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Over 60% of GM revenues in North America come from larger vehicles and SUV's. This is the situation as oil prices are rising and change is sweeping across the Middle East. Another problem is overcapacity in the auto industry. The overinvestment is highlighted by the recent decision of Geely to invest $10 billion in Volvo to double production to 800,000 units over 5 years. The car industry can produce 94 million cars the Economist magazine estimates, and demand worldwide is only 64 million. One estimate shows production capacity could reach 40 million in China by 2015!

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Oil prices in the U.S. drop to $55 a barrel on the New York Mercantile Exchange, and $65 a barrel for Brent crude price. Earlier expectation of the impact of reimposed sanctions on Iranian oil shrinking global oil supplies have been reversed with increased production from Saudi Arabia, Russia and the U.S.

Another new development that caused this reversal in sentiment is that the Trump administration granted waivers to some buyers of Iranian crude oil. The U.S. trade dispute with China has also added to this with lower growth forecasts. Unlike in previous years OPEC or Saudi Arabia cannot by itself shrink global supplies with production cuts. The U.S. and Russian output also plays a significant part.

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Greek unemployment is up to 11% and this does not reflect the women who are not registering as unemployed. About 100,000 public sector workers will be let go by 2013 as the austeity plan takes effect. The three year reform programme from the IMF, the European Commission and the ECB tries to cut the budget deficit from 13.6% to 2.7% of GDP in a quick three years even as the econmy is shrinking. The criticism of Germany is relatively less, but there is strong resentment in Greece for the IMF program with 60% of Greeks opposing it. And in Germany Merkel faces voter resentment of having to pay for other EU member countries mistakes in the election in North Rhine-Westphalia, where her CDU and FDP coalition faces a tough challenge. Intenationally Merkel is facing tough criticism for waffling as the euro currency faced a serious threat. The whole European Union plan was being put to the test resulting in the size of the bailout growing from $60 billon to $160 billion in a few weeks, many experts calling it ineptitude....

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Problems that may be unfixable for the Afghan national army, and for which no increase in foreign trainers could make a difference. About 3% of the army recruits are from the Pushtun south, the main part of the country, where the Taliban are strongest. Officers from the northern areas have to use translators in the Pushtun south, a bad sign. And there is a shortage of officer talent. Gereral Caldwell who is working on training the army, says he was appalled at the emphasis on quantity not quality- the Afghan army has reached 134,000 in numbers. The ratio of instructors to recruits ranges from 1 to 80 to 1 to 466. It will cost $11 billion to maintain compared to an estimated $1 million per American soldier each year. Even if training problems are fixed, having 3% of recruits from the major Pushtun part of the country where the fighting is being done, simply makes the overall problem unfixable. See the group - Defense Department biannual report on Afghanistan, for related insight.

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Some features of the U.S. health care law are likely to be retained even if the Supreme Court overturns the health care law- the feature that lets parents carry a teenager on their polcy till age 26, and the feature that private insurers cover preventive services without copays. These are very popular and preventive services make sense for the insurance companies to reduce higher costs later on. Other features such as the discount pharmaceutical companies must give to seniors falling under the Medicare gap, and annual physicals without copays may not be retained. 3.6 million Medicare benificiaries saved $2.1 billion on prescription drugs, $604 per person, from the Medicare gap discount. And 32.5 million Americans took advantage of the annual physical without co-pays in 2011. About 50,000 Americans insured temporarily for people with a pre-existing condition also may lose their coverage. Another provision which prevents states from tightening eligibility rules for Medicaid before 2014, may be questioned also as states feel burdened by these rules during a period of budget cutting in areas such as education....

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Jurio Osawa talks to Toshiba Corp.'s CEO, Norio Sasaki about Toshiba's plans to increase investments in infrastructure businesses, including nuclear energy. Sasaki sees continuing need to use nuclear energy because of limited supplies of oil and gas to meet needs in emerging markets. He sees demand growing for nuclear energy in China, Brazil, India, Turkey and Vietnam. Toshiba owns Westinghouse Electric, a maker of nuclear power equipment, and acquired Landis+Gyr, a Swiss company which makes advanced power meters. Demand for Westinghouses' AP1000 reactors with safety equipment in China is expected to grow from the 4 being built today to 20 in 2020, and 70 in 2030. He says the consumer electronics businesses have suffered because of the strong yen, and for the failure of Japanese companies to taking strong action to improve their competitive position and staying ahead of market trends. At the same time the consumer electronics business generates cash because investment requirements are low compared to infrastructure businesses, which is why Toshiba will continue to operate in profitable parts of the consumer electronics business....

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S. Africa's slow progress in getting opportunites for black farmers and President Zuma's efforts to jump start this with a mentorship program. The program benefits S. Africa and white farmers as fewer young people want to stay on the land and farm. About 80% of farmland is white controlled, yet the number of white commercial farmers is declining rapidly, from 60,000 in 1994 to 37,000 in 2012, according to Theo de Jager, deputy president of Agri SA, a commercial farmer association. Jager says a new generaion of farmers from the black community has to fill the gap left by fewer white farmers. One of the problems is the high cost of the program and seed money for new black farmers. Since 2009 the government spent $122 million a year to support only about 1 in 10 farmers on redistributed land. The government has spent $730 million to buy white owned farmland since 1994. New farmers receive about $500,000 for equipment, seed and livestock. A mentor gets $600 per month.

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Republicans Kasich, Walker and Snyder won reelection for governor in Ohio, Wisconsin and Michigan. Republicans also won elections for governor in Illinois, Massachusetts, Georgia, Kansas and Maryland. Democratic Governor Brown won in California and Iowa Republican Governor Terry Branstad won a sixth term. Voter issues focussed on the economic uncertainty for households, and on school funding and services in states such as Pennsylvania and Michigan. Local issues affected some elections, and some campaigns were seen as badly run such as the Udall campaign in Colorado. Governors Snyder in Michigan and Brown in California ran on their own record by aiding Detroit and tackling budget and water issues in California. A Pew Center research poll shows only 27% of Americans feel comfortable about their economic future- 27% say the economic future will be better in 2015, worse than in 2010 and 2012. Rauner in Illinois spent $27 million and Brown in California a negligible amount running on his record, showing there are different pathways in a midterm U.S. election that cost candidates $4 billion....

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India's central bank governor, Raghuram Rajan, announces a interest rate reduction of the benchmark rate by one quarter percentage point to 7.75 percent on Jan. 14, 2014. He had come under criticism from business for not lowering rates at the Dec. 2, 2014 meeting, after the decline in oil prices. Rajan notes in his news release that when he left rates at the same level on Dec. 2, the policy statement said clearly- "once the monetary policy stance shifts, subsequent policy actions will be consistent with this stance." In the NYT interview with Keith Bradsher, Rajan pointed out that more information was needed to confirm that low crude oil price environment was going to last. India imports about $100 billion in crude oil and is a key beneficiary of lower oil prices, at a time when the energy infrastructure and supplies are lagging behind causing a severe bottleneck for growth. The current situation points to inflationary pressures easing. Dec. 2014 inflation was 5%. Prices have fallen for fruits and vegetables since Sept.2014, and cereal price pressures are also easing. ...

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With inflation running at 6.7% in Russia, the central bank has decided not to increase interest rates following the U.S. Fed's bond purchase tapering decision in Jan 2014. The ruble declined by 6% in Jan 2014 and 15% for the last year. With the economy slowing the central bank finds it difficult to raise interest rates, and with inflation the bank has less flexibility to lower rates and increase credit availability. The ruble's lower value is a result of a shrinking current account surplus, with the added effect of capital flight from markets seen as riskier by investors. Currency collapse is a sensitive issue for many Russians after the 1997 crisis and collapse of the ruble. Central bank chief Ms. Nabiullina was on television explaining the decline to ordinary Russians, saying- " It's not that the ruble is weakening but the dollar and the euro are rising in price." Economists say the ruble's weakening won't add as much to inflation as slowing demand will make it harder for retail chains to raise prices....

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In an intervew with WSJ's David Pearson, Tom Enders, CEO of Airbus, points to the changes at Airbus after improvements in governance in 2012, leading to a smaller role for the governments of France and Germany. One is the shift away from Europe. Compared to 2004 when Airbus orders were 50% from Europe, this has dropped to 10% in 2014. Airbus is also staying away from a 623 million euros loan from Germany for the new Airbus A350 widebody jet, because of pressure from the German government to allocate work to German factories. The same policy will be followed in future programs to rely less on government support. Enders does not want to be tied down to certain workshare agreements imposed by governments with the loans. In 2012 Airbus reduced the role of the German and French governments with a large increase in the percentage of shares traded on stock markets. In the past the funding was critical for programs. Today Airbus has 9-10 billion euros on its books because of booming sales.

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After years of negotiations Russia and China reached agreement on a memorandum that provides deliveries by Gazprom of 38 billion cubic metres of natural gas to China by 2018, under a 30 year supply deal. The pipeline to deliver gas to China is part of a $50 billion project for a pipeline that takes gas to Vladivostock for liquefaction. A spur from that pipeline would take gas to China. This would make China the largest importer of natural gas from Russia. In 2012 Germany imported 33 billion cubic metres of natural gas from Russia, followed by other large importers Ukraine, Turkey, Belarus and Italy. A new agreement between China and Russia's state owned oil company, Rosneft, doubles the oil imports to 31 million metric tons a year under a 25 year deal. The current level of imports is 15 million tons set by a deal in 2009. The lower price of natural gas going to Europe helped the two countries bridge differences over price. China's National Petroleum Corporation will partner with Rosneft for exploration in new oil fields in the Russian Arctic region....

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Eventually China's stimulus efforts and efforts to build up its reserves of commodities like its Strategic Petroleum Reserve, may not boost demand for oil, iron ore and other commodities enough to offset the recessionary impact on the industrialized economies. And China's demand is large but not that large that it can tilt prices one way or the other. In the first quarter China accounted for 9% of global oil demand, compared with 55% for the largely recession impacted industrialized world. Stockpiling of resources is a temporary factor. Sanford Bernstein estimates the first phase of China's Strategic Petroleum Reserve may have boosted imports by 400,000 barrels a day in March and April. Another factor is consumption. Stimulus dollars pushed fixed asset investment by one third in the first quarter, yet consumer spending went up less than 10%. Consumption will remain weak. Ultimately China's stimulus efforts may act as a brake on sudden falls in commodities prices, and not support continual upward pressure on commodities prices right smack in the face of a deep recession and large underutilization of manufacturing capacity in the industrialized world....

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With huge losses at RBS, Prime Minister Brown says he is angry at RBS for the excessive risks taken by the bank. A big chunk of losses of 28 billion pounds for 2008 relate to the deal to acquire ABN-Amro. ABN Amro had on its portfolio a loan to chemical maker LyondellBasell, owned by Len Blavatnik a Russian-American industrialist, which filed for bankruptcy protection in January 2009. Says RBS CEO Stephhen Hester, "we doubled up at the wrong time". Now RBS shares have fallen to 11.6 pence or less than the price of a candy bar. And Brown's administration faces growing criticism that the earlier bank rcapitalization and lending plan has not worked, even as new elections are due by May 2010. With the new deal with RBS government ownership goes up from 58% to 70%, and the next step may be nationalization of RBS. In an effort to limit banks losses and help capital needs of banks, the UK government will insure a majority of losses after the banks assume a first portion of the losses.

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Philippe Varin faces some tough decisions when he takes over Peugeot-Citroen. Unlike the turnaroungd he achieved at Corus steel group where the booming demand from China for steel helped, this time the auto market in Europe is declining by about 30%. He has to navigate betwen the interests of the Peugeot family which has 45% of the voting rights, employees who are affected by the cost cutting, the French government which has required no closing of factories for as long as the company receives governement aid. Peugeot-Citroen received a low interest loan of 3 billion euros from the French government. Questions he will have to address, as do all auto manufacturers in the USA and Europe relate to overcapacity as demand declines. And for Peugeot this has to be tackled without factory closures. And the other major issue facing auto manufacturers worldwide is how much to focus on the fuel efficient small car segment. Peugeot has key strengths in this segment and Varin may decide on refocussing on this segment....

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With better currency reserves and lower debt the Asian countries are in a better position than in the 1997 crisis. But a big problem will be lack of export markets. In 1997 Asian countries could export their way out of difficulties and the devaluations actually helped exports. And domestic markets are weak with weaker currencies making imports more expensive. In the past 10 years consumption as a percent of GDP has fallen in China and elsewhere in Asia outside Japan, even as exports as a percentage of GDP have grown by about 30%. And this has implications for Russia, Brazil, Australia and other countries which send soyabeans, mining products, commodities and oil to meet Asian demand. Riskier still is the prospect as Stephen Roach of Morgan Stanley Asia reminds people. is that when the tide goes out you can see the rocks for the first time which were covered by the hyper growth of China. China may see a big increase in nonperforming loans for its banking system, loans tied to the real estate sector where prices are falling. ...

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Among the reasons given for Roche's bid are the need to bring the creative energies of Genentech inside Roche's own pharmaceutical division. This at a time when pharmaceutical companies are having a difficult time coming up with new drugs, without as Bill Burns the head of Roche pharmaceutical put it, a "Chinese wall" between Genentech scientists and Roche scientists. Other reasons are the opportunity for the Basel based company to capture all the profits from Genentech and achieve cost savings of $850 million annually by combining the 2 companies' clinical research teams and sales, manufacturing and administrative departments in the USA. Another reason is that the agreement with Genentech for Roche to market its drugs outside the USA expires in 2015. With Genentech's share price at a low Roche's bid at a 9% premium also appears as an attempt to get the remaining 44% of the company that Roche does not own for a low bid. It risks however the 18 year relationship betweeen Roche and Genentech, in which Genentech operated within its own scientific culture in the San Francisco area, almost like a separate company. Roche CEO Schwan, still wants to keep some of this arrangement and have Genentech drug researchers operate as a separate group, but its not clear how the cost savings and the interaction with Roche scientists would occur under the new arrangement. Genentech was founded in 1976 after a meeting between venture capitalist Robert Swan and bichemist Herbert Boyer at a bar near the University of California, San Francisco campus. It has come up with a number of successful cancer drugs such as Avastin, Herceptin, and Tarceva, and total sales are $11.7 billion, a significant part of Roche's overall sales....

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Judith Dobrzynski's interview with David Neelman, CEO of Jet Blue, at the airlines offices in Forest Hills, Queens. Neelman talks about the problems facing Jet Blue as it faces losses in 2006. This follows rapid expansion at the low cost carrier. He says Jet Blue did not monitor costs effectively. "Other problems include not pricing connections competitively with other airlines and poor revenue management. Analysts say low cost carriers will have a difficult time with high oil prices. Neelman maintains that it still works for oil at $60 a barrel. Jet Blue is turning its order of 100 Embraer jets, planes with 100 seats and 200 mile range to advantage, by gaining flexibility to serve short haul destinations from New York and Boston to Columbus, Tucson, Nashville, Houston and other places.

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This NYT story describes the origin of the Panama Papers with an anonymous email sent to Bastian Obermayer of the German newspaper Suddeutsche Zeitung- "Interested in data?" Obermayer, who had done previous investigations into money laundering and tax evasion, replied "Very interested." When the 5 member team of the Suddeutsche Zeitung could not cope with the torrent of data coming in, the International Commission of Investigative Journalism organized an effort that brought in about 400 journalists from 100 news companies in 80 countries to tackle the trove of data. This process went on for one year till the data was released in April 2016. In the first 2 months when Obermayer worked with a colleague, the two exchanged emails in the middle of the night at late hours, saying it was taking all their time.

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P&G CEO, Bob McDonald, says the company will focus on getting things right in the North American market, before investing further in emerging markets. Price increases in the U.S. market for powdered laundry detergent, automatic dishwashing detergent, oral care, blades and razors, have led to loss of market share and P&G is working to reverse this situation by lowering the prices. After becoming CEO in 2009, McDonald pushed hard to increase sales in emerging markets- during the 70's and 80's P&G had neglected developing countries- and this now makes up 37% of sales, up from 20% in 2000. But margins are smaller in emerging markets, and there was a sense among shareholders that P&G had lost its focus in the largest markets in the U.S. and Europe.

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The WSJ discloses that the U.S. Federal Trade Commission's Bureau of Competition 160 page report in 2012 described Google's anti-compettitive practices and recommended a anit-trust lawsuit for three anti-competitive practices. The WSJ obtained documents based on the Freedom of Information Act. Mullins and Winkler provide a detailed account of the practices cited in the report as anti-competitive. The FTC Commissioners did not act on the report and instead voted unanimously in 2013 to end the investigation after Google agreed to some voluntary changes. The report stated a different conclusion: Google's "conduct has resulted-and will result- in real harm to consumers and to innovation in the online search and advertising markets." Mullins and Winkler point out that this report shows Google's statement that no wrongdoing was found is incorrect.

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The NYT's Scott Shane talks to residents of Baltimore and the neighborhoods where a community center and CVS store were set ablaze. Baltimore has suffered from economic decline as the city's major employer Bethlehem Steel closed its plant, and fewer industry jobs remained to sustain poorer neighborhoods. Incarceration, drug use, crime, all have taken a toll as more residents left the city for the suburbs. Unlike Detroit which has the auto industry, and dilapidated buildings are gradually being replaced with newer structures, Baltimore has only one large employer, John Hopkins University and its medical complex. Economist Basu says the loss is felt more deeply because efforts were being made to give new life to poorer neighborhoods, and because the rest of the country will now have a different impression of the city reducing outside investment.

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Akerson's last day at GM. He talks about saving GM and the selection of Mary Barra as the new CEO. In a talk with employees at the Detroit Rennaissance Center Akerson says about saving GM: " You had to feel you were doing something for the country. To let the industry go by the wayside... it could be fixed and I love an underdog. Although I am a Republican I knew the bailout was the right thing to do." He says about Barra that when she took the product development job things were in chaos, and Barra was a decisive person who did a miraculous job in an uncomfortable situation. About Barra's personal characteristics Akerson says- "she is humble, confident and decisive and she will move the needle- also a very balanced individual and well centred."

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This WSJ editorial summarizes the main reasons Republicans and many others object to increase in U.S. contributions as the IMF increases its resources under a new plan. The reforms increase the influence of Brazil, China, India, Turkey and other countries in the IMF governance. Also at issue is European influence that the U.S. sees allowing risky loans to countries such as Greece, where rules were relaxed under EU influence during the eurozone crisis. This topic of IMF reform will be coming up in the G 7 meeting of central bankers and finance ministers in Dec 2014 at Sydney, Australia, with the new U.S. IMF representative defending U.S. interests. The case for the reforms was presented in WSJ by Christine Lagarde, head of the IMF, and is part of the link.

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U.S. Fed chairwoman Janet Yellen, says the Fed will be prepared to respond to the "twists and turns" in the recovering U.S. economy in 2014-2015. In many ways Yellen finds the recovery "disappointingly slow and consistent expectations for a pickup in growth dashed over a number of years." She sees the labor market behaving in "some perplexing ways and showing patterns that are novel." The high rate of long term unemployed is an abiding concern and Yellen says a healthy job market is "more than 2 years away." This clarifies remarks made at her first press conference, which were interpreted to mean the Fed would raise rates in a much shorter time frame. U.S. stock markets responded favorably to her remarks after declines and volatility over several weeks following the previous press conference.