President Obama Interview

The interview President Obama recently granted BusinessWeek.com focuses on how his Administration has been called anti-business by much of the business community. The President provides many valid arguements as to why this is an unfair assumption. Obama contends that much of the policies put in place over the last year have been done in order to provide American businesses with a stronger footing. He believes the steps that were taken were meant to break the back of the recession, put a floor under the economy and reduce a sense of panic that has grown in the United States. If one is looking for numerical facts, they can't help but agree with the President when he states that the economy was declining at a rate of 6 percent when he took office and now it is growing by 6 percent. The perception of the Administration being anti-business has also been spurred by some big issues, such as health reform, energy and financial regulatory reform. When asked if there was a specific CEO President Obama admired, he responded by mentioning Fed Ex CEO Fred Smith. The President described Smith as someone who is thinking long term and as someone who has special interests in finding a new energy policy for his company that is smart. BusinessWeek also discussed President Obama's proposed payroll tax for small business to boost hiring. According to Obama small businesses are the area where a targeted jobs credit would make the most difference. Big businesses already have more money and are in a better position to hire employees, so their decisions are based around whether or not there are enough customers out there to expand payroll. Now that the economy is starting to take a turn for the better, Obama believes a job credit can potentially speed up the decision for people who are thinking about hiring at some point. The next topic in the interview dealt with the issue of performance and pay, along with bonuses. Obama believes that the shareholders should have a chance to scrutinize the amount CEO's are getting paid, which would help align performance with pay. The President is also in favor of pay coming in the form of stock, which would require proven performance over a certain time period and is a much fairer way of measuring CEO performance. When asked about exports over the next five years, President Obama had much to say. He mentioned how his plan is to double exports over the next five years, especially with countries such as South Korea, Colombia and Panama. However, there has been different complications in getting deals completed with each of these countries. He also eluded to the well-known fact that the U.S. has gotten "it's clock cleaned" in the area of world trade over the last few years, which is why he believes what needs to be done is to align the interest of businesses, workers and the U.S. government. Another country which the President is concerned with is China, whose currency manipulation has interfered with the rebalancing of the global economy. Obama closed the interview by speaking out on marginal rates and the issue of deferrals and the multinational practice in terms of dealing with the tax code. His pro-business arguement centers around average businesses who are located in the U.S., invested in the U.S. and hire workers in the U.S.. These are the companies that are paying a 35 percent rate. Obama's goal is to level the playing field between companies investing in the United States and those who are operating overseas or across the border. Through this interview, one would have a hard time believing that the Administration has ever been viewed as anything but pro-business, however many still get this feeling. Obama and his staff believe and have said openly that they have every interest in American businesses succeeding.

How Detroit Can Gain From Toyota's Recalls

The article "How Detroit Can Gain From Toyota's Recalls", found at BusinessWeek.com, discusses how many auto companies in Detroit have the unprecedented opportunity to steal many of Toyota's customers after the Japanese carmaker was hit hard by recalls. Toyota, still a great company, will eventually recover, however this is a huge boost to automakers in Detroit.
After visiting Toyota, Ford's CEO Alan Mullaly, described the company as "the master" and later applied these same production techniques to another company of his, Boeing. Mullaly also urged Ford to create more sophisticated cars that would better Toyota's sedans. Over the past year, after Ford invested billions into the new Focus and Fiesta models, sales began to rise, while Toyota's decreased. Mullaly has also had a big impact on overall quality of the Ford brand, even garnering praise from auto editor of the magazine Consumer Report David Champion who believes Ford now has "world class reliability".
Although General Motors has improved the quality of its cars, the company must remain humble. Another added help to GM is the unveiling of the new Chevy Volt, which could give the company something to really brag about. The Volt will be four times as fuel efcient as Toyota's 2010 Prius, however Chevy will only make 10,000 of this model in 2010 as a way of establishing technological credibility among the comsumers. 2012 is the year Chevy could take the most away from Toyota Prius sales as this year marks the production of 60,000 Volts.
The third Detroit company, Chrysler, may have the hardest time prying Toyota customers away from the company due to their quality scores being extremely low. However, the Jeep brand may attract some.
The article then went on to discuss how the market share of both Ford and GM rose this past year, while Toyota's dropped. This has occured mainly because of Detroit's efforts to "woo" the Generation Y, which likes Toyota, but is less loyal than older consumers. Ford has the biggest opportunity,as it has focused on smaller, more compact cars, such as the Focus and Fiesta. However, Ford and GM aren't the only companies jockying for Toyota's customers. Companies such as Hyundai, Nissan and Honda are all ready to take advantage of the situation. As many will not forget, Toyota remains a top company in the auto industry and once the company comes out of the recall situation it can be counted on to start the comeback campaign. With Toyota employing 40, 000 Americans in six states, it has entrenched itself in the American culture. Toyota knows what type of cars Americans want and therefore the company will regain its strength sooner than later. According to Champion, "If you're going to grab market share from Toyota, you have to do it in the next nine months." If the Detroit companies find a way to convince Americans that their cars are of high qulaity and fun to drive, they just may have turned a streak of another companies bad luck into their own personal gains.

Summary: Fertile Ground For Startups

The article "Fertile Ground For Startups", found at Businessweek.com , points to the fact that the recent recession has done little to dampen the entrepreneurial spirit. Entrepreneur and business woman Caterina Fake believes "the entrepreneurial spirit really thrives in situations of adversity". This could explain the increased number of angel investors from the first half of this year compared to the same period last year. According to the article, history has shown that great companies are built during bad times. One example came in 1939, when Hewlett Packard was created at the end of the Great Depression. There are many reasons for entrepreneurs to take risks like this during hard times including the fact that everything is cheaper, there is less competition and tough times force entrepreneurs to work on their business models earlier. In the United States, startup companies are playing an extremely important role in the recovery, accounting for over 12 million jobs and 20% of U.S. gross domestic product. However, this is not just occuring in the United States, with 5 of the 25 companies listed in Businessweek being based outside of the U.S. The article also mentions how much harder it is to raise capital, take the company public and find business customers during tough times. It definitely takes a lot of knowledge and a certain entrepreneurial mindset to start a business during a recession, but it can be done.

Summary:GM Loss Reduction

The article "At GM, Loss Reduction is a Good Start" found at BusinessWeek.com, discusses how GM CEO, Frederick A. Henderson, will soon give the company's first update since emerging from bankruptcy nearly 80 days ago. According to sources close to top management, GM will show much improved third quarter earnings, although the company will still be in the red. However, even a small loss would be a positive for the same company that lost over $4.2 billion during the third quarter in 2008 and over $31 billion last year. GM's earnings and cash flows will be helped in the quarter because of the fact that the company shut down many of its plants during the bankruptcy. The factories opened again when the company emerged from bankruptcy, greatly helping earnings because car makers book revenue when the car heads off the assembly line to the dealership. Another way GM has tried to cut back costs is by setting up a Voluntary Employee Benefits Trust, or VEBA. Set up the same way a pension fund pays pension benefits, VEBA will reduce union health care costs. While GM cars had an $8,000 increase in net price, recent sales have risen and market-share losses have decreased. All of these are good signs as GM tries to recover from one of the worst recessions to ever hit the auto industry.

Essay: A Bold Plan for Chrysler

According to the article "A Bold Plan for Chrysler", found at Businessweek.com, Chrysler will once again operate at a profit in the year 2012. In order for this to happen, Chrysler must have the U.S. market grow from today's current level of about 10 million cars sold. The company also needs to revamp the design of some it's existing models. Also, Chrysler needs a fast start from its Fiat-engineered cars.
For Chrysler's recovery plan to effectively work, the company needs the U.S. market to grow from todays level of 10 million cars sold to 14.5 million cars sold. According to the article, this is a very reasonable goal to have, evidence being the 17 million cars and trucks sold in in 2000. However, I believe this goal could be a bit lofty seeing as the economy is still very weak and the job market being in an endless depression. Chrysler CEO Sergio Marchionne is also counting on stealing a part of the market share from rival companies. One may ask how the company ever plans on doing that? The solution lies in the advertising budget, where Chrysler plans to spend double what they have in the past on marketing. According to Marchionne, the company will spend $4.1 billion in advertising next year and $5.7 billion the year after that.
Another major cog to the recovery plan is retuning Chrysler's existing models and creating many new designs. By 2014, the company plans on rolling out 16 new or heavily freshened models for Dodge, Jeep, and Chrysler. New Chrysler models will be made more upscale and styled to give owners "comfort and glamour". Along with the advertising, it should give the company a fresh, new look that it desperately needs.
The final piece that would greatly enhance Chrysler's chance of success is the fast start(sales wise) from Fiat-engineered cars. The company needs to generate enough cash flow to support it's $23 billion budget. However, even if sales fall 20% below expected 2011 targets, Chrysler would still have a cash balance of $3 billion, which is the bare minimum the company would need to survive and pay its bills.
The plan is in place for Chrysler to dig it's way out of an extremely large hole, but the plan is dependent on many things going right and is very risky. However, the company needs to take chances in order for it to ever become as successful as it once was. I believe the company will be able to meet it's goals and overcome it's huge deficit. Chrysler has many powerful business minds who have been through situations like this before, which can only be beneficial in the long run.

Essay: Stuck in the Rough

The article "Stuck in the Rough" discusses why some elite golf clubs around the nation are stuck in crisis as money and memberships decline. The article mentions how the idea of the "country club" needs to be changed, focusing more on the changing needs of younger members. It also describes how country club's woes cannot be blamed solely on the economic crisis. One problem being faced by country clubs is that members are becoming younger every year. It would be wise for many clubs to cater to the ideas and needs of younger employees and members by offering a broader set of services. I believe by changing the culture of an organization, it will attract different types of people with new, fresh ideas. The article also mentions that the recent troubles faced by country clubs are not only due to the depression, but can be traced back to the early 1990's, when Congress enacted tax reforms that eliminated or reduced the ability of club members to deduct club dues as a business expense. In turn, this raised the effective cost of joining clubs and gave rise to a new type of upscale, public course. The article also points to some ways that clubs are plugging the current shortfalls. Some of the solutions include discounting initiation fees or waiving them all together and also merging with nearby clubs to reduce overhead costs. If I were the owner of a country club, I would begin by becoming more diverse by hiring a variety of employees to bring a certain flair to the club. I would also offer new programs to the club, such as yoga and different exercise classes that would widen the club's services to not only attract men, but their families as well. Every company, not just country clubs, can benefit from a more varied cultural environment.

Summary: Are Investors Ready For Higher Interest Rates?

The article "Are Investors Ready For Higher Interest Rates" discusses which direction interest rates are headed as the U.S. economy continues to grow. U.S. GDP grew by 3.5% last quarter and 10 year Treasury bonds also rose from .8% to 3.5%. According to Villanova business professor Victor Li, "At some the point the Fed needs to think about tightening monetary policy," because he believes that such low rates can overheat the economy, spark inflation and devalue the U.S. dollar. The Fed has not given many clues on what they plan to do, but there are many different opinions. Some believe the Fed will be forced to raise rates very soon, while others think the Fed will keep rates steady for many months or even years. The differing opinions are caused by different beliefs in how fast the economy will recover from the current depression. The article points to the fact that the Fed is walking a very fine line when considering interest rates because it needs to make clear that it is taking the threat seriously, at the same time it needs to make sure it does not end economic growth before it even starts. In the end it will be a wait-and-see approach, as the Fed's action will most likely follow the economy and the financial markets.