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New Sony CEO, Kazuo Hirai, plans to cut 10,000 jobs, about 6% of its total employees, over the next 2 fiscal years ending March 2014. Sony's television business has faced 8 years of losses, and the entire electronics business has faced 4 consecutive years of losses. The price competition and the high price of the yen has hurt Sony's sales and margins. This has affected the entire Japanese electronics industry, which has suffered consecutive years of losses, including Toshiba and Panasonic. Hirai is changing Sony's strategy in the television business. Instead of targeting a goal of 40 million in sales for television sets, he is cutting this in half to 20 million and reducing the size of its television sales operations. Sony's plan appears to be to focus on its strengths in new technologies and maufacturing, including the new 4 K technology, which would have to be adapted to mass market from its current specialized application. By doing this Sony would not have to compete on price in the manner it does today with Samsung and other Asian brands which have closed the gap in conventional technologies. Hirai's employee cuts follow the 16,000 job cuts made by Howard Stringer in 2008, during the global financial crisis. During March 2011 Sony had 168,200 employees....

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The critical exchange between oil companies and auto companies about who is at fault for the energy crisis. In one ad that ran last year, Chevron argued that "if automakers improved fuel economy across the board by just 5 mpg, we'd save over 22 billion gallons of gasoline a year." The criticism is also sparked by the high price of oil which is hurting sales of pickups and large SUV's that the automakers depend on for profits. One ad by Exxon Mobil shows a cartoon of a large SUV filling up at a gas station and hints that the problem rests with the automakers who have failed to build the kind of highly fuel efficient vehicles that are needed. The ad says that the average fuel economy of new U.S. autos has not gone up much in two decades, the small gains have been offset by the increases in the size and weight of vehicles.

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Revised auto fuel efficiency standards win the support of GM, Ford, Chrysler, Honda and Hyundai. These standards would lower the average fuel economy to 54.5 miles per gallon by 2025, a decline from the initial target of 56.2 mpg. The revised proposal calls for a 5% average annual increase in fuel economy for cars and a 3.5% increase for light trucks through 2021. After 2021 both cars and trucks have to meet a 5% annual increase. Useful innovation in the new standards is to provide credits for hybrid pickup trucks, and give credits for technological advances that improve fuel economy but don't show up in EPA tests such as the one that shuts of the engine when a car is idling. Other credits would be offered for solar roof panels on electric vehicles. It includes incentives for "promoting early market penetration of tailpipe CO2/fuel consumption reducing technologies." This comes after a long period in which the U.S. lagged behind other countries in fuel economy. It could be one of the main achievements of the Obama administration, and help build a new auto industry around new technologies....

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This issue of the Economist magazine looks at Saudi oil price cuts and the future for shale oil in the world's energy mix. In the short run overleveraged companies in the shale oil business in the U.S. will be affected by oil prices below $50 a barrel. The Economist points out that shale oil deposits are extensive in the U.S. and other parts of the world. The upfront costs are as little as $1.5 million for drilling a well. As a result the economics of shale will depend on new advances in technology and efficiency to bring costs down below existing costs averaging of about $57 a barrel, with some producers at costs of $35 a barrel. Because of technology advances anticipated in the field it points to shale oil as a reliable source of low cost oil supplies in the future, keeping oil prices lower than in the past and much less subject to manipulation by cartel pricing or oil price shocks. The lower volatility and lower level of oil prices will be good for the rapidly growing economies in Asia and the developed economies of Europe and the U.S., and for countries in Latin America such as Argentina with large shale deposits....

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This report by Martin in the NYT points out that Ohio no longer plays a critical role in U.S. presidential elections. It was critical for a Bush win over Gore, and president Obama carried it by 2 points against Romney in 2012. It is critical for Trump to win. For Hillary Clinton other states are gaining importance as they better reflect the demographic changes in the U.S. and the mix with minorities- states such as Georgia, N. Carolina, Colorado and Florida. Ohio has not seen an influx of Hispanics as other states, and is now more white, more evangelical voters, and reflects a mix that was prevalent earlier. 

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The government sets a goal of reducing the number of automakers in China from 70 currently to a much smaller number by 2015. With slower growth in the Chinese market, 55 of these companies sell only 11% of the total cars sold, and no sales for 10 manufacturers. Foreign car companies are investing heavily and control 58% of the 18 million cars sold in China. Domestic car companies are faring poorly. Cherry sales dropped by 30% in November 2011 acccording to the China Association of Automobile Manufacturers. Changan, Guangzhou Automobile Group and BYD have seen sales declines of 10% in 2011 for domestic sales.

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RIM CEO Thorsten Hein's plans to win over the corporat technology market with the new Blackberry 10 model due to come out Jan 30, 2013.

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Brett Arends cites several factors for his skepticism about the 4th quarter 2010 US stock market rally. Cyclically adjusted price to earnings ratios that are 75% above their average value. A market value for US equities excluding financial stocks, that is within 15% of the October 2007 peak. Fed data that shows nonfinancial corporations have debt of $7.4 trillion at the end of the third quarter 2010, an increase of $250 billion in one year, and up from $5.5 trillion in 2005. This Fed data shows the debt for nonfinancial US corporations is 58% of their net worth, up from 41% five years ago. US consumers are still have the kind of debt burdens they had in 2008, with US households having reduced their debt by only about 3.5%. Arends says the leveraging is through the roof when you add up the debt that government and corporations have run up. Total debt has risen to $36 trillion, up 15% from the fall of 2007. He cites other experts who were right for the last decade who are skeptical this time- Rosenberg at Gluskin Sheff, Albert Edwards at S.G. Securities, John Hussman at Hussman Funds. The latest analysis by Jeremy Grantham at GMO is that large cap US stocks are not likely to beat inflation by much over the next 7 years. Arends has not mentioned global risk indicators such as the asset price bubbles developing in emerging markets, and the sovereign debt restructuring needed in debt burdened countries of the European Union. Analysis by the Economist in year-end 2010 points to the diverging directions of austerity in Europe, spending in the US and asset price bubbles in emerging markets, as a disturbing sign for 2011-2012. Risks in the US that Arends has not mentioned include problems in housing. Nouriel Roubini sees problems in housing in 2011. ...

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Lenovo leads in a shrinking PC market as tablets become popular in 2013.

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Blackberry employees reached a peak of over 17,000 in 2011 as the company continued to hire through 2009-2011. It was about 8000 in 2008 the first year of the financial crisis and recession and doubled in 3 years. The employee count is at 12,700 in 2013. The company was hit hard by the introduction of smartphones by Samsung and Apple. Blackberry now plans huge cuts of about 40% by the end of 2013. This shows how quickly the winds can change in the tech business field where disruptions for existing technology are the norm. A niche in the corporate business field was not sufficient to keep Blackberry from shrinking rapidly as businesses shifted to the new smartphone technology from rivals. Failure to anticipate new technologies can lead to irreversible losses. Blackberry shows the way down can be just as fast as the way up and a lost year or a wrong decision can be the difference between success and irreversible failure.

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Experts at Stanford Law School say the fewer IPO's expected in coming years will be a good thing as it reduces the boom and bust cycles in tech and internet IPO's of previous years. New technologies enable firms to reach breakeven at a much earlier stage with smaller investment- using founders money and capital from angel investors and less reliance on venture capital- so that companies can focus on the long term. The result will be fewer jobs created in investment banking and more in other places.

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Rising wages and rising production costs for Chinese exports of low tech products like shoes, clothing, toys, clothing, furniture, means a lot of these factories will shut down and move to lower wage countries like Vietnam and India or elsewhere. Elimination of rebates on more than 2000 export items raises cost of manufacturing 14-17% according to Guangzhou based American Chamber of Commerce in South China. And the the tough new labor law enforcing worker rights would increase manufacturing costs by 40% according to the Textile Council of Hong Kong. Additional costs would be incurred to meet tougher environmental controls and anti pollution laws and stricter enforcement. As a result of this Adidas wants its suppliers like Taiwan based Apache Footwear with 18000 employees in Guangdong to move as fast as they can to India where it opened a second factory. This process will unfold over several years till India and Vietnam bercome the new sources of cheaper goods because of the large supply of manufacturing labor for lower value added products, as it will take years to build the logistics and infrastructure for these plants in these countries. But because wages will also rise in India and the laws in India are more likely to be enforced than they were in the atmosphere in China where the Communist led government may have turned a blind eye to enforcement and worker rights in the interests of growth, the export of deflation to the west in the way of cheap Chinese products may be a thing of the past. China is doing this as a planned move it appears. Why? On the surface it makes sense that the heavily polluting factories making lower value added products like shoes, clothing, toys, furniture, would not receive rebates from te state and to improve living conditions and promote consumption at home the government woud pass tough new laws to ensure employee benefits and collective bargaining rights, and employee job security. It also reduces trde tensions at a time when the US economy will be in poor shape and jobs lost become a political issue in the 2008 presidential campaign. But there may bigger pressing concern and urgency in these moves after so many years of this being discussed and this may be that China finally may be at a moment when it is confronted with a sober fact that the US consumer is heavily in debt and may not support China's export growth model much longer and with it China faces a really significant slowdown in its growth rate from 11% to maybe half that if China does not develop its own domestic markets for growth. The old foreign investment model may not work anymore. See the link to Ireland where growth is falling off quickly. Higher wages and longer term jobs with benefits would enable a large middle class to develop from this huge manufacturing worker base especially as China moves to more value added products where even higher wages would be paid. This in turn creates a domestic market over time that would insulate China to some extent from the winds that would be blowing from a US economy suffering from a deep recession that may last several years. This may be evident in the words of the Governor of Guangdong when he says that the government is not abandoning the exporters but that selling domestically is good for the country and good for the people. Something deeper is at work here and one would expect an about turn in policy where instead of workers not receiving back wages and lax enforcement that went on freely in the last decade we would see an effort to build the kind of middle class that would provide the market for Chinese goods that would sustain growth at a more modest but sustainable pace. Which means in the short term all those workers at factories that make toys, shoes, clothing and furniture in provinces like Guangdong would be jobless. Some of these factories may move to provinces in the interior like Sichuan and Hunan provinces which may pickup employment. A report by the American Chamber of Commerce in Shanghai written by Booz Allen says that a fifth of the companies surveyed are considering relocating outside China, and that over half of foreign manufacturers surveyed think that mainland China is losing its competitive advantage to places like Vietnam and India....

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Just before the general elections of Feb 24-25 in Italy, the centre left PD party of Luigi Bersani sees its 12 point lead over the coalition of Silvio Berlusconi go down to 6 points. Former EU commissioner and prime minister in 2012, Mario Monti, has 14 points. The maverick Five Star Movement of comedian Beppe Grillo has the support of younger voters looking for a break from the past in Italian politics with 15 points. Italy's election rules automatically gives the coalition with the largest number of votes a 55% majority in the lower house of parliament. In the Senate a similiar rule gives a majority on a regional basis. For the eurozone the best outcome is for a Bersani win. Bersani looks to the Monti coaliton, which has the support of Italy's business community, for credibility and backing. The Economist provides an insight into how Italy lost competitiveness and income per capita stagnated in Italy in the last two decades. The dynamism of the sixties and seventies is missing, Italy's infrastructure is old and needs to be modernized, the productivity growth is negligible, and application of new technologies for productivity in many sectors is lagging. Political mismanagement under Berlusconi and other administrations before him has led to an entrenched stagnation and Italy badly needs to get out of this. Italy and Portugal are the only two countries with a lower per capita real income in 2013 compared to 1999, when the euro was launched. Unit labor costs have risen, and productivity has declined in the last two decades leading to lost competitiveness. The inability to resort to devaluations, and the lagging application of technology in many sectors, has increased the lack of competitiveness, with the economy becoming dependent on higher public spending, higher public debt. The result is higher unemployment at 11% and youth unemployment at 36%, infrastructure that is old and badly needs modernizing. Foreign investment is small, and the cost of doing business higher, including electricity rates 50% higher than the European average, R&D spending low, all of which need to be reversed for Italy to grow. But there is hope. The Economist cites an OECD report that shows the Monti government's reforms in regulatory, labor-markets, product-markets, can generate 4 points of GDP growth in the next decade. An IMF report of Jan 2013 looks at proposed reforms in energy, transport, professional services, judicial system and public services and more labor-market improvements, with the larger impact when done in combination, could add 5.7% to GDP growth in 5 years, and 10.7% in 10 years. Adding changes to taxation and shifting public spending towards investment for growth increases the figure to 21.9%....

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With poor sales for the Blackberry Z 10 in 2013, AT&T and Best Buy retailers are discounting the phone to $49 for a refurbished phone, and $99 for a new phone from the original price of $199. Such steep discounting soon after the March 2013 launch of the Z 10 suggests the phone is selling poorly.

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A new report, "China: 2030," by the World Bank and the Development Research Center (DRC), has major implications for the course of action taken by new Chinese leaders. The limits to China's economic model with the dominant role of state owned companies has been pointed out in the past. It has now reached a point where China must choose to move to a modified model or face the "middle income trap" of countries like Brazil and Mexico, where income levels and growth reaches a certain level and then decelerates suddenly with little warning. The report makes some major recommendations that would modify the current system. It says the state owned companies should be supervised by asset management firms focussed on commercializing these companies, and not supervised by the State-owned Assets Supervision and Administration Commission (SASAC). The asset management firms would restrict the state owned companies on what areas they participate and sell off businesses to make it possible for private companies to compete. Zoellick says- "China needs to restrict the role of the state-owned companies, break up monopolies, diversify ownership and lower entry barriers to private firms." The state owned companies would be required to pay sharply higher dividends to the government which could then be used for social programs. Currently state owned companies invest in land which is sold by local governments for revenue helping fuel the real estate bubble. Significantly, the report had its origins when it was proposed by Mr. Zoellick, head of the World Bank, during a visit to Beijing in Sept 2010. It was supported by Li Keqiang, then vice premier, and now expected to be the new prime minister of China. The World Bank is widely respected by Chinese leaders because of its assistance during the early stages of reform in the 1980's. The DRC reports to China's State Council, a top governmental institution, and the No. 2 person at DRC, Liu He, is a senior advisor to the Politburo Standing Committee. He helped draft the current five year plan and is close to Li and Xi Jinping, the next president of China. The SASAC has opposed these ideas, especially any shift in its personnel selection of management at the state owned companies, which it shares with the Communist party's personnel department. Respected China economists say China faces large risks of a sudden sharp slowdown because the the state owned companies have largely copied foreign technology and have not generated enough technological advances, which will be needed for the next stage of growth. Lower growth rates could worsen problems in China's banking system leading to a crisis. The Conference Board, estimates China's growth at 8% for 2012, slowing to an average annual growth rate of 6.6% from 2013 to 2016. Barry Eichengreen of UC Berkeley, Donghyun Park of the Asian Development Bank, and Kwanho Shin of Korea University, say the annual growth rate will drop by at least 2 percentage points by 2015....