July 27th, 2009
05:16 AM GMT
Share this on:

BEIJING, China - There's something strange these days over Beijing, something many of us here have not seen for a very long time. As I look up, there's this strange blue-looking color - at first I thought the officials may have been dying the pollution blue, or maybe I had lived here so long that I had forgotten what a sky should looked like.

I've lived in Beijing for a little less than three years, but one of our local office workers made the remark that she had never seen such beautiful, white fluffy clouds, so I knew something had changed. Don't get me wrong, this place is still polluted, but since the Beijing Olympics it seems the number of adversely polluted days is about the same as the number of really good days we had last year, in other words, not a lot.

And it might just be making the people who live here a little happier, as well. In the parks, on the streets, many Beijingers seem to be smiling a little more, perhaps a bit more relaxed.

So how did this happen? The government has been trying to clean up this city for years - building subway lines, converting buses and taxis to natural gas, and stopping cars from driving one day a week (a watered-down continuation of the tough traffic controls in place during the Olympics). Some major polluters, too, have been closed down and relocated - notably Beijing Capital Iron and Steel, the biggest single contributor to the city's air pollution problem. Now that the Olympics are over there's been a massive drop in construction, and so dust particles have been reduced. But also playing its part is the global economic slump; many of the factories which were meant to close temporarily for the Olympics have never re-opened.

An old joke was never check the stock market or government statistics to know the state of China's economy, just look to the sky. When those gray skies are blue, the economists would say, start to worry. Well, the sky has been blue a lot this year, but in a bizarre coincidence, as economic growth here started to head toward 8 percent, we seem to be getting more polluted days. I'll let you know what happens of the GDP numbers hit double digits.

Posted by: ,
Filed under: BusinessChinaenvironment


July 26th, 2009
10:52 AM GMT
Share this on:

LONDON, England – Last week when I appeared on CNN to talk about earnings, I raised the issue of the quality of the U.S earnings.

Wall Street gains sent the Dow above 9,000 points for the first time since January.
Wall Street gains sent the Dow above 9,000 points for the first time since January.

Investors have been pushing stocks higher fueled by better than expected earnings. The Dow broke through 9,000 for first time since January, while the S&P 500 has shot up 11 percent in the past two weeks. The U.S. earnings season has fueled a global rally.

But are investors getting too euphoric? If you look at the revenue side of the earnings, not all is well. Take the 143 companies in the S&P 500 who reported last week. Revenues actual fell on average 10 percent from the same period a year ago, according to Bloomberg data.

Steven Ricchiuto, chief economist at Mizuo Securities USA hit the nail on the head when he spoke about the divergence between earnings and revenues.

"We know companies are cutting costs at a record pace, and that is helping earnings. But you can't keep on shrinking your way to profitability. Eventually, you do damage to your end users. You have to get revenues up to have a sustainable upturn."

David Rosenberg, chief economist and strategist at Gluskin Sheff, echoed similar sentiments when quoted by the Financial Times.

"Earnings may be beating low-balled estimates for the majority of S&P 500 companies, but there is no questioning the fact that we are also seeing a sustained decline in revenues."

"What we are still witnessing is a trading opportunity rather than a fundamental shift in the outlook. We must take into account what the risks are going to be once the buying momentum is lost," he added.

The bottom line is that companies can't indefinitely cut costs, they need to get revenues moving higher. But every time they shed a job, that means one less consumer spending as much money in the economy, undermining the prospects for recovery, which in turn of course, hurts companies earnings prospects.

In a research note this month, the economist Nouriel Roubini sounded a note of caution.

"Expectations of corporate earnings will have to be downgraded again. Demand will be weak, most prices will be falling, and companies will therefore have little pricing power and their profit margins will remain squeezed. The expectation that in these conditions profits will rebound strongly is quite far-fetched."

Roubini is worth listening to, because he's the guy who predicted the credit mess. As I've written many times before, any sustainable recovery is still far away.

But for now, investors aren't too concerned why companies are beating earnings expectations; that they are is enough. A closer analysis might make investors a little less euphoric.

Do you agree or disagree?



July 24th, 2009
12:06 PM GMT
Share this on:



July 24th, 2009
08:04 AM GMT
Share this on:

BERLIN, Germany – The takeover war between Volkswagen and Porsche is playing out almost like a Shakespearean Drama. At the heart are two of Germany’s most well known and yet most reclusive industrial families - the Porsches and the Piechs, who incidentally belong to the same family line.

It began with Ferdinand Porsche, the German engineering genius who constructed the first Volkswagen, known at first as the KdF car, and then later as the VW Beetle. Porsche had several children, but two would come to define the family rift we are all now seeing.

Ferry Porsche would go on to manage the Porsche Engineer Bureau and oversee the construction of Porsche’s first own sports car, while Louise Porsche went on to marry Anton Piech and keep a high stake in the then fledgling Volkswagen Auto Company.

Fast forward to today and the main players are cousins Wolfgang Porsche, Ferry' son, who heads the supervisory board of Porsche SE, and Ferdinand Piech, Louise's son, who is at the helm of the Volkswagen board. Both men are involved in both companies, but Piech has been busy building the VW Empire while Wolfgang Porsche oversaw the rise of the tiny sports car maker to one of the most efficient car manufacturers in the world.

Then came Wendelin Wiediking, CEO of Porsche, who had the idea of attempting a hostile takeover. The tiny Porsche would try to take a majority stake in Volkswagen, the largest car company in Europe. Just to put this in perspective, Volkswagen turns out more vehicles a week than Porsche does in a whole year.

The deal failed and Porsche was left with massive debt of more than $10 billion, and now is when Ferdinand Piech saw his chance.

Piech gathered his friends in German politics and applied pressure on his cousin Wolfgang Porsche. After a long battle, Wolfgang conceded defeat. Porsche will probably merge with VW, thus losing much of its famed independence.

There is however some consolation in all this for Wolfgang Porsche. While he lost his top manager Wendelin Wiedeking and has allowed his company to fall into the fangs of Volkswagen, under the new management structure the Porsche and Piech families would hold more than 50 per cent of Volkswagen AG - and thus become more powerful and richer than ever before. Making this possibly one of the most profitable family feuds of all time.



July 24th, 2009
04:31 AM GMT
Share this on:

Remember the anticipation that used to come with turning on a new computer? The graphics were cooler, the load-time faster and the new features in the operating system inspired awe.

When did that end? Starting up my latest laptop was a less than thrilling experience. Sure it was new and shiny, but the user experience was essentially the same as the computer I'd had before. Faster, yes, but the difference to me as a relatively average computer user was negligible. Look I love my new laptop, but it simply is not leaps and bounds ahead of my last one.

So that got me thinking - what would make my mouth drop open these days when it comes to a new laptop? There is only one thing that really frustrates me anymore: battery life. What good is wireless Internet when you can only be so far from a power socket? A 16-hour transcontinental flight and a four-hour battery life do not a happy work trip make.

Acer CEO J.T. Wang is betting other consumers feel the same way. The Taiwanese company has just launched a series of laptops they say have eight-plus hours of battery life. "Eight is a magical number, according to market studies." says Wang. "Because eight hours represents a whole day computing and you don't have to bring a big adapter."

Apparently, the battle to build a better battery is a battle of the bulge – it all comes down to weight. Building a lighter, more powerful battery appears to be more challenging than building lighter, more powerful chips.

As for me, I don't know if an eight-hour battery life is enough. I want 16. Or 24.Honestly I'd be happiest if I never had to plug the thing in at all.

How many hours of computing time would keep you satisfied?



July 23rd, 2009
06:02 PM GMT
Share this on:

For the past 12 years, some 50 of Europe’s top corporate leaders have been under special surveillance.

Wendelin Wiedeking's time at the head of Porsche has come to an end.
Wendelin Wiedeking's time at the head of Porsche has come to an end.

This has nothing to do with this week’s revelation that Frankfurt state prosecutors are deciding whether to bring criminal charges as they investigate allegations of illegal tactics by private detectives on contract to Deutsche Bank – though that mighty bank’s former CEO and Chairman, Rolf Breuer, is among the names being watched.

In 1997 and 1998 I was part of a CNN team that made some 50 programmes about individual company bosses in a series called “Pinnacle Europe.” We spent at least a day with each one, talking to them about how they’d got to the top, what they’d done for their companies, how they planned to stay ahead and what they did outside the office.

The series producer, Jeff Nathenson, and I still regularly exchange banter about what has happened to each of the CEOs we profiled; he maintains there is a “curse of Pinnacle” that gradually topples them, one by one. So we continue our casual surveillance of all 50 – by the boringly legal method of watching the headlines, I should add.

The fact is, though, that many are now ex-bosses. Many crashed and burned; they fell victim to boardroom knife attacks and are spending more time with their families. Some, like Jorma Ollila of Nokia, completed their distinguished careers and moved on to even higher things. Others sold their companies.

A handful have survived. Sir Richard Branson is still running Virgin in his unique way and is even wealthier than he was in 1997; Daniel Vasella is still atop the Swiss pharmaceuticals company Novartis; and Klaus Schwab is still head of the World Economic Forum.

But today one name did fall victim to Jeff Nathenson’s putative “curse of Pinnacle.” Germany woke up this morning to learn that one of its corporate titans, Wendelin Wiedeking, had been ousted as boss of Porsche, the role in which I had interviewed him for our CNN profile early in 1998, and which he had held for a very successful five years before that. With Wiedeking and his impressive collection of model cars evicted from the Porsche headquarters, talks are now underway to bring about a merger of the sports car maker and Volkswagen.

Dr Wiedeking had sought exactly the same thing, but in a different format. Having rescued Porsche from the weak dollar of the early 1990s (US sales are crucial to the company), he launched new models, shifted some production out of Germany and made the Stuttgart-based icon one of the jewels of its sector: prestigious and profitable.

Money piled up at the bank – and in the CEO’s personal wallet. His contract awarded him 0.9% of Porsche’s pre-tax earnings, a bonus reported at some 77 million euros in 2007-08. Confident in his ability to run any car company, even Europe’s largest, Wiedeking set his sights on a takeover of Volkswagen.

That proved his undoing. Like the Icarus of myth, this high-flier had ventured too close to the sun. True, Porsche amassed more than half of VW’s shares and had options on a further 20 percent. But it had also run up $14.2 billion in debt, and as the credit crunch bore down on big corporate borrowers, that burden crushed the life out of his ambitions.

Family politics also played a part. Porsche and Volkswagen have always been intertwined. Before World War II, Ferdinand Porsche designed the original Volkswagen or “People’s Car” – the evergreen Beetle. When the War was over he built his first Porsche model in a shed up an Austrian mountain, shifting production to Stuttgart when his sports cars started selling in big numbers.

Ferdinand Porsche’s descendants still control the company he founded – but one of his grandsons is the redoubtable Ferdinand Piëch, the Austrian former Volkswagen CEO, now its chairman. Wiedeking’s designs on VW split the extended family, and made an enemy of Piëch, a man not to be crossed.

History will shake its head at the ill-fated ambitions of Wendelin Wiedeking, while admiring the way he rescued Porsche, and that neat clause in his contract which rewarded him so handsomely for genuine, measurable success.

But why am I writing him off? He still has some interesting directorships – Novartis, for example. He has no need of money, even giving half his $70 million pay-off to charity, but driven people like that don’t just retire to the golf course. They waste no time in passing out their telephone numbers to the head-hunters.

There aren’t that many executives who can say they’ve rescued a major car company once before and left it wonderfully profitable, and these days those qualifications are badly needed. Like, who’s going to run Opel once it’s been sold off by GM?



July 23rd, 2009
12:22 PM GMT
Share this on:

(CNN) – The Quest Means Business team has been tasked to try and explain business jargon to its viewers.

We are often guilty of throwing terms around when talking about company results that are difficult to explain in a sentence or two.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is one of those for me.

So I was pleased to delve into it, not only to try and explain it, but also to really get my head around it. Why did companies publish EBITDA figures during the dotcom bubble era? Why do few companies use it now? Why is it not acceptable under so-called U.S. Generally Accepted Accounting Principles (GAAP)?

Ok, I will try and explain it again. Basically (and really basically) it’s a way to express a company’s earnings (the same as net income or profits or the “bottom line”) in a given period. But it is a number that is expressed before the company strips out recurring charges or costs like taxes, interest paid on debt, the loss of value of assets etc. (If I write anymore, I will confuse myself).

Companies use EBITDA (and ITDA and other complication formulae) especially when the number is positive while all others may be negative: “Company X lost six billion dollars last quarter, but EBITDA grew 15 percent!”

To be fair it is a way to try and show a consistent number if a new company is growing fast and spending huge amounts of money so it has no hopes of turning a profit. That is why it became a popular number during the late 1990s.

Today, private equity likes to look at EBITDA figures during a potential takeover because it helps to clarify a company’s underlying ability to earn money.

Is it any clearer to you now?

If not, the video below shows me trying to explain it to a classroom full of children. They were enthusiastic to learn and were shouting “EBITDA” when we packed up to leave their London school.



July 23rd, 2009
12:05 PM GMT
Share this on:

(CNN) – The Quest Means Business team has been tasked to try and explain business jargon to its viewers.

We are often guilty of throwing terms around when talking about company results that are difficult to explain in a sentence or two.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is one of those for me.

So I was pleased to delve into it, not only to try and explain it, but also to really get my head around it. Why did companies publish EBITDA figures during the dotcom bubble era? Why do few companies use it now? Why is it not acceptable under so-called U.S. Generally Accepted Accounting Principles (GAAP)?

Ok, I will try and explain it again. Basically (and really basically) it’s a way to express a company’s earnings (the same as net income or profits or the “bottom line”) in a given period. But it is a number that is expressed before the company strips out recurring charges or costs like taxes, interest paid on debt, the loss of value of assets etc. (If I write anymore, I will confuse myself).

Companies use EBITDA (and ITDA and other complication formulae) especially when the number is positive while all others may be negative: “Company X lost six billion dollars last quarter, but EBITDA grew 15 percent!”

To be fair it is a way to try and show a consistent number if a new company is growing fast and spending huge amounts of money so it has no hopes of turning a profit. That is why it became a popular number during the late 1990s.

Today, private equity likes to look at EBITDA figures during a potential takeover because it helps to clarify a company’s underlying ability to earn money.

Is it any clearer to you now?

If not, the video below shows me trying to explain it to a classroom full of children.  They were enthusiastic to learn and were shouting “EBITDA” when we packed up to leave their London school.



July 23rd, 2009
10:50 AM GMT
Share this on:



July 23rd, 2009
07:27 AM GMT
Share this on:



About Business 360

CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.

 
 
Powered by WordPress.com VIP