Category: Business

New Jobs in America – No Time Soon

My life work was in manufacturing businesses.  As a consequence I still receive newsletters and magazines from manufacturing websites.  This item says it all.  Headline is Foxconn’s New China Plant to Produce 200k Phones/Day, Mostly iPhones.  That company will employ 200,000 people at the new facility.  The problem is we love iPhones but we don’t manufacture them in the United States.  The reason is those workers in China will be earning 1/5 or less the pay we want in the USA.   (The U.S. Bureau of Labor Statistics reports assembler average annual pay in the United States is $26,820.00 per year.)   Technicolor moved its three manufacturing facilities to Mexico.  Those facilities each employed at least 1,000 people. Care to guess why they would do that?

Today I received another on-line newsletter from asiaone business.  The headline reads Foxconn to raise wages again at China plant. The item says that employees at their facility at its Shenzhen factory will be increased by two-thirds.  That will bring the pay up to $392.00 per month.  Businessweek (September 13, 2010 edition) reports that there are 470,000 employees at that facility.  

Back in the United States: Where are the ideas from either the GOP or the Democrats for bringing jobs back to America?  There are no sensible ideas.  The GOP want to give more tax breaks to the corporations that are sitting on almost $2 Trillion in earnings that are being held for some future projects. The Democrats just want to enlarge government to take up the slack but have no idea how to create private sector jobs.

The political parties just hope that the public won’t notice that neither of them has even one worthwhile idea.

Canada Learned a Lesson from the United States

Richard Florida (born 1957 in Newark, New Jersey) is an American urban studies theorist.  On Sunday, August 29, he was interviewed on CNN’s Fareed Zakaria GPS and pointed out that the United States seems to have forgotten its basic message to the world.  That message was that this is the country that will take “…your tired, your poor, Your huddled masses yearning to breathe free,…”  Guesting on that show from Toronto, Canada, he pointed out that ½ of all the residents in Toronto and Vancouver, Canada are immigrants from around the world.  The mayor of Winnipeg, Manitoba is an expatriate from Israel. Canada has taken the mantle from the United States.

Here we are arguing about legal versus illegal immigration.  We are not alone.  Business Week reports in its September 6, 2010 edition that Australia is concerned about the impact on their nation of Chinese investments for the purpose of mining their minerals.  They haven’t visited Vancouver, Canada.  The first thing you notice driving into the city is that Mandarin is the primary language on many building signs and English beneath in a smaller font.  Check out this article by another Canadian.  Canada’s Teck Resources has the Chinese government’s China Investment Corp. sovereign wealth fund as a strategic 17% shareholder.

All races, all religions, all sexual orientations are accepted without reservation.  Taxes are high but more American cars are manufactured in Canada than in the United States.  The taxi driver said, “medical care is free.”  It isn’t.  They pay for it in higher taxes.  Canada is growing despite its major reliance on the United States.

There is a lesson here.  Will the United States learn too?

“It’s the economy, Stupid”

The words of James Carville, campaign advisor to when Bill Clinton in 1992.  It has always been about the economy.  President Obama decided to focus on health care rather than the most pressing issue in the past two years.  I want to be an optimist but the numbers are not promising.  There is nothing on the horizon to indicate that this recession will be ending soon. 

Maybe this is a good thing because everyone in America has been coming to grips with their credit card and car payment debt.  Listen to Dave Ramsey on any morning and you realize how utterly foolish Americans have been about managing their money.  Visa, Master Card and the rest of them may be hurting but perhaps Americans are starting to grow up.  I include myself.

This graph tells the story of the on going unemployment picture.  New claims for unemployment finally dropped below 500,000 in the week ending November 21, 2009.  The weekly new claims has swayed between 427,000 and 496,000 since then.  Last week claims climbed for four weeks in row to 484,000.  I doubt that the Republicans can do any better than the Democrats in ending this disaster.

Click on the graph to get a better view. 

Growth Through Global Investing

This Morningstar article is indicative of the amount that Americans are investing in the rest of the world.  Clearly the United States is not a leader.  Our focus must be investing at home.  Wait a minute,  Businessweek reports that American corporation are sitting on $1.8 trillion.       

By looking at the big picture and taking advantage of opportunities abroad, investors may experience higher returns than if they were invested solely in the United States. However, holding a diversified portfolio (both in U.S. and international markets) may be the best way to protect against global market fluctuations and risk.  

This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Past performance is no guarantee of future results. All returns were calculated in U.S. dollars. Returns and principal invested in stocks are not guaranteed. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, and differences in accounting and financial standards. 

Source: Equities for each country are represented by Morgan Stanley Capital International Indexes and the U.S. stock market by the Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock market in general. Developed countries in this analysis include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, United Kingdom and the United States. 

Article reprinted with permission from Morningstar, Inc.

How the Rich Stay Rich

HP CEO forced to resign amid harassment claims

Mark Hurd has been the CEO of Hewlett-Packard Company since Carly Fiorina left that job in 2005.  He was asked to resign as a consequence of either sexual harassment charges or some other internal misbehavior.

It has been reported that Mr. Hurd  will get a $12.2 million severance payment, and nearly 350,000 shares of HP stock worth about $16 million at Friday’s closing price, plus an extension of options to buy up to 775,000 HP shares. Clearly he will never have to work another day in his life.  Even at 4% interest the $12.2 million will provide him with an income of $488,000 per year.  At a 39% income tax rate and allowing for no deductions he will have a net $200,000 per year for living expenses.

 

Under current law he could also sell those $16 million in shares as needed and everything above the current price would be taxed as capital gains.  That is a rate of 15%.  The rest of us who earn a living by working would pay our taxes at a higher rate.

 

This is what the GOP wants to perpetuate.  I am sure members of the GOP can justify this situation.  I just do not know how they will do it.

Tragic Unemployment

We have Exported American Jobs

ALAN GREENSPAN, to David Gregory on “Meet the Press” on August 1, 2010: “I think we’re in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession. Our problem basically is that we have a very distorted economy in the sense that there’s been a significant recovery in a limited area of the economy, amongst high income individuals … Large banks, who are doing much better, and large corporations … are in excellent shape. The rest of the economy, small business, small banks, and a very significant amount of the labor force — which is in tragic unemployment, long-term unemployment — that is pulling the economy apart.”

Apple Inc. the company responsible for the iPad, iPod, iPhone, and Mac computers, had revenues $15.7 Billion in the quarter just ended.  Their income before taxes was $6.136 Billion.  Their net income after taxes was $3.253 Billion.  Clearly the cost of making, advertising and distributing all their marvelous electronic gadgetry was the biggest issue for them.  It was not their taxes.  Of course lower taxes wouldn’t hurt.  This data was collected from Morningstar.

All of the items they develop are manufactured in China or other countries that have much lower labor costs.  That is the problem facing the United States and all major industrialized nations.  Manufacturers must make their products in low labor costs countries to be more profitable.

The problem surrounding service jobs is in many ways even more alarming.  Dozens of companies have sent their customer service departments to Asia.  My own experience confirms this fact.  Companies I have telephoned linking to a nation there include Citi Bank, Dell Computer, Earthlink, and the Los Angeles Times.  Labor  costs for those functions is at least one fifth the cost in the United States or Canada.

Where does that leave the unemployed Americans who used to work in factories or the service sector?  The 22 million people affected by the Great Recession will either take lower paying jobs than the ones they used to have or they will have to find other professions.

Neither Republicans nor Democrats have offered one worthwhile idea that will re-employ those who have lost their jobs during the past two years.  Lower taxes will not bring hundreds of thousands of jobs, that are no longer in America, back to these shores.  The lower taxes that Republicans promote will add to the $1 Trillion or more of unspent money that corporations are now holding for some future investments and even higher pay for their already well paid management.

You may want to read “Newsweek vs Businessweek: Growing American Jobs.”

Newsweek vs Businessweek: Growing American Jobs

The real reason I started blogging was because the newspapers and magazines I read rarely print my opinion.  The latest best example is the following letter that I tried posting on Newsweek’s web site.  I tried for four days. 

—

I had just finished reading Andy Grove’s “How to Make an American Job” in Businessweek’s July 5 edition when latest edition of Newsweek arrived.  He is the former CEO and chairman of Intel.  Rana Foroohar writes her article “How to Build Again” in Newsweek.  My background in is management of a variety of manufacturing concerns.  What is her background?

Mr. Grove points out that Foxconn, the giant electronics subcontractor in China, employs over 800,000 people.  Most of those people are earning one-fifth the pay that Americans require.  Back in the 1950s 1960s and 1970s those 800,000 jobs would be in the United States.  Innovation is wonderful but who will manufacture and assemble the next 3-D television or the next iPhone?  Unless there is more job creation in the United States for the millions of Americans that are continuing to be laid off our children and grandchildren are in for some very unhappy lives.

Hubris and the iPhone 4

We need more Hubris in America!

Today Apple has announced “We’re Not Pefect“, and that they will give everyone a free protective case for their iPhone 4.  Of course the reason is that the case insulates your hand from the wrap around stainless steel frame that is acting as an antenna.

Daniel Lyons of Newsweek does an excellent job of telling us how hubris has impacted Apple in his July 15 on line posting.  “Apple had this really clever idea and just couldn’t let it go. Why not put a stainless-steel frame around the phone and have that frame serve as the antenna? Jobs made a big deal out of this innovation when he introduced the phone in June, calling it “brilliant engineering” and boasting that the antenna design “has never been done before.”

Apple’s success is wrapped around Steve Jobs.  So naturally he is the ultimate holder of the Hubris Award.  He has seen his company, which he co-founded, grow to a company with a market cap of $229 Billion and earnings per share of $12.96.  Stock market ID is APPL.  IN just this past year alone shares in that company have risen from $148.63 to today’s $252.00.

Remember when he gave his demo of the new phone?  He could not access the internet.  Now this unfortunate event.  Perhaps it is a good thing there are other people like Steve Jobs.  They are the individuals who will help bring America out of its current funk.

What’s Wrong with Free Trade?

 Will those Mama Bears stand up for this issue?

Ross Perot called it “the giant sucking sound.” It was his opinion of the consequences of NAFTA. He told us all that the free trade agreement with Mexico and Canada would result in the loss of thousands of American jobs. He was pooh-poohed by many in the media, in government and many ordinary Americans like myself. A casual acquaintance at work, who looked and dressed like a hippy was giving me the same arguments as Mr. Perot. I told him that the only result of NAFTA would be a better life for Mexicans with no impact on the United States. They were right and I was wrong.

Companies with assembly and manufacturing plants in Mexico include, Chrysler, Technicolor, Panasonic, and Sony. Those jobs are now being fulfilled by Mexicans at salaries that are 1/5 the amount paid to Americans. Is it any wonder so many companies have located their manufacturing facilities there?

Now there are proposals for free trade agreements with other Latin American nations and South Korea. Trade with South Korea totals $68 Billion. Obama is reported to believe that the proposed agreement will result in increased exports of American goods. Some American labor unions and manufacturers are opposed. Every American should be opposed to all new free trade agreements.

Corporations and the wealthy favor those new agreements because they will be the beneficiaries. The reason is simple. Keeping American employee compensation Low is their objective. When Americans have to compete with workers in other countries they will have to reduce their pay demands to be competitive.

If Tea Party participants are looking for a cause that will attract more Americans, then this is it. Everyone understands it is all about jobs. Will those Mama Bears stand up for this issue? This really would be protecting their young!