NEWS,03.02.2013

Fiat boss eyes Chrysler merger in 2014

Fiat boss Sergio Marchionne said Sunday that he expected the merger of the Italian car giant and its US partner Chrysler will take place in 2014."We will succeed in doing it," he said in an interview with the editor of the Repubblica newspaper. "We and VEBA (the United Auto Workers pension fund a Chrysler shareholder) have different opinions on the value of Chrysler but we will resolve the problem in 2014."Macchione, who heads both companies, had said on January 30 that the ties between the two automakers were "irreversible" and would merge "as soon as I can afford it" but did not put date on the merger.Asked on Sunday if Fiat would keep its Turin headquarters Macchione said: "We are a big group present throughout the world, it will depend on access to financial markets and the choices of the Agnelli family" who founded Fiat.He had "not thought" about the future name of the new entity, he said.The deal will ultimately give Fiat a 65% stake in Chrysler and full ownership by 2015.Boosted by increased sales at Chrysler, the Italian giant on Wednesday reported a profitable 2012, announcing a fourth quarter net profit that rose to €388m from €265m the year before.The company said it was aiming for profits of between €1.2bn and €1.5bn this year.Fiat took a 20% stake in Chrysler in 2009 as the third largest US automaker emerged from a government-financed restructuring under bankruptcy protection.It has since steadily expanded its stake by purchasing shares owned by the US government and the VEBA fund.

Starbucks tax offer too little, too late

Despite pledging to pay millions of pounds in extra tax in Britain, Starbucks faces a battle to restore its reputation over its fiscal stance, with analysts saying the offer is "too little too late".With 760 Starbucks outlets dotting Britain, coffee lovers need not travel far to find the familiar green signage and grab a frothy latte or a flat white.But surveys suggest British consumers may be losing appetite for the US chain following the revelation last year that it has paid just £8.6m in British corporation tax since 1998, despite generating £3 billion in revenues.The revelations sparked a stream of negative publicity plus protests outside coffee shops which analysts say hit the brand hard, though Starbucks itself insists "UK customers have remained loyal".Under the weight of pressure from lawmakers and consumers, the company pledged in December to pay an additional £20m in corporation tax over two years.But Sarah Murphy, director of market researchers YouGov BrandIndex, said the offer "has done little to slow down negative sentiment surrounding the brand."BrandIndex has tracked public perception of the coffee giant over several months. Its "Buzz" index gives companies a score based on what people have been hearing about the brand, with zero representing equal levels of positive and negative.In early October Starbucks' Buzz score stood at +1.9, but this plummeted to -28.4 following the tax headlines, and reached -45.2 in mid-December."That was quite a significant decline," said Murphy, adding that measures of perceptions of Starbucks' quality and value also sank during that time.In November, Britain's parliamentary accounts committee grilled top executives from Google, Amazon and Starbucks over their tax affairs.The apparent peak in negativity surrounding Starbucks in December came after the committee's chairman Margaret Hodge slammed companies involved in tax avoidance schemes as "totally immoral".Since then, Murphy says the brand "does seem to be making a slow recovery", but that the company "did too little too late."Social media agency Yomego identified similar patterns. It tracked online conversation over the same period and found negative comments about Starbucks increasingly outweighed positive.Some 95% of comments on Starbucks UK's Facebook and Twitter pages made reference to tax evasion, analysts said.Yomego managing director Steve Richards said: "The outrage over tax avoidance can't help but have an impact on a company's reputation in social channels."The old adage that 'bad news travels fast' has never been more true. Now news has so many channels to travel through, with the potential to multiply as people comment on and share stories."But does negative chatter cause consumers to shop elsewhere?Restaurant manager Julia Stypik said she's "not a huge fan of Starbucks... There's much better coffee and plenty of competitors."However this did not stop her frequenting a busy London branch of the chain one lunch-hour.On the tax issue, she told AFP: "I think they have been very clever but this should end at some point. It's unfair. Everyone has to pay taxes. "Some critics argue Starbucks is being unfairly targeted; Britain needs to tighten up on loopholes which allow companies to pay less corporation tax by moving profits abroad. Starbucks has acknowledged paying no corporation tax for three years on sales worth £400m owing to fees paid to other parts of its business. Executives insist its British division is unprofitable.Despite operating within the law, the multinational has borne fierce criticism from lawmakers, including Prime Minister David Cameron who told the World Economic Forum in Davos last month that tax-avoiding companies must "wake up and smell the coffee".The swipe was ill-received by Starbucks, according to the Sunday Telegraph which claimed it threatened to pull £100m of British investment, though a source close to the company told AFP "no threat was made".A Starbucks spokesperson said: "Starbucks agrees with the prime minister that all businesses should pay their fair share."In the UK, we employ 9 000 people, contribute £300m a year to the economy and are foregoing tax deductions that will make the Exchequer at least £20m better off."Starbucks says it remains "fully committed" to opening 300 new stores and creating 5 000 new jobs by 2016.

Kuwait growth to slow - report

Oil-driven economic growth in the Gulf state of Kuwait is forecast to slow down this year and in 2014 as crude output is expected to remain flat, the National Bank of Kuwait said in a report Sunday.After Gross Domestic Product (GDP) grew by a healthy 6.1% in real terms last year, thanks to continued strong oil income, it is forecast to drop to 3.2% in 2013 and to 2.5% in 2014, NBK said.Following a massive contraction of around 8% in 2009 due to the impact of the global financial crisis, Kuwait's economy gradually rebounded to grow by around 8% in 2011 as oil output and price remained high.Oil income in the OPEC member contributes an average of 95% to public revenues. Kuwait ended the past 13 fiscal years in the black and is forecast to post a huge budget surplus in the current fiscal year which ends on March 31.Oil GDP, which grew by 15% and 10% in 2011 and 2012 respectively, is expected to remain flat this year and contract by around 1.5% in 2014, according to the NBK report.But the bank revised upward expected non-oil GDP growth from 4% to 5% this year based on signs of greater determination by the authorities to implement large infrastructure projects.Most projects under a $110bn four-year development plan, that runs until 2014, have been stalled because of a political crisis in the emirate.The opposition has staged protests to demand the dissolution of parliament elected last month on the basis of an electoral law that was amended by the emir, claiming that the change is illegal and aimed at electing a rubber stamp body.But over the past few months, authorities either signed or gave the green light for mega projects worth around $40bn, mostly in the oil and power sectors.Inflation this year and next is expected to remain moderate at between 3-4%.Kuwait says it sits on around 10% of global oil reserves and pumps around 3.0 million barrels per day. It is estimated to have $400bn in foreign assets run by the sovereign wealth fund.The emirate has a native population of 1.2 million in addition to 2.6 million foreigners, mostly Asians and Arabs.

China's shortage threatens economy

China's demographic timebomb is ticking much louder with the first fall in its labour pool for decades, analysts say, highlighting the risk that the country grows old before it grows rich.The abundant supply of cheap workers in the world's most populous nation has created unprecedented cost efficiencies that underpinned its blistering economic expansion over the past 35 years, propelling the global economy forward.But now the inexorable consequences of the one-child policy imposed in the late 1970s are beginning to appear, and threaten to impact its future growth.China's working-age population, defined as 15-59, fell 3.45 million last year, official data showed earlier this month the first decline since 1963, after tens of millions died in a famine caused by the Great Leap Forward.The immediate effect may be small in a nation of 1.35 billion people, but the cumulative effects will accelerate over the coming decades.The number of people aged between 15 and 64 will drop by around 40 million between 2014 and 2030, said Wang Guangzhou, a researcher with the Chinese Academy of Social Sciences (CASS), a government think-tank --more than Poland's entire population."The population is aging so fast that we are running short of time to deal with it," said Li Jun, also of CASS, adding the family planning policy had exacerbated the problem.China's proportion of over-65-year-olds is projected to double from seven to 14% over only 26 years a key demographic measure that took the United States 69 years to complete."Undoubtedly it will substantially slow down China's potential growth rate," Yao Wei, an economist with Societe Generale in Hong Kong, told AFP.An ageing population not only means fewer people available to employ and higher labour costs, but investment a key driver of China's growth will be harder to maintain as families spend their savings on health care, she said.Chinese authorities maintain that controlling its population growth has been key to increasing its prosperity.But while China has risen to become the world's second-largest economy, on a per capita basis it still lags far behind the US and other developed countries.Industrial disputes have become more common in recent years, as workers demand higher pay and better working conditions on the back of growing awareness of their rights and the shortage of skilled staff.Multinational companies are looking to other developing economies with lower wages for further expansion, with some already moving production bases out of China to rivals such as Indonesia and Vietnam.In a survey of 514 Japanese manufacturers by the Japan Bank for International Cooperation last year, the number of respondents voting China as the top destination for overseas business fell by more than 10 percentage points on 2011.Economists said China must look to speed up the transformation of its economic model and move up the value chain.The golden period of the manufacturing industry, particularly those depending on exports, has gone," said Yao.At the same time, she said, the country was woefully underprepared to meet the burden of caring for the elderly."The fiscal situation is not prepared and the social security network is not complete," she said.By around 2060, every three Chinese workers will have to support two people above 60, compared with a ratio of five to one now, according to Li's projections.It is a crucial challenge for the ruling Communist Party, said Ren Xianfang, a Beijing-based analyst with research firm IHS Global Insight."Delivering growth and delivering social security to the general public are the key things for the state to (maintain) its legitimacy."Analysts said the medical services are increasingly expensive and hard to access, while the country's flagship public pension plans are crippled by problems including insolvency risks, difficulties in expanding coverage and mismanagement.A rural areas programme was introduced in 2009 to provide people from the countryside with their first ever state-subsided retirement scheme, but its payouts are particularly meagre in many areas as low as 55 yuan ($9) a month.The husband of Du Wenlan, a farmer from Chongqing, gets 80 yuan a month from the plan. She only buys new clothes once every three years, she said, and tries to save money by diluting their rice porridge."What can 80 yuan do?" she asked.On the streets of Beijing, Su Xu, 30, who works for a cosmetics company, told AFP: "I panic when I think about my retirement."

Why 'A players' matter

It's All About Who You Hire, How They Lead... and Other Essential Advice from a Self-Made Leader by Morton L MandelTHIS is an unusual book on leadership.It is the distilled wisdom of an American businessman and philanthropist, but that in itself is not unusual as there are literally thousands of books of this kind.There are three facts that make this book unusual. First, Mandel was described by the business guru, Peter Drucker, in a Forbes magazine article as one of the three businessmen he admired most. (The other two were Jack Welsh of General Electric and Andy Grove of Intel.)Second, his company, Premier Industrial Corporation, was the lead anecdote in a Business Week cover story on customer service, and superlative customer service is always the result of a business that is well managed.Finally, Mandel is a self-made dollar billionaire; his is a genuine story of rags to riches.The title of the book, “It is all about who you hire" encapsulates much of its wisdom. Great leaders have always had an undue impact on the organisations they lead, whether the organisation is a non-profit, a for-profit or a country.This position has led to Mandel insisting that only “A players” occupy leadership positions in his own companies, and in the many public benefit organisations he served and those he established with his own wealth.In a conversation with Mandel, Drucker asserted that you must always put your very best person into your greatest opportunity. When Mandel countered with the question: what if your best person is dentist and your greatest opportunity is a brass foundry, Drucker replied that the best person would fast realise what he could not do and fast find the right person to do it.This begs the question  what is an “A player?” Mandel has five criteria: intellect, values, passion, work ethic, and experience in this order.The complexity of modern business requires its leader to have intellectual firepower, that ability to analyse facts correctly, interrogate situations cleverly, apply thoughtful judgement, and make good decisions.Fortunately, there are many ways to see a person’s intellect and Mandel favours school and university grades because they are taken over long periods and therefore are more reliable than a quick test or flash of brilliance in an interview. Values are harder to discern, but how a candidate talks about their parents, teacher and role models does provide clues.Intellect and values without passion won’t get results you require from the leader. Passion, unlike values, is much easier to discern because you can feel it, hear, it see it. If you can feel it, so will the leader’s staff.The work ethic Mandel is referring to is not only the capacity to work long and work hard, but the way you engage with your work. The work ethic is the belief that work goes a long way in defining oneself.Experience comes last on this list of what you look for when you hire an “A player” because you can help an incumbent to have the relevant experience if he has the other four ingredients.“A players” will need to be paid well, but this is always a small investment for the type of return they are able create. A greater problem is keeping them; they will not stay long in a company or organisation which does not have a rich, deep and ethical culture.A deeply ethical culture is the created and maintained only through diligently enforcing and reinforcing ethical behaviour between staff, and between the company and its suppliers and customers. It requires the establishing codes of conduct that are taken seriously, and never giving in to the temptation to compromise even if the cost is high.Mandel recalls a hugely valuable deal his firm had worked hard to close. When it was secured, the representative of the customer company explained that a 5% consideration was required a veiled request for a “side payment.”There was no discussion as to whether Mandel’s company should accede to the request, so clear were the company's values to all. They don’t engage in dishonest practices, no matter the cost, so the deal was declined.The style of management practised and promoted by Mandel is the polar opposite of the laissez faire type, where the CEO hires his leaders and releases them to do as they will. It is also not a command and control style.Mandel stays on top of all issues to provide guidance and assistance so that both the decisions and the execution are superb.The managers we want out of our way are invariably the managers who we do not respect. These are not managers who are helping you to do your best work; rather, they want you to blindly execute their will.One of the techniques to achieve your personal best in your private life as well as your career is the “Factsbook.” This is a three-ring binder that every leader at every level has that contains minutes of every meeting you have with your manager, all your assignments, your progress in these assignments, and even a schedule of your meetings for the year.At the beginning of each meeting the notes from the last meeting are read aloud to the manager. This seemingly odd practice is of enormous value in keeping responsibilities clear and ensuring they are fulfilled. Consider this: how many times have decisions you and a staff member agreed should be done, not been carried out? Then read the chapter on Factbooks and start using them.The book covers a wide array of thoughts ranging from uncommonly high commitment to satisfying a customer to what to watch out for in mergers or acquisitions. Many of the lessons were learned from Mandel’s successes, but equally from failures or missteps. What Mandel stresses, as seen from having been there, is that there is no difference between running a for-profit and a not-for-profit organisation. The only difference is the measures of success.This book will enlighten you, remind you of things you already know, but perhaps don’t practice, and give you a perspective on doing business successfully. The approach works. Mandel proved it.