factories

Manufacturing Data Points to an Economy Gaining Speed

September 3, 2013 by NewsMaker

The Institute for Supply Management, a trade group of purchasing managers, said Tuesday that its manufacturing index rose to 55.7 in August from 55.4 in July. That was higher than the index’s 12-month average of 52. A reading above 50 indicates growth.

A gauge of new orders rose nearly five points to 63.2, the highest level in more than two years. However, production increased more slowly than in July, and factories added jobs at a weaker rate. Despite the drop, production reached its highest level in two-and-a-half years.

The overall improvement contrasted with other recent reports that had pointed to a slowdown in manufacturing. The institute’s survey found broad-based growth, with 15 out of 18 industries reporting expansion and only one reporting contraction. That suggested that factory production could accelerate.

“The data unambiguously point to a pickup,” Jim O’Sullivan, an economist at High Frequency Economics, said in a note to clients.

The Federal Reserve will closely examine the report, released two weeks before Fed policy makers will decide whether to slow their bond-buying program. The Fed chairman, Ben S. Bernanke, has said the central bank would scale back its purchases this year if the economy continued to strengthen. The monthly bond purchases worth $85 billion have been intended to keep interest rates low.

The jobs report for August, to be released Friday, is the most important remaining economic report the Fed will consider.

Orders from overseas also rose, a sign that improving economies in Europe and China may be bolstering American manufacturers. The economies of the 17 countries in the European Union that use the euro grew in the April-June quarter after six quarters of recession.

And a private survey of purchasing managers in China found that manufacturing in that country expanded after shrinking for the three previous months.

Article source: http://www.nytimes.com/2013/09/04/business/economy/manufacturing-data-points-to-an-economy-gaining-speed.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: contraction, factories, slowdown

You’re the Boss Blog: Trying to Take the Sting Out of a Price Increase

June 5, 2013 by NewsMaker Leave a Comment

She Owns It

Portraits of women entrepreneurs.

Suzanne DeChillo/The New York Times Susan Parker, owner of Bari Jay.

At the last She Owns It Business Group meeting, the owners talked about several pricing issues. Susan Parker, who owns Bari Jay, recently discovered that customers react not only to a price increase but also to the way it is presented. When she learned her factories were raising her prices, she thought she would pass along a 10-percent-per-dress increase to all of customers. But then she had another idea.

Bari Jay customers who paid their invoices within 30 days had been receiving an 8 percent discount. Rather than increasing dress prices for all customers, Ms. Parker decided to discontinue the discount. This seemed like a good idea because it would affect fewer accounts, and the timely payers would still end up paying less than they would if she increased prices 10 percent across the board. But when customers learned they would be losing their discount for prompt payment, they were angry and confused, Ms. Parker said.

“I could see that,” said the group member Alexandra Mayzler, who owns Thinking Caps Group. “I’d feel like I’d been being so good, paying early, and you’re taking that opportunity away from me.”

With hindsight, Ms. Parker realized where Bari Jay went wrong. When she and her sister sent letters to the discount recipients, they said simply that Bari Jay was eliminating the 8 percent discount. The news might have been better received had they stressed that the discontinuation was in lieu of a 10 percent increase. “We only gave them the negative without giving them the positive, so the perception was that we’re taking something away,” she said.

“I think understanding that these things are going to happen, and building contingencies into your contracts — if you have a contract-type business — helps,” said Jessica Johnson, owner of Johnson Security Bureau.

Shifting gears, Ms. Parker said Bari Jay’s biggest pricing challenges are in Europe and Australia. While the company sells directly to stores in the United States, it sells through distributors in Europe and Australia, and the relationships with those distributors were in place before Ms. Parker and her sister took over the company.

Recently, Ms. Parker’s Australian distributor claimed it could increase Bari Jay’s business if it received a bigger discount. Ms. Parker said she was glad to offer one given the promise of more sales. But Bari Jay found that the change resulted in a decline in revenue. “The distributor must have made more money but it came from our pockets, not from increased sales,” she said.

Ms. Parker had agreed to offer the bigger discount for a trial period that ended about six months ago. But because Bari Jay didn’t speak up when the trial ended, Ms. Parker said she and her sister now feel stuck with the discount.

“Did they know it was a trial period?” asked Deirdre Lord, who owns the Megawatt Hour.

“They did,” Ms. Parker replied. Sometimes, she added, she wonders whether she and her sister are “suckers.” She said they walked into a meeting with the distributor saying, “We’re going back to our original discount.” But they found neither of them had the nerve to push for the result they wanted.

“Are you afraid that they’re going to stop carrying your line?” Ms. Lord asked.

Ms. Parker doesn’t think that would happen — it doesn’t cost the distributor all that much to keep the line. But she said she has learned from her experiences with stores in the United States that they seem to promote the lines of their favorites. So, she said, she is wary of becoming “the person they don’t love dealing with.” Already, Ms. Parker suspects her Australian distributor isn’t promoting Bari Jay as much as it does other lines. For example, she said the distributor advertises other lines in all four issues of Australia’s leading bridal magazine but only advertises Bari Jay in two issues.

Ms. Lord said it sounds like Bari Jay may have a marketing issue, not a pricing one. That is, it’s not Bari Jay’s prices that are affecting sales, but the way in which the distributor is marketing the company’s dresses.

In Europe, Bari Jay’s distributor claims he needs a bigger discount to improve sales, which have fallen significantly. Ms. Parker is considering offering a discount that incorporates a minimum order. But she’s not sure. “If I do this and it doesn’t work, well then how do you renege?” she asked.

Why wouldn’t Ms. Parker just conclude that Europe isn’t her market? Ms. Mayzler asked. “You don’t want to have a price that’s not actually working,” she said.

But Ms. Parker stressed that Bari Jay has been successful there. At their peak, she said European annual sales were about $500,000, or one-fourteenth of Bari Jay’s revenue — with minimal labor costs. The dresses ship directly from Asia, at the distributor’s expense, so Bari Jay isn’t responsible for packing and unpacking. She said her labor is basically limited to order entry and invoicing. “So, it’s mostly profit,” she said. But now, European sales are close to zero — not profitable at any cost.

“What happened?” Ms. Mayzler asked.

“Europe keeps saying the market changed,” Ms. Parker said. She acknowledged that the region’s economic woes aren’t helping. But she suspects other issues are at play. She recently learned the distributor buys all of his other lines directly from factories, not retailers like Bari Jay, which mark up the factory’s price. “I can’t compete when he’s getting direct from a factory and I’m a middle man,” Ms. Parker said. “He’s selling my dresses next to a dress for half the price.”

Ms. Mayzler suggested that the problem is the distributor, not the discount amount. Ms. Parker acknowledged she is searching for a new European distributor. But until she finds one, she said she would like to see at least some European business. A bigger discount may offer her current distributor an incentive.

“Dare I say it’s not worth being in Europe?” Ms. Lord asked.

“It is though, because I can do half a million dollars, why wouldn’t I want that?” Ms. Parker replied.

“It depends how much it costs you,” Ms. Mayzler said.

You can follow Adriana Gardella on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/06/05/trying-to-take-the-sting-out-of-a-price-increase/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: factories, hindsight, thinking caps

High & Low Finance: Cyprus Capital Controls Come Years After They Were Needed

March 28, 2013 by NewsMaker Leave a Comment

The new controls are aimed at stopping that hot money from fleeing Cyprus too rapidly. They limit how much cash anyone can take out of the country. Electronic transfers are banned. So is check-cashing. The controls are supposed to be temporary. But they sure don’t look like one-week wonders. There are limits on how much cash can be sent abroad each quarter for a student’s overseas education. There are monthly limits on how much any Cypriot can run up in credit card charges abroad.

That something like this was necessary seems clear. That it will work is not.

During 2008 and 2009, as it became obvious that the Irish banking system was imploding, Cyprus became the new euro zone locale for hot money. Cypriot banks paid higher interest rates on euros and — by some accounts — were not too picky about the provenance of the money coming in.

In 2008, according to a study by the McKinsey Global Institute, $40.7 billion was funneled into Cyprus through loans and bank deposits. In the context of world capital flows, that was a blip. But it amounted to 161 percent of Cypriot gross domestic product that year.

During the Asian currency crisis of the late 1990s, the world learned just how vulnerable a country can be to hot money. If it seems nice on the way in, it can be very nasty on the way out. It is one thing for international capital flows to take the form of direct investment, in factories and companies, or even portfolio investment, through the purchase of corporate stocks and bonds. The nature of that investment does not involve a promise to repay it on demand. But loans and deposits can be demanded just when a country and its banking system can least afford to repay them.

During that crisis, Malaysia broke from the consensus that capital controls were always bad, that the free market knew best. It proved to be a wise decision, although it was endorsed at the time by few economists.

What is happening in Cyprus now bears more than a little similarity to what happened in Ireland earlier. The Irish also enjoyed capital inflows that were a multiple of G.D.P., and the country’s oversize banking system eventually collapsed. There the largest part of the problem was a housing bubble, brought on by lenient lending. When that bubble burst, foreigners wanted their money immediately, and Ireland decided to stand behind its banks, virtually bankrupting the country’s government.

Most of the capital that flowed into Ireland during the good times was not bank deposits. And Ireland had enough of a real economy — absent banking and real estate — that it has continued to attract some foreign direct investment every year since the collapse.

But it used to be said of Cyprus that it had only banks and beaches. It got little in the way of foreign direct investment during the good times. When money flowed in, it took the form of demand deposits that were supposed to be available at any minute.

Luckily for those who had put money into Irish banks, or bought senior bonds from those banks, the Irish banks failed early, before governments realized they could not afford to do bailouts. In Cyprus’s case, the European institutions that were making the decisions first came up with the idea of “taxing” all bank deposits, whether they were insured or not. Fortunately, the Cypriot Parliament balked at that, and the eventual plan makes more sense.

Shareholders and bondholders at the worst bank are wiped out. Deposits up to the 100,000-euro limit for insured deposits are protected, although the capital controls may mean it will be a while before depositors can get their hands on the money. Deposits over that limit in the most troubled bank could be wiped out. At best, those depositors are likely to wait years before they get back a small fraction of their money. The central bank estimates large depositors in the largest bank will do a little better, perhaps getting most of their money back. But such estimates could prove wildly optimistic if banks lose most of their deposits when, or if, capital controls come off.

Article source: http://www.nytimes.com/2013/03/29/business/cyprus-capital-controls-come-years-after-they-were-needed.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: bank deposits, factories, gross domestic product

Housing and Manufacturing Gains Drive U.S. Economy

March 26, 2013 by NewsMaker Leave a Comment

Home prices rose 8.1 percent in January, the fastest annual rate since the peak of the housing boom in summer 2006. Demand for longer-lasting factory goods increased 5.7 percent in February, the biggest gain in five months.

February sales of new homes and March consumer confidence looked shakier. But the overall picture reflected an improving economy.

“There is nothing in this data that says the economy is falling back,” said Joel Naroff, chief economist at Naroff Economic Advisors.

The year-over-year increase in home prices reported by the Standard Poor’s/Case-Shiller 20-city index was the fastest since June 2006. Prices rose in all 20 cities and eight markets posted double-digit increases, including some of those hardest hit during the crisis. Prices rose 23.2 percent in Phoenix, 17.5 percent in San Francisco and 15.3 percent in Las Vegas.

The strength in home prices has far from erased the damage from the crisis. Home prices nationwide are still on average 29 percent below the peak reached in August 2006.

Sales of new homes cooled in February to a seasonally adjusted annual rate of 411,000, the Commerce Department reported Tuesday. That is down from January’s pace of 431,000, which was the fastest since September 2008. But February’s pace was still better than every other month since April 2010, when a temporary home-buying tax credit was lifting sales. And February sales were 12.3 percent higher than a year earlier.

“We are still far from the healthy level of 700,000, but we’re slowly making our way in that direction,” said Jennifer Lee, senior economist with BMO Capital Markets. “We just have to accept the fact that the path will be interrupted once in a while, and that’s what happened in February.”

Manufacturing is also pushing the economy this year, and factories were busier in February, the Commerce Department’s report on durable goods orders said.

The increase in February was caused by a surge in commercial aircraft orders, which tend to be volatile. Still, orders for motor vehicles and parts increased solidly, suggesting demand for cars and trucks remains strong.

Orders for machinery and other goods that signal business investment plans fell sharply in February. But the decline followed the biggest monthly gain in nearly three years. Economists had expected companies to ease up after their spending spree in January. When looking at the two months together, business investment has accelerated from the end of 2012.

“The picture of business spending to start the year is fairly healthy,” said Dan Greenhaus, chief global strategist at BTIG, an institutional brokerage.

But tax increases and government spending cuts could slow the economy’s momentum. Both weighed on consumers’ minds in March.

The Conference Board, a private research group, said its Consumer Confidence Index fell to 59.7 this month, down from 68 in February. The decline was mainly a result of a drop in expectations for the economy in the next six months, though consumers also were more pessimistic about current economic conditions.

The survey was conducted from March 1 through March 14, as $85 billion in automatic spending cuts began. Consumers were already feeling pinched by higher Social Security taxes that have reduced take-home pay for most workers this year. And gasoline prices rose sharply in February, then eased slightly this month.

“It was sort of a perfect storm,” said Chris G. Christopher Jr., director of consumer economics at IHS Global Insight. “I do expect confidence to rebound as long as there is no government shutdown and the political bickering in Washington doesn’t reach a fever pitch.”

Article source: http://www.nytimes.com/2013/03/27/business/economy/orders-for-durable-goods-jump.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: factories, tax credit, temporary home

Opinion: The Tijuana Connection, a Template for Growth

January 26, 2013 by NewsMaker Leave a Comment

IN November I quit my job as the editor of Wired to run 3D Robotics, the San Diego-based drone company I started with a partner as a side project three years ago. We make autopilot technology and small aircraft — both planes and multirotor copters — that can fly by themselves. The drones, which sell for a few hundred bucks, are for civilians: they don’t shoot anything but photographs and videos. And they’re incredibly fun to build (which we do with the ample help of robots). It wasn’t a hard decision to give up publishing for this.

But my company, like many manufacturers, is faced with a familiar challenge: its main competitors are Chinese companies that have the dual advantages of cheap labor and top-notch engineering. So, naturally, when we were raising a round of investment financing last year, venture capitalists demanded a plausible explanation for how our little start-up could beat its Chinese rivals. The answer was as much a surprise to the investors as it had been to me a few years earlier: Mexico. In particular, Tijuana.

Like many Americans, until recently, when I heard “Tijuana” I thought only of drug cartels and cheap tequila. “TJ,” though, is a city of more than two million people (larger than neighboring San Diego), and it has become North America’s electronics assembly hot spot: most of the flat-screen TVs sold in the United States, from companies like Samsung and Sony, are made there, along with everything from medical devices to aerospace parts. Jordi Muñoz, the smart young guy who had taught me about drones and then started 3D Robotics with me, is from TJ — and he persuaded me to build a second factory there to supplement the work we were doing in San Diego.

Shuttling between the two factories — in San Diego, where we engineer our drones, and in TJ, where we assemble them — I’m reminded of a similar experience I had a decade earlier. In the late 1990s and early 2000s, I lived in Hong Kong (working for The Economist) and saw how that city was paired with the “special economic zone” of Shenzhen across the border on the Chinese mainland in Guangdong Province. Together, the two created a world-beating manufacturing hub: business, design and finance in Hong Kong, manufacturing in Shenzhen. The clear division of labor between the two became a model for modern China.

Today, what Shenzhen is to Hong Kong, Tijuana is becoming to San Diego. You can drive from our San Diego engineering center to our Tijuana factory in 20 minutes, no passport required. (A passport is needed to come back, but there are fast-track lanes for business people.) Some of our employees commute across the border each day; good doctors are cheaper and easier to find in TJ, as are private schools, although it’s generally nicer to live in San Diego. In some ways, the border feels more like the notional borders of the European Union than a divide between the developed and developing worlds.

And it’s not just TJ. To the east, in Juárez, Dell computers are built by Foxconn, the company that manufactures more than 40 percent of the world’s electronics (including Apple’s iPhone and iPad). To the south, in Querétaro, a factory builds the transmissions that General Motors installs in its Corvettes. The design of General Electric’s GEnx turbine jet engine and the production of interior elements of Boeing’s 787 Dreamliner also happen in Mexico. Manufactured goods are the country’s chief export, with private investment in this sector among the highest in the world.

The notion that Mexico offers only cheap labor is just plain off the mark. Mexico graduates some 115,000 engineering students per year — roughly three times as many as the U.S. on a per-capita basis. One result is that some machine specialists are typically easier to find in TJ than in many big American cities. So, for that matter, are accountants experienced in production economics and other highly skilled workers.

What all these pieces add up to is a model — one that might hold the long-sought answer for how American manufacturers can compete with those in China, India and the next generation of economic powerhouses. That’s because the TJ template isn’t so much about outsourcing as it is quicksourcing. And that’s also the way to create thousands of good jobs in the United States.

As any entrepreneur can tell you, the shorter and more nimble a supply chain is, the better.

First, a shorter supply chain means that a company can make things when it wants to, instead of solely when it has to. Strange as it may seem, many small manufacturers don’t have that option. When we started 3D, we produced everything in China and needed to order in units of thousands to get good pricing. That meant that we had to write big checks to make big batches of goods — money we wouldn’t see again until all those products sold, sometimes a year or more later. Now that we carry out our production locally, we’re able to make only what we need that week.

Chris Anderson is the former editor of Wired and the author of “Makers: The New Industrial Revolution.”

Article source: http://www.nytimes.com/2013/01/27/opinion/sunday/the-tijuana-connection-a-template-for-growth.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: factories, medical devices, robotics

Embattled ThyssenKrupp Reports Huge Loss

December 11, 2012 by NewsMaker Leave a Comment

FRANKFURT — The German steel maker ThyssenKrupp, battered by slow economic growth and a series of corruption scandals, reported the biggest loss in its history late Monday and confirmed that three top executives would leave the company.

The loss of 5 billion euros ($6.5 billion) for the fiscal year that ended in September capped a tumultuous year for a company that once symbolized German industrial might. The period included the disclosure of huge losses at the unit that operates steel plants in Brazil and Alabama, fines related to a price-fixing scandal and other setbacks.

Last year, the company reported a loss of 1.8 billion euros.

“I’m not going to talk anything up here, because it is obvious that a great deal has gone wrong in the past,” Heinrich Hiesinger, the chief executive of Thyssen-Krupp, said Tuesday at its headquarters in Essen, Germany.

ThyssenKrupp attributed 3.6 billion euros of the loss to its unit Steel Americas, which Mr. Hiesinger referred to as a “disaster.” He conceded that managers had valued plants in Rio de Janeiro and Calvert, Ala., at far above their market value. Accounting rules required the company to record a loss after recognizing the actual worth of the factories.

The Brazilian factory suffered from cost overruns during construction, and both mills were hit by slack demand, ThyssenKrupp said.

The fiscal-year loss means that ThyssenKrupp will not pay a dividend to shareholders for the first time since it was created in a merger in 1999. Still, Thyssen-Krupp shares rose 5.63 percent in Frankfurt on Tuesday as investors concluded that Mr. Hiesinger, who became chief executive in January 2011, was grappling with the problems.

“The track record of new management has been very solid,” analysts at Credit Suisse said Tuesday in a note to clients. “They are dealing with perhaps some of the most difficult issues of Thyssen-Krupp’s existence.”

Blame for the problems fell on three members of the company’s six-member executive board. ThyssenKrupp said the three had agreed to terminate their contracts at the request of the company’s supervisory board.

The managers are Olaf Berlien, whose responsibilities included plant technology; Jürgen Claassen, the longtime head of communications; and Edwin Eichler, who was in charge of Steel Americas. About 50 managers have already left the company after they were found to have violated compliance codes, Mr. Hiesinger said.

Mr. Claassen, who was also responsible for compliance with the company’s ethics rules, has been the subject of articles in the newspaper Handelsblatt and other news outlets asserting that he took journalists on junkets that were considered lavish even by the flexible standards of the European press.

The Essen prosecutor’s office, which investigated the accusations, said last week that it had found no evidence that the trips broke any laws.

Questions have also been raised about whether top managers concealed the true extent of the company’s problems, but Mr. Hiesinger said there was no evidence of wrongdoing. “To date there are no facts indicating compliance infringements or illegal conduct by any of them,” he said.

But the huge loss, at a time when most big German companies continue to do well, was a further blow to ThyssenKrupp’s reputation.

In July, the company paid a 103 million euro fine to the Federal Cartel Office in Germany after accusations it was part of a conspiracy to fix the price of railway tracks sold to Deutsche Bahn, the national railroad, and other customers. The company warned on Tuesday that it might face additional investigations or lawsuits stemming from its involvement in the cartel.

Krupp, which merged with Thyssen in 1999 after one of the first hostile takeover battles in German history, once symbolized the country’s industrial might. Founded in 1811, Krupp was responsible for many advances in steel technology but also developed and built the cannons and other weapons that provided the foundation for German militarism in the 19th and 20th centuries. During World War II, Krupp used slave labor at its factories. Its top managers were later convicted of war crimes, though they served only brief prison terms.

In recent years, ThyssenKrupp has been overshadowed by companies like Daimler and Siemens, reflecting a shift in Germany’s economic center of gravity from the Ruhr Valley to the south. Daimler is based in Stuttgart, and Siemens in Munich.

With sales of about 40 billion euros in the fiscal year ended Sept. 30, ThyssenKrupp has about half the revenue of fellow industrial giant Siemens and a little more than a third the sales of Daimler. Still, it remains an enormous company with 152,000 workers, including 58,000 in Germany.

Besides making steel, primarily for automakers, Thyssen-Krupp also makes elevators, builds and equips factories, and manufactures submarines and other naval vessels.

Mr. Hiesinger, a former Siemens executive, acknowledged on Tuesday that “our leadership culture has failed in many areas of the company.”

“In the past there has been an understanding of leadership in which ‘old boys’ networks’ and blind loyalty were more important than business success,” he said. “And there were obviously some who thought that rules, regulations and laws do not apply to everyone.”

“I am aware that through this attitude we have lost a great deal of trust and credibility,” Mr. Hiesinger said. “We must now earn back both.”

Article source: http://www.nytimes.com/2012/12/12/business/global/record-loss-for-embattled-thyssenkrupp.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: factories, rio de janeiro, setbacks

Record Loss for Embattled ThyssenKrupp

December 11, 2012 by NewsMaker Leave a Comment

FRANKFURT — The German steelmaker ThyssenKrupp, battered by slow economic growth and a series of corruption scandals, reported the biggest loss in its history and confirmed that three top executives would leave the company.

The loss of €5 billion, or $6.5 billion, for the fiscal year that ended in September, was announced late Monday, capping a tumultuous year for a company that once symbolized German industrial might. The period was marked by the revelation of huge losses at the unit that operates steel plants in Brazil and Alabama, fines related to a price-fixing scandal, and other setbacks.

Last year the company lost €1.8 billion.

“I’m not going to talk anything up here, because it is obvious that a great deal has gone wrong in the past,” Heinrich Hiesinger, the chief executive of ThyssenKrupp, said at a news conference at company headquarters in Essen, Germany, on Tuesday.

ThyssenKrupp blamed €3.6 billion of the loss on its Steel Americas unit, which Mr. Hiesinger referred to as a “disaster.” He conceded that managers had valued plants in Rio de Janeiro and Calvert, Alabama, at far above their market value. Accounting rules required the company to record a loss after recognizing the factories’ actual worth.

The Brazil factory suffered from cost overruns during construction, and both mills were hit by slack demand, ThyssenKrupp said.

The fiscal-year loss means that ThyssenKrupp will not pay a shareholder dividend for the first time since it was created by a historic merger in 1999. Still, ThyssenKrupp shares rose about 1 percent in Frankfurt trading as investors concluded that Mr. Hiesinger, who became chief executive in January 2011, was grappling with the company’s problems.

“The track record of new management has been very solid,” analysts at Credit Suisse said in a note to clients Tuesday. “They are dealing with perhaps some of the most difficult issues of ThyssenKrupp’s existence.”

The managers are Olaf Berlien, whose responsibilities included plant technology; Jürgen Claassen, the company’s longtime head of communications; and Edwin Eichler, who was in charge of Steel Americas. About 50 managers have already left the company after they were found to have violated compliance codes, Mr. Hiesinger said.

Mr. Claassen, who was also responsible for compliance with the company’s ethics rules, has been the subject of articles in the Handelsblatt newspaper and other news outlets accusing him of taking journalists on junkets that were considered lavish even by the flexible standards of the European press.

The Essen prosecutor’s office, which investigated the accusations, said last week that it had found no evidence that the trips broke any laws.

Questions have also been raised about whether top managers concealed the true extent of the company’s problems, but Mr. Heinrich said there was no evidence of wrongdoing.

“To date there are no facts indicating compliance infringements or illegal conduct by any of them,” he said.

But the huge loss, at a time when most big German companies continue to do well, was a further blow to ThyssenKrupp’s reputation.

In July, the company paid a €103 million fine to the German Cartel Office following accusations it was part of a conspiracy to fix the price of railway tracks sold to Deutsche Bahn, the national railroad, and other customers. The company warned Tuesday it may face additional investigations or lawsuits stemming from its involvement in the cartel.

Krupp, which merged with Thyssen in 1999 following one of the first hostile takeover battles in German history, was once the very symbol of the country’s industrial might — for better or worse.

Founded in 1811, Krupp was responsible for many advances in steel technology but also developed and built the cannons and other weapons that provided the foundation for German militarism in the 19th and 20th Centuries. During World War II, Krupp used slave labor at its factories. Its top managers were later convicted of war crimes, though they served only brief prison terms.

With sales of about €40 billion in the fiscal year ended Sept. 30, ThyssenKrupp has about half the revenue of Siemens and a little more than a third the sales of Daimler. Still, it remains an enormous company with 152,000 workers, including 58,000 in Germany.

Besides making steel, primarily for automakers, ThyssenKrupp also makes elevators, builds and equips factories, and manufactures submarines and other naval vessels.

Mr. Hiesinger, a former Siemens executive, acknowledged Tuesday that “our leadership culture has failed in many areas of the company.”

“I am aware that through this attitude we have lost a great deal of trust and credibility,” Mr. Hiesinger said. “We must now earn back both.”

Article source: http://www.nytimes.com/2012/12/12/business/global/record-loss-for-embattled-thyssenkrupp.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: factories, news conference, overruns

It’s the Economy: Skills Don’t Pay the Bills

November 25, 2012 by NewsMaker Leave a Comment

Nearly six million factory jobs, almost a third of the entire manufacturing industry, have disappeared since 2000. And while many of these jobs were lost to competition with low-wage countries, even more vanished because of computer-driven machinery that can do the work of 10, or in some cases, 100 workers. Those jobs are not coming back, but many believe that the industry’s future (and, to some extent, the future of the American economy) lies in training a new generation for highly skilled manufacturing jobs — the ones that require people who know how to run the computer that runs the machine.

This is partly because advanced manufacturing is really complicated. Running these machines requires a basic understanding of metallurgy, physics, chemistry, pneumatics, electrical wiring and computer code. It also requires a worker with the ability to figure out what’s going on when the machine isn’t working properly. And aspiring workers often need to spend a considerable amount of time and money taking classes like Goldenberg’s to even be considered. Every one of Goldenberg’s students, he says, will probably have a job for as long as he or she wants one.

And yet, even as classes like Goldenberg’s are filled to capacity all over America, hundreds of thousands of U.S. factories are starving for skilled workers. Throughout the campaign, President Obama lamented the so-called skills gap and referenced a study claiming that nearly 80 percent of manufacturers have jobs they can’t fill. Mitt Romney made similar claims. The National Association of Manufacturers estimates that there are roughly 600,000 jobs available for whoever has the right set of advanced skills.

Eric Isbister, the C.E.O. of GenMet, a metal-fabricating manufacturer outside Milwaukee, told me that he would hire as many skilled workers as show up at his door. Last year, he received 1,051 applications and found only 25 people who were qualified. He hired all of them, but soon had to fire 15. Part of Isbister’s pickiness, he says, comes from an avoidance of workers with experience in a “union-type job.” Isbister, after all, doesn’t abide by strict work rules and $30-an-hour salaries. At GenMet, the starting pay is $10 an hour. Those with an associate degree can make $15, which can rise to $18 an hour after several years of good performance. From what I understand, a new shift manager at a nearby McDonald’s can earn around $14 an hour.

The secret behind this skills gap is that it’s not a skills gap at all. I spoke to several other factory managers who also confessed that they had a hard time recruiting in-demand workers for $10-an-hour jobs. “It’s hard not to break out laughing,” says Mark Price, a labor economist at the Keystone Research Center, referring to manufacturers complaining about the shortage of skilled workers. “If there’s a skill shortage, there has to be rises in wages,” he says. “It’s basic economics.” After all, according to supply and demand, a shortage of workers with valuable skills should push wages up. Yet according to the Bureau of Labor Statistics, the number of skilled jobs has fallen and so have their wages.

In a recent study, the Boston Consulting Group noted that, outside a few small cities that rely on the oil industry, there weren’t many places where manufacturing wages were going up and employers still couldn’t find enough workers. “Trying to hire high-skilled workers at rock-bottom rates,” the Boston Group study asserted, “is not a skills gap.” The study’s conclusion, however, was scarier. Many skilled workers have simply chosen to apply their skills elsewhere rather than work for less, and few young people choose to invest in training for jobs that pay fast-food wages. As a result, the United States may soon have a hard time competing in the global economy. The average age of a highly skilled factory worker in the U.S. is now 56. “That’s average,” says Hal Sirkin, the lead author of the study. “That means there’s a lot who are in their 60s. They’re going to retire soon.” And there are not enough trainees in the pipeline, he said, to replace them.

Article source: http://www.nytimes.com/2012/11/25/magazine/skills-dont-pay-the-bills.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: factories, obama, pneumatics

Industrial Production in U.S. Falls After Storm’s Disruption

November 17, 2012 by NewsMaker Leave a Comment

Production at the nation’s mines, factories and refineries contracted 0.4 percent last month, after a 0.2 percent increase in September, the Fed said. It said the storm, which hit the East Coast at the end of October, cut output by nearly one percentage point. Utilities and producers of chemicals, food, transportation equipment, and computers and electronic products were the most affected, it said.

Still, the gain in output last month would have been modest even without the storm, with fears about the possibility of higher taxes and sharp cuts in government spending early next year making businesses hesitant to raise output and invest.

Those measures would drain about $600 billion from the economy unless Congress and the Obama administration agree on a plan to soften the blow.

Industrial output contracted in the third quarter for the first time since the 2007-9 recession ended, a hard landing is not expected for the industrial sector.

Economists are divided on whether industrial output will bounce back in November. Some expect the effects of the storm to linger longer.

“Sandy’s impact is also likely to be felt in the November industrial production data as power outages and other disruptions in the Northeast persisted into the second week of the month,” said Jeremy Lawson, an economist at BNP Paribas in New York.

Last month, utilities output fell 0.1 percent, even though parts of the Northeast lost power during the storm. Utilities production was flat in September. Production at mines increased 1.5 percent after rising 0.9 percent the previous month.

The amount of factory capacity in use — a measure of how fully firms are using their resources — slipped 0.8 of a point, to 75.9 percent in October, the lowest level since November 2011.

Article source: http://www.nytimes.com/2012/11/17/business/economy/industrial-production-declines.html?partner=rss&emc=rss

Filed Under: Business News Tagged With: bnp paribas, electronic products, factories

Factory Production Is Fueling Increased Growth in U.S.

January 19, 2012 by NewsMaker Leave a Comment

WASHINGTON (AP) — Factory production in the United States has surged 15 percent above its lows of two and a half years ago and is helping drive the economy’s recovery.

A jump in manufacturing output last month coincided with other data suggesting that the economy began 2012 with renewed vigor, and another report shows that wholesale prices are tame.

There appear to be signs “that manufacturing in the U.S. is gaining global market share,” said John Ryding of RDQ Economics, “and this could be an important dynamic supporting growth in 2012.”

Manufacturing rose 0.9 percent from November to December, the Federal Reserve said Wednesday. It was the biggest monthly gain since December 2010.

Overall output at the nation’s factories, mines and utilities increased 0.4 percent. Warm weather reduced demand for energy produced by utilities.

Over the last year, factory output has risen 3.7 percent. Factories benefited in particular in the second half of 2011 from several trends. People bought more cars. Businesses spent more on industrial machinery and computers before a tax incentive expired. And companies restocked their supplies after cutting them last summer.

The growth has also fueled more hiring. Factories added 23,000 jobs in December, the most since July. That helped reduce the unemployment rate to 8.5 percent, the lowest level in nearly three years.

Still, Europe’s debt crisis has begun to dampen demand for American exports. That trend, should it continue, could slow manufacturing and threaten growth this year.

December’s gains suggest the industry “is still resistant to the apparent slowdown in growth elsewhere, particularly in Europe,” said Paul Ashworth, chief United States economist with Capital Economics.

Businesses are starting to see some relief from high prices for energy and food, and that should benefit consumers later this year.

The Producer Price Index declined 0.1 percent in December, the Labor Department said Wednesday. The index measures price changes before they reach consumers.

Core wholesale prices, which exclude costs for food and energy, rose more sharply in December — 0.3 percent. But economists played down the increase. They cited temporary factors that had pushed auto prices down in October and November.

Over all, wholesale prices are trending lower. They increased 4.8 percent in December compared with the same month a year ago, reflecting in part the effect of higher oil and other commodity prices. Even so, it is the slowest annual increase since January and down from 7.1 percent in July.

Falling prices for oil and agricultural commodities have lowered the cost of food and gas.

Gas prices have turned upward in recent months, but economists do not expect that to worsen inflation this year because prices will most likely be lower than last winter and spring, when political turmoil in North Africa and the Middle East sent prices up.

Lower wholesale costs mean manufacturers and retailers face less pressure to raise prices for consumers to maintain profits. That could keep consumer price inflation in check.

Lower inflation also gives the Federal Reserve leeway to keep short-term interest rates low and take other steps, if necessary, to bolster the economy.

Article source: http://feeds.nytimes.com/click.phdo?i=b499efd1e042169ed24d2cb8f7895547

Filed Under: Economy News Tagged With: debt crisis, factories, lows