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The poor performance of GM shares since its IPO offering. GM shares in July 2012 were 41% below the November 2010 initial offering price. Ford was at its lowest level in 2 years. One problem facing both automakers is the weakness in European sales. A second is the uncertainty for U.S. sales in a weak economy.

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Thomas Sargent of New York University, the 2012 Nobel prize winner in economics, says the EU leaders can learn from the way the federal government in the U.S. handled the issue of state's debt when it came up in the 1790's and in 1840. In 1790 the federal government- under the leadership of Washington and Hamilton- saw the need to honor state's debt because of the contribution made by states in the war of independence and the U.S. assumed state's debt. In 1840 the U.S. refused to assume state's debt and states went into default. The result was beneficial because state's passed balanced budget rules and restrained reckless spending. Another benefit was that this preserved state rights to manage their finances and the federal structure setup under the constitution.

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The Japan Automobile Dealer's Association says Toyota's Prius hybrid was No. 1 in sales in Japan in 2009 with 209,000 sales, three times the sales in 2008. This shows the high popularity of green cars in Japan and a sign of future trends. Hybrid sales made up 10% of new vehicle sales in Japan in 2009. By comparison hybrid sales in the U.S. were 2.8%. Second in car sales in Japan was the Honda Fit, third the Toyota Vitz, both small fuel efficient cars. About 1.6 million Prius cars were sold worldwide from 1997 to 2009, according to Toyota. Toyota has kept the price of the Prius affordable by pricing it at around $22,000.

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Conversation with Ford's marketing chief Jim Farley who had 17 years with Toyota and marketed the Scion brand. He is a guy who likes to get a fresh look at things like talking to a security guard before coming up with a marketing plan for the Scion, and talking to a maintenance technician about the 150, all off the beaten track. This is reflective of the approach of Jim Farley. Even talking to psychologists about how to convince people to come and try out Ford cars. He is excited about Ford's Eco-boost engine which is a direct injection technology engine which Ford can democratize as he puts it to put it, on some 500,000 cars and trucks by 2013, something not done before. This is a technology that scales up pretty well. Drivers in Western Europe are familiar with direct injection diesels as a way to cut high gas costs and cut emissions, but Americans are not that familiar with it. It boosts fuel economy by 20% and reduces emissions by 15%, and giving a V6 the power and torque of a V8 engine. Basically it injects fuel directly into the engine in small specific amounts so that very little is wasted and the turbocharger uses waste energy from exhaust gas to drive the turbine. He is also in charge of promoting and marketing the Eco-Boost engine, which will show up first in the 2009 MKS Lincoln sedan. ...

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Thomas Kleine-Brockhoff, a senior transatlantic fellow at the German Marshall Fund of the United States, leads the EuroFuture Project. Here he offers his ideas of the dilemmas facing German leaders in agreeing to letting the European Central Bank take a larger role of supporting the bonds of Italy, Portugal and Spain. He says Germans are seeing a contradiction between European demands for German leadership and not wanting to be led by Germany or perceiving Germany as a hegemon. Brockhoff says Germans have never in the postwar period wanted to or learned to exercize continental leadership. He recounts the postwar period when Germans were content with the deutsche mark, and limited their expression of national pride to the deutsche mark. Giving up the deutsche mark was part of the deal for reunification of the two Germanys, a surrender of economic sovereignty for the sake of a larger integration into Europe. He says that even though the arguments are framed in terms of orthodox economics, economic nationalists who never really wanted to give up the deutsche mark are the core of the opposition to the common issue of eurozone bonds. The German position is to go back to the framework of principles for economic and monetary union and tighten the rules for spending and taxes, something that is good in the long run, but does not work in the short run with shrinking economies from austerity programs and nervous markets. The Merkel government's resolution of this crisis is to set new fiscal rules for the eurozone, and either move in the direction of letting the ECB play a larger role, or support such a move. What is not clear is whether the government will survive the next election taking on this leadership role in Europe, or a revolt in the Christian Democratic party....

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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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China's current account surplus has declined to 2.8% of GDP for 2011 from about 10% in 2007, and will be around 2.3% of GDP in 2012, according to IMF estimates. The U.S. current account deficit is down to 3.1% of GDP from 5.1%. By controlling the exchange rate China was able to keep the competitiveness of its exports, resulting in a five fold increase in exports from 2000 to 2010, according to the IMF. The decline could be temporary say experts, as the the recession in Europe and the U.S. resulted in slowing exports, with its infrastructure buildup sucking in imports of machinery and other goods from the western countries at an accelerated pace with its 2009 stimulus measures. Another reason is that in the last decade China has developed its own high tech and other companies which will now increase exports. IMF forecasts show a pickup in China's trade surplus to 4.25% by 2017. This could be lower if the renminbi is allowed to appreciate. Estimates of appreciation of the renminbi are 8 percent in nominal terms since June 2010 against the dollar. Including inflation, which is higher in China, the renminbi has appreciated by 13% since June 2010. ...

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Matt Vela responded to Shailen's comments on this article on the BW site. Comments were on NYTimes columnist Tom Friedman's remarks, about the dangers of overdependence on Mideast oil vs. GM and Ford's efforts to simply move cars off the lot. A quick reading of reader comments about 5-6 (all comments) shows a huge perception and marketing gap for Ford and GM if this is even anywhere near a representative sample, because they were heavily negative. Friedman said in the NYT, that "GM is more dangerous to America's future" than any other company, that "its like a crack dealer" addicting Americans to SUVs in the face of higher gas prices- by offering buyers of its least fuel efficient SUV's gas capped at $1.99 per gallon. He also said GM is in cabal with Ford and DaimlerChrysler to buy votes in Congress. BY May 2006 compared to 2003, in just 3 years, once popular midsize SUV's like the Ford Explorer, Chevy Trailblazer, and Dodge Durango saw a sales plunge of 50%. And this after the gas promotions such as the Ford one for free gas upto $1000 with aprepaid Master Charge debit card, enough for 6000 miles. Add to this zero percent financing. GM offered rebates of $2500 to $3500 per SUV. In this manner the whole profit structure of SUV's is being lowered, and no new strategy is being developed to deal with changing conditions and changing consumer preferences, and a changing global situation....

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As Japanese prime minister Noda prepares to restart the Oi nuclear plant in June 2012, former prime minister Naoto Kan, who was premier during the Fukushima nuclear disaster, answers questions in a parliamentary inquiry. He says he realized how dangerous nuclear power can be when it got to the point where the evalcuation of Tokyo was being considered, Japan was then on "the verge of national collapse." His fears were that a number of meltdowns could together " release into the air and sea many times, no, many dozens of times, many hundreds of times the radiation released by Chernobyl." The Japanese public has focussed on the parliamentary hearings because the previous inquiry is thought to have been perfunctory, and not really examined in depth all the issues the Fukushima disaster had raised, and the general feeling is that a proper public dialogue had not taken place. In contrast in Germany the issues had been discussed openly, and the Angela Merkel government which had been receptive to nuclear power reversed its stand on nuclear power. Germany is phasing out dependence on nuclear energy. Kan pointed out that the "nuclear village," the network of nuclear power companies, bureaucrats, and researchers, had hijacked national nuclear policy and was putting Japan back on the same path. He went so far as to compare it with the situation facing Gorbachev in Russia after Chernobyl: "Gorbachev said in his memoirs that the Chernobyl accident exposed the sickness of the Soviet system. The Fukushima accident did the same for Japan." In his assessment of what happened Kan said: "It is impossible to ensure safety sufficiently to prevent the risk of a national collapse. Experiencing the accident convinced me that the best way to make nuclear plants safe is not to rely on them, but rather to get rid of them."...

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Mexico's president Enrique Pena Nieto describes his plans for increasing economic growth in an interview with Lally Weymouth. He looks back at the changes made through the Pacto de Mexico in energy, education and telecommunications, and in other areas. Changes made will allow political parties to form coalitions after 2018 following a presidential election, to form a majority in the legislature so that new legislation can be passed. A new criminal code for the entire country will override a patchwork of laws in different states. Economic growth is a high priority after disappointing 2.6% growth in the last 3 years, with infrastructure projects planned- new airport for Mexico City, doubling port capacity, new rail lines and high speed rail line Mexico City to Queretaro.

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About 53% of the uninsured Americans disapprove of the Obama health care law, in comparison to 51% of the insured with health care coverage who disapprove of the new law. About 35% of the uninsured say they are likely to pay the penalty for not carrying insurance, and six of ten uninsured say it will make their health better. Overall the approval of the law is at 39% and disapproval at 50% in the Dec. 2013 poll. A striking part of the poll result is that 57% of the uninsured say it will increase their health care costs, compared to 52% of the insured. Only 20% say it will decrease their health care costs. This reflects the lack of serious controls on the surge in healthcare spending in the law. A separate research shows that more of the costs are passed on to users who will pay higher out-of-pocket costs after the law.

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Adly Mansour, a judge with the Supreme Constitutional Court in Egypt, is appointed by the military as president of Egypt. He was to take office as Chief Justice before the June 2013 protests in Egypt intervened to delay this. On July 3, 2013 he was sworn in as president before the Supreme Court. Mansour is one of two judges selected by president Morsi. He is a graduate of Cairo University, and studied public affairs and management in Paris before joining the judicial sytem in 1977. His decisions as judge went against both Mubarak and Morsi, showing his independent position as a judge on the Supreme Court. The judiciary is now taking an important role in Egypt similar to the role it has played in Pakistan, another Muslim country adopting democratic forms of governance after decades of coups and military rule since the 1950's. The larger Muslim countries in the Middle East, Turkey, Pakistan, Iran, and Egypt are faced with the challenge of balancing the demands of modernization with tradition, the demands of educated urban population with the more devout Islamist rural population, and creating stable transitions in democratically elected government. Islamists such as president Erdogan in Turkey who described western democratic forms of government as a train to get to a destination have still to take in to account the need to incorporate opposing secular views in governance. In this sense Turkey is not the model for governance as it once appeared for Egypt, Pakistan Iran and other Muslim countries. A new consensus in society needs to develop that respects all aspects of democratic governance including respect for the role of the opposition in a democracy, the role of an independent impartial judiciary, and the role of independent media. This will take time to develop just as it took time to develop in Europe and North America....

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The WSJ's Alessandra Galloni speaks with Mario Monti, the Italian premier, for in-depth interviews. Here Galloni and Walker provide an account of what happened during and after the June 28, 2012 summit of European leaders. Monti described the comments of ECB president Draghi in early August- about ECB buying of bonds of Italy and Spain being within the mandate of the ECB if monetary transmission channels were not working properly to reduce yields- as a bold effort following the agreement made at the June 28 summit to support Italy and Spain. Monti expressed the idea that Draghi should feel morally and politically justified if and when he makes the bold moves to rescue the euro. The only problem he says is whether one has to wait till the night before the euro is about to disintegrate for this to happen. This is the first time Monti has publicly expressed the possibility of this happening.

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The yuan is up 5.5% since the peg to the dollar ended in 2010, reaching 6.469 to the dollar. But this is not helping the U.S. trade deficit. The U.S. Bureau of Labor Statistics shows the price of imports from China are up 2.8% in May over the same month prior year. And the trade surplus for China in the first four months of 2011 is higher than the same period in 2010. What is happening? The improvements in productivity of Chinese manufacturers and the acceptance of lower margins is reducing the effects on trade balance of a small appreciation of the yuan, so that only a fraction of that appreciation is showing up in higher prices for Chinese goods. Also significant is that the yuan's small appreciation against the dollar is not enough to make up for the dollar's fall against other currencies. The yuan is down 8.3% against the euro and has actually declined 3.7% on a trade weighted basis in the last year.

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Arvind Panagriya, Prof. of Economics at Columbia University, points out the key initiatives of the Modi government in its first four years which will show results in future years for development of the country.  He mentions the Swachh Bharat Mission and cites results that show rural households with toilets are now 84% up from 38%.  By 2019 the whole country will be defecation zone free on the 100th anniversary of the birth of Mahatma Gandhi. The Dhan Jan Yojana DJY accounts opened for rural households are up to 316 million. Aadhar cards for identification are up from 650 million to 1.2 billion. The Aadhar and DJY work together to enable direct transfer of benefits to poor households, eliminating the leaks in benefits transfer and ghost accounts of the period since independence in 1947. Not mentioned by Panagriya is the Health Insurance scheme for lower income households that enable families to survive a sudden medical expense that could put them in dire straits.  These efforts work in a way to change India from the ground up from its villages and rural areas as envisioned by Mahatma Gandhi in the struggle for independence. The land acquisition law amendments were put on hold till farmers concerns could be better accomodated, an area of concern for industrial development cited in an editorial in the Hindu newspaper. Fiscal consolidation and inflation targeting have resulted in an average inflation rate of 4.3% for the 4 years of the Modi government. Inflation was over 9% in the last 2 years of the previous Congress UPA government with GDP growth dropping to 5.9% for the last two years. Average GDP growth for four years for the Modi government is 7.3%, even after the changes to implement GST taxation for one national tax eliminating state barriers in interstate commerce and demonetization to fight corruption and black money. Rate of GDP growth should be higher after the gains from the initiatives and the new GST integration of the country are felt, with increase in investment and FDI, after infrastructure improvements and land acquisition arrangements are made. Transportation infrastructure modernization initiative pushes ahead with the first bullet train in the pilot project for Ahmedabad- Mumbai set to start in 2022. This is a $17 billion project financed for $13 billion by the Japanese government at 0.1% loan for 50 years, moratorium on repayments for 20 years, using E5 Shinkansen series technology. Implementation of this project on a sound financial basis should lead to transformation of the Indian rail network, raising the level of technology implementation across the entire Indian rail system. Such an achievement would rival the first introduction of railways into India in the nineteenth century under the British. A new bankruptcy law is intended to free up capital for investment by putting behind the large number of non performing loans in the Indian banking system. Changes made by the central bank RBI are designed to speed up this process so that loss making enterprises are absorbed, consolidated or shut down, a legacy from the earlier period.     ...