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Hard hitting article by an expert in the field of manufacturing and the automobile industry. Problems facing GM and Ford in his view- Note the following: 1) The engineering system with chief engineer in charge of product, concurrent and simultaneous engineering. Better development system for new products at Toyota. 2) How to work with suppliers by leaving room for suppliers to make a profit while attacking every kind of waste jointly. 3) Hardest hitting point on the culture. GM and Ford have cultures that turn competent people into Dilberts. And noting that if ordinary people -Dilberts even- are put in a great business process they become great team players. 4) Customer Service at Lexus. Customers cheerfully pay more because they love the treatment. 5) Labor relations- Union and management know what does not make sense yet no accomodation has been reached, because their conversation has broken down. Womack's comments leave a lot to think about and reflects a feeling that seems to run outside of the midwest- that if GM and Ford can't get a grip on their problems and fix them other companies like Toyota can replace them. A sense that Toyota as a global company is as much of an American company as GM or Ford. ...

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In India 70% of smartphones sold in 2015 cost less than $150. Apple's market share in India is really small at about 2%. Apple iPhone sales were up 56% in the 1st quarter of 2016 over the same quarter in 2015, according to CEO Tim Cook. iPhones cost about $300-$1000 without a data plan in India reducing the size of the market. In May 2016 Apple applied for approval from the Indian government to sell refurbished or certified iPhones at lower cost. In India the best selling iPhone is the older 5S which costs about $300. It makes up 50% of iPhone sales in India for 1st quarter in 2016, according to Counterpoint. Apple has no model at the low end, as the SE model will cost even more at $500. The Indian market is growing at 26% in 2016 over prior year, making it the next largest market after China. Another approach Apple is taking is seeking approval to open its own retail stores and sell online. A waiver has been given by the government for using locally made parts. Apple's high prices and margins remain a significant barrier in opening up the Indian market, when lower priced Korean and Chinese smartphone models offer attractive options to price conscious Indian buyers....

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As HP separates into two separate companies that can be focussed and nimble, CEO Meg Whitman says that it has been a difficult road for HP. The new organization will have a lower cost basis by making job cuts as HP sales shrink- about 30,000 additional job cuts will be made in addition to the 55,000 announced earlier, mostly in enterprise services as the outsourcing operations have declined. HP sales and profits have declined with profit of $8.76 billion in fiscal 2010 on $126 billion in sales dropping to $5 billion in profit on $111.5 billion sales by fiscal 2014. Meg Whitman, CEO, says this should complete the changes and set the business up for future growth in new business areas. She also says HP has not done anything stupid in the last 4 years, alluding to the losses on the ill advised Autonomy acquisition. A big shift is being made in the Enterprise Services Group by setting a rule that no single account should be more than 10%- in 2013 just 3 accounts made up 65% of operating profit. One area of growth is cloud computing related business where it sees revenue growth of 20% for the next couple of years. Other areas include data analytics....

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The repeated denials by VW officials from global headquarters in Wolfsburg, Germany, and from VW in the U.S., since 2012- when the problem of higher emissions on roads compared to emission test readings first came to public attention- show that VW management took the problem lightly. The deep consequences of such a move to hide real emissions, not just from the EPA but from unwary buyers, appears to have been entirely missed by management. Even when the issue was raised by the EPA, VW stated to EPA that the differences in results on roads vs actual emissions tests were technical flaws. In December 2014 VW even made a voluntary recall of half million diesel vehicles. Yet the high emissions on roads continued till VW officials told EPA about the software that was the real cause in August 2015. Even then VW officials offered to personally apologize, and asked for certification of 2016 models in the U.S., missing entirely the deep consequences of their actions. VW now says that the software to conceal the real emissions was installed on 11 million vehicles worldwide. VW management has set aside $7.7 billion as provision for penalties. The VW stock declined by 35% by September 22, 2015....

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Afghanistan, says aUN report, s seeing the development of narco-catels similiar to Columbia, where drug profits are seen as more imortant than insurgent ideology. The interdiction of opium crops says the UN office on Drugs and Crime has reduced production by 10% with 22% less land being cultivated. But this does not mean that the flow of opium has beeen affected. A stockpile of 10,000 tons of opium has been built up and is in the hands of narco-gangs, which is about 2 years supply for world demand. This also suggests that the efforts to cut financing of the insurgency are being dwarfed by the access for terrorists to this large source of financing. It also raises other questions about the billions of dollars that can be used for terrorist purposes. As the war situation deteriorates this financing suggests two ways in which the situation becomes intractable, first through the financing of the insurgency, and second through the corruption in the government of Afghanistan that this engenders. with the complete loss of confidence among ordinary people in the government. In these circumstances a democratic election does not have anywhere near the kind of credibility that for example the Iraqi elections had. Quite the reverse....

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Whitacre is basically blunt about his mission from the Obama adminstration when he attends meetings at the Tech Center in Warren or at the Westin Detroit Airport hotel and the San Antonio club: get GM growing again, he wants to see market share north of 20%. The Obama administration, Bloom and others are clear about the government wanting to get its $50 billion for the USA and $9 billion for Canada back as early as possible. He has told GM's Henderson he will be replaced it things don't change fast enough, and he wants product out faster, 2 year development times for new cars instead of three years today. The same message has been passed on to middle and upper middle managers in diagonal meetings. And what are readers commenting on this- and readers views matter a lot because GM has a wrong perception out there that hurts sales- a third of twelve readers said they cannot understand why young people are not moved up to run the company especially from design and engineering, one mentions Whitacre's age 70 years. A third just don't think much will change, and one says he will buy aFord. And a third says Whitacre is the guy who can shake things up and he should. ...

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The countries that would be affected the most from a slowdown in China are the commodity producer countries- Australia, Brazil, S. Africa, Chile. Other countries include Thailand, Indonesia and Vietnam. Currencies such as the Australian dollar, the South African Rand, the Brazilian Real and the Chilean peso would decline in value. South Korea, Taiwan and Japan which supply large machinery for construction and manufacturing would be affected. Oversupply of steel and other products in China would mean higher exports causing a drop in steel prices and prices of other items. There would be a decline in commodity prices. Germany which provides the high tech machinery for China's industrialization will be affected. Exports growth to China from Germany increased by 44% in 2010. It has been pointed out that China is the seventh largest export market for Germany, coming after France, the U.S., the Netherlands, the U.K., Italy and Austria, exports to EU countries being the largest market for Germany. A global economic slowdown, with the Chinese slowdown as a part of this would impact German exports, leading to a slower growth in Germany. The U.S. would be affected also because exports were picking up in 2010-2011, and remain the one bright spot for the U.S. economy's recovery....

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Areas in the "too big to fail" part of Dodd-Frank U.S. financial reform legislation where work remains to be done to prevent a future crisis include: the creation of living wills by the largest banks so that they can be dismantled in an orderly fashion, and the designation of which banks are systemic risks by the Financial Oversight Stability Council. The FDIC and the Federal Reserve have yet to finalize the rules for creating "living wills" for large banks. The rules are expected to be finalized by fall 2011. The FOSC is working on the designations and what criteria to use for selecting the non-bank firms that pose systemic risks. Progress has been made at the FDIC by finishing several rules for implementing a new system to wind down a large failing bank. The FDIC is hiring staff for a new office that focusses specifically on large complex financial firms. Fed Governor Daniel Tarullo has led the effort for higher capital reserve requirements for U.S. banks, requirements that would be closer to 14% for capital reserves. In an editorial on June 16, 2011, the Wall Street Journal said that if the Federal Reserve is serious about controlling systemic risk then it should support capital reserve requirements of 14%....

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The president of the Pew Research Center, Andrew Kohut, says Romney was an especially weak candidate for Republicans and this has to be taken into account in understanding the results of the 2012 U.S. presidential election. Romney failed when it came to establishing empathy with voters compared with Obama and this was a significant factor- 53% to 43% for Romney in exit polls. Even on the economy which should have been a Republican strong point Romney failed to get an advantage over the president with both tied at 48% to 49% for Romney. Republicans were favored in their approach to government- only 43% favored activist government in 2012 compared to 52% in 2008, and 49% disapproved of the Obama health care law and only 44% approving in 2012. On social issues exit polls showed 59% believe abortion should be made legal, and on immigration 65% support a pathway to citizenship for illegal immigrants. Early in the primaries some commentators said the Republicans were not fielding strong candidates for president who could relate to voters and this has turned out to be true. This also explains the Republicans retaining a majority in the House of Representatives and continuing the hold on governorships. ...

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The failure at the British Broadcasting Corporation (BBC) to make the right critical judgements on fair journalistic practice after changes were made to place responsibility within the bureaucracy and chain of command for such decisions. In a classic case of such failures no one took responsibility to ask questions even as it was throughly "lawyered and complied." This involves the airing of a broadcast accusing a member of Margaret Thatcher's government of being a pedophile, which turned out to be completely false. Around the same time the BBC broadcast several tributes praising Jimmy Savile, a veteran BBC host, and made the decision not to broadcast other reports showing that he had been a serial chld molester. The BBC Trust's Chris Patten, said about the failure: the decision about a Nov. 2 broadcast passed through "every damned layer of BBC management bureaucracy, legal checks," and no one raised questions. As for the head of the BBC, Mr Thompson, now head of the New York Times, he was insulated from the decisions about which programs or broadcasts should be made after a 2004 scandal about reporting on Iraqi weapons of mass destruction. And the one remaining link between the BBC director general and the news division, a longtime BBC manager was let go in job cuts. ...

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European banks have been slow to get rid of risky assets such as collateralized debt obligations, subprime mortgages and other risky assets after the 2007 financial crisis. As a result sixteen top European banks hold 386 billion euros of suspect credit-market and real estate assets, according to Credit Suisse analysts. The Royal Bank of Scotland has 79.6 billion of assets dating from the 2007 financial crisis. Over the three year period since the 2008 financial crisis, the top three U.S. banks shed 80% of this type of risky assets, compared to 50% for European banks. The four largest British banks have reduced these risky assets by more than 50%, and four French banks have reduced these assets by only 30%. At 29 billion euros, French bank Credit Agricole had the largest amount of such risky assets among the leading French banks. This adds to the difficulties facing French banks which also have large amount of loans to customers in Greece and Greece's sovereign bonds. Deutsche Bank has 20.2 billion euros in commercial mortgages and whole loans and 2.9 billion euros in U.S. residential assets including subprime loans. Mediobanca analysts estimate that Deutsche Bank's exposure to such assets is more than 150% of its tangible equity....

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Friedman describes the lack of decisionmaking, initiative and courage in the Eurozone, India and China to tackle difficult problems. During his visit to India he describes the problems India faces. A serious problem with lack of good governance within the democratic framework. India also has a growing population that will soon surpass China's population, which makes the task of development that much harder, with the small steps India is taking to move forward not making a serious impact. Azim Premji, chairman of Wipro, described it this way: "There is a complete lack of decision-making among leaders in the government. If prompt action is not taken, the country will face a setback. You must appreciate how serious it is." Friedman sees a similiar situation in the eurozone countries as new governments are being formed in Greece and Italy by Papademos and Mario Monti, both technocrats from the European Union. This has the added complication because these experts have not been elected. The fact that they have support and goodwill is because of the failure of the political class in Greece and Italy. The failure of the political class in the U.S. is evident from the stymied negotiations over the deficit, and the lack of leadership from President Obama....

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Bayer AG CEO Marijn Dekkers talks to the Journal's Geoffrey Rogow about the company's pharmaceuticals business and job retention. Dekkers says profits are reduced by the tight budgets of European governments and the pressure on pricing. He cites the 16% mandatory rebate in Germany on prescriptions. For Bayer diversification through the chemicals business offers a way to handle the ups and downs in the pharmaceuical business with patent expiration. He is not interested in acquisitions because of the high premium involved and the difficulty of recovering this for investors. Bayer like other drug companies has extensive operations in China. Bayer is training salespersons in top and second tier Chinese cities. It has a program to train 10,000 physicians in rural areas of China working with the local government. Dekkers makes an interesting point about jobs and job retention in the U.S. He says a lot of jobs were outsourced in the 1990's and its difficult to bring them back. Germany has done a better job with job retention with "kurzarbeit" and other programs working in partnership with industry. In his view this could have been managed better in the U.S. with active programs such as this in the last two decades....

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Under IMF and US presssure S. Korea's government took tough steps to resolve its banking crisis in 1997. The government closed or restructured 12 of the 32 largest banks and put in $60 billion to write off bad loans and replenish cash reserves of remaining banks, says Prof. Eichengreen. The Korea Asset Management Corporation, a public fund, bought about two-thirds of the problem loans on the bank's books, to free up capital for new loans. This was also done in a compressed period of time under US pressure. In the US because of heavy lobbying influence in Washington and with the Bush and Obama administrations, and the lack of any external pressures such as S. Korea experienced, the banking industry has not undergone a serious restructuring. Volcker recommended reforms have actually been watered down. The difference in the two approaches is striking. S. Korea had the advantage of being able to rebound with exports to a growing US and Europe during that period. A serious restructuring of the banking industry was the first step, something that has not taken place in the US. And there is a failure to cleanup the problem of mortgage backed securities in the US financial system. ...

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In an interview with the WSJ's Aaron Lucchetti, the CEO of a future business combination of Deutsche Bourse and NYSE Euronext, Duncan Niederauer, talks about the difficulties in naming the merged companies, the efforts to achieve a balance for the board, emotional issues about the ownership of the new company. He repeatedly emphasized that this is a merger not a takeover by Deutsche Bourse. This even though the higher market value of Deutsche Bourse at $15 billion compared to about $10 billion for NYSE Euronext, gives Deutsche Bourse 60% of the new company and 10 of 17 board members. He says he realizes the naming and related issues are emotional ones and there is a lot of pride involved in this. Placing Deutsche Bourse as in DB NYSE Euronext has been ruled out. The shareholder base will still be majority U.S., he reminds readers. And the board will have five or six Germans, five or six Americans, and five or six people from other countries. Is he brushing up on his German? No, he says but he tried to introduce his deputy CEO Dominique Cerutti in French, and its a good thing for Americans to learn other languages. Deutsche Borse's Francioni speaks three or four languages, which makes it a little humbling for him....

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The European Financial Treaty or Fiscal Compact referendum in Ireland is being fiercely debated in Ireland. The government says the referendum's outcome will determine Ireland's access to financing in financial markets. The opposition parties including Sinn Fein say the fiscal compact for austerity measures in the eurozone will subject Ireland to a decade of austerity and stagnation. The new property tax issue with over half of the population refusing to register has also hardened opinions in Ireland, and helped the opposition parties organize for this referendum. Cutbacks in spending on services and higher taxes will also affect the outcome. Opposition to the fiscal compact is growing in France with Socialist candidate for president, Francois Hollande, saying he will negotiate changes in the treaty to include growth measures. Both sides in Ireland support Hollande's viewpoint that growth is needed, and the election of Hollande is likely to influence the referendum results. As the fiscal compact has already been approved by 25 of 27 countries signing, except for Britain and Czech Republic, and can be ratified by a simple vote of parliament, the Irish referendum will not affect the treaty. Ireland is having this referendum because it is required under Irish law since 1987....

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The Nuclear Regulatory Commission's inspector general points to significant flaws in reporting of equipment problems at U.S. nuclear plants. There is ambiguity in the reporting requirements, with one section Part 21 of the reporting law requiring reporting defects that can cause a loss of safety functions, and another section requiring reporting only the actual loss of safety functions. As a result 28% of the nuclear plants are not reporting safety defects in equipmment unless this leads to an actual breakdown. This represents an unacceptable level of risk for nuclear plant operations, and the inspector general calls for increasing the margin of safety. In fact the NRC is aware of these lapses in reporting since 2009. NRC has identified 24 such instances between Dec 2009 and Sept 2010, and yet no penalties have been assessed or corrective action taken to make the law clear about the reporting requirements. The lack of a good reporting system complicates things further, because early indentification of defects and defect resolution for equipment problems is critical to effective quality assurance for nuclear operators. Safety defect spotted at one plant could come up in other plants. For this reason the Inspector General's report calls this "a substantial safety hazard."...

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Leon Panetta, former Defense Secretary in Obama's first term, and president Clinton's chief of staff, says president Obama made a series of poor decisions for Iraq and Syria. Not following up on the "red line" of use of chemical weapons by the Assad regime has damaged U.S. credibility, says Panetta. The failure to lead in budget fights, on health care, is seen in foreign policy for Iraq. There Panetta points out Obama failed to lead to ensure that Maliki had to agree to a residual troop presence in Iraq, for without this the hard won gains under the previous Republican administration could easily be allowed to slip away. Sectarian tensions, and rise of ISIS could have been controlled by having U.S. troop presence, according to Panetta. White House centralized power under Tom Donilon, chief of staff, and John Brennan, counter terrorism advisor, to th detriment of input from the Defense Secretary and the Secretary of State, says Panetta. Panetta says Obama lacks fire and too often does not take the lead as a president should. A similiar complaint is made by Washington Post journalist Bob Woodward, who covered Nixon and Watergate, after observing Obama's dealings with the Republicans and Congress up close in the first term....

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Greg Ip provides useful insights into the nature of the economic recovery in Britain compared to the U.S. by 2015. The recovery in Britain has done better than in the U.S. in job creation, but has lagged behind in productivity gains. The labor force participation rate is 72% in Britain compared to 68% in the U.S., going back up to 2007 levels in Britain, whereas in the U.S. it has steadily declined with some older working class Americans too discouraged to look for work and left behind. Stagnant wage growth is a major issue in Britain, more so than in the U.S. where wage growth is slow. Economic austerity is not the main cause of the economic difficulties as the coalition government of prime minister Cameron relaxed earlier goals for austerity by 2012 with tax revenues and growth below forecasts. The structural budget deficit has been reduced by 6.6% of GDP since the peak, and the Office of Budget Responsibility estimates the UK economy was 1.5%-2% smaller by 2013 because of the austerity policies. Britain was also affected by the eurozone crisis to a larger degree than the U.S. Productivity remains a long term challenge- with needed investments in housing, education and infrastructure, improved lending for new business, and higher tech improvement exports....

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Gretchen Morgenson sees systemic risk looking ahead beyond 2013 in the $4.6 trillion repurchase obligations market or repo market. Problems in the repo market caused the collapse of Lehman Brothers in the financial crisis of 2008. Bernanke, Dudley, Bair and other finance officials have referred to the risk in the repo market which have not been reduced since the 2008 financial crisis. In the repo market money market mutual funds provide short term funding to banks accepting collateral such as mortgage securities. These are overnight loans made to banks and other financial institutions based entirely on trust. During normal functioning the trades are rolled over. The risk is that the trust disappears in a few days as happened for Bear Stearns and Lehman and the firms not able to obtain this short term financing. This is a very unstable form of financing and Lehman depended on it because of the low cost and not having to set aside capital for the trades. Basel III rules require that banks set aside capital against the assets they finance inthe repo markets, and a recent JP Morgan report says the 8 largest banks would need to raise $28-$34 billon in capital for their repo business....

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U.S. president Obama's passive response in the handling of the NSA spying on the phones of world leaders including the president of Brazil and the chancellor of Germany comes under criticism in the U.S. The failure to provide adequate assurance- and take immediate action since the summer of 2013 when the first revelations of NSA spying were out- to regain trust of European and other leaders is seen as a weakness in leadership. With German presidential elections approaching German chancellor Merkel actually tried to tone down the initial uproar over NSA spying revelations in the summer of 2013. It was only after it was revealed in October 2013 that NSA had monitored Merkel's mobile phone did the chancellor make an issue of this and Obama could not respond to why no action had been taken since the summer and a complete review of NSA spy activities made by the President and advisors. Because world leaders are involved, and not just of allies but large emerging market nations such as Brazil, this becomes the personal responsibility of the U.S. president. Obama also comes under criticism for not responding to the failure of the healthcare website. This matter is of a different nature and could be handled by the President's Health and Human Services Secretary, Ms. Sibelius....

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A major problem for President Hollande of France in the 2014 budget is how to handle the deficits in the country's Social Security System. Over the years the deficits were transferred to a vehicle called the Cades, which is approaching its legal ceiling of 270 billion euros. The vehicle was originally set up in 1996 with the idea of separating past deficits, so that the state could balance its budget every year for the Social Security System, which covers health care, pension and family allowances. Previous governments have for the most part bypassed this and added new deficits to Cades instead of making cuts in spending. The Hollande administration says it is controlling health care expenses and increasing pension contributions as a way to bring the deficits under control. It will not assess a special tax for the deficit in Social Security in 2014, as new taxes are highly unpopular. Cades lifetime has been extended twice, first in 1997 to 2014, and during the 2009 financial crisis to 2025. In 2010 following the crisis, Cades chairman, Ract Madoux says, the short term borrowing had reached 60 billion euros. It is down to 30 billion euros, which he still considers too high....

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China's leaders meeting at the Third Plemum in November 2013 announced changes to the one-child policy. If either member of a couple is an only child the couple will be allowed to have 2 children. The result will be that most Chinese couples will be able to have 2 children. Demographic experts say this is unlikely to lead to a large increase in China's 1.3 billion population as a majority of only child parents live in cities where the cost of raising children is very high, and many parents will avoid the cost of a second child. In the past couples with both partners as only children, which is common in China's urban areas, have been permitted to have a second child but have not chosen this option because of the costs of housing and education. Rural families were allowed to have 2 children if the first child was a girl in the past. With the decline of the number of people of working age, and an increase in older retired people, this is also a way to address the problem of shortages in young people to work in manufacturing and assembly lines. This is needed to support an increasing elderly population....

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The Dutch model for counterinsurgency which intertwines the civilian efforts with aid workers working inside the military, and military work focussing on security for the people so that economic development projects can go on, is an inspiration for the US effort. It has also reduced casualties for the Dutch. Only 19 deaths have occurred for the Dutch for 2000 personnel employed since they deployed in Uruzgan province in March 2006, where 350,000 Afghans live, according to icasualties.org. Sec of state Hillary Clinton describes this 3 D effort of defense, diplomacy, and development, as the model for her own efforts and that of the Obama administration. Dutch soldiers are ingrained in their training for this mission that their main work in Afghainstan will be economic development. The aid workers work closely with the soldiers and the commander Col. Gert-Jan Koolj says over time the focus has been on pure development. In fact diplomats from the Dutch foreigh ministry help to command the Dutch team in Uruzgan. One problem Clinton is facing is the shortage of civilian personnel to work in provincial reconstruction teams. About 500-600 more civilians are needed to complement the additional 21,000 troops that are to be added in 2009. ...

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Whats different about the May unemployment numbers? The Labor department reported job losses were 345,000 in May, 2009, which is a drop from previous months. Manufacturing posted half of these job losses. Factory job losses have been aconstant inthis downturn, with losses of 156,000 in May, 154,000 in April, and the average monthly decline for the fourth quarter 2008 and first quarter 2009 of 171,000. Auto job losses are likely to be permanent, and further downsizing at GM and Chrysler could lead to steady job losses in manufacturing. The job losses in service related companies was 120,000 jobs for May 2009, much smaller than the 230,000 jobs lost in April, and much smaller than the average job losses of 334,000 in the fourth quarter 2008 and first quarter 2009. The steep losses in the service sector is unprecedented in ths downturn going back to the 70 years the Labor Department has tracked this data. But continued losses in manufacturing will weaken a recovery, especially as many of these jobs in construction and manufacturing are permanently lost. This recession is impacting men more than women because of construction and manufacturing job losses, blacks and hispanics more than whites, the less educated hit the hardest, and young people also hit hard....