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The Logan lower cost model produced by Renault's Romanian affiliate Automobile Dacia SA is setting a pattern that is being looked at as a model for the future throughout Renault. It is combining the advantages of Japanese manufacturing methods with their attention to detail and good practices evident at Nissan, Renault's partner company, with the cost conscious methods evident in operations in a Renault joint venture with Mahindra and Mahindra of India. Dacia Automobile was a Soviet era plant, and Renault has modernized it but keeps a more labor intensive attitude with good basics operation here, in contrast to the trend to automate everything and use robots extensively that became popular at other plants in Europe, U.S., and Japan. As Renault managers in France and its overseas operations look at both the expanding markets for lower cost cars and the profitability of the Dacia plant in Romania, it is becoming a model to be imitated. Other plants built earlier now look overautomated and costly for manufacturing cars in a cost conscious pricing sensitive competitive market that automakers face. Logan is contributing to Renault's bottom line, and may help it in reaching the 6% in operating margins that is a new goal for Renault for 2009. Dacia Automobile S.A. initally owned 55% by Renault is now 99% owned by Renault. It has sales of 2 billion euros ,in 2007 with revenue increase of 30% over 2006. The profit was 100 million euros in 2007. It employs 14,000 workers and Renault's investment has reached 1 billion euros upto this point. The plant turns out 60 cars per hour. Compare this with a similiar investment by VW in a Soviet era Skoda automobile plant in the Czech Republic, where VW started with an inital investment in part ownership and ended up in full ownership of Skoda with large investments in modernizing Skoda, and the success in selling Skoda cars known for their good quality. The Skoda is expected to sell at the million dollar sales level in 2010 and is the fastest growing brand in Europe. It ties with Honda in quality surveys. ...

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Bowles and Simpson call for deficit savings along the lines they suggested as co-chairmen of the President's Deficit Commission- reducing the cost increases in Medicare, changes to Social Security, and cutting tax expenditures.

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Morgenson says that the lobbying by the financial inudstry to weaken reform efforts for derivatives trading and resisting other reforms will only lead to taxpayers paying for more rescues later on.

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A detailed account of the developments that unfolded for Bankia bank during and after the initial public offering of its shares, after it was put together from seven failing cajas savings banks with bad real estate loans made during the housing bubble. The procrastination and small steps taken to paper over the problems by the Spanish government and regulators during the last year of the Zapatero administration and into the first year of the Rajoy administration.

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This report by Peter Baker shows President Trump only reluctantly agreed to certify the Iran Nuclear Agreement. He opposed it in discussions with the Secretary of State Tillerson. It took the combined effort of Tillerson Dunford of the combined chiefs of staff, Defense Secretary Mattis, and of National Security Adviser McMaster, to get Trump to agree to go ahead with the deal. President Trump wanted a new strategy to counter Iran in the Middle East. The Iranian foreign minister Zarif has not yet met with Tillerson of the U.S. Zarif says Iran may withdraw from the deal if there is significant nonperformance by the U.S. Trump advisers are wary about the influence on Europe as the EU is not interested in taking a new look at the Iran nuclear deal. The EU sees things differently- that the issues of Iranian influence in the war torn Middle East is a separate issue from the nuclear deal, and that in any case a nuclear constrained Iran is better than one with nuclear weapons. Another factor is that the Middle East is now a complicated place with relations crisscrossing in different and even conflicting directions. The U.S. played a part on the Iranian side in the retaking of Mosul in Iraq with U.S. bombing strikes against Islamic State. In Iraq the U.S. is supporting the Abadi government which is mainly Shiite in its structure and is supported by Iran. The Trump position is that president Obama gave away too much in negotiating the deal and was not against the negotiating process.   ...

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At the height of the Eurozone crisis in December 2011, David Brooks points out that it is important not to forget what the Germans are saying in this crisis. They are arguing for truth in accounting, which the government in Greece failed to do, and which may have more to do with negative opinion in the media and with the public in Germany about Greece than any other factor. They are arguing against speculative excesses that enabled Greece to borrow recklessly. And they are making the argument that the only way to put the finances of the eurozone on a sound basis is to have the financial discipline that is necessary for a sound currency. Anthony Faiola pointed out recently that one estimate for tax evasion in Italy is $340 billion a year- Washington Post, 11/25/2011. Greece has a similiar problem, which needs to be addressed. This view has credibility and the backing of every principle of sound financial practices, irrespective of country or region. For ordinary Germans who have gone through years of wage restraint during the period of high unemployment, their attitude is captured in one German workers response to Greece's situation - when she said there are "poor children in Germany also." Years after reunification were a difficult experience for Germany, and left parts of the country still affected by the experience. The period of high unemployment is still a fresh memory, as the economic recovery is fairly recent. There is a feeling that the situation is precarious, depending on exports, as the 2009 downturn showed. These facts remain even when one considers the criticism levelled at Germany. Germany benefitted from the bubble in the economies of Southern Europe through surging exports- from a currency that was undervalued in relation to neighbors- because of the common currency. German banks lent heavily to Greece, Ireland, Italy, Spain, and Portugal, along with French and British banks, and bear responsibility for reckless lending and not doing due diligence for loans to Greece and other countries. Germany also carries the burden of memories of hyperinflation in the 1920's, and the sense along with France that partnership is necessary for peace in Europe. Germany's position on austerity measures also has one underlying weakness - if this leads to shrinking economies in southern Europe in the name of fianncial discipline, then the plan fails as tax revenues decline and budget deficits increase. Given this experience Germany faces the challenge of convincing neighbors of the need for good governance and sound spending practices for long term stability of the currency, even as it leads the effort for providing short term funding. In the short run this reaps criticism for Germany, including criticism for some members such as Greece having to leave the euro as a way to regain competitiveness and growth. Experts have suggested that this would be a better option for Greece than a shrinking economy after strong austerity measures, and the referendum proposed by former prime minister Papandreou on strict austerity measures is likely to have gone in this direction. ...

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Harold Meyerson compares the continuing inhumanity of separating parents from children that president Obama has to face with the choice presented to Lt. Colonel Jager at the Berlin Wall in 1989. Jager decided to let both parents visiting West Germany to return to East Germany to their children, even though the father had a stamp on his passport banning a return. He says the Republican control of Congress could last till 2023 by which time current law would have separated millions of parents and children. In 2012 about 13% of schoolchildren in California and Texas had an undocumented immigrant as a parent, according to the Pew Research Center. And for the last 6 years of the Obama administration deportations have reached 400,000 a year, leading to a lot of broken families.

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The risks to Republicans of losing sight of their narrative by tea-party leader comments such as calling Latino voters "illiterate." This is balanced by the careful and considered respose of presidential candidates, Kasich of Ohio, Rand of Kentucky, and Jindal of Louisiana, and of senior party leaders such as McConnell and McCain.

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A former chairman of the Council of Economic Advisors during 2010-2011 offers his reflections on the quantitative easing policies of Fed chairman Bernanke. He points out that the Fed was simply offsetting the effects of tight credit channels when it employed QE to prevent this from damaging the economy at a sensitive time. Inflation would have increased as critics say, only if the Fed did not reverse its policy with tapering as it is doing now. Bernanke offers a similiar assessment and says Fed critics refuse to look at todays inflation numbers which are below 2% for 2013- and also below 2% for 2012.

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Economists at the IMF estimate that the public debt of the leading 10 industrialized countries would reach 114% of GDP by 2014, from 78% today. The governments then owe about $50,000 for each person in the country. Unlike World War II this situation is not temporary, because of the pension and health care costs of a population that is getting older. So what is to be done? Without the stimulus, the deep and prolonged recession would lead to greater damage to the finances of these countries. But continued in this manner the government would crowd out private investment and lead to lower economic growth. In some countries, Greece, Ireland, Italy Portugal and Spain it might lead to default, in other countries the real cost of the debt may be reduced through inflation. In the USA yields on 10 year Treasuries reached about 4% on June 10th, in December it was about 2%, a consequence of the economic recovery. If interest rates are allowed to rise too fast, it might abort the economic recovery. A rise in taxes is also not the answer, because in Europe the taxes are already at 40%, in America they are around 30%. But raising consumption taxes at the time when the economy was fragile, aborted a recovery in Japan during Japan's earlier crisis decade. A caution signal that says fiscal tightening can backfire, especially some years after a banking crisis when things are still in a weak condition. Some steps that can be taken are raising the retirement age, which would cut pension costs as people work longer and would boost tax revenues, and eliminating the tax deduction for home mortgage payments in the US. Its important to build credibility that the government and the legislative bodies are serious about controlling the finances and acting with prudence. In America wasteful health care spending is a priority, as this would reduce the burden on public finances considerably , and should be as much of a priority for the new Obama administration, as providing universal health care. With today's finances its not something that can be put off....

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Vernon Smith, Professor of Economics and Law at Chapman University, 2002 Nobel prize winner, makes an effort to explain in simple language what has happened in the housing bubble, the various aspects of this crisis, and what might help and what might be difficult to accomplish in the rescue plan. He thinks that a reverse auction is awfully hard to do with some success especially as Treasury has no experience with this, and thinks its better to inject capital in banks and companies in return for equity stakes, which incidentally is what Gordon Brown's plan in the UK intends to do. With that Chapman believes Treasury has experience having recently demonstrated that several times including the way Treasury and the FDIC assisted JP Morgan takeover Washington Mutual. He asks readers to look at the Shiller price index graph from 1987 and asks do they think the home prices which only in 2006 and 2007 gradually turned downward and plumetted in 2008, has it run its course. The answer from the graph looks like a no after such a long runup in prices since 1987 and there is a ways to go in 2009 and into 2010. In this context and the context of a declining economy wiith higher unemployment what are the prospects of stabilizing home prices anytime soon? Which suggests injection of capital in return for equity by the government to recapitalize them and get lending back up, as well as act a a clearinghouse to take some of the fear risk out of transactions, as some of the more sensible solutions. And at the same time putting in a comprehensive homeowner relief program with taxpayer money and lender participation to have the lenders modify mortgages, or something like the Hubbard or Feldstein plans, to keep homeowners in their homes. And there is one bit of good news in all this oil prices have already hit $80 a barrel and are headed downward, and so are the prices of all commodities including steel, and the prices of soybeans, corn wheat and so on. ...

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The Tax Plan of Jeb Bush, with the help of advisors Martin Feldstein and Kevin Warsh, lowers the top personal tax rate from 40% (including surcharges) to 28%, and reduces the corporate tax rate from 30% to 20%. The plan is designed to jumpstart the economy for higher growth by increasing business investment and incentives. Businesses are allowed to deduct 100% of new investment immediately. The idea is to increase capital investment so that benefits also go to workers in higher wages. The Bush economic advisors see 50% of the corporate tax burden as affecting workers wages- average compensation would go up by $2750 a year by 2020 and $6200 by 2025 in 2015 dollars. Companies can pay a one time 8.75% tax on money earned and held overseas, paid over 10 years- about $2.1 trillion of this income held overseas can be added to the pool available for business investment. As proposed earlier by Feldstein the itemized deductions including mortgage interest can be taken only upto 2% of adjusted gross income, suggestions during the reform effort not taken up by Obama. To reduce the excessive use of leverage in business decisions the field is levelled for use of debt and equity by removing the deduction for business interest expense. This editorial says that by putting in the details, which political leaders tend to leave vague on specific figures, Jeb Bush and his advisors have taken a crucial step forward. This it says, shifts the debate from current shallow posturing to how America can lay the groundwork for the kind of growth needed to help increase wages, increase economic growth to higher levels, and preserve America's position in the world....

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David Reilly warns that though the U.S. Federal Reserve's stress tests of U.S. banks showed they passed- including approval for dividends and share buyback- except for Ally Financial and Citigroup, this can be deceptive. True, the Fed used 13% unemployment and sharp drop in stock market prices as conditions. The problem is with capital ratios. The Fed used a leverage ratio of 3%. It should not be forgotten that the financial crisis of 2008 was caused by excessive leverage and risk. Tested on this measure the banks fail to achieve safe levels of leverage and risk. Under the Fed's highest stress scenario Citigroup ratio was at 2.9%, Morgan Stanley's at 3.4%, Goldman Sachs and J.P. Morgan at 3.8%- what ths means is that the leverage for these banks was at 26-29 times capital. Reilly raises the question- how is this so different than the leverage used by these banks before the crisis. The stress tests in the U.S. by the U.S. Federal Reserve are lauded for being better than the European Banking Authority's stress tests, but is this a standard by which to judge them? Before the collapse of Lehman in 2008, experts including Anil Kashyap at the University of Chicago, pointed out that for every $1 of bank losses in a deleveraging cycle bank lending goes down at banks by $10, and for investment banks at $20-$30 depending on leveraging- in David Henry and Matthew Goldstein, Business Week, July 16, 2008, How Bad Will It Get on Wall Street? Lehman's leverage ratio was between 24-31 times capital before the crisis. Worse, by saying banks are now safe compared to the situation before the crisis, is the Fed giving the green light to banks for some of the same leveraging behaviour that ocurred before the crisis?...

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The different strategies of Apple and Samsung in getting to the point where the two companies now dominate the smartphone market. Whereas Apple makes only one phone, its iPhone, Samsung's strategy is to have multiple phones in each price segment. It has five levels of Android based phones, with 2-3 models in each price segment. Samsung also benefits from doing its own maufacturing. When faced with a number of technologies Samsung's strategy is to bet on all of the technologies until one of them emerges as a winner, and then concentrate resources on that technology. It uses a similiar strategy for televisions. Apple by contrast places more emphasis on original design and profit margins over sales, gaining sales without eroding margins by being the first innovator in the market. It also has its own unique arrangement for manufacturing at lowcost with Foxconn in China that supports its high margins. Apple is secretive about its designs and promotes its brand heavily with its own retail stores. Apple also uses its innovative edge as leverage to steer profits away from carriers. Analyst estimates are that carriers such as AT&T and Verizon pay about $400 per iPhone to subsidize its cost because this is the only way to get customers into their retail stores. IDC estimates are that the smartphone market is $219 billon in 2012. Both companies are very close in volume- IDC estimates Apple shipped 93.2 million smartphones in 2011, compared to Samsung's 94 million units. Apple has market share of 23.5% in the fourth quarter 2012, up from 16% in 2010. Samsung has 22.8%, up from 9.4% in 2010. Apple and Samsung have together taken 91% of operating profits of all cellphone companies in the fourth quarter, an increase of 30% from 2011, according to Strategy Analytics....

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Sinn Fein wins the largest share of votes in Ireland ahead of the two main parties Fianna Fail and Fine Gael. It wins about 25% of the vote but needs to form a coalition as it has contested only 42 seats. 80 seats are needed for a majority. Sinn Fein will make plans to stage a referendum on Irish reunification if it forms a government in coalition with other parties. This also complicates negotiating a trade deal for Britain's Boris Johnson after Brexit. Sinn Fein is likely to take a tougher line on the issue of divergence from EU regulations for the UK. All 27 states of the EU have to approve any deal negotiated by Mr. Johnson.

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The German and French positions on solutions to the eurozone debt crisis are in conflict. As a result the negotiations between France's Sarkozy and Germany's Merkel are deadlocked. The basic differences revolve around three basic issues. Germany wants to see a lasting solution in which Greece debt is restructured so that banks and other creditors that loaned money to Greece voluntarily take losses so that Greece's debt can be reduced to a sustainable level of no more than 50% of what it is now. France, the ECB and the French banks do not want to restructure Greek debt in this manner beyond the 21% reduction in value of debt under the July 2011 agreement. The voluntary reduction in Greek debt by the banks would prevent a default by Greece and unsettling of the financial markets. France fears market contagion from the restructuring of Greece debt that would place pressure on French banks as the value of the Greek, Spanish and Italian sovereign debt French banks hold declines in value. That would require a major recapitalization of French banks and additional cuts to the French budget. Additional twists to the negotiations are that Sarkozy is unpopular in France with elections six months away. For this reason Sarkozy would prefer to recapitalize after 9 months. A way to get around the need for more deficit cutting (austerity measures) in France, is for the European Financial Stability Fund to be able to borrow money from the European Central bank. The ECB can print euros in that situation. Germany's chancellor Merkel has to consider German public opinion and experts from the German central bank, who are adamantly against using the ECB to print money and Germany committing itself to bankrolling most of the effort. Germany wants France to use its own money to recapitalize French banks, with Germany only responsible for recapitalizing its banks. Merkel told her parliamentary caucus in Berlin that "the path is closed for using the European Central Bank to ease liquidity problems." Because of Germany's insistence on financial soundness for any solution, France being in the more difficult financial position and Sarkozy facing elections willing to come up with a short term fix, and the unwillingness of French and German banks to take the losses necessary for a lasting solution, the Germans see a real solution taking a long time. ...

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The civilian labor force participation rate for people over 60 years of age reached 29.4% in the U.S. in 2012, up from a little over 22% in 2002, according to the Labor Department. This reflects the slow growth in retirement savings with low interest rates and the economic shocks from the global financial crisis of 2008 to savings. A Conference Board report shows about two thirds of people between 45 and 60 years age are planning to delay retirement, up from 42% two years earlier.

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How much is the drop in sales of light trucks, including truck based SUV's? Acttually not much so far, title is misleading! 2004- 55.7% of total vehicle sales 2005- 54.9% of total vehicle sales 2006 1st quarter- 53.8 % of total vehicle sales source: Autodata, NYT cite For GM in April 2006 situation according to GM figures Overall Light Truck sales up 1.5% Escalade up 127% Tahoe up 30% Overall GM down 7.3% in all vehicle sales in April source Ward's AutoInfo Bank But the mix weighted toward the Escalade, Tahoe, and new SUV's which are non-incentive and priced to meet demand, which mean higher profits to make up for lost volume in cars. This is occurring in the middle of bigger changes, and as GM moves to introduction of more fuel efficient cars with better quality and appeal to younger demographics. GM is restructuring to transform itself into a global company with growing Asian sales and shifting volumes overseas. It is shifting employee and capital base to more countries overseas to create new opportunities and make GM a new and different company, a global company. Incentives pay part of the gas price for buyers, and more fuel efficient SUV's also chip in to pay gas costs. Americans are not out to get off the SUV's just yet, as fuel effficiency standards go up.The investments oil companies are making are expected to provide a payoff in increased production by 2008-2009, and the new oil policy of Saudi Arabia kicks in (see Naimi at CSIS 2006 meeting). The situation eases up for families accustomed to carrying kids around or hauling stuff around. See also links to Tradin Frenzy (Mouawad, NYT, 4/29/06) speculators in oil markets cause 10-20% of price rise, could lead to drops later after ethanol part of spike eases, and if global demand drops with economies cooling off a bit. ...

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A striking change is coming over US airlines as they turn their focus from operating costs to taking out unprofitable routes, reducing the size of their plane fleets, and increase the number of seats filled on a flight. The numbers bear this out. According to ATA the airlines reduced fleets from 3469 aircraft to 2747 aircraft from 2000 to 2005. American Airlines is typical in discontinuing 27 MD-80 aircraft which are older and gas guzzling. Delta and Northwest used the bankruptcy period to to get court approval to return many planes to leaseholders by breaking the leases- before breaking the lease parking the planes was more expensive than flying them at a loss. As a result according to ATA US airlines filled an average of 77.6% up from 75.4% in 2004. With this strategy airlines recovered some of their pricing power. US Dept of Transportation statistics show prices are higher than at any time since Sept 11, 2001 and the Air Travel Price Index, increased by 9.1% in 4th quarter 2005 over 4th quarter 2004. And airlines are being more restrained in getting into new routes just because some other airline has eliminated that route. Airlines however have to be careful to increase prices just enough but not too much that demand starts falling, and this is possible with fewer seats on more popular routes. Other methods the airlines are using are sophisticated O&D origin and destination revenue management systems which reduce the number of inexpensive, and unprofitable seats available on the internet. Larger airlines have tried to get back corporate customers by reducing the extremely high fares they used to charge and instead raising last minute fares because corporate customers see this as a price burden they are willing to shoulder. Larger airlines are doing better in relation to the price discounters like Southwest and JetBlue. With Southwest's hedging strategy against fuel price increases not as useful as in prior years it too faces need to raise fares....