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Boeing’s troubles cost the aerospace industry $4bn a quarter

The Economist - Thu, 08/22/2019 - 16:44

BOEING HAS long been a central cog of America’s industrial machine. Each year it sells $100bn-worth of aerospace equipment and services around the world and pays $45bn to other American firms. It is the world’s largest aircraft-maker and America’s largest manufacturing exporter. Its commercial jets, which account for 60% of revenues, ferry millions of passengers. One in 100 American workers toils either directly for Boeing, whose workforce numbers 137,000 in its home country, or one of its 13,600 domestic suppliers, which employ a further 1.3m people in mostly well-paid jobs. In short, what is good for Boeing is good for corporate America.

The flipside is also true, as has become obvious in the wake of two crashes of Boeing’s 737 MAX aircraft, in October and March, which have been linked to a malfunctioning flight-software system, and which killed 346 people. The human cost is immeasurable. The financial blow to Boeing itself, its suppliers and its airline customers is more tangible—and mounting.

The company has continued to churn out the troubled aircraft since its grounding by regulators in March. But it has not been able to deliver them to customers. As a result Boeing’s inventories have grown by $6bn so far this year. The flightless planes fill all free space at its facilities, including car parks. Add the knock-on...

Vodafone’s search for the G-spot

The Economist - Thu, 08/22/2019 - 16:44

THE GLOBAL telecoms boom that reached its zenith almost two decades ago was made for satire. It united two of the most intoxicating technologies of all time, the mobile phone and the internet. It generated the biggest wave of value-destroying takeovers the world had ever seen. Its apex, the £22.5bn ($35bn) sale of third-generation (3G) wireless spectrum in Britain in 2000, was such a humdinger that the boffins who devised it described it, with a Pythonesque flourish, as the most successful auction since the Praetorian Guard sold the Roman Empire to Didius Julianus in 193AD.

Vodafone, a British mobile operator active across Europe, epitomised the madness of the time. Its £112bn hostile takeover launched in 1999 of Mannesmann, a German rival, was a gripping epic that went on for months—partly against the backdrop of the Savoy Grill, a posh London eatery where both sides mercilessly skewered each other. Vodafone bid almost £6bn over 150 rounds for its British 3G licence, more than any other firm. Then came the telecoms bust of 2001, almost as abrupt as the end of Didius Julianus, whose reign lasted all of nine weeks. It still haunts Vodafone today. The company’s return on assets, in lofty double digits until 2000, has been negligible or negative every year since but one.

Vodafone’s protracted dark ages stem from a problem...

Cathay Pacific’s fate rattles multinationals in Hong Kong

The Economist - Thu, 08/22/2019 - 16:44

MULTINATIONAL COMPANIES in Hong Kong operated under the convenient illusion, nurtured by China’s Communist Party, that the mainland would not meddle (too much) in the territory’s business affairs. That faith, already shaken during weeks of political protests against the entrepot’s pro-Beijing government, is in tatters following China’s treatment of Cathay Pacific, an airline based in Hong Kong. Earlier this month China’s aviation regulator barred cabin crew found to have participated in or supported the demonstrations, which many Cathay staff openly had, from flying over the mainland. The carrier yielded to the pressure and even fired four staff, including two pilots. On August 16th it announced the departure of Rupert Hogg, chief executive since 2017. Though Mr Hogg said he was taking responsibility for what had been “challenging weeks” for the airline, China left little doubt as to the circumstances of his exit.

Businesses have a right to be rattled. The assault on Cathay is unprecedented in its speed and scope. Chinese state media shrilly denounced the company, and social media brimmed with indignant calls to boycott it. CCTV, China’s state broadcaster, reported Mr Hogg’s departure half an hour before Hong Kong’s bourse, where Cathay is listed. CCTV paired it with a Chinese internet meme that roughly translates to “You would not be...

GE finds friends on Wall Street

The Economist - Thu, 08/22/2019 - 16:44

ON AUGUST 20th credit-raters at Fitch warned of insufficient financial reserves against the costs of long-term care for buyers of insurance products at General Electric. Days earlier Harry Markopolos, an accounting investigator, alleged inadequate provisioning of reserves in GE’s insurance division and improper accounting of its Baker Hughes petroleum holdings. This, claimed the corporate sleuth, who shot to fame by uncovering Bernard Madoff’s Ponzi scheme, may dig a $38bn hole in the industrial conglomerate’s books. Its share price fell by 11% in response.

So far, so familiar. Management missteps and other stumbles have erased 70%, or $200bn, of GE’s market capitalisation since 2016. Nor did the full-throated defence of GE by its executives come as a surprise, though it took a particularly macho form when Larry Culp, its third boss in as many years, bought $3m in GE shares to show his confidence in the company. What was really surprising was the chorus of support for the struggling giant from experts, investors and analysts.

Harvey Pitt, a former chairman of America’s Securities and Exchange Commission (SEC), criticised Mr Markopolos for going public without giving his target the chance to respond to his concerns. Stanley Druckenmiller, a respected billionaire investor, praised Mr Culp’s efforts to turn around the firm...

Thomas Middelhoff reflects on failure in German business

The Economist - Thu, 08/22/2019 - 16:44

“GUILTY” IS THE title of a book presented on August 20th by Thomas Middelhoff, the former boss of Bertelsmann, a media conglomerate, once feted from Berlin to Hollywood. It is not an admission of legal guilt, for Mr Middelhoff still feels his three-year prison sentence for tax evasion and breach of trust was overly harsh. But he committed the seven deadly sins in a biblical sense, he says, which is why he feels he deserved time behind bars and the loss of his fortune, reputation, health and marriage. He wants the account of his failures to serve as a cautionary tale for businesspeople in Germany and beyond.

Mr Middelhoff’s stellar rise was unusual in staid Teutonic business culture. He climbed to the top of Bertelsmann through a combination of hard work, unwavering belief in his instincts, showmanship and an Anglo-Saxon appetite for risk. Perhaps his biggest coup was a partnership with Steve Case, who at the time was the virtually unknown boss of a struggling startup called America Online. Then known as “Big T”, Mr Middelhoff made a fortune for Bertelsmann when he sold its stake in AOL for close to €7bn ($6.7bn) in 2000, just before the dotcom bubble burst.

His reward—a bonus of €45m—was the start of the undoing of his personal finances. Greed, he says, led him to invest in dodgy real-estate funds and tax-avoidance...

What companies can learn from comedians

The Economist - Thu, 08/22/2019 - 16:44

THE SECOND CITY is the La Scala of laughs. In its 60-year history the vast comedy club on Chicago’s North Side has, by night, hosted acts by Joan Rivers, John Candy, Bill Murray and other giants of the genre. By day it offers wannabe funny folk workshops on how to make others giggle. Contemporary greats like Steve Carrell and Tina Fey are alumni. So, increasingly, are managers, marketers and a host of other corporate types.

Firms have used comedy as a way to hone their employees’ soft skills for some time. Their number is growing, reports Kelly Leonard, the club’s boss of “applied improvisation”. Its comics have worked with Twitter, Google and Facebook to find ways for brainy but tongue-tied software engineers to interact more easily with less tech-minded colleagues in sales or strategy. Companies from Motorola and McDonald’s to Nike and Nissan believe that sending executives to comedy classes can help them get better at their day jobs. In response to clients’ complaints about its able but arrogant employees, one management consultancy asked comedians to teach its clever clogs how to be less obnoxious (or at least come across as such).

Hundreds of corporate customers think jokery can encourage serious lateral thinking among workers, and get them into the habit of welcoming others’ ideas. An improv exercise called “Yes,...

Zomato says restaurant prez offers the same discounts he campaigns against

Admiral Quixote's Roundtable - Thu, 08/22/2019 - 16:05
Zomato, which initially claimed that the logout campaign was driven by vested interests, had on Wednesday made sweeping changes to its Gold programme

McDonald's row: NCLAT gives Bakshi last chance to settle dispute with Hudco

Admiral Quixote's Roundtable - Thu, 08/22/2019 - 15:55
The appellate tribunal was hearing an intervention plea by HUDCO, claiming dues of Rs 195 crore from Bakshi

Auto companies cut more jobs, halt production as India slowdown bites

Admiral Quixote's Roundtable - Thu, 08/22/2019 - 15:36
Toyota, Hyundai halt production; auto part makers Denso, Bellsonica cut 350 jobs each.

Gillette India net profit rises 32.3% at Rs 45.82 crore in June quarter

Admiral Quixote's Roundtable - Thu, 08/22/2019 - 15:10
Gillette India net profit rises 32.3% at Rs 45.82 crore in June quarter

Non-integrated steelmakers set to pay 15-20% more for iron ore from FY21

Admiral Quixote's Roundtable - Thu, 08/22/2019 - 14:20
Bereft of captive iron ore resources, the non-integrated producers bank on merchant supplies to sustain their operations

Hong Kong protests: Cathay Pacific staff speak of climate of fear

BBC News - Business - Thu, 08/22/2019 - 13:54
Employees tell the BBC they try not to talk politics at work in case colleagues are pro-Beijing.

Lupin divests its Japanese injectables business to Abu Dhabi company

Admiral Quixote's Roundtable - Thu, 08/22/2019 - 13:43
Company is looking at enhancing efficiencies in Japanese market which is facing pricing pressure

Britannia to increase prices 'marginally', optimise cost to beat slowdown

Admiral Quixote's Roundtable - Thu, 08/22/2019 - 13:15
The FMCG major said slowdown had been witnessed in the last five to six months and the period till January would 'not be easy'

Amazon eyes expansion, launches largest delivery station in Tamil Nadu

Admiral Quixote's Roundtable - Thu, 08/22/2019 - 12:48
The delivery stations enable Amazon Logistics to supplement capacity and provide flexibility to its delivery capabilities to support the growing volume of customer orders

Apple to bring three new iPhones, iPad upgrades, larger MacBook Pro

Admiral Quixote's Roundtable - Thu, 08/22/2019 - 12:37
The handsets will likely go on sale in September, contributing to fiscal fourth-quarter sales. But the real test will come in the crucial holiday season

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