Monday, January 30, 2006
Survival of the fittest but scope for co-operation, too (FT)
Capitalism is not just about ruthless and relentless competition says Sandra Dawson of the Judge Business school, University of Cambridge.
Friday, January 27, 2006
Ford Restructuring Means Opportunities for IT Vendors (Gartner)
The success of Ford Motor Company's turnaround strategy will depend heavily on the company's ability to embrace product and process innovation. IT vendors should try to become partners in Ford's ambitious restructuring.
Thursday, January 26, 2006
G.M. Reports Big Losses as Its Woes Grow (NYTimes.com)
The General Motors Corporation said today that losses in its North American automotive business topped $5 billion last year as sales of sport utility vehicles continued to fall and advertising and health expenses rose.
Calling it the "one of the most difficult years in G.M.'s history," the company, which is cutting 30,000 jobs and closing all or parts of 12 factories, reported a fourth-quarter loss of $4.8 billion and an annual shortfall for the entire company of $8.6 billion.
G.M. said its total sales and share of the North American market continued to shrink, while the expenses that it has been trying to cut with its restructuring plan remained a significant burden and in some cases increased. The decline in sales of sport utility vehicles was particularly painful, because those vehicles have until recent years been the source of large profit margins that have made up for weaknesses in other areas of G.M.'s operations.
G.M. and its cross-town rival, the Ford Motor Company, find themselves in the middle of two exceedingly powerful forces — intense competition from foreign automakers like Toyota and high labor and supplier costs. Toyota, which has lower labor and health costs, could overtake G.M. as the world's biggest automaker this year with its fleet of popular and fuel-efficient vehicles.
Since 2000, G.M., Ford and the Chrysler Corporation have cut or announced they would eliminate up to 140,000 jobs, or a third of their payrolls. Earlier this week, Ford announced that it would cut 30,000 jobs and close 14 plants over the next six years.
In an interview with The Wall Street Journal published today, President Bush said that G.M. and Ford executives have not asked him for federal aid and that he would not look favorably upon such a request. Mr. Bush said he would instead encourage the automakers to build "a product that's relevant."
"I would hope I wouldn't be asked to make that decision," he told The Journal.
Analysts say G.M. will face enormous challenges in the coming year, because the cuts it is making now will not provide meaningful financial relief until next year, and the new cars and trucks it has said it is working on will not hit the market for a year or two. And even then, the new vehicles may fall short against the competition.
"Our sell rating reflects the risks of successfully implementing a sweeping turnaround in a hypercompetitive market," Jon Rogers, an auto industry analyst at Citigroup, wrote in a note to investors, explaining his firm's view why G.M.'s stock should be avoided. "The benefits of management's plan — health care concessions and lower North American capacity — do not accrue to cash flow until 2007-2008."
Shares of G.M. were trading down $1.35, , or 5.7 percent, to $22.50 early this afternoon on the New York Stock Exchange.
In a conference call with analysts and investors, G.M.'s new chief financial officer, Frederick Henderson, said the company ran into a range of problems last quarter. "There are no highlights," he said. "It was a very, very tough quarter."
G.M. blamed several factors for its deep loss. First, its market share in the United States fell by 2 percentage points, leaving G.M. with only 23.6 percent of the American market. High gasoline prices meant the sold fewer S.U.V.'s, which meant its revenue per vehicle dropped. G.M.'s costs for health care and material costs, including the price it pays for steel, rose during the quarter. It also spent much more on advertising and sales, reflecting its promotion of price cuts on three-quarters of the vehicles it sells in the United States.
"The results are logical but unacceptable," Mr. Henderson said. "The losses are very, very high."
Mr. Henderson said G.M.'s plan to cut its structural costs by $7 billion a year were a "good start." But he said the automaker would be under pressure to improve the "robustness" of its results.
Wall Street agrees with that assessment, but some analysts said the company has not really shown that it is moving aggressively to achieve such an improvement. G.M. did not provide an update on its plans for its credit unit, the General Motors Acceptance Corporation, nor did it comment on proposals by its largest individual investor, Kirk Kerkorian, who has said G.M. should stop paying a dividend, said Shelly Lombard, a bond analyst at Gimme Credit, a research firm.
"The fourth quarter was expected to be lousy and that's exactly what we got," she said. "The main thing that was missing from the call was any indication that the urgency has improved and the company."
G.M.'s 2005 loss of $8.6 billion, or $15.13 a share, was the company's largest since 1992, when it posted a $23.5 billion loss. That compares with a profit of $2.8 billion,, or $4.92 a share, in 2004. Revenue fell nearly $1 billion, to $192.6 billion, last year.
Calling it the "one of the most difficult years in G.M.'s history," the company, which is cutting 30,000 jobs and closing all or parts of 12 factories, reported a fourth-quarter loss of $4.8 billion and an annual shortfall for the entire company of $8.6 billion.
G.M. said its total sales and share of the North American market continued to shrink, while the expenses that it has been trying to cut with its restructuring plan remained a significant burden and in some cases increased. The decline in sales of sport utility vehicles was particularly painful, because those vehicles have until recent years been the source of large profit margins that have made up for weaknesses in other areas of G.M.'s operations.
G.M. and its cross-town rival, the Ford Motor Company, find themselves in the middle of two exceedingly powerful forces — intense competition from foreign automakers like Toyota and high labor and supplier costs. Toyota, which has lower labor and health costs, could overtake G.M. as the world's biggest automaker this year with its fleet of popular and fuel-efficient vehicles.
Since 2000, G.M., Ford and the Chrysler Corporation have cut or announced they would eliminate up to 140,000 jobs, or a third of their payrolls. Earlier this week, Ford announced that it would cut 30,000 jobs and close 14 plants over the next six years.
In an interview with The Wall Street Journal published today, President Bush said that G.M. and Ford executives have not asked him for federal aid and that he would not look favorably upon such a request. Mr. Bush said he would instead encourage the automakers to build "a product that's relevant."
"I would hope I wouldn't be asked to make that decision," he told The Journal.
Analysts say G.M. will face enormous challenges in the coming year, because the cuts it is making now will not provide meaningful financial relief until next year, and the new cars and trucks it has said it is working on will not hit the market for a year or two. And even then, the new vehicles may fall short against the competition.
"Our sell rating reflects the risks of successfully implementing a sweeping turnaround in a hypercompetitive market," Jon Rogers, an auto industry analyst at Citigroup, wrote in a note to investors, explaining his firm's view why G.M.'s stock should be avoided. "The benefits of management's plan — health care concessions and lower North American capacity — do not accrue to cash flow until 2007-2008."
Shares of G.M. were trading down $1.35, , or 5.7 percent, to $22.50 early this afternoon on the New York Stock Exchange.
In a conference call with analysts and investors, G.M.'s new chief financial officer, Frederick Henderson, said the company ran into a range of problems last quarter. "There are no highlights," he said. "It was a very, very tough quarter."
G.M. blamed several factors for its deep loss. First, its market share in the United States fell by 2 percentage points, leaving G.M. with only 23.6 percent of the American market. High gasoline prices meant the sold fewer S.U.V.'s, which meant its revenue per vehicle dropped. G.M.'s costs for health care and material costs, including the price it pays for steel, rose during the quarter. It also spent much more on advertising and sales, reflecting its promotion of price cuts on three-quarters of the vehicles it sells in the United States.
"The results are logical but unacceptable," Mr. Henderson said. "The losses are very, very high."
Mr. Henderson said G.M.'s plan to cut its structural costs by $7 billion a year were a "good start." But he said the automaker would be under pressure to improve the "robustness" of its results.
Wall Street agrees with that assessment, but some analysts said the company has not really shown that it is moving aggressively to achieve such an improvement. G.M. did not provide an update on its plans for its credit unit, the General Motors Acceptance Corporation, nor did it comment on proposals by its largest individual investor, Kirk Kerkorian, who has said G.M. should stop paying a dividend, said Shelly Lombard, a bond analyst at Gimme Credit, a research firm.
"The fourth quarter was expected to be lousy and that's exactly what we got," she said. "The main thing that was missing from the call was any indication that the urgency has improved and the company."
G.M.'s 2005 loss of $8.6 billion, or $15.13 a share, was the company's largest since 1992, when it posted a $23.5 billion loss. That compares with a profit of $2.8 billion,, or $4.92 a share, in 2004. Revenue fell nearly $1 billion, to $192.6 billion, last year.
The company's fourth-quarter loss of $4.8 billion, or $8.45 a share, well exceeded its loss of $99 million, or 18 cents a share, in the comparable quarter of 2004. G.M.'s revenue for the quarter was modestly lower, at $51.2 billion, compared with $51.4 billion a year earlier. This was G.M.'s fifth consecutive quarterly loss and it included a $1.3 billion charge for severance, plant closures and other restructuring costs.
Monday, January 23, 2006
SAP CEO: German IT sector needs special treatment (Infoworld Netherlands)
Globalization is a good thing and it's here to stay, according to Henning Kagermann, chief executive officer of SAP AG. But that doesn't stop him from asking for special treatment for Germany's high-tech companies, to help them compete in world markets. High-tech companies need flexible working laws and lower non-wage labor costs, he said in a speech delivered at the German government-sponsored Informatikjahr IT conference earlier this week.
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Thursday, January 19, 2006
SAP CEO: German IT sector needs special treatment (InfoWorld)
Kagermann says globalization is good thing but German companies need help competing in world markets
Monday, January 02, 2006
The Future Of The Global Workplace (Forbes)
NEW YORK - global market for labor is changing in unprecedented ways. In developed markets, such as the U.S. and Western Europe, executives face a rapidly aging workforce and high labor costs. Meanwhile, executives in China, India and much of the rest of the developing world increasingly encounter want amid plenty, as a shortage of suitable candidates and the changes associated with the staggering pace of economic growth make it difficult for companies to attract--and retain--enough qualified workers.
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