Saturday, December 22, 2007

MEXICAN AUTO PARTS INDUSTRY STRUGGLING TO COMPETE GLOBALLY

Mexico is learning the same lesson that the United States did decades ago - jobs will shift to the lowest cost country that can produce the product at an acceptable quality. In the case of the United States, some of the early production jobs that left the country went to Mexico where wages were a fraction of those paid in the U.S. Today, those Mexican jobs are leaving for even lower-cost countries like China and Honduras. Mexico can seem attractive to companies with wages of $1.50 per hour, but cannot compete with Honduran wages that are less than $1.00 (74 cents for Alcoa workers in that country).

From The Chicago Tribune:

Not so long ago, Mexico floated along as a low-cost producer to the auto parts world. But now its niche is threatened by global rivals who can trump it with lower salaries or superior quality and productivity. As a result, Mexican auto parts firms keep pressing to trim costs, and Mexican workers find themselves working longer, harder and sometimes for less.

Consider Alcoa Inc.'s move into Honduras. Several years ago the Pittsburgh-based firm opened some auto parts facilities with a base wage of 74 cents an hour in that country, according to the National Labor Committee, a small New York-based group that tracks workers' conditions globally. That compares with Alcoa's auto parts operations in Ciudad Acuna, Mexico, where workers' average weekly salaries and other benefits for a 48-hour week come to $76.22, according to company spokesman Kevin Lowery.

Sunday, December 16, 2007

CRISIS MANAGEMENT LESSONS FROM THE NFL

In September, the New England Patriots were fined $250,000, head coach Bill Belichick $500,000, and the team lost a first-round draft pick in the upcoming draft as penalties for videotaping the New York Jets sideline signals from coaches, a clear violation of National Football League rules.

The NFL required the Patriots to submit all videotapes (from the Jets game and anyt other game in which they had violated the taping rules) to the league office.  Within days of receiving the tapes, the NFL destroyed all of the tapes.  Why?  Why destroy the tapes unless something damaging, such as tapes of playoff and Superbowl opponents, was on them?  That is a question that is leading to a bit of a scandal, and quite possibly a full-blown crisis for the NFL.

Every business, and make not mistake, the NFL is a business, will encounter crisis at some point.  Many are handled well (Tylenol), many are not (Firestone).  Crisis consultants are available to guide businesses through crisis situations, minimizing the damage and helping the firms move past the the crisis as soon as possible.

The New York Times has an outstanding article regarding this NFL scandal that includes comments from crisis management experts.  Here are some excerpts:

Greg Wilson, a crisis counselor and senior vice president at Levick Strategic Communications in Washington, said: “They’re rolling the dice that the whole thing is just going to go away. And here’s the thing — a lot of this could be avoided.”

Wilson sees a crisis that requires managing, a “clear-cut case of all the parties needing to rip off the Band-Aid as soon as possible.” The goal of managing any crisis, he said, is to acknowledge the black eye and compress the time it lasts.

Wilson says the American public generally wants to hear what he calls the Big Three of crisis management: I am sorry. I take responsibility. And I will fix it.

He recommended that the league respond with more transparency, explaining in detail what the tapes contained and why they were destroyed.

“When you destroy evidence, most people assume guilt,” Wilson said. “The N.F.L. is cashing in on its trust bank. They can weather the storm, but they are stringing it out longer than most companies or people can afford to.”

Tortorella points to the N.B.A. in comparison. When the referee scandal surfaced earlier this year, Commissioner David Stern went on national television and gave a sincere-sounding apology. In these different reactions, Tortorella said the N.B.A. came down on its crisis like a “ton of bricks” — the N.F.L. like a “ton of feathers.”

“Roger Goodell learned what Richard Nixon did not,” Tortorella said. “If the tapes are destroyed, you keep your job.”

The N.F.L. said the Patriots signed a statement that the league was in possession of the only copies of the evidence, all of which have been destroyed. Tortorella said they should not be so sure.

“That might come back to haunt them,” he said. “I know this: nobody ever makes one Xerox copy. Nobody ever makes one tape. Nobody ever makes one set of anything. Based on that, I’m not sure this crisis is over yet.”

Tortorella said what surprised him most was how little scrutiny resulted from the destruction of the tapes. (Gregg Easterbrook of espn.com looked into the issue in September.)

Tortorella said between Spygate and the Michael Vick dogfighting case — a crisis that experts said Goodell managed superbly — “the league gets two black eyes, but neither belongs to him.” Wilson dismissed the Vick scandal as an N.F.L. crisis, but added to the list the health problems retired players are experiencing.

“The problem is the Patriots keep winning,” Wilson said. “That is both a blessing and a curse. By winning, they are vindicating themselves, showing this whole Spygate thing did not matter. But they are also shining a spotlight, over and over again, on what happened earlier this season.

“Spygate will be the biggest story if they win the Super Bowl.”

The Patriots’ perfect season so far, and the taping controversy, have made football fans only care more about the team, said David Carter, the executive director of the Sports Business Institute at the University of Southern California.

“Love them or hate them, you care,” Carter said. “Some people think they represent everything wrong with sports. The N.F.L. walks a fine line here. A certain amount of controversy is helpful. But if it looks like they are not coming down hard enough, they undermine the very credibility they are hoping to promote.”

LETTERMAN SEEKS DEAL WITH HIS WRITERS

David Letterman is seeking a deal with writers to put his show back on the air before his competitors.

From The New York Times:
In what may be the first break in the entertainment writers’ strike, David Letterman is pursuing a deal with the Writers Guild of America that would allow his late-night show on CBS to return to the air in early January with the usual complement of material from his writers, even if the strike is still continuing.

Executives from Mr. Letterman’s production company said Saturday that they were hopeful they would have an interim agreement in place with the guild as early as this week. That could potentially put Mr. Letterman at an enormous advantage over most of his late-night colleagues.

Thursday, December 13, 2007

MICROSOFT HIT WITH ANOTHER EU ANTITRUST SUIT

This post mixes news with my opinion.  I welcome the thoughts and opinions of others.

From PC World:

Opera [browser company] is asking the [European] Commission, the executive branch of the European Union, to force Microsoft to unbundle IE from Windows, or include other browsers as a standard part of its operating system. It also wants it to require Microsoft to adhere to industry standards with its Web browser.

The issue of standards is seen as important because if all Web browsers do not use the same standards, Web site developers are likely to design their Web sites to work with the most widely-used browser, which is Internet Explorer. That gives people a disincentive to use other browsers.

"By tying its Internet Explorer product to its monopoly Windows operating system and refusing to faithfully implement industry accepted open standards, Microsoft deprives consumers of a real choice in internet browsers. Browsers are the gateway to the internet. Microsoft seeks to control this gateway," said Thomas Vinje, speaking for ECIS [European Committee for Interoperable Systems].

Let's review.  

  1. Microsoft has created the world's most popular browser.
  2. Opera has created a competing browser that is preferred by a few users and has a tiny market share. 
  3. Opera has sued Microsoft in the E.U. claiming that (1) bundling IE with an operating system is unfair and (2) that Microsoft should be FORCED to use "standards" spelled out by others in the creation of their product.
  4. The ECIS spokesperson claims that consumers are being denied a choice of browsers.

The implications of points one and two should be obvious to everyone; Microsoft is the big market share winner, Opera cannot compete in a free market, so Opera goes crying to the European courts for help and protection.  I have an idea.  Why don't they invest the time and money they will spend on this suit creating a better browser that can compete more favorably with Internet Explorer?

As for points three and four, who believes that any company should be forced to adhere to other's "standards" in creation of their product?  It is absurd and would crush the creativity it is supposedly designed to protect.  Microsoft, along with any other company, should be free to design its software any way it chooses.  If users and designers do not like it, they will avoid it and choose another product.  The ECIS spokesperson is way off base.  Consumers are not being denied a choice of browsers.  How do I know?  Well, as I write this, I'm using Apple's Safari browser on my Microsoft Windows Vista computer.  And, in other window, I'm running Firefox.  And, yes, I do have Internet Explorer and Opera installed, as well.  I use each browser for different tasks.

You have to question the motive and sincerity of anyone who would suggest that consumers are being denied a choice when Safari, Firefox, and Opera are all free and easy to download and install.  While you are at it, question the motive of a company that files a lawsuit because it is unsuccessful in competing in a free and open market.

BUSINESS NEWS IN BRIEF

NOVEMBER RETAIL SALES UP 1.2% - Reuters
Sales at retailers posted a much stronger-than-expected 1.2 percent rise in November, government data showed on Thursday, as holiday shoppers coped with high energy costs and the fallout from a housing slump.

Excluding autos, retail sales gained 1.8 percent, the Commerce Department said.


ILLINOIS INVESTIGATING COUNTRYWIDE FINANCIAL - The New York Times

The Illinois attorney general is investigating the home loan unit of Countrywide Financial as part of the state’s expanding inquiry into dubious lending practices that have trapped borrowers in high-cost mortgages they can no longer afford.

The inquiry follows an investigation by Ms. Madigan’s office into One Source Mortgage, a Chicago mortgage broker that recently closed its doors. Ms. Madigan sued One Source on Nov. 27, contending that the company misled borrowers by promising low rates on mortgages without advising them that their payments would jump sharply shortly after the loans were made. Countrywide was One Source’s primary lender, according to the lawsuit.



PRODUCER PRICE INDEX JUMPS 3.2% - Reuters
Producer prices surged 3.2 percent in November, the biggest rise in 34 years, on a record rise in gasoline prices, the Labor Department said on Thursday.

Excluding food and energy prices, the producer price index rose an unexpectedly large 0.4 percent, the heftiest gain since February, the report showed. When cars and light trucks also were stripped out, core producer prices rose 0.1 percent.


CONGRESS VOTES TO MOVE RETIREMENT FOR AIRLINE PILOTS TO 65 - USA Today

The Senate approved a measure late Wednesday allowing airline pilots to continue flying past age 60.

Final passage of the bill first approved unanimously on Tuesday by the House answers pleas by older pilots who have lost their pensions because of airline bankruptcies. The bill now awaits President Bush's signature.



STATE INTERESTED IN BUYING WRIGLEY FIELD - Chicago Tribune
City and state officials have had discussions with Cubs executives about possibly selling historic Wrigley Field to a state government entity that currently owns and operates the White Sox's home, U.S. Cellular Field, sources close to the Cubs told the Tribune.

The talks with state and city officials centered on selling the 93-year-old facility to the Illinois Sports Facilities Authority, the government unit the Illinois General Assembly created in 1987 for the purpose of building new Comiskey Park, now U.S. Cellular Field.

SLOW, STEADY APPRECIATION OF CHINESE YUAN CONTINUES

U.S. Treasury Secretary Henry Paulson wrapped up his now twice yearly meetings with Chinese officials yesterday. Some progress regarding the appreciation of the Chinese currency, the yuan, and food and product safety for Chinese exports to the United States seems to have been made.

From Reuters:

"The Chinese recognize growing inflationary pressures in their economy and that a more flexible currency expands their ability to use monetary policy to stabilize their economy," Paulson said at a closing news conference.

China's central bank, which keeps the currency on a tight leash, let the yuan rise on Thursday to its highest level since it was revalued and depegged from the dollar in July 2005. The bank is battling inflation of 6.9 percent, an 11-year high.

A highlight of the talks was an agreement to increase safety standards for Chinese food and product exports to U.S. markets -- a highly sensitive topic after millions of Chinese-made toys were recalled and American indignity over tainted food and pharmaceuticals from China ran high.
I find it interesting that Paulson is stating that the Chinese recognize that a flexible currency allows them to better fight inflationary pressures. That is a concept that freshman business students seem to grasp, so I would hope that one of the world's economic powers understands it. They have tried fixing prices on some goods and raising the bank reserve rate to slow inflation. When will they try the more economically sound principle of a flexible currency?

As for the increase in safety standards for Chinese food and other products that are exported to the United States, there was plenty of room for improvement. We will have to wait and see if the reports of unsafe Chinese products decrease.

Wednesday, December 12, 2007

CUBS EXPECTED TO FETCH $1 BILLION IN 2008

The Cubs have announced that they expect to complete the sale of the team in the first half of 2008 and plan to use the proceeds to pay down some debt and complete the $8.2 billion buyout from Chicago billionaire Sam Zell.

From Reuters via MSNBC:

Publisher and broadcaster Tribune Co said on Wednesday it now expects to complete the sale of the Chicago Cubs baseball team, Wrigley Field and other assets in the first half of 2008.

Analysts believe the assets, which include a stake in sports cable TV network [Comcast] SportsNet Chicago, could attract bids topping $1 billion.

TRADE DEFICIT RISES EVEN AS EXPORTS INCREASE

From AP via MSNBC:

The U.S. trade deficit rose to the highest level in three months, with record oil prices and a flood of toys and other imports from China swamping a solid gain in American exports.

The Commerce Department reported Wednesday that the deficit for October increased to $57.8 billion, the highest level since July and 1.2 percent above the September imbalance.

The widening deficit was slightly worse than expected and occurred even though U.S. exports of goods and services rose for an eighth consecutive month, climbing 0.9 percent to an all-time high of $141.7 billion. This gain was offset by a 1 percent rise in imports to $199.5 billion, also a record, as a surge in global oil prices sent America’s oil bill soaring.