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Roben Farzad of Bloomberg BW meets with Goldman Sach's Harvey M. Schwartz, co-head of the global securities division, to get Goldman's account of the global financial crisis of 2008-2009, the AIG rescue, and John Paulson.

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The competing visions of Li Shufu of Geely, Volvo's new Chinese owner, and that of Stefan Jaccoby, CEO of Volvo. Volvo is known for a family friendly car with fuel efficiency and safety. Geely's vision for Volvo is a luxury car that will compete with Mercedes S class and the BMW 7 Series, and Lexus in the Chinese upscale market. The problem is that China is less than 10% of Volvo's worldwide market and Jaccoby wants to keep these customers who buy the Volvo as an understated family friendly car that emphasizes safety and fuel efficiency. Geely executives are moving in another direction and are focussing on the fast growing market for luxury cars in China. This segment is dominated by Mercedes, BMW and Lexus, who sell 90% of the cars in this segment. Such a strategy would depend on gaining acceptance in this segment, which is highly uncertain. It also risks alienating customers around the world who look at Volvo in a certain way, just as Subaru owners in the U.S. look at Subaru in a certain way. The culture clash is also reflected in the backgrounds of the two executives. Jaccoby, is quiet in manner, studied at the University of Cologne, and worked at VW before joining Volvo. Li Shufu is a son of former farmers who built Geely from humble beginnings in a rural area of China. Li wanted to move aggressively and build three plants in China. Jaccoby persuaded Li to make plans for one plant and make agradual expansion. The design of a new Volvo shown recently in Shanghai also represents a compromise. The design is called Concept Universe and gives a larger and different look for the Volvo....

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The problems Brazil faces with a sea of liquidity from developed countries with low interest rates going to emerging market countries with higher interest rates. Brazil is taking steps including a recent cut in interest rates to stem the flow. But interest rates at 12% are still too high not to attract business people in the carrying trade who borrow at low rates in the U.S. and Europe and invest the money in Brazil. The foreign direct investment has also increased. The result is an artificially overvalued currency- by as much as 36% since Jan 1, 2009 according to analysts- which hurts exporters and job creation in Brazil, as it becomes cheaper to import products than manufacture at home. Workers from VW recently protested in Sao Paulo as imports of cars are up significantly and there is a fear of job reduction at VW plants in Brazil. Brazil's automakers association estimate is for car imports to make up 25% of all cars sold in Brazil in 2011. This compares with 5% of cars sold being imported in 2005. It also shows up in production statistics. Brazilian industrial production declined by 1.6% in June 2011 from May. The cost of inputs are increasing rapidly for labor, raw materials, transportation, making Brazil a costly place to do business. The cost of living is now higher in Sao Paulo than in New York city. Cynthia Benedetto, the CFO of Embraer, a large Brazilian aircraft maker, says she always thought since she was a little girl that Brazil was the place of the future. But its deceptive now that the future is here, because this euphoria of progress could be shortlived. Embraer is investing in technology to reduce labor costs and is opening factories overseas. Bombardier, one of Embraer's competitors from Canada recently announced plans to build a manufacturing plant in Mexico. Brazilian president Rousseff is aware of this, and told Latin American leaders in Lima, Peru: "we have to defend ourselves against this immense, fantastic, extraordinary sea of liquidity that finds its way to our economies in search of returns that it can't find in its own." At the same time Rousseff has election promises to fulfill that require larger spending and for which the capital inflows are convenient but could prove erratic- for social welfare projects, and for infrastructure spending in advance of the Olympics. Turkey is seeing a similiar situation with booming consumer credit sustained by capital inflows even as its manufacturing competitiveness has remained weak. ...

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BMW lags Mercedes in return on sales its 6% vs Mercedes 8%. And it faces higher costs in meeting new EU emissions standards.Mercedes is doing a lot better now that it has gotten rid of the Chrysler distraction. One way is to develop new hybrid and other fuel economy and lower emissions technology in alliance with Daimler. Its developing a new hybrid engine with Daimler and GM of which a model was shown at the Frankfurt Auto Show. Improving profitability to have an 8%-10% return on sales by 2012 is the goal of BMW and it hopes to achieve this with a plan to create costs savings of 6 billion euros in a five yer plan announced by CEO Reithofer. in September 2007. This will mean thousands of layoffs and will mean that it will affect those with temporary contracts first and will include some buyouts also. BMW sales are growing and could reach 1.8 million by 2012.

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The U.S. Justice Department files a lawsuit against VW seeking $18 billion in sanctions on behalf of the Environmental Protection Agency. VW shares declined by 4 percent. Experts expect an out of court settlement of $12-$13 billion. The inconclusive discussions between the EPA and VW led to the filing of the lawsuit. The lawsuit is seen as sending a message to the auto industry that the kind of behaviour that led to the VW emissions cherating scandal will not be tolerated.

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Brinkmauer and Pfister of the German magazine Der Spiegel interview German Chancellor Angela Merkel in September 2017. The interview covers a range of topics from whether Merkel is addicted to power, why she chose to run for a fourth term, revolving door for CDU politicians as lobbyists for the automobile industry, the AfD right wing party, the refugee crisis and the CDU's historic policy of controlled immigration, and whether democracy is losing strength.  In characteristic Merkel fashion the chancellor takes up the idea of her addiction to power by saying she is careful not to let this happen to her by reading critical articles in the press and having her staff bring critical reports. Her discussion with her constituents in her electoral district are also frank and open, more so in 2017. About the idea that Helmut Kohl's fourth term as chancellor being not good for Germany and for the CDU, Merkel responds that she has given it considerable thought. She found that she still has the intellectual curiosity to learn new things, understands that she has much to learn about how the country and the world is changing. This has been decisive in her decision to run.  Merkel believes that someone who has worked in politics should be able to work in private industry following historic practice in Germany. On the government links with the automobile industry Merkel says her approach has been to look at what was best for an industry employing 800,000 people in Germany, yet deplores the diesel emissions cheating at VW. Has democracy lost momentum after the U.S. elections and the refugee crisis? Merkel says democracy is still strong, and that she will do everything to strengthen democracy in Germany and other parts of the world.  Merkel's view is that it is important that there be counterweights in democratic systems. In this way democracy is strong in America, and also in Poland and Hungary. The chancellor cites high voter turnout of 82% in 1998, 79% in 2002, 78% in 2009. Since then she says in 2009 it dropped to 71% and 2013  72%, yet  expects that with the issues in this election people will come out to vote in larger numbers.  For many years Merkel is seen as co-opting the issues of the left parties and the SPD, being careful to move to the centre. Der Spiegel puts this idea forward to the chancellor by asking her if she is the best SPD chancellor Germany ever had.  In her matter of fact style Merkel responds that voters do not think of it this way, simply expect her to her job as best as she can possibly do it.       ...

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CEO Norbert Reithofer who became head of BMW in September is pushing BMW in the direction of more collaborative work with other car companies. He has set as a goal collaborations in the areas of components, drive systems and modules. Daimler's new chief Dieter Zetsche s also rethinking how it approaches its business. One way to develop new technologies and purchase parts and components efficiently is to work with other companies who are striving to do the same things. Both CEO's see their companies as midsize manufacturers in a world of auto manufacturing where Toyota and VW, GM and Ford have the advantage of much larger sales over which to spread their research dollars, or to make efficient purchasing by using volume purchasing. Daimler is encourged by its participation in a combined effort in the area of hybrid technologies with BMW, GM and Chrysler, and the progress made in that area through collaborative effort. This is making both companies rethink their intense rivalry since the 1930's, one based in Stuutgart and the other in Munich. Both companies have good profits and as the environment gets harsher with steel prices rising, with demands from the public for tougher new auto emission and fuel efficiency stadards requiring allocating more dollars for R&D, a strong euro and a struggling US economy. The challenge they face is sustaining this profitability as it becomes more costly to operate in this environment. Both companies have appointed some of their talented executives to profitability teams which are working at developing more collaborative efforts....

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Reorganizing a large and ineffective sales force at H-P is one of the biggest challenges facing new CEO Mark Hurd, who took the job in 2005. Under CEO Carly Fiorina the situation had deteriorated. The H-P sales force has become a large bureaucracy which takes much longer to get things done, with the added problems of duplication, redundant layers of management, delays getting approvals and so on. Corporate customers had difficulty reaching salespeople, and getting simple tasks done such as price quotes or getting a sample product took way too long for customers. Salespeople spent only 30% of their time in front of customers, with the bulk of their time spent navigating the large H-P bureaucracy to get things done. Out of 17000 salespeople only 10000 sell to customers, 7000 or 40% are in support or administrative positions. Four people from different groups can be found chasing the same customer, and different quotes from different salespeople cause duplication and confusion. H-P corporate salespeople did not specialize in any particular product area. And salespeople used 30 different types of software to track sales because of years of acquisitions, including the acquisition of Compaq. There are 11 layers of managers between the CEO and corporate customers. Hurd's solution was to organize the sales force so that it was responsible for specific products and specific countries, similiar to the situation he had seen at his previous company NCR. Responsibility and authority for decisionmaking were matched and clearly assigned. Each salesperson had a narrower focus and was to be limited to 3 accounts. H-P's 2000 corporate accounts would have just one salesperson to interface with. Sales would only use one type of software from Oracle Corporation. Changing an organization the size of H-P is a slow process. A year after these changes, the VP of Information Technology at Lear Corporation, says he still does not know who has been assigned as the salesperson for Lear. He has not seen much change in H-P sales. Hurd also reduced the number of employees by 10%, or about 14,500 people. After these layoffs the layers of management have been cut from eleven to eight between Hurd and the corporate customer, still too big a set of layers. ...

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For the last 4 quarters Tesla has average profit of about $70 million each quarter yet in May Tesla awarded shares worth $800 million in May to Mr. Elon Musk, CEO, as part of the pay package, says this report in the WSJ.  These stock options need to be expensed as stock based compensation expense. These expenses put Tesla's meager profits based on GAAP in jeopardy says the WSJ. A third quarter net loss of just $226 million would put Tesla in a loss situation for the past 4 quarters. This for a company that is attracting massive amounts of capital. Is this a misallocation of capital by capital markets as structured today when there are pressing needs for infrastructure, health and education from the investment behaviour that prevailed for decades before the pandemic? Are there questions about pay packages that are thousands of times the pay of average manufacturing workers at the same company consistent with the kind of society we once were and now want to build after the pandemic? The average pay at Tesla is between $70,000 to $94,000 a year for workers making the CEO pay package about a thousand times that of the average worker. At the height of the crisis at VW it was about 170 times the average worker in 2015 in Germany. ...