAP and have implemented the treasury module. There are limitations for sure, but the same applies to all treasury applications. The limitations are around countries and currencies. It is still impossible to have multi-currency cash-pools. In theory you can pool cash into a single entity, but you need to use different banks working in different currencies and that makes it next to impossible to do it on a zero balance basis.

What would help turn the cash-pool ideal into reality?

Well there is no ideal state. The ultimate dream of treasurers is to have one account – probably in the US – and all cash comes into that account and all operations get funded from it. The reason we still can’t do that comes down to regulatory issues and tax issues. For example, will payments be treated as a dividend and get taxed at 35 per cent? – whenever you have something that looks like a dividend you will get tax leakage. I think the systems are there whether with SAP or any other treasury management system, but it’s local regulatory issues that are the barrier.

So what is on your change agenda right now?

For us the first item is working through the implementation of SAP S4/HANA. Obviously we hope that will give us better treasury functionality, but whether it actually will is something we will have to take a view on. And secondly, we are constantly working on legal and compliant ways to be able to repatriate cash to the US without incurring unnecessary tax costs. But that is always a work in progress.

Many treasurers complain they are at the back of the queue for new investment. What do you think?

Has treasury got enough investment? Maybe not. Everyone is trying to save costs. There are always things we would like to do, but that is not so much a desire for new technology as the wish to hire additional staff. The fact we can’t do that within the budget is what is making technology so important.

Could you do more with technology?

Actually, I think we have probably automated just about everything we can. There may be some improvements we could make, but the big issue for me is not so much automation as digitisation of all our interfaces. For example, SAP is not an open system. Everything has to be set up correctly and you are never going to get the full functionality of SAP until everyone within the corporate network is on the same correctly implemented SAP. When it doesn’t work you end up falling back on static documents, PDFs and so on, and that isn’t ideal.

Tell us about the treasury challenges of the recent spin-off that turned Carrier into an independent business.

When we spun off from UTC [United Technologies Corporation, now known as Raytheon Technologies] we used what we call a ‘clone and cleanse’ process. What that amounts to from the treasury point of view is that you need a working system from day one, so you simply duplicate what you had in the previous entity.

Then you cleanse, which means removing all specifics and references to the former corporate structure. That too is a simple process. But it is only when that is done that you get to the real fundamentals, when you stand back and ask whether what you are left with actually makes sense for the new entity. That could even mean a change of ERP (Enterprise Resource Planning system) – I mean SAP is a wonderful ERP, but it is not as flexible as some other systems.

Looking forward, do you see new digital technologies like blockchain having a big impact?

Certainly, in the near future. We are looking at cryptocurrencies for sales. For example, aircon systems go to customers all over the world, so there are bound to be some who want to pay in cryptocurrencies. But right now the danger is obvious, because cryptos are not regulated.

When it comes to funding through something like tokenised corporate paper (short-term working capital borrowing), we would be interested if we could understand the cost implications. The advantage of instantaneous settlement may be limited – we already have T+0 (days to complete a transaction) settlement in the US for corporate paper. If we initiate at 8am, the order is placed by 8.15am and settled the same day. And I don’t understand why the eurozone can’t do the same thing when anyone can make real-time inter-bank transfers in Europe. What would be interesting is if we could digitise bond offers. In the US the bond process is still T+2 or T+3. But why not T+0? That’s something I also don’t understand.

Anything we haven’t talked about on your treasury wish list? 

Oh, that is simple, and it is just about the US. Please, everyone, stop using cheques! No one else uses cheques. Why the US still uses cheques, not only for payments but also for ID authorisations, is beyond me!


Ed Lopez, President, Global Money Market Services

Money Market Services in person...…with François Masquelier, Simply Treasury, ATEL, EACT
Money Market Services in person... with Reyer Kooy, Managing Director at DWS
Find out more about our Money Market Services

Featured articles