Saturday, April 26, 2008
Wednesday, April 23, 2008
Cost Cutting
Refer to the article
http://www.boston.com/business/markets/articles/2008/02/20/wal_mart_gains_after_refocusing_on_cost_cutting/
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Article Review
According to the article, Wal-Mart successfully lifted its profits after undertaking cost cutting measures. I agree that cost cutting can maximise profits since Total Revenue-Total Costs = Profits. However, there are limitations to the effectiveness of cost cutting depending on different circumstances.
This strategy may work for one individual company. But when every company does it, it may not work out.
Cost cutting not only reduces the cost of production but also reduces demand. When cost is cut, the income of employees being a factor of production, may be cut as well. When every company does this, generally there will be a fall in income, causing people to have less money to spend. Hence, consumers buy less and the hope for increase in demand evaporates. Cost cutting becomes self-defeating.
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I shall end off with some JOKES ! If our imba teacher Mr Ho is unable to enlighten you why studying economics is important, perhaps i can ! Have a good laugh [[:
Reasons for Studying Economics
{Reference: www.etla.fi/pkm/Jokec.html}
1. Economists are armed and dangerous: "Watch out for our invisible hands."
2. Economists can supply it on demand.
3. You can talk about money without every having to make any.
4. When you are in the unemployment line, at least you will know why you are there.
5. If you rearrange the letters in "ECONOMICS", you get "COMIC NOSE".
6. Although ethics teaches that virtue is its own reward, in economics we get taught that reward is its own virtue.
7. When you get drunk, you can tell everyone that you are just researching the law of diminishing marginal utility.
Personally, i like number 3 the most. Thats all ! Thanks for reading [:
-IRENE the model pupil !
Sustained oil prices could bring Canada close to recession: EDC
source: http://www.canada.com/vancouversun/news/story.html?id=a0068899-6ac9-4552-8499-b814131e0534&k=38003
TORONTO - Bubbling oil prices need to burst, and soon, to prevent Canada's export sector from dragging the economy to the brink of recession, Canada's export credit agency said today.
"Exports in Canada are in recession, there's no question about that," Peter Hall, vice-president and deputy chief economist at Export Development Canada, said in an interview.
He said export prospects would remain dim as the impact of a protracted U.S. economic slowdown intensified across the globe.
"We've got 50 per cent of the world economy, even more, in the euro-zone, U.S. and Japan, altogether that are undergoing a significant slowing now. It's already happening," he said.
Hall said strength in the domestic side of the economy, which accounts for about 60 per cent of economic growth, should help Canada hold its head above water in 2008. However, with Canadian exports losing ground in the U.S. market, which accounts for 76 per cent of merchandise exports, as well as emerging weakness in other parts of the globe, exports were forecast to drag economic growth down to a painfully low one per cent this year.
The forecast puts the Canadian economy's performance at the bottom of the global list, sinking below that of the beleaguered U.S. Hall said the U.S. government's fiscal stimulus package would help the world's largest economy skirt past recession and post growth of 1.3 per cent this year.
The growth projections may seem dire, but the situation could be worse if energy prices fail to ease.
The EDC's forecasts are based on light crude averaging $82 US a barrel in 2008 and $68 in 2009. Hall said he expects oil to trade at $70 a barrel at the end of 2008. That's close to $50 less than Tuesday's intra-day record of $119.90 a barrel. But it's a far cry from the $50 a barrel oil traded for at the beginning of 2007.
"This is a bubble. Bubbles don't deflate - they pop. We just don't know when," he said, adding that oil had risen higher than he expected.
Hall said economic fundamentals showed the slowing global economy cannot sustain oil prices at the current levels. Furthermore, he believed the use of oil as a hedge against U.S. dollar weakness would unwind as slower growth drives a flight to safe-haven U.S. dollars.
"Demand and supply fundamentals just don't tell us that those prices should be the way they are right now," he said. "When world markets become convinced that this is truly a global thing, the flight to quality money is going to end up back in the U.S., and that will boost the dollar, so we're looking at that as an antidote to these currency hedge movements."
Meanwhile, Hall said food prices would continue to rise, and were already driving growth in Canada's agricultural-linked sectors.
The EDC predicts fertilizer exports to rise 31 per cent in 2008, with agricultural food up five per cent. Energy exports, despite expectations of lower prices, were expected to see a pickup in volume to rise nine per cent this year. However, consumer goods exports were tipped to fall 11 per cent, motor vehicle parts to decline nine per cent, and forestry to slip a further three per cent.
-
Canada facing a possible recession could be due to the fall in demand of oil. The cause? Probably the expectations of the drop in oil prices. Oil is one of Canada's major exports, maybe that is why they are facing the risk of recession now.
The article also stated that it was the effect of U.S economic slowdown. A decrease in average income.. and since the U.S is one of the countries where Canada exports their goods to, this accounts for the fall in demand. The exports are normal goods, thus when income falls, demand for these normal goods fall as well.
So, since prices are expected to drop in the near future, maybe at that time, the demand for these goods would increase..
-xing yi
TORONTO - Bubbling oil prices need to burst, and soon, to prevent Canada's export sector from dragging the economy to the brink of recession, Canada's export credit agency said today.
"Exports in Canada are in recession, there's no question about that," Peter Hall, vice-president and deputy chief economist at Export Development Canada, said in an interview.
He said export prospects would remain dim as the impact of a protracted U.S. economic slowdown intensified across the globe.
"We've got 50 per cent of the world economy, even more, in the euro-zone, U.S. and Japan, altogether that are undergoing a significant slowing now. It's already happening," he said.
Hall said strength in the domestic side of the economy, which accounts for about 60 per cent of economic growth, should help Canada hold its head above water in 2008. However, with Canadian exports losing ground in the U.S. market, which accounts for 76 per cent of merchandise exports, as well as emerging weakness in other parts of the globe, exports were forecast to drag economic growth down to a painfully low one per cent this year.
The forecast puts the Canadian economy's performance at the bottom of the global list, sinking below that of the beleaguered U.S. Hall said the U.S. government's fiscal stimulus package would help the world's largest economy skirt past recession and post growth of 1.3 per cent this year.
The growth projections may seem dire, but the situation could be worse if energy prices fail to ease.
The EDC's forecasts are based on light crude averaging $82 US a barrel in 2008 and $68 in 2009. Hall said he expects oil to trade at $70 a barrel at the end of 2008. That's close to $50 less than Tuesday's intra-day record of $119.90 a barrel. But it's a far cry from the $50 a barrel oil traded for at the beginning of 2007.
"This is a bubble. Bubbles don't deflate - they pop. We just don't know when," he said, adding that oil had risen higher than he expected.
Hall said economic fundamentals showed the slowing global economy cannot sustain oil prices at the current levels. Furthermore, he believed the use of oil as a hedge against U.S. dollar weakness would unwind as slower growth drives a flight to safe-haven U.S. dollars.
"Demand and supply fundamentals just don't tell us that those prices should be the way they are right now," he said. "When world markets become convinced that this is truly a global thing, the flight to quality money is going to end up back in the U.S., and that will boost the dollar, so we're looking at that as an antidote to these currency hedge movements."
Meanwhile, Hall said food prices would continue to rise, and were already driving growth in Canada's agricultural-linked sectors.
The EDC predicts fertilizer exports to rise 31 per cent in 2008, with agricultural food up five per cent. Energy exports, despite expectations of lower prices, were expected to see a pickup in volume to rise nine per cent this year. However, consumer goods exports were tipped to fall 11 per cent, motor vehicle parts to decline nine per cent, and forestry to slip a further three per cent.
-
Canada facing a possible recession could be due to the fall in demand of oil. The cause? Probably the expectations of the drop in oil prices. Oil is one of Canada's major exports, maybe that is why they are facing the risk of recession now.
The article also stated that it was the effect of U.S economic slowdown. A decrease in average income.. and since the U.S is one of the countries where Canada exports their goods to, this accounts for the fall in demand. The exports are normal goods, thus when income falls, demand for these normal goods fall as well.
So, since prices are expected to drop in the near future, maybe at that time, the demand for these goods would increase..
-xing yi
http://www.forbes.com/markets/2008/04/22/home-prices-sales-markets-equity-cx_md_0422markets13.html it
U.S. Home Prices Tumble
Artcle review
It is reported that sales of existing homes in the US fell by 2% in March from the month before. Compared to a year ago, US’s house prices has dropped about 7.7% Joseph A. LaVorgna, chief economist at Standard & Poor's said in a note to investors Tuesday that falling home prices aren't such a bad thing, "On one hand they are causing negative wealth effects and forcing some new mortgages underwater; but on the other hand, this is a necessary, albeit unpleasant, prescription for restimulating housing demand," he said. This is true as falling prices will lead to a higher demand demanded for the houses in the USA in the future. On the other hand I feel that the falling prices will not stop due to the current world trend of rising gas and food prices. This has clearly affected consumer's confidence which drive the market. Also i would like to point out that USA is currently undergoing depreciation of the US dollar consumers will as a result postpone their plans to purchase houses until they feel economically secure and confident.
TAN ZI JIE
Tuesday, April 22, 2008
Rise in price of rice
Recently, there is a rise in prices of rice and when people learnt about it, they rushed to supermarkets to stock up on rice (my mother did!!!). So, i will be reviewing on articles regarding this topic...
Well, the reviews might REALLY lack depth and touch only on simple concepts...
Article Title: Limited rice supply will force price rise: Philippine farmers
source: http://news.sg.msn.com/regional/article.aspx?cp-documentid=1308472
The reasons cited in the article for the rise in price of rice will be firstly, due to an expected lean harvest. Quote "prices were expected to soar amid an expected lean harvest next month".
Output will further decrease too since "farmers to put aside some of their harvests for personal consumptions, because they too will be hit by prices". As farmers expect prices to rice, some will want to hold back supply to sell and earn more in the future Also, they have to stock up so they themselves have sufficient food to last and not buy at high prices in the future.
The above reasons will lead to a leftward shift of the supply curve. As the demand curve of rice is inelastic (since it is a staple food or necessity), as the supply curve shifts left, a small drop in output will actually lead to a big rise in price.
Article Title: Hong Kong Rice Buyers Expect 30% Price Rise; Shoppers Stock Up
source: http://www.bloomberg.com/apps/news?pid=20601080&sid=a0wJbwZyemxs&refer=asia
The surge in price of rice can also be attributed to an increase in world population and urban encroachment of land, thus increasing demand and reducing supply. A decrease in supply and increase in demand leads to the rise in price. Then, as shoppers expect prices of rice to go up, they started stocking up lots of rice. The impact of this would only be to further shift the inelastic demand curve to the right, leading to a higher rise in price.
Hmm....i wonder if this is considered self-fulfilling prophecy....
that's all...
<3xin yi
Well, the reviews might REALLY lack depth and touch only on simple concepts...
Article Title: Limited rice supply will force price rise: Philippine farmers
source: http://news.sg.msn.com/regional/article.aspx?cp-documentid=1308472
The reasons cited in the article for the rise in price of rice will be firstly, due to an expected lean harvest. Quote "prices were expected to soar amid an expected lean harvest next month".
Output will further decrease too since "farmers to put aside some of their harvests for personal consumptions, because they too will be hit by prices". As farmers expect prices to rice, some will want to hold back supply to sell and earn more in the future Also, they have to stock up so they themselves have sufficient food to last and not buy at high prices in the future.
The above reasons will lead to a leftward shift of the supply curve. As the demand curve of rice is inelastic (since it is a staple food or necessity), as the supply curve shifts left, a small drop in output will actually lead to a big rise in price.
Article Title: Hong Kong Rice Buyers Expect 30% Price Rise; Shoppers Stock Up
source: http://www.bloomberg.com/apps/news?pid=20601080&sid=a0wJbwZyemxs&refer=asia
The surge in price of rice can also be attributed to an increase in world population and urban encroachment of land, thus increasing demand and reducing supply. A decrease in supply and increase in demand leads to the rise in price. Then, as shoppers expect prices of rice to go up, they started stocking up lots of rice. The impact of this would only be to further shift the inelastic demand curve to the right, leading to a higher rise in price.
Hmm....i wonder if this is considered self-fulfilling prophecy....
that's all...
<3xin yi
Goodbye, SHanghai---Newsweek
“Goodbye, Shanghai” Newsweek
http://www.newsweek.com/id/130657/output/print
Article Review:
The cheap labors, cheap raw materials and unconsciousness of human rights in China are the most attractive points for foreign investors. These three factors together have greatly reduced the cost for production and have successfully attracted foreign companies to open up factories in China. The foreign investment has served as an incentive for local firms to compete with them and driven China’s economy to grow at an exponential rate. However, China’s economic success was somehow based on exploitation of labors and devastation of environment. These hasty methods to economic success, especially the issue regarding labor’s human rights, have caused a lot of international controversy. In order to alleviate international pressure, China has implemented several laws addressing these issues (e.g. new labor rules, environmental regulations). These new restrictions definitely have much negative impact on foreign investment as they have greatly increased the cost of production. Since profit=revenue-cost, as cost rises while revenue keeps unchanged, the profit earned by a firm decreases. In that sense, China is no more a lucrative market for foreign investors. In comparison, Vietnam, India, Thailand and Indonesia are becoming more favorable choices for investments due to the low cost for production in those countries. Hence, it is not a wonder that more and more foreign firms are leaving China for better develepment.
Tianning
http://www.newsweek.com/id/130657/output/print
Article Review:
The cheap labors, cheap raw materials and unconsciousness of human rights in China are the most attractive points for foreign investors. These three factors together have greatly reduced the cost for production and have successfully attracted foreign companies to open up factories in China. The foreign investment has served as an incentive for local firms to compete with them and driven China’s economy to grow at an exponential rate. However, China’s economic success was somehow based on exploitation of labors and devastation of environment. These hasty methods to economic success, especially the issue regarding labor’s human rights, have caused a lot of international controversy. In order to alleviate international pressure, China has implemented several laws addressing these issues (e.g. new labor rules, environmental regulations). These new restrictions definitely have much negative impact on foreign investment as they have greatly increased the cost of production. Since profit=revenue-cost, as cost rises while revenue keeps unchanged, the profit earned by a firm decreases. In that sense, China is no more a lucrative market for foreign investors. In comparison, Vietnam, India, Thailand and Indonesia are becoming more favorable choices for investments due to the low cost for production in those countries. Hence, it is not a wonder that more and more foreign firms are leaving China for better develepment.
Tianning
hi 6B.
on the topic of econ, i will like to share some stuff that will unlikely to be taught in comming months.it is good to know more about whats happening around the world.
Recession in US
So what is recession. Personally, i can't explain it fully from my own words. Quote from wikipedia.org, it is define as "a decline in a country's real gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year." There is speculation that US is going to have a recession this year.
Contributing factors includes:
1, Oil and gold hit historic high as US dollar hit historic low.
2, US subprime-mortgage crisis.
3, Dropping on US stock market price.
4, GDP of 2.2% in year 2007.
If there is a recession in US, the world's economy will suffer togather with the US market. This is due to the major influence that the US economy has on the world economy.
How does it affect us?
ChannelNewsAsia news report[27th march 2008] states that US recession may cause Singapore's GDP growth to drop to 3%. The electronic sector of Singapore will be hit significantly, as demand from US will fall.
Reports also stated that the construction sector of Singapore will be her main pillar during the downward turn of the economic in 2008. GDP growth is expected to be slow down by almost half, from a 12.5 percent growth in 2007 to just 6.5 percent this year.
On the other hand, Singapore economic should be well maintained during the course of the year, as service sector and tourism should not be largely affected. Having F1 in singapore also do help in boasting their economic, as the tourism and service sector will benefit from this event.
On a down note, inflation should remain high in Singapore. Consumers will also cut back due to the slow down on the US economic.
moxiang
on the topic of econ, i will like to share some stuff that will unlikely to be taught in comming months.it is good to know more about whats happening around the world.
Recession in US
So what is recession. Personally, i can't explain it fully from my own words. Quote from wikipedia.org, it is define as "a decline in a country's real gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year." There is speculation that US is going to have a recession this year.
Contributing factors includes:
1, Oil and gold hit historic high as US dollar hit historic low.
2, US subprime-mortgage crisis.
3, Dropping on US stock market price.
4, GDP of 2.2% in year 2007.
If there is a recession in US, the world's economy will suffer togather with the US market. This is due to the major influence that the US economy has on the world economy.
How does it affect us?
ChannelNewsAsia news report[27th march 2008] states that US recession may cause Singapore's GDP growth to drop to 3%. The electronic sector of Singapore will be hit significantly, as demand from US will fall.
Reports also stated that the construction sector of Singapore will be her main pillar during the downward turn of the economic in 2008. GDP growth is expected to be slow down by almost half, from a 12.5 percent growth in 2007 to just 6.5 percent this year.
On the other hand, Singapore economic should be well maintained during the course of the year, as service sector and tourism should not be largely affected. Having F1 in singapore also do help in boasting their economic, as the tourism and service sector will benefit from this event.
On a down note, inflation should remain high in Singapore. Consumers will also cut back due to the slow down on the US economic.
moxiang
Monday, April 21, 2008
information adapted from The Straits Times, Thursday 17April 2008
"New round of competition as mobile numbers go portable- from June, a big hurdle to switching operators will be removed, prompting more intense fight to retain customers."
1988 to 1997: Singtel monopoly
Then, Singtel was the only producer (single seller) who is supplying the whole telecommunications market. Therefore the market demand curve is also the firm's demand curve as the monopolist also represents the industry. Moreover, as neither M1 nor Starhub existed back then, there are no close substitutes for Singtel's telecommunication services provided. Thus its monopoly power is very huge.
Singtel was then a price setter as it can raise the price and consumers have no choice but to pay or go without the good as they have no other alternatives. Then, a basic cellphone plan for a month was $47 in 1997.
However, in April 1997, m1 enters the market and as a result, mobile phone bills halved due to competition.
It is evident that a price war between Singtel and m1 had taken place at that point of time. In this case, we can introduce the concept of Cross Elasticity of demand (its application is to follow suit when market leader/rivals lower price). Thus when m1 joined the market and offered mobile plans at lower rates, Singtel has no choice but to follow suit and as a result mobile phone bills were significantly lowered.
April 2000 saw starhub entering the market. Starhub introduced free incoming calls and per-second billing plans. This can be seen as starhub's strategy to try to differentiate its products (i.e. mobile plans) in an attempt to reduce the positive cross elasticity with Singtel or M1's mobile plans such that there will be a smaller change in quantity of the first good as the result of a change in the price of a substitute.
"New round of competition as mobile numbers go portable- from June, a big hurdle to switching operators will be removed, prompting more intense fight to retain customers."
1988 to 1997: Singtel monopoly
Then, Singtel was the only producer (single seller) who is supplying the whole telecommunications market. Therefore the market demand curve is also the firm's demand curve as the monopolist also represents the industry. Moreover, as neither M1 nor Starhub existed back then, there are no close substitutes for Singtel's telecommunication services provided. Thus its monopoly power is very huge.
Singtel was then a price setter as it can raise the price and consumers have no choice but to pay or go without the good as they have no other alternatives. Then, a basic cellphone plan for a month was $47 in 1997.
However, in April 1997, m1 enters the market and as a result, mobile phone bills halved due to competition.
It is evident that a price war between Singtel and m1 had taken place at that point of time. In this case, we can introduce the concept of Cross Elasticity of demand (its application is to follow suit when market leader/rivals lower price). Thus when m1 joined the market and offered mobile plans at lower rates, Singtel has no choice but to follow suit and as a result mobile phone bills were significantly lowered.
April 2000 saw starhub entering the market. Starhub introduced free incoming calls and per-second billing plans. This can be seen as starhub's strategy to try to differentiate its products (i.e. mobile plans) in an attempt to reduce the positive cross elasticity with Singtel or M1's mobile plans such that there will be a smaller change in quantity of the first good as the result of a change in the price of a substitute.
Oil @ $114.00!!!
Oil @ $114.00, AT&T laying off 1.5 % of work force, Citibank 5.1 Billion in the red for the first qtr, and the market goes up over 200 points?! What is really going on here? Anyone care to comment?
Foreign Branding: Häagen-Dazs!
Question: Where did Häagen-Dazs originate from?
A) Sweden
B) Denmark
C) Norway
D) America
Don't let the name fool you, Häagen-Dazs is actually an American brand! According to wikipedia, its simply a combination of two made-up words to look Scandinavian! Yes the words are made-up! Theres no such word in any language.
Okay so right now you're asking whats the relevance of this to economics?
Well...I'll try to bring in economic concepts as we go along.
A) Sweden
B) Denmark
C) Norway
D) America
Don't let the name fool you, Häagen-Dazs is actually an American brand! According to wikipedia, its simply a combination of two made-up words to look Scandinavian! Yes the words are made-up! Theres no such word in any language.
Okay so right now you're asking whats the relevance of this to economics?
Well...I'll try to bring in economic concepts as we go along.
Firstly, this smart technique which Häagen-Dazs used is called Foreign Branding in the marketing industry. From Wikipedia: "Foreign branding is an advertising and marketing term describing the implied cachet or superiority of domestic products with a foreign or foreign-sounding name. In English-speaking countries, many cosmetics and fashion brands use French or Italian-styled names to imply a connection to the style-conscious. Food and drink items also use French or Italian names, trading on the high reputation of France in these areas." This advertising technique can actually increase demand for the good since people have a false impression that these products with 'cheem' brand names are actually of superior quality. I thought this was quite interesting because its surprisingly true, and it shows how people can sometimes be gullible enough to fall for 'cheem-sounding' foreign names, even though they're just made-up.
Besides that, another reason why Häagen-Dazs is so successful because it caters to a different market. If you realised, before Häagen-Daz, all ice-cream brands were targeted at little children, with cute animals, colourful designs and even cuter names like 'Paddlepop'. However, Häagen-Daz chose to target the adults. They presented ice-cream in style and class. They're the 'super-premium' brand, attracting the upper class people. And well, its quite a smart move because in the end the people with more money in their pockets are the adults and not the children.
This two factors combined, smart advertising strategy and creation of a new market (of selling ice cream to adults), has resulted in the great success of Häagen-Daz. This brand differentiation has made demand for Häagen-Daz products price inelastic. Although there are many substitutes for ice cream (magnolia, movenpick, nestle, etc), there are no close substitutes for Häagen-Dazs' "premium-class" ice cream. There are also few other ice-cream brands that adopt a restaurant style to sell their products. Maybe only Swensen's and Ben & Jerry's, but these two brands don't come close to beating the "high-classness" of Häagen-Dazs. haha. Thus, even though Häagen-Daz charges desserts at really high prices compared to the ice cream man who parks outside the hci high school bus stop, it can and will still survive because its demand is price inelastic.
Besides that, another reason why Häagen-Dazs is so successful because it caters to a different market. If you realised, before Häagen-Daz, all ice-cream brands were targeted at little children, with cute animals, colourful designs and even cuter names like 'Paddlepop'. However, Häagen-Daz chose to target the adults. They presented ice-cream in style and class. They're the 'super-premium' brand, attracting the upper class people. And well, its quite a smart move because in the end the people with more money in their pockets are the adults and not the children.
This two factors combined, smart advertising strategy and creation of a new market (of selling ice cream to adults), has resulted in the great success of Häagen-Daz. This brand differentiation has made demand for Häagen-Daz products price inelastic. Although there are many substitutes for ice cream (magnolia, movenpick, nestle, etc), there are no close substitutes for Häagen-Dazs' "premium-class" ice cream. There are also few other ice-cream brands that adopt a restaurant style to sell their products. Maybe only Swensen's and Ben & Jerry's, but these two brands don't come close to beating the "high-classness" of Häagen-Dazs. haha. Thus, even though Häagen-Daz charges desserts at really high prices compared to the ice cream man who parks outside the hci high school bus stop, it can and will still survive because its demand is price inelastic.
Alright... I tried to bring in as many economic concepts as possible. I know this is not a brilliant post but I just wanted to share it anyways because I think its really interesting to understand why some brands can achieve such high successes while others can't. I didn't exactly do an article review because I couldn't find a good article on Häagen-Daz. So I just did my 'evaluation' here. Hope you guys find it interesting! Feel free to response or critique or refute...haha
Eileen :)
Wednesday, April 16, 2008
Sample of Article Review
This is a sample of an article review that Miss How posted on SMB. Use this as a guideline when you are doing your article review for the econs blog.
Participate in Wanted! to Earn CASH, Participation Points, GNA$, etc
Dear all,
You are strongly encouraged to join the Wanted! Competition! We are extending the deadline till as long as the blog competition is on!
As long as I see some good stuff you have put up and stand a chance of $50 cash, I will alert you and ask you to participate.
Also, it's already mid of 3 terms in which you are graded for 5% participation points..... well, by posting article reviews on this blog will entitled you to gain some class participation points, and also to stand a chance to win best blog - $200 cash, etc. Why not?
You will be given more details on how to score higher for your participation points.
Mr Chris Ho
Monday, April 14, 2008
Ford + GM = Gord?
Indecent Proposal? What a Ford/GM Merger Could Mean
Would Americans Buy Cars From A Company Called 'Gord'?
By DAN ARNALL
Sept. 18, 2006 —
Times are so tough in the American auto industry that the country's two biggest nameplates have actually talked about a massive combination. Reports out of Detroit suggest that GM and Ford had discussions about the possibility of a merger or alliance.
"It's a joke, there's no real meat on that bone," said Kevin Tynan, senior auto analyst at Argus Research Company. "They need to get smaller, not bigger. They need to be more flexible, not continue in their old way of doing business."
But the tantilizing possibility of a mega merger has many industry experts rubbing their eyes in disbelief, wondering if these two icons could actually find a way to marry, and if they did, how that would change the auto industry landscape.
"Does it become General Ford? Gord? Ford Motors?" asked Karl Brauer, editor-in-chief of auto web site Edmunds.com. "That's actually one of the strengths of a merger -- they'd be combining two of the world's most recognized brands."
Combined, Ford and General Motors would be a force to be reckoned with.
Based on their most recent sales reports, a merged company would have accounted for more than 4.6 million cars and trucks sold in the United States so far this year. That's an astounding 41 percent of the U.S. auto market and almost three times the size of Toyota's slice of the auto pie.
That new sizable company would have leverage with suppliers that neither has enjoyed for decades. Experts say a combination could allow for better deals on everything from steel components to tires, air conditioners to ad time.
But in this case, size doesn't necessarily make for success in the car business.
Today the companies are too big, with expensive plants that are not running and thousands of union workers they have to pay even when they do not need them. Combine that with the financial burden of pensions and providing health care to workers and their families, and you see that size can, in fact, hurt a company.
"Even if a merger happened, they'd still face these costs," said Brauer. "Becoming a single company doesn't reduce their obligations to the UAW or their health care costs. Unless they made these issues a part of the alliance negotiations and included the unions in whatever deal they struck."
Asian competitors Toyota and Honda -- both of which have made big headway in grabbing market share from GM and Ford in recent years -- have a younger work force, which means lower pension obligations and less expensive health care costs. Those foreign competitors have used those lower financial burdens to make cars in the United States for less than their American competitors.
A merger would allow the combined company to negotiate simultaneously with its unions about cost reducing moves, but GM is already a few steps ahead of Ford in cutting these costs with aggressive hourly-worker buyouts and layoffs of salaried managers.
GM chief Rick Wagoner says that the company's restructuring plan, announced late last year, has already succeeded in cutting some $9 billion out of the struggling company's expenses. Ford's recent acceleration of its "Way Forward" plan is taking a line from GM's script, offering one-time payouts of up to $140,000 to workers willing to walk away from their jobs and drop corporate health insurance in their retirement years.
But success is not just about reducing costs. It is about making cars and trucks that people want to buy.
"You could easily end up with a stronger line-up of vehicles and nameplates," said Bauer. He says both GM and Ford have brands that they could jettison without having a negative effect on their bottom lines. Losing the car and truck nameplates that haven't found a place in the marketplace would make the overall car market stronger; a Darwinian thinning of the herd. A big auto merger like the one reportedly discussed by GM and Ford has happened before. The $38 billion combination of Chrysler with German auto giant Daimler-Benz in 1998 offers a precedent. It took years and a shift in top management to get the merger to work.
"The real challenge will be getting somebody that can actually manage it and make it stronger, instead of just creating an unwieldy monster," said Bauer. "It would take a hell of a management effort."
But the speculation about a merged GM/Ford is just that: speculation.
Most analysts are not confident that a GM/Ford marriage is in the offing, pointing out that there's no real financial benefit to either company that would justify the Herculean effort of pulling off a combination.
http://abcnews.go.com/Business/IndustryInfo/story?id=2459206
Would Americans Buy Cars From A Company Called 'Gord'?
By DAN ARNALL
Sept. 18, 2006 —
Times are so tough in the American auto industry that the country's two biggest nameplates have actually talked about a massive combination. Reports out of Detroit suggest that GM and Ford had discussions about the possibility of a merger or alliance.
"It's a joke, there's no real meat on that bone," said Kevin Tynan, senior auto analyst at Argus Research Company. "They need to get smaller, not bigger. They need to be more flexible, not continue in their old way of doing business."
But the tantilizing possibility of a mega merger has many industry experts rubbing their eyes in disbelief, wondering if these two icons could actually find a way to marry, and if they did, how that would change the auto industry landscape.
"Does it become General Ford? Gord? Ford Motors?" asked Karl Brauer, editor-in-chief of auto web site Edmunds.com. "That's actually one of the strengths of a merger -- they'd be combining two of the world's most recognized brands."
Combined, Ford and General Motors would be a force to be reckoned with.
Based on their most recent sales reports, a merged company would have accounted for more than 4.6 million cars and trucks sold in the United States so far this year. That's an astounding 41 percent of the U.S. auto market and almost three times the size of Toyota's slice of the auto pie.
That new sizable company would have leverage with suppliers that neither has enjoyed for decades. Experts say a combination could allow for better deals on everything from steel components to tires, air conditioners to ad time.
But in this case, size doesn't necessarily make for success in the car business.
Today the companies are too big, with expensive plants that are not running and thousands of union workers they have to pay even when they do not need them. Combine that with the financial burden of pensions and providing health care to workers and their families, and you see that size can, in fact, hurt a company.
"Even if a merger happened, they'd still face these costs," said Brauer. "Becoming a single company doesn't reduce their obligations to the UAW or their health care costs. Unless they made these issues a part of the alliance negotiations and included the unions in whatever deal they struck."
Asian competitors Toyota and Honda -- both of which have made big headway in grabbing market share from GM and Ford in recent years -- have a younger work force, which means lower pension obligations and less expensive health care costs. Those foreign competitors have used those lower financial burdens to make cars in the United States for less than their American competitors.
A merger would allow the combined company to negotiate simultaneously with its unions about cost reducing moves, but GM is already a few steps ahead of Ford in cutting these costs with aggressive hourly-worker buyouts and layoffs of salaried managers.
GM chief Rick Wagoner says that the company's restructuring plan, announced late last year, has already succeeded in cutting some $9 billion out of the struggling company's expenses. Ford's recent acceleration of its "Way Forward" plan is taking a line from GM's script, offering one-time payouts of up to $140,000 to workers willing to walk away from their jobs and drop corporate health insurance in their retirement years.
But success is not just about reducing costs. It is about making cars and trucks that people want to buy.
"You could easily end up with a stronger line-up of vehicles and nameplates," said Bauer. He says both GM and Ford have brands that they could jettison without having a negative effect on their bottom lines. Losing the car and truck nameplates that haven't found a place in the marketplace would make the overall car market stronger; a Darwinian thinning of the herd. A big auto merger like the one reportedly discussed by GM and Ford has happened before. The $38 billion combination of Chrysler with German auto giant Daimler-Benz in 1998 offers a precedent. It took years and a shift in top management to get the merger to work.
"The real challenge will be getting somebody that can actually manage it and make it stronger, instead of just creating an unwieldy monster," said Bauer. "It would take a hell of a management effort."
But the speculation about a merged GM/Ford is just that: speculation.
Most analysts are not confident that a GM/Ford marriage is in the offing, pointing out that there's no real financial benefit to either company that would justify the Herculean effort of pulling off a combination.
http://abcnews.go.com/Business/IndustryInfo/story?id=2459206
Video clip: Delta and Northwest Airlines Potential Merger
This video clip was shown before discussing Tutorial 10 Question 2.
Do you think the merger between Northwest and Delta Airlines will work out? Why and why not?
Merger talks intensify between Delta and Northwest
Merger talks between Delta Air Lines and Northwest Airlines have picked up pace again, and people briefed on the negotiations said that announcement of a deal could come as soon as Tuesday.
The two companies have seemed on the verge of announcing a deal several times in recent months - raising hopes among some investors and worrying those concerned about loss of competition among airlines - only to back away from a merger.
During that period, the airline business has deteriorated sharply. Record-high fuel prices have sent a handful of smaller carriers into bankruptcy in recent weeks. The latest was Frontier Airlines, which made its announcement Friday.
Some analysts now expect the industry to lose money this year after two years that were mostly profitable. And the slowing economy is making it hard for airlines to raise fares to cover fuel costs.
A representative at Delta could not be reached and a Northwest spokesman declined to comment.
Shares in Delta and Northwest have plunged since they emerged from bankruptcy about a year ago. Delta closed at $10.01 on Friday, down from a high of $21.95 last spring. Northwest closed at $10.96, down from a high of $26.50 last spring. If the deal is structured as a stock acquisition of Northwest by Delta, it will be worth Northwest's market capitalization of $2.59 billion.
The broad outlines of a deal have remained constant: an exchange of stock at a ratio close to market prices; a combined airline that would be called Delta, with headquarters in Atlanta; and Richard Anderson, Delta's chief executive, keeping that position, with Northwest's chief executive, Douglas Steenland, stepping aside.
Pilots at Delta and Northwest earlier could not agree on how to merge their seniority lists, which is important to them because it determines their ranking for pay, what kind of planes they fly and their days off. So last month, Northwest asked Delta to proceed toward a deal without a combined list.
The carriers had hoped to get a merged list before a deal so that operations could be combined quickly and without rancor. US Airways and America West Airlines have been unable to combine operations fully more than two years after merging because of disputes over a seniority list.
Pilots have no legal power to block a merger, but they could appeal to lawmakers to help prevent a deal.
James Oberstar, chairman of the Transportation and Infrastructure Committee in the U.S. House of Representatives, has said he opposes big airline mergers because competition would suffer and some markets would lose service.
Putting a deal together now without a merged pilots list and amid an industry downturn could be difficult. The carriers had promised the pilots a raise and a lot of stock in the merged airline in exchange for a combined seniority list.
Leaders of the Delta and Northwest pilots' unions met separately over the weekend. There was no immediate action by either union.
The two companies have seemed on the verge of announcing a deal several times in recent months - raising hopes among some investors and worrying those concerned about loss of competition among airlines - only to back away from a merger.
During that period, the airline business has deteriorated sharply. Record-high fuel prices have sent a handful of smaller carriers into bankruptcy in recent weeks. The latest was Frontier Airlines, which made its announcement Friday.
Some analysts now expect the industry to lose money this year after two years that were mostly profitable. And the slowing economy is making it hard for airlines to raise fares to cover fuel costs.
A representative at Delta could not be reached and a Northwest spokesman declined to comment.
Shares in Delta and Northwest have plunged since they emerged from bankruptcy about a year ago. Delta closed at $10.01 on Friday, down from a high of $21.95 last spring. Northwest closed at $10.96, down from a high of $26.50 last spring. If the deal is structured as a stock acquisition of Northwest by Delta, it will be worth Northwest's market capitalization of $2.59 billion.
The broad outlines of a deal have remained constant: an exchange of stock at a ratio close to market prices; a combined airline that would be called Delta, with headquarters in Atlanta; and Richard Anderson, Delta's chief executive, keeping that position, with Northwest's chief executive, Douglas Steenland, stepping aside.
Pilots at Delta and Northwest earlier could not agree on how to merge their seniority lists, which is important to them because it determines their ranking for pay, what kind of planes they fly and their days off. So last month, Northwest asked Delta to proceed toward a deal without a combined list.
The carriers had hoped to get a merged list before a deal so that operations could be combined quickly and without rancor. US Airways and America West Airlines have been unable to combine operations fully more than two years after merging because of disputes over a seniority list.
Pilots have no legal power to block a merger, but they could appeal to lawmakers to help prevent a deal.
James Oberstar, chairman of the Transportation and Infrastructure Committee in the U.S. House of Representatives, has said he opposes big airline mergers because competition would suffer and some markets would lose service.
Putting a deal together now without a merged pilots list and amid an industry downturn could be difficult. The carriers had promised the pilots a raise and a lot of stock in the merged airline in exchange for a combined seniority list.
Leaders of the Delta and Northwest pilots' unions met separately over the weekend. There was no immediate action by either union.
Pulished: April 14, 2008
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Since Mr. Ho talked about the issue on the merger between Delta Air Lines and Northwest Airlines, I just hope this would provide you some additional infomations. =)
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