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Hitachi's conversion to a leaner, more profit conscious company, learning from rivals, GE, Siemens, IBM and large Korean companies. CEO, Nakanishi, graduated from Stanford with a computer science degree in 1979, during a break from Hitachi. He takes a hands on approach to management and brings this approach to tough assignments to learn what is going wrong. He moved to San Jose, to figure out why the hard disk drive business Hitachi bought from IBM for $2.05 billion was losing money. There he found quality problems were causing 60% of the hard drives coming off the production line with defects. After fixing the problems and achieving 10% profit margins Nakanishi put the company up for sale. Western Digital bought the company for $4.8 billion. His hands on approach includes meeting directly with public officials and ministers in governments around the world that buy its nuclear plants, high speed trains and large machinery. To maintain its preferred bidder status Nakanishi met with Britain's transport minister during the switch in government to the Conservative party in 2010. In his approach he is part of a new breed of Japanese executives, some with education in the U.S., such as Toyota's new CEO, Akio Toyoda, and others such as Toshiba's CEO, Norio Sasaki, who are eager to break away from the mold. Like Toshiba, Hitachi has shifted away from its consumer product lines. Hitachi consumer products are expected to make up only 10% of sales in the coming fiscal year. Emphasis is on the industrial products from nuclear plants to power plant equipment and high speed trains that powered Hitachi from its early beginnings as a maker of mining equipment in the 1920's. These executives are vigilant about a "Not Invented Here Syndrome" typical of large Japanese companies. Nakanishi says there is a lot Japanese companies can learn from rivals about cost and strategies. The experience came with hard knocks. In March 2009, Hitachi announced the biggest loss for a Japanese company upto that time of $9.9 billion. As head of the power and industrial business Nakanishi lost a contract to build a power plant in the Unted Arab Emirates to Korean companies. Compared to Hitachi, Toshiba's strategy is to emphasize industrial products such as nuclear reactors but also keep a presence in consumer products because Sasaki's view is that consumer products require smaller investments and generate cash flow. Jurio Osawa, WSJ, April 9, 2012, Toshiba's Chief Takes Stock....

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The WSJ's Iliff and Luhnow's interview with Emilio Lozoya, CEO of Petroleos Mexicanos (PEMEX). Lozoya says about the new oil law that allows foreign companies to compete with Pemex, as something that should have happened decades ago. President Calderon of the PAN party pushed hard for this, but failed to get the support of the PRI during his term in office 2006-2012. It made sense for Mexico because President Cardozo (1997-2002) of Brazil already set a successful example by doing this for Brazil's state oil company, Petrobras. The main point is that competition is good for Pemex, and good for Mexico and Mexicans, and Lozoya emphasizes this. Under the law Pemex can keep oil fields it already has and have the first pick in future fields. Pemex is expected to partner in oil field exploration in deep waters of the Gulf of Mexico where it needs the technologies of foreign oil companies. Under the new rules Pemex will have 2 years in which to make the transition to a well managed business enterprise. A new tax code works to increase nonoil tax revenues, so that Mexico does not depend on Pemex profits for one third of its budget. It also gives Pemex autonomy and control over its budget, and lowers its tax burden to international levels. This frees up badly needed resources for investment opportunties to increase Mexico's growth rate. Lozoya says the investment budget could be increased from $25 billion to about $30-$35 billion as a result. He gives a list of badly needed projects not taken up by Pemex for lack of funds- developing natural gas from Mexico's large reserves where Mexico imports its natural gas from Texas increasing the cost of manufacturing, building pipelines where Mexico transports fuel by truck which is 15 times more costly, making its own fertilizer and petrochemicals instead of importing it in a country where 60% of farmland is not fertilized. There is so much to be done that Lozoya realizes his main challenge will be execution. Enormous responsibility rests on Lozoya's shoulders to get the execution right. Pemex has 160,000 employees and crude oil sales of $130 billion in 2012. He has a Masters degree in economic development from Harvard and managed investment funds in New York before this position. Cardozo also picked an investment banking professional for the job of recharting the course of Petrobras and attracting foreign investment....

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The large increase in auto sales in 2013 to 15.6 million follows a strong rebound in the U.S. market. The gains in sales over 2009 at the peak of the financial crisis, shows Chrysler at 93% gain in sales over 2009, VW at 92%, Nissan 62% and Ford 54%, according to Autodata. Smaller gains of 33% and 26% for Honda and Toyota. Chrysler's sales were 1.8 million in 2013- the company which depended on policymakers in the Obama administration for survival showed remarkable gains under Fiat's CEO Marchionne. VW returning to the market and stumbling repeatedly in the previous ten years, made serious gains with Jetta and Passat models designed and priced for the U.S. market. VW achieved sales of 0.6 million in 2013. Ford sales were 2.5 million, Nissan 1.2 million, Honda 1.5 million and Toyota 2.2 million for 2013. GM sales 2.8 million increasing by 35% in 2013 over 2009. The automobile story may be the biggest story in the U.S. manufacturing recovery. It also may have made a difference in the election campaign of 2012- with winning campaign points in key midwestern states such as Michigan and Ohio for the Obama administration's backing of a renewed auto industry around fuel efficiency improvements, new management, and new relationship with unions. In the period 1998-2007 average sales were 16 million in the U.S. market, with a nosedive to 10.4 million vehicles in 2009, and a rebound to 15.6 million in 2013, according to Autodata. Under previous union contracts with higher wages and pension costs, and a flurry of price incentives, car makers needed higher volume to make profits. Changes since the bankruptcy of 2 automakers include bringing in management from outside the auto industry- Marchionne at Chrysler, Whittaker and Akerson at GM came from other fields (telecom, finance) bringing new perspectives. Mulally at Ford was from Boeing commercial aerospace. Other changes were lower wages and pension costs with renegotiated contracts and relationships with unions, discipline to lower incentives, younger managers moved up and brought in from outside including Reuss and Barra at GM, Farley at Ford, lower sales to fleets, improved fuel efficiency for SUV's and pickups to change the cost of operating, a mix shifted to smaller and midsized cars, improved quality, and changing the buyer perception of American brands....

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The stories of Dylan Roberts, 32 years, in Rockford, Illinois and Alfred Butt, 42 years,in Hohenlockenstedt, Germany. Roberts lost his job at aChrysler plant in Belvidere, near Rockford, Illinois, and Butt lost his job a German auto parts maker. Roberts gets a $64,000 severance package, and 59 weeks of unemployment insurance, with apossible additional 13 weeks, with monthly check of $1426 that is 27% of his income of $64,000 a year when employed. attribute 33 weeks of the 59 weeks to the stimulus measures of President Obama. Butt has 4 months as atransfer worker at full pay, which can be as long as 1 year, then he has till May 2010 at 80% of his pay when employed full time of 2700 euros amonth. The transfer company gives job training and job hunting advice. He continues getting his medical insurance benefits which are provided by the state. Roberts loses his health insurance with his job, and hopes to pay his expenses for a2 bedroom apartment with his girlfriend who makes close to $1500 as an elementary school teacher. He will take a2 year electronic engineering course with a local college using $6000 from Obama's Dislocated Worker's Program. But he isn't sure if he can do his studies after one year when his unemployment benefits expire. Butt can afford to take a vacation to Cyprus and his lifestyle is not much affected he says. His wife works as a nurse at a rheumatism clinic. Butt is like the 64% of Germans who say the crisis is not affecting them personally. Roberts is like the 87% of Americans who say this crisis id hurting them in their persdonal lives. To pay for the state funded benefits the total wage tax burdenas a percentage of labor costs for Butt is 52% in Germany. FOr Roberts it is 30% in the USA. France is at 49% Spain at 39% and the UK at 34%. Germany's public expenditures for these labor benefits are 2.97% of GDP in 2006, the USA's are 0.38%. Spain and France are at 2.32% and the UK at 0.61%. This also explains why the impact in countries like Germany and Spain is not felt so badly as in the USA. In SPain there is also the lower mobility and the safety net of family support helping people cope making it possible to cope with 20% unemployment without serious distress and hardships. See the link to Spain's unemployed....

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Chinese companies are heavily invesing in the stock markets and many companies get a large part of their earnings from the stock markets. The myth is that the real economy will simply go on like before if the stock market takes a nosedive. This is not true because large and small companies are both playing the stock market and IPO's in a big way. They are using corporate funds to invest in IPO's and stocks to boost their earnings. Morgan Stanley estimates that more than one third of corporate earnings in China come from putting money in stocks. The figures are much higher for some industries. In the health sector this number is 54% including real etate earnings also and in consumer goods sector 65% according to Morgan Stanley. If the markets take a steep downturn then these companies will have to show the losses on their income statements, depressing earnings and pushing their stock prices down even further and more steeply. Japan experienced something similiar in the the eighties. And in one respect the situation is more dismal than in Japan. The financial statements may be even less transparent than the ones in Japan's boom period. And investors lack the expertise to figure out whats behind the financial statements. There is no effort to think deeply about what can happen when a nosedive in stocks hits corporate earnings and these losses create a vicious cycle that sends stocks into a further fall turning into a freefall. A Professor of Accounting at a Business School in Shanghai, head of China research at Morgan Stanley and a governance expert in HongKong all point to the dangers in the situation as it evolves. Most of these bubbles like the housing bubble in the US have a situation which George Soros described recently as it burst after he had kept predicting for years that its going to collapse and finally he got tired of saying that because it continued going up. Its possibly the nature of bubbles that a sharp observer can tell whats going on but the phenomena will continue for quite awhile even when its obvious that something is wrong. Its something to do with human nature and the dynamics of human situations where knowing the danger the person will continue to act the opposite way just because everybody else is playing in a certain way. This is the situation in China in 2007. ...

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How ArvinMeritor navigated the treacherous waters of the automotive parts buzsiness since 2000 when the company was formed taking in the automotive business of Rockwell International in Troy, Michigan. The combination was designed to bring the automotive parts business for roof and door systems, chassis and wheel products with the comercial truck business which makes drivetrain systems and components like axles, drivelines and braking systems. The business is in turmoil and ArvinMeritor last recorded a profit in 2005. Here is how they did it. First, the combination provided some linited diversification for the cyclicality of the automotive business passenger cars and trucking together. By 2004 the foreign makers especially the Japanese were taking market share from the Detroit Big Three car makers which only accelerated after that when the Big Three overconcentrated on SUV's and had no competitive car lineup to match the Japanese in 2007 and 2008. The Big three closed plants and companies like ArvinMeritor closed plants also. In the last couple of years first GM and then Ford began to emphasize emerging market countries like China, Russia, Brazil and India. Wagoner GM's CEO in citing improved results in 2008 specifically referred to the $500 million profit in Brazil as making this possible. He also said that when investors see the improved results so early they are forgetting that the model that GM has setup has changed completely from the model that investors were used to in previous years which was a large and growing US focussed market base. Now its a global focussed market base with particular focus on emerging markets. ArvinMeritor has followed this pattern and set up parts plants in new countries like Russia to supply the Big Three's plants there. But it appears from Phil Martens, Arvin Innovation's CEO's statement that only 20% of global automotive sales for ArvinInnovation, the automobile part of the busines that is being setup as a separate company, are coming from the Big Three of Detroit. And 65% of the sales are coming from outside North America. Which suggests that 15% of sales are coming from the foreign carmakers in North America. ArvinMeritor closed 11 plants in North America and the new company Arvin Innovation has 42 facilities in 16 countries with sales of $2.2 billion in fiscal 2007. ...

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Coordinated action by the governments of France, Britain and Germany each with its own package depending on its own circumstances but committing over a trillion dollars to rescue plans for financial institutions. In Britain the government moved to take majority stakes in 2 of its largest banks, the Royal Bank of Scotland, and the newly combied bank of Lloyds TSB and HBOS in exchange for a $64 billion capital infusion. In Berlin the German government setup a 480 billion euros package consisting mostly of loan guarantees, with 400 billon euros in guarantees for inter-bank loans and another $80 billion euros for direct injections of capital to help weak balance sheets and purchase toxic or illiquid assets of German banks that are at the brink of collapse. The French have setup their own 360 billion euros package. The French government will create a fund to raise money to guarantee debt for upto 5 years in a bid to make cash available to banks. The banks can access these funds in exchange for putting up their own collateral, including debt not currently accepted by the ECB. And a state sponsored company will provide upto 40 billion euros in direct capital injections to banks that request it in exchange for equity stakes. In addition Netherlands made $220 billion euros available for capital injection into banks and other efforts and Spain will insure upto 100 billion euros in bank debt. Britain's step are the boldest ones yet and Britain's crisis is also likely to be one of the worst because of years of leveraging and overborrowing. But the German financial system is also under heavy strain and strong swift action was necessary to keep its banking system functioning. While other countries have setup the funds for capital injection like other European countries and the USA, Britain has also take the lead in taking majority stakes in two of its largest banks by Monday, October 13, with the departure of the executives who got these banks into such a mess. Gordon Brown has shown cosiderable leadership in this crisis and has been at the forefront in proposing and acting on workable solutions and swift response while Germany and the USA lagged behind. France's Sarkozy's contribution has been in the area of global coordination which he has argued and worked for and successfully achieved during the last 2 weeks....

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Elelven of twelve Fed Governors support the U.S. Federal Reserve's decision to keep rates low till unemployment falls below 6.5%, as long as inflation remains subdued at 2-2.5% and inflation expectations are low. Only the Fed governor of Richmond expressed a dissenting vote. The Fed in its policy statement said it was addressing the problems of the last three years in housing and joblessness. Charles Evans of the Chicago Fed put it this way in a Sept 2011 speech- suppose the inflation rate was 5% when the target was 2%, then central banksers at the Fed would have acted as if their hair was on fire to tackle inflation, then why shouldn't the Fed do the same for unemployment. He succeeded in convincing Bernanke, Yellen and other Fed governors. Bernanke emphasized the enormous cost in human potential and productive capacity of the U.S. economy from high unemployment and people dropping out of the labor force.

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VW shows a loss of $1.77 billion for 2015 after taking a charge of $18 billion for recall of 11 million cars, and buyback of 500,000 cars in the U.S.

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The controversy surounding Greece's purchase of submarines from Germany costing about 1 billion euros. This at a time when public pensions are being reduced by 5%. A vice admiral of the Greek navy resigned in protest citing this reason, and it is reported that the deals are politically motivated, with the Greek deputy prime minister saying that he feels "national shame" about the decision to buy the submarines. Reports question whether the German and French effort to rescue Greece involves efforts to continue military sales to Greece. Chancellor Merkel denies this. In a visit to Athens Turkey's Prime Minister Erdogan said that both Greece and Turkey do not need fighter planes and submarines, and need to reduce military spending to help build their economic future.

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Brooks points out that the best way to arrive at workable solutions is to take the best ideas from all sides of the political spectrum. The Republicans and the Democrats are too ideologically and politically driven and lack the imagination to come up with good solutions.

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The battle in Congress over the Puerto Rico bankruptcy bill. Hedge funds are financing the campaigns of many candidates including Marco Rubio, leading to stalled efforts on the bill. Speaker Ryan has put the issue off till March 2016 by sending it for further discussion to committee chairmen. Senator Orrin Hatch and other Republicans oppose the bill.

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The pressures on Apple to reduce prices and margins in 2016 with the slowdown in sales. Apple also has to deal with the impact of a stronger dollar with a large part of sales coming from overseas.

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Reactions of Republican state governors in the U.S. to president Obama's executive order on immigration. Presidential candidate Governor Jindal of Louisiana says about deportation efforts for illegal immigrants- "we will deal with people here illegally compassionately and fairly," while at the same time calling for greater security at the borders. Governor Kasich of Ohio asked about citizenship for undocumented immigrants- "I'm open to it, I will tell you that." Governors in Texas, Kansas and Wisconsin oppose the executive order.

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The unemployment rate drops to 6.3% in April 2014, as a significant number of Americans stop looking for jobs they cannot find. 288,000 new jobs were created in April 2014, according to the Labor Department. Yet the participation rate has declined to 62.8%, the lowest in three decades, and wages are up only about 1.9% from the prior year month. The unemployment rate which counts involuntary part-time workers and workers discouraged and not looking for a job was 12.3% for April 2014.