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Toyota has passed GM in sales worldwidefor the first quarter 2007. But this is happening against a changing backdrop which is that worldwide sales and markets are shifting to China and India, and GM has the initative in both countries. Its Chinese sales increased by 32% to 876,000 units in 2006 and it plans to inroduce 10 new models or upgrades in the Chinese market in 2007. The other change is that after years of growth Toyota sees a relatively stagnant US market and its strategy is shifting to extracting more profit from each car, by increasing the flexibility of US plants to make more and diverse models, and building plants in low wage areas like the one in Mississippi. Note that the plant in Mississippi is expected to come onstream a year later in 2010 and produce 150,000 not 200,000 Highlander SUV's. Also related to this is the disappointment in Tundra pickup sales which may miss the modest target of 200,000 for 2007. On the manufacturing front Toyota is slowing down product development to ensure that all needed quality checks are performed by engineers. Mr Watanabe, Toyota's CEO, and a manufacturing man himself, has referred to quality checks being skipped or neglected in the rush for sales growth. GM is pursuing cost, efficiency and quality goals of its own and $9 billion in cost savings are planned for this year compared to 2006, another $9 billion is expected to be achieved in 2008. Another factor that is relevant to Toyota's experience in the US market is its fear of being labeled as a foreign company taking away American jobs. Hence the build up of US manufacturing capacity to 1.8 million now to increase to 2.2 million by 2010. And advertising for Toyota continues to foster an image of cars made in America, by American workers for the American buyers. In this new environment leadership in a worldwide market may actually shift back and forth between competitors and new challenges will come up as the Asian market explodes, and profitability and quality will become just as important or more important than sales....

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What is the educational system Toyota is relying on as it faces a huge problem stemming from its high growth rate of new employees overseas who have little knowledge of the Toyota Way and the Toyota Production System. Another part of the same problemis that as it ages many of the last generation of Toyota executives who were there from the inception of Toyota's early days in the USA and the early days of the extraordinary growth in the 80's and 90's will now be retiring or in their seventies and eighties. All this is happening as the American Big Three and the German manufacturers are getting new blood and going through a process of renewal, and the Americans especially are seeing themselves as the underdogs coming from behind. So Toyota's concerns can be seen in a new light, any complacency on its part is going to be costly in the long run. Toyota is using the Toyoa Institute in rural Mikkabi, Japan for training its senior executives like Randy Pflughaupt, chief of US marketing for the Toyota brand. Watanabe, presidetn, Fujio Cho chairman, and Akio Toyoda of the Toyota family personally teach there and share their personal experiences. Toyota asks executives there to come up with a problem Toyota faces and come up with a proposed solution all on one 11 by 17 sheet of paper. Hands on on the ground on site fact finding and exploration are stressed. A management school Globis in Japan instructs Toyota's middle management inthe Toyota philosophy including quality control philosophy methods such as asking the 5 Why's, why a problem is ocurring until one reaches 5 or 6 levels of answers. Global centers in USA Europe and Asia have been opened by Toyota to train roving experts who can help increase the numbers of roving experts from todays 2000 mostly at this time from Japan. These roving experts teach older employees as well as coach younger ones. Then there are the Toyota Technical Training Institutes. The one in Bangalore for example offers an intensive program for new hires to teach Toyota's basic principles. The one in Bangalore has 21 teachers. And appicants selection is tight in India just 64 out of 5000. Before working on the assembly line the applicants will spend 2 years in classes in technical training, including discipline and personal grooming. Its interesting that the applicant mentioned here was from a village where his family and friends were especially proud of his Toyota uniform and training. The idea may be to avoid the problems of trade unionism, worker feeling of entitlement and worker rights which has led to the problems in the US and in India of workers not willing to learn new things being open to new ideas. One way would be to avoid entirely areas where there has been trade union influence, history and activity such as rural Kentucky or rural Karnataka. The student Harish Hanumantayappa is 17 years old and sees this as an opportunity that was not even in his imagination, which makes for a highly enthusiastic trainee, just the kind Toyota may be looking for away from India's trade union and worker indiscipline environments in some states and regions. Reflecting on this one can note that its natural for Toyota to respond in this fashion and it may extend the period in which the Toyota Production System and the Toyota Way functions effectively. But companies like HP also had what they called the HP Way but eventually this suffered a decline as new managers and leadership came into the picture. Only now is HP recovering and getting back its step under a manager who spent his training years at NCR not a training ground for managers, but may have been chosen for his good management instincts and performance and personal characteristics. Also many of the tenets such as asking 5 Why's and the Toyota Production System except for the Just In Time Innovation are basic quality control philsophy that is practiced all over Japanese industry and is practiced worldwide and originated in quality control philosophy in the United States in the 1920's and 1930's before declining and then coming back in the 1980's with Deming and Juran two American quality control advocates. So there is a pattern of decline as new managers forget old ideas and its not clear if Toyota can overcome this tendency completely, except to sustain the memory of what Toyota is and how they got here for as long as possible for a new generation of managers. And the risks to Toyota may also come from another direction to which Toyota may not pay as much attention which is the innovation that Americans are known for, and the innovative thinking mode is a bit different from the rigorous training of the total quality mode. ction ...

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A survey of 414 National Association of Business Economics (NABE) economists shows Libertarian candidate Gary Johnson with 15%, overtaking Trump at 14% on who would best manage the economy. On protectionist views only 9% support this. 15% said they have no opinion and 55% said Hillary Clinton would do the best job of managing the economy. About 62% say the election uncertainty is holding back growth. Some aspects of Hillary Clinton's economic plan are the $275 billion infrastructure investment over 10 years, taking action against companies that ship jobs overseas, a capital gains tax paln that encourages long term investments, supporting $15 minimum wage, making upward mobility a top priority, providing government financed access to public colleges for working class and lower income groups. Donald Trump's plan has suffered form lack of specifics, shifting comments, lack of careful study, and excessive use of slogans. Both candidates oppose trade agreements that shift jobs overseas. Trump's plan also suffers from lack of credibility overseas as this is important in a global business structure, with fears of protectionism increasing. and reminding people of the protectionism under Smoot-Hawley that increased the damage from the depression of the thirties. ...

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Demonstrations by public workers in Madison, Wisconsin. Public workers are protesting cuts in benefits by Republican governor, Scott Walker. Governor Walker is proposing legislation that will require public workers to pay more for health insurance and pensions, resulting in a reduction in take home pay of about 7%. He is also proposing changes that limit bargaining to basic wages, excluding benefits from bargaining. Wisconsin faces a deficit gap of $3.6 billion for the next 2 years.

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In a sign of the low returns in the past year for pension funds, the 896,000 California teacher retirement pension fund CALSTRS, shows returns for year ending June 30, 2016, at 1.3%. Half of the holdings of CALSTRS are in U.S. and global stocks with returns of negative 2.3%. Real estate provided return of 11% but overall the returns were low. Over 10 years the returns of CALSTRS are now at 5.6%. The California Public Employees Retirement System (CALPERS), says its returns on its investments were 0.6% for the past year. With large retirement obligations pension funds in the U.S. face real challenges in this low return environment. Private equity investments of CALSTRS had returns of 2.9%, also lagging behind.

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Indian Finance Minister Nirmala Sitharaman is interviewed by Ashok Malik for the Economic Times in this videocast. On what India did right and lessons learned from addressing the pandemic and the supply chain crisis, inflation, Sitharaman says-Getting input and listening to people about what was needed and the pain, was critical in developing the financial plans. On the realization of India's potential in manufacturing, exports, and industrializing its economy, Sitharaman says-India's strength is its rule of law, so that the country is tolerant of criticism including of the prime minister, and there are democratic institutions that protect ordinary citizens, the business and other sectors. Also important is friend shoring as expressed by US Treasury Secretary Yellen alongside Sitharaman, that sees India as a favored destination for the US and the EU. The efforts to develop first rate infrastructure and logistics removes impediments to foreign investment. Training and education of workers is part of this effort to create a supply of trained labor for foreign investment factories in India. The competition between states is also part of this effort to build attractive locations for foreign investments in manufacturing in India. On 20th century financial institutions transforming into 21st century institutions for the IMF, the World Bank and other international financial institutions Sitharaman says- India has full support from all G-20 countries on debt crisis of countries in Asia and Africa, Latin America to change the way in which help is provided. And the skills are put in place to access financial markets on terms that help meet the aspirations of the people in poor countries or middle income countries, including some G20 countries such as Argentina. Sri Lanka she says, is an example where India is the governor and representing the country at the IMF and World Bank for its financial needs. India took up the interests of Sri Lanka with the G20 and the US, so that the loans are not delayed or given in ways that lead to the country exiting the program, unable to meet the aspirations for development of its people. Sitharaman says the G20 found complete agreement on 15 issues facing the world out of 17 issues, these two related to the war in Ukraine and that too from only 2 countries. This suggests that the media focus creating a general perception of lack of unanimity does not reflect what happened at the G20 meetings in India, and is distorted. What really happened is that all countries agreed on the substantial economic issues facing the world- of food insecurity, of development needs, and of climate change impact.  Sitharaman's responses showed optimism based on the hard work put in at the Finance Ministry and connected to all ministries and agencies of the government. And of a resilient attitude, of concentrated effort on the issues facing India and its partners in growth in the US and EU.  ...

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U.S. President Obama's 2013 State of the Union address focussed on the problems facing the U.S. middle class, calling it "our generation's task" to tackle this problem. Economic changes have changed the patterns of economic growth and jobs, growth, income growth, that prevailed from the end of the Second World War to about 1989. But he offered few solutions beyond increasing the minimum wage to $9.00 from $7.25 to reduce poverty.

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Clements provides an exceptionally useful reasoning for the average investor to give an important role to high dividend paying stocks in retirement planning. This applies to today's low interest environment with stock market volatility. The higher dividends help reduce the need to sell stocks in a volatile stock market and limit this to occasional selling. Using estimates from Yale Prof. Shiller's website for past 100 years data diversified U.S. stocks with high dividends pay about 4.4% in annual dividends outpacing the inflation average of 3.2%, and 5.6% appreciation in value of the stock each year. This helps preserve retirement capital. As many high dividend large cap stocks are also value stocks there is an additional value effect in holding these stocks.

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The NYT's Jonathan Kandell offers an indepth look at former German Chancellor Helmut Schmidt, who succeeded SPD leader Willy Brandt. Schmidt was from a working class neigborhood in Hamburg. Schmidt fought in the Germany army on the eastern front and the western front. He was a prisoner of war in a British camp in 1945. From 1946 to 1949 he studied politics and economics at the University of Hamburg. Both his father and wife were schoolteachers. He joined the SPD party during this period and worked for the Hamburg city government in various positions before being elected to the Bundestag, the German parliament in 1953. He returned to city government and supervised the response to a flood from the overflowing Elbe river in 1961 with extraordinary vigor. When Brandt was elected chancellor in the Social Democrat government in 1969, Schmidt was made defense minister, making improved relations with the Soviet Union and East Germany (German Democratic Republic or GDR) a priority, at the same time supporting the stationing of American nuclear missiles in Germany. In 1972 Schmidt became finance minister, and in 1974 he succeeded Brandt as chancellor. Schmidt and Giscard D'Estaing, the French president helped setup the European Council, and made the early efforts that led to the common Euro currency of the European Union, Schmidt's main achievement. By 1982 the Social Democrats party was divided following Schmidt's support for stationing nuclear missiles in Germany, and a parliamentary vote led to the fall of the Schmidt government. Kandell describes Schmidt as overconfident, not willing to listen to criticism. Some of Schmidt's popularity in Germany he attributes to Schmidt's wife Loki, a botanist with a likable personality. Later assessments of Schmidt in the media make references to Schmidt's frequent cigarette smoking right up to the end....

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Mr Obama's vision of a nuclear weapons free world going back to his days at Columbia University. There as a senior he took Prof. Michael Baron's seminar on international politics and American policy. In a paper for that course Mr Obama analyzed how a President might go about negotiating nuclear arms reductions with Russia. Baron says Obama has been thinking about these issues for a long time. About this time Obama wrote an essay in the Columbia Sundial student newspaper. This was the time when the Greens movement for a nuclear weapons free world was strong in Germany, and Reagan was pushing for a nuclear arms development race with Russia. The article was titled "Breaking the War Mentality." As a senator Obama joined Senator Dick Lugar -who has worked hard for non-proliferation- on a trip to Russia to monitor efforts by Ruusia to scrap nuclear arms and secure atomic materials from theft or diversion. He allied himself with four Reagan period veterans Kissinger, Shultz, Perry and Sam Nunn, who in a 2007 WSJ op-ed article, argued that it was time- as the headline for the article said -to work for "A World Free of Nuclear Weapons." The steps in practice Obama plans to take are the following. A Fissile Material Cutoff Treaty, which would bar all nations signing it from making fuel for their atomic bombs. Rewriting crucial provisions of the 1968 Nuclear Nonproliferation Treaty, strengthening inspection provisions and closing loopholes that let N. Korea drop out in 2003. Countries would have to give up the freedom to make fuel for reactors and instead buy it from an international fuel bank. Global consensus and prevention when it comes to deviant states hoping to enhance their own security, or regimes or terrorist groups, will be crucial in setting up a new system for a nuclear weapons free world....

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Under the Deferred Action for Childhood Arrivals (DACA) executive order of 2012, a group of immigrants brought to the country as children can have temporary status to stay and work in the U.S. In 2012 this was restricted to children brought in under the age of 16, with a maximum age of 30. The program was called "Dreamers." Under president Obama's executive order this will be changed to children brought in under the age of 18, with no maximum age. The number of immigrants goes up from 1.2 million in 2012 to 1.9 million with this particular change in 2014. A new group of parents of children who are citizens or legal residents residing in the U.S. for more than 5 years adds another 3.3 million to this number, with an additional 100,000 for parents of Dreamers. The total 1.9 million children and 3.4 million parents would be 5.3 million given new status to stay and work in the U.S. The 5.3 million will not be eligible for subsidies and for the Affordable Healthcare Act assistance. All will be required to pass security checks. This leaves about 6 million, including farm workers and other undocumented or illegal immigrants not touched by the new executive order. President Obama is expected to make the announcement of the executive order on Nov. 20, 2014, in Nevada, a state with a large Hispanic population. On the question of legal authority for the executive order, Prof. Stephen Yale-Loehr, an expert on immigration law at Cornell says the U.S. president does have broad authority to decide which group should get a reprieve from deportations. The decision to exclude benefits of government subsidies and subsidized healthcare was made to appeal to increased support of the American public for the executive order. ...

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The Nobel prize in economics was created in 1968 by the Swedish central bank and was not one of the original Nobels. The latest recipient is Paul Krugman of Princeton University, who also writes a column in the New York Times op-ed pages since 1999 and has been a critic of President Bush's policies. He is a student of Jagdish Bhagwati who is wellknown for his work on international trade. Krugman won for his work on international trade theory where he came up with more realistic models of what goes on in international trade compared to the traditional comparitive advantage model where each country produced what it was good at. Krugmanexplained why worldwide trade was dominated by a few countries that were similiar to each other, and why a country may import the same kind of goods that it exported. He also explained under what conditions trade would lead to centralization or decentralization of populations. He has done work in international monetary policy and theory for his dissertation as well as some of his more recent academic research and teaches a course on this subject and the international liquidity crises at Princeton. Krugman compared his wnning of the Nobel to Joseph Stiglitz winning in 2001 after which Stiglitz did not get an easy time from critics of his economic ideas, especially when he was critical of the handling of the Asian and Latin American liquidity crises by Clinton's Treasury Secretary Rubin and Treasury Secretary Sommers. At the time Kenneth Rogoff at the IMF was very critical of Stiglitz. Jagdish Bhagwati at Columbia University described Prugman's winning as the next best thing to his winning the prize. Both Bhagwati and Krugma have worked tirelessly Bhagwati for international trade and Krugman for traditional bread and butter issues for the working class espoused by the Democratic party....

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The Congressional Budget Office report in 2011 shows after tax resource flow that a family has to pay for consumption, a better approach to measuring the growth in incomes since 1970 including government help to lower income people and gains in the stock market for upper class Americans. This report shows after tax resource flow for the top 1% in the U.S. tripled from 1970 to 2011. For the middle fifth of the distribution families experienced real net income gains of 36 percent, and the bottom fifth of the distribution real net income gain of 50 percent.This suggests gains of about 10 percent a year if averaged over 30 years for the top 1 percent compared to 1% a year for the middle fifth and 1.5% for the bottom fifth. The report was done in 2011 and this could skew the results. Between 2011 and 2015 the stock market recovered and this would suggest a much higher gain for the top 1% of incomes and the top 10%, while also providing improvement in incomes for the middle fifth and the bottom fifth as unemployment decreased. Working class and minimum wage slowly recovered, and interest income on savings extremely low, with large student and other household debt, so that even at 10-12% gains per year for the top 1%, and 1-2% for the middle fifth of the distribution and 1.5-2% for the bottom fifth the last three decades have not been good for working class and middle income Americans compared to the the period 1950-1970 early postwar period recovery....

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The U.S. market looks like it is becoming the kind of maturing market that Japan and Germany have become for automobiles. Germany and Japan saw sales peak at high levels and then decline. And they have been declining steadily for several years. The US has a growing population and demographics because of immigration compared to Japan so there wil be continued demand for new cars. However since 2000 carmakers have introduced so many price incentives, interest free loans, and other ways of pushing sales that sales have continued to climb to unsustainable levels. All through the 1990's sales were in the 15 million range, then after 2000 sales climbed, except for the short period of uncertainty after 9/11/2001 Trade Center bombings. Sales climbed up to 17 million and stayed at these higher levels till the recent crises in 2007 saw a drop in sales and a shift to smaller fuel efficient cars. GM was offering 0% financing for 5 years through its Keep America Rolling campaign in the aftermath of 9/11. By 2005 automakers were offering as much as $8000 in discounts on pickup trucks. Employee pricing enabled regular customers to buy at employee prices. The Big Three sold to rental fleets unsold cars, so much so that by 2005 25% of all vehicles made by GM and Ford went to rental fleets, to rental companies in which these companies had large ownership stakes. For GM this became part of strategy. Fixed costs were high and the UAW contracts made it difficult to layoff workers, a jobs bank in which layed off workers could remain till rehired was itself quite costly as money had to be paid to the workers in the job bank. With this kind of inflexibility in the labor market GM could only spread all the fixed costs for its aging workforce which required pension payouts to retirees and health payments to retirees, by selling more automobiles. During this period of inflexibility in labor, and the legacy costs of previous boom years since the 1950's with generous UAW contracts, GM and Ford pushed sales to unsustainable levels; without considering the furture implications of this short term strategy. Another way this could hurt is by pulling sales in future years into current years because of interest free financing or huge discounting which probably happened in 2004-2005 and is seeing a payback today in 2008. At the peak in 2005 carmakers were planning further expansion of SUV capacity or expansion of other carmaking facilities. Gas was still not at the high levels of today. In 1999 gas cost $1.15 cents a gallon, and it was a little higher than that, but nowhere near what we are seeeing today. These new plants are coming up just as the sales are dropping dramatically, the half million SUV's sold in 2008 is about half the sales in 2003, enough to fill 2 plants when many more plants are being built or opening. The new capacity of 4 plants capable of producing 1 million vehicles is looking like a big mistake, like the new Toyota Tundra plant in Texas. Some of the new carmaking capacity is a Toyota plant in Tupelo, Mississippi, a Honda plant in Indiana, and a Kia Motors plant in Georgia. All this means a big drop in factory utilization rates. GM has 2 plants making full size SUV's. Later this year GM will cut production at these plants and at 2 plants making pickup trucks to utilize them only for 1 eight hour shift a day. Toyota has 1 full plant of excess capacity, not including the plant opening in Tupelo, Missisippi, making it likely to be down in utilization very significantly as well. Nissan is only using 65% of capacity at plants in Canton, Mississippi and Smyrna , Tennessee. And these utilization rates reflect the impact at the early stage of the housing crisis, consumption spending is only now beginning to bite, and unemployment is still to take a hit, so th economic recession immpact is still not reflected in auto sales. Even now GM and Chrysler cling to the hope of a sales pickup in late 2008 and in 2009, which is looking less likely by the day. J.D. Powers survey show the North American auto making capacity at 18.7 million cars and production this year at 14.1 million. This means the automakers have disastrously misjudged the auto market, and the role their own actions in pushing sales have affected the market in inflating the sales numbers beyond what is a sustainable sale increase. When credit tightening and lower consumption spending, housing crisis, and higher unemployment all hit the US in full impact by 2009 the situation is likely to worsen significantly and could become a disaster. ...

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A NYT report on Donald Trump's long standing relationship with his lawyer Roy Cohn,  who was also an advisor to Senator Joseph McCarthy. The report says Roy Cohn used aggressive legal tactics in lawsuits and influenced Trump's style of doing business in his real estate dealings. It is a detailed report of Roy Cohn's influence on Trump, which the reporters say has influenced the way  Trump ran his 2016 election campaign. It shows Cohn as protecting Trump in lawsuits, and Cohn's sense that Trump would someday play a big role in New York's real estate business, as Cohn's first meeting with Trump started when Trump was beginning his career in the early 70's. 

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Not since the days of the Vietnam War has Madison, Wisconsin seen the kinds of demonstrations that were seen last week. This raises a question whether this creates an awakening of the progressive movement. Wisconsin, New Jersey, Ohio, seem to suggest that whats happening in the states will become more important in shaping public opinion as the U.S. elections of 2012 approach. Ohio also has a plan by Governor John Kasich that restricts collective bargaining rights of public workers. A key question is how much public support there is for reduction of pension and health benefits of public employees. Even though the favorable ratings of unions are at a low, according to a survey by the Pew Research Center, the public is divided over whether it supports unions or state governments in disputes about benefits, with slightly more support for the unions. And other states such as Michigan with new Republican governors and majorities in state legislatures say they are not taking the path of Wisconsin in limiting collective bargaining rights, suggesting caution in this respect, even as they plan cuts in benefits. Because of the intensity and passion that has been aroused something more than the calculations of the politicians, including the President, may be at play. President Obama, says the Washington Post, is playing a longer game on the budget, with a measured response, but also saying that teachers, firefighters and police officers were being vilified. The demonstrations in Wisconsin were more bottom up than top down, and have the potential to affect the political dynamic and the way the U.S. addresses its problems in unpredictable ways....

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GM will invest $3 billion in electric car production in Michigan. The Orion Assembly plant near Detroit  will produce electric pickup trucks- renovation costing $2 billion and bringing 1500 jobs. A new battery cell factory near Lansing would bring $2 billion in investment in 50-50 joint partnership with LG Energy Solutions creating 1200 jobs. Ford is investing in other states, with $11 billion investment in building 3 battery plants- 2 in Kentucky, one in Tennessee near Memphis. Tesla is investing in Austin, Texas. GM says it is revamping existing factories to save $10 billion through 2030. The new GM investments are part of $35 billion in spending on electric cars through 2025.  For the US as a whole these investments change the look of the auto industry from one that in the past put factories in China and Mexico for gas and diesel vehicles. The shift to electric is now being taken as an opportunity by the Biden administration to encourage auto companies to make a new beginning and speedily build the future electric car base in the homeland itself. So that American workers and families come first in the great American tradition. ...

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Planning for lifestyle issues and how time will be spent together, as well as expenses, when one partner retires before the other.