Archive | April 10, 2013

Corporate News: GE to Cut Back Trains — Pennsylvania Plant to Lose 950 Jobs, as Some Go to Texas

General Electric Co. is planning to cut 950 jobs at its plant in Pennsylvania as well as shift one-sixth of the employment to a newer facility in Texas.  These lay-offs are a result of decreased demand in North America.  Job cuts will begin in October after a 60-day period of discussion with union leaders.  The switch was also made because the plant in Texas is 20% more productive per employee than the over-100-year-old plant in Erie, PA.

GE’s competitors, like Caterpillar, the world’s biggest maker of construction and mining equipment, have also suffered from a global slump in orders or mining equipment.  Caterpillar closed a locomotive factory in London, Ontario last year.  Jobs were relocated to a factory in Muncie, Indiana, where wages are about half of those at the London plant.

Despite a 15% increase last year in revenue by GE’s transportation business, the company has suffered as locomotive sales and mining orders have dropped.

Written by: Constantine Kostikas

Source: The Wall Street Journal

Inside Trading Strikes Again

Big four company KPMG has recently been under fire for an insider trading case. The people involved with this case have been recently identified as Bryan Shaw and Scott London. London was receiving information and passing this information to Shaw, helping Shaw earn a lot of money from investing. London was also found to be trading information with someone from his golf club. Shaw and London had both admitted to the mistake and understand they do have performed in an unethical manner, while Shaw is sending out public apologies and accepting the consequences, London simply said that he would stop trading information with Shaw.

The issue of insider trading comes up yet again, it seems that there is always someone getting sued for these unethical practices. The fact that Bryan Shaw is able to admit his mistakes and suffer the consequences deserves attention. Many investors who take part in insider trading fail to acknowledge their wrong doings and instead pay a large settlement fee.

Written by: Jessica Ho
Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887324010704578415143864008814.html?mod=WSJ_hps_LEFTTopStories

Let’s Be France

Facing political scandals, a stagnant economy, and angry public reaction to investigative reports of offshore accounts, the President of France, Francois Hollande has created a position of a special prosecutor to focus on tax fraud and corruption and to get rid of tax havens. Among those tax havens is Luxembourg and it has succumbed to pressures from other European allies that made them supply information about foreign clients to their home governments. While Luxembourg has a population of only half a million people, it has a banking sector more than twenty times the size of its GDP.

This announcement from Luxembourg came after five of the biggest European countries: Britain, France, Germany, Italy and Spain agreed to exchange banking and create a tax information exchange system, modeled on the Foreign Account Tax Compliance Act, which was passed in 2010 to track assets of Americans who might be trying to avoid taxes. The European government said that this information exchange is an effort to deter tax evaders and serve as a future mold or template for future multinational agreements.

 

Written by Kevin Zhang

Source:

Jolly, Steven Erlanger And David. “Hollande Creates a French Prosecutor for Fraud and Vows to End Tax Havens.” The New York Times. The New York Times, 10 Apr. 2013. Web. 10 Apr. 2013. <http://www.nytimes.com/2013/04/11/business/global/european-countries-move-to-toughen-stance-on-tax-evasion.html&gt;.

 

Goldman Reaches Deal to Let C.E.O. Be Chairman

Well the fuzz about a new chairman for Goldman Sachs is not over. The proposal of reaching a deal with CtW Investment Group for a split the position chairman and chief executive, a proposal that was suggested in January was withdrawn. Lloyd C. Blankfein, is keeping the roles of both position. Also, the independent directors of annual meetings will increase from two to four. 

The issue of whether or not a chief executive should be chairman are affecting other banks as well, according to this article, big banks like Morgan Stanley and JP Morgan have chief executives who also serves as chairman. Also there are big banks like Citigroup and Bank of America have different people serving to their positions.

I personally think may be this is good for the company that they could save more money on salary and not as much dispute when making a decision. May be more companies will follow this tradition in the future. 

-Derby Ng

http://dealbook.nytimes.com/2013/04/10/goldman-reaches-deal-to-let-c-e-o-be-chairman/

 

Lenders Used Aid To Repay TARP

Small businesses are often the driving force of the economy. The government acknowledges this and created a program that permitted small banks to lend money to banks. More than half of the banks participating in the small-business lending program have spent half of the funds allocated to the program. Funds borrowed from it are used to repay the Troubled Asset Relief Program (TARP) that was established in 2008. Just like other programs that have been established, critics claim that this program decreases banks’ loan obligations too easily. The chairman of small-business committee, Representative Sam Graves also points out that the programs may not be able to increase lending and stimulate the economy at the same time. The nature of TARP has also changed over time. Originally, small-business funds were used to relieve banks from TARP. However, now, programs are used to increase lending.

The Obama administration claims that TARP banks have helped increased small business lending and exceeded the Congress’ expectations. The different opinions about various relief programs established for banks and small businesses have made it difficult for Congress to estimate the amount of money it would take to reduce most loans. The current projection is $37.93 billion.

 

Written By: Melody Mark

Source:

Sparshott, Jeffrey. “Lenders Used Aid To Repay TARP.” Wall Street Journal. Dow Jones & Company, 9 Apr. 2013. Web. 10 Apr. 2013.

Gold Going Bear

Gold has historically been a “safe” investment for investors during troubled times in the economy but this has not held true recently. The investment bank Goldman Sachs announced today that “gold’s prospects for the year have eroded, recommending investors close out long positions and initiate bearish bets, or shorts.” The last 6 months have shown a 12% decline in the price of gold, a trend Goldman predicts will continue throughout the second half of 2013. Portfolio management company Windham Financial Investments, reduced its holdings in gold from 15% down to zero in February.

A bear market is defined as a 20% drop or more from a peak so this precious metal has not yet been categorized as bear. Circumstances may change at any time due to the volatility of the market although gold’s consistent increase in value these past 12 years is something which cannot be overlooked. It is unlikely however that the price of gold will rebound after the weak U.S. job report last month and the new economic stimulus package in Japan.

Evan Chang

Source:

The Wall Street Journal

Yum’s China Sales Tumble 13% in March

Yum Brands, the owner of large chains such as Pizza Hut and KFC, has seen a hit in sales for their China region. A few months ago, there was an announcement concerning the quality of Yum’s chicken supplier, stating the health issues that would affect the chains. Today, it is seen that confidence has not yet been restored, and consumers remain wary of the chains. The issue is particularly poignant in the China region, as that is the main area hit. Other regions were not as affected by the news.

In order to combat this loss of confidence, Yum! has decided to boost advertising and begin new campaigns to entice customers and bring them back to their chains. Promotions are planned, and Yum! is working with Jeremy Lin. It was also noted that offering free ice cream did not help the situation.

I feel that only time can truly heal Yum’s woes, and the concerns of an outbreak of bird flu are not helping the situation. However, if the advertising is successful, even a few customers going back may be enough to assure Yum’s lost customers that the issue of chicken health is overblown.

Source:

http://www.bloomberg.com/news/2013-04-10/yum-s-china-sales-tumble-13-in-march.html

 

Mercedes Benz Expands Their Market Vision

Mercedes Benz’s parent company, Diamler AG, is expanding the range of vehicles offered in their attempt to regain majority ownership of the luxury-car market. The main competition that Mercedes-Benz tries to defeat is Bayerische Motoren Werke AG (BMW) and Audi. Their vision to gain higher sales and profit is by expanding the consumer market to not only the wealthy class but also to the younger crowd with a tighter budget. The switch may come from the sales record seen in previous years, where in 2005 BMW has taken the top sales position in luxury car along with car manufacture Audi, which has taken second spot in sales in 2011.  

Mercedes Benz introduced the product line of CLA class cars that is said to launch in the United States in September to gain attention from the younger consumer market. The Mercedes Benz CLA is set at a price point of $29,900 that undercuts BMW’s 3-Series line of car, which starts at $32,550, and Audi’s A4 model car, which starts at $32,500.

The expansion of this new line of car will offer appeal to younger consumer that will potentially regain lost market shares from BMW and Audi car companies.

Written by: Victor To

Source: http://www.bloomberg.com/news/2013-04-09/mercedes-counting-on-coupe-with-more-power-to-catch-bmw.html

Macy’s Shows J.C. Penney How to Rebuild After Johnson

Since the economic recession hit in 2008 J.C. Penney has been doing poorly compared to their competitor, Macy’s  While Macy’s is still sustaining growth, J.C. Penney is taking a slide. Ullman, the Chief Executive Officer of the company is trying to turn the company around and his first step is to decide how to change their strategy. It is apparent that Johnson, the past Chief Executive Officer’s strategy was not working, but at the same time he did bring in some positive things. Coming up with a completely new strategy to improve the company would be costly because some of Johnson’s actions actually helped improve the company in some areas so the question now is what parts of Johnson’s strategy can be changed.

Although Macy’s is one of J.C. Penney’s biggest competitors it is smart to take cues from the company considering they’re still doing great. One of the reasons why Macy’s is outperforming most of their competitors is because they have more exclusive products from more well-known brands. J.C. Penney lacks the same range of variety which is costing them a lot of potential sales. The company reported that there was a increase in sales when the stores introduced brands like Lev’s, Izod and Liz Claiborne. By adding more exclusive merchandise that other company’s lack would be a good approach to turn the company around.

Written by: Wilson Tang

Source:

http://www.bloomberg.com/news/2013-04-10/macy-s-shows-j-c-penney-how-to-rebuild-after-johnson.html

Corporate News: Chilean Copper Mines Face Cost Pressures

Chile used to be the center of copper mining. Global mining companies used to venture into the rich copper deposits high in the mountains of Chile. However as costs have rose, many companies are starting to consider new investments in places such as North America. Since Chile became the world’s largest copper-producing nation, Codelco emerged. Codelco is the Chilean state owned copper mining company. Some of the variable costs that increased in Chile are electricity and the desalination of seawater. Another huge increase in total production costs is the rise in labor while a decrease in productivity.

For all the reasons combined, many global mining companies are looking for projects in North America. The United States have comparably less wages depending on the positions, higher productivity, a lot cheaper electricity, and plenty of freshwater. The only downside to moving copper mines to the U.S. is the environmental and regulatory permitting needed. Nomura Securities analyst Patrick Jones said “It can take as many as ten years to bring a mine into production in the U.S. due to rigorous regulatory permitting process.”

URL: http://online.wsj.com/article/SB10001424127887324050304578410552224565638.html?mod=rss_canada

-Jonathan Chan

GM Tests Mobile Facebook Ad

About a year ago, General Motors Co. chose to not use the social networking website, Facebook to advertise, but recently they began a test marketing program for its Chevrolet Sonic.  General Motors Co. dropped Facebook as an advertising resource in May 2012. They intend on using a mobile advertising approach through Facebook as part of its ‘Find New Roads’ campaign. Since Facebook allows advertisers to target certain audiences with their new audience targeting tools, in which Facebook joined together with data companies that track shopper loyalty programs to tie their users to their shopping habits.  Chevrolet is only focusing on a mobile-only campaign in which using social media websites would definitely play a huge role in reaching out to their audience.

I believe that social media plays a huge role when influencing people’s decision when they are purchasing something in the market. Since Facebook is able to collect data and see what ads are unique that attracts the customer, it would hurt a company such as General Motors Co., to not use social networking as an outlet to advertise. I think that by using social networks as a connection and understanding of their customers, it can be very valuable to companies and future sales.

Written by: Samantha Chin

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323550604578413020536000146.html