December 13, 2019

Shifting Tech Scene Unsettles Big Players

On Wednesday, Hewlett-Packard announced several significant personnel changes, along with sharply lower revenue and narrower operating profit margins. It was the latest in a string of disappointing earnings news from big technology companies that has some asking if the industry, after at least five years of growth, is finally slowing down.

“We’re doing a turnaround in not the greatest economic environment,” said Meg Whitman, H.P.’s chief executive, in an interview. “Everyone is trying to position themselves for the new style of information technology. The fittest will survive.”

But the bad earnings news from older, big tech companies does not — so far — appear to be spreading to more youthful Internet companies like Google or Salesforce.com, which provide their software as a service over the Internet.

H.P.’s news, for example, comes on the heels of surprising plans announced last week to cut about 5 percent of the work force at the network computing company Cisco Systems and continuing issues at giant tech companies like Oracle, Intel and even Microsoft.

If there is a common thread among these older outfits, long considered bellwethers for their industry, it is that they are all struggling to adapt to a computing world where people use the Internet on mobile devices like smartphones and tablets. Likewise, the information they retrieve is stored in a cloud of network computers that are used by many companies at the same time.

In some cases, they are big makers of things like personal computers, which people are not buying as quickly as they once did. In other cases, they are making costly corporate computing equipment like routers, which direct traffic on Internet networks. Those routers are still in demand, but they don’t typically attract the prices they once did.

“All the traditional enterprises are in a pickle,” said Krish Ramakrishnan, a former general manager at Cisco who now runs Blue Jeans Network, a cloud-based videoconferencing service. “They want to have cloud businesses, but each of their divisions will have to transform differently.”

For H.P., a leader in personal computers, printers and computer servers, as well as data storage and networking, sales were down in almost every business. Total revenue was $27.2 billion, down 8 percent from a year earlier. Net earnings were $1.4 billion and, excluding special charges, were about 15 percent below their year-ago level. H.P. stock, which fell 1.8 percent in regular trading on Wednesday, dropped 6 percent more in after-hours trading.

Ms. Whitman also announced several executive changes, replacing the head of products and sales for business, and consolidating marketing and communications. Earlier this year she also replaced the head of her PC division.

“Revenue growth across the company has been very weak,” said Toni Sacconaghi, an analyst with Sanford C. Bernstein. He noted that H.P. now had one of the worst share valuations among all major American companies, which he said “appears to reflect a permanently declining business.”

If it is any consolation, Ms. Whitman has plenty of company. Michael S. Dell, the chief executive of the computer maker Dell, is fighting to take his company private, a move that will almost certainly mean layoffs as the company moves away from selling personal computers, a once-good business that has gone bad thanks to the shift to tablet computing devices.

And at Cisco, sales are still strong, but John T. Chambers, the company’s chief executive, signaled trouble ahead with his job cuts, which he said were necessary because of economic “uncertainty.”

While there is no doubt there are broader economic issues affecting big-ticket tech sales — particularly in Asia, where Cisco’s sales were off 3 percent from the same quarter last year — analysts believe Mr. Chambers’ economic discussion fails to address the technology changes with which Cisco is trying to cope. In recent years, the company has faced a series of cheaper competitors, many of which rely more on software and off-the-shelf components, as compared with Cisco’s custom-made equipment.

Article source: http://www.nytimes.com/2013/08/22/technology/shifting-tech-scene-unsettles-big-players.html?partner=rss&emc=rss

China Service Sector Shows Expansion

BEIJING — Activity in China’s service sector defied the cooling of the country’s economy and expanded modestly in July, a private survey showed Monday. New business orders recovered from a multiyear low in a rare sign of resilience.

But that rise was tempered by a decline in prices charged by companies to a nine-month low, suggesting that demand was still too weak for them to raise prices, while business expectations hovered near their lowest level since 2005.

The HSBC/Markit purchasing managers’ index for the service industry stood at 51.3 in July, unchanged from June and just a whisker above a 20-month low of 51.1 struck in April.

It echoed data China’s National Bureau of Statistics had released over the weekend, which showed a reading of 54.1 last month, up from 53.9 in June.

A reading above 50 suggests business has grown from the previous month, while an outcome below 50 points to contraction.

Crucially, service companies are the biggest employers in China, at a time when the government is worried that the downturn could threaten social stability by driving up unemployment as Beijing tries to shift the economy away from a focus on manufacturing.

China’s economy is set to grow this year at its weakest pace since 1990, as flagging foreign and domestic demand weighs on exports and factory production. A slowdown in investment has further dragged on growth.

“China’s service sector has stabilized at a relatively low level of growth,” said Qu Hongbin, an economist at HSBC. “But profit margins continue to be squeezed. Without a sustained improvement in demand, services growth is likely to remain lackluster, putting downside pressures to employment growth.”

The subindex for new orders rebounded to 52.3 from the reading in June, which was the lowest reading in more than four years.

Financial markets have grown increasingly nervous about China’s economic health, despite reassurances from Beijing that it is on track to meet its growth target of 7.5 percent this year.

A pair of P.M.I. surveys of Chinese manufacturers last week showed a contradictory picture of factory production; the official figure was slightly stronger than expected in July among larger Chinese manufacturers, while the HSBC/Markit survey came in at an 11-month low.

“I am more worried about manufacturers. I don’t think the worst is over,” said Zhang Zhiwei, a Nomura economist in Hong Kong.

He said the service sector was holding up better than manufacturing, as it was not saddled with excess capacity and debt and was supported by demand intrinsically less volatile.

“Policy will continue to be tight, and growth will continue to slow in the second half of the year,” Mr. Zhang said.

The HSBC survey showed the employment subindex had slipped in July, although it remained above a four-year trough touched in April.

HSBC said 6 percent of survey respondents had increased their payrolls, with a particular focus on hiring graduates. In contrast, 2 percent of companies had shed jobs.

The service sector accounted for 46 percent of China’s economy in 2012, so a sharp slowdown in the industry would exacerbate concerns about slackening economic growth.

Service firms created 35 percent of all jobs in China in 2011, overtaking manufacturers, who accounted for 30 percent of hiring.

Article source: http://www.nytimes.com/2013/08/06/business/global/china-service-sector-shows-expansion.html?partner=rss&emc=rss

It’s the Economy: The Sippy Cup 1%

Amalia Goldvaser, due in September, walked right by the plant-resin teething rings and told me that she was “very skeptical” of the benefits offered by many of the natural products on display. She then laughed, because despite her skepticism, she was indeed spending a Sunday looking at all those natural products. Nearby, Jackie Pepe, mother of a 3-month-old named Matilda, was looking for a cheap natural cleaner for cloth diapers. For her, going natural is what economists call a weak revealed preference. She will embrace it as long as it doesn’t cost a lot more.

Much of the baby market is devoted to figuring out which preferences people will pay more for. And it seems as if the market now offers endless choices. At my last count, Amazon alone sold 2,417 different pacifiers, more than 1,000 car seats and 3,085 bath toys. But most of those products are essentially identical, made from the same inexpensive raw materials — metal, plastic, foam, wood — and manipulated into similar shapes and tested in exactly the same way. Stringent governmental regulation ensures that concerned parents could buy the cheapest car seat, stroller, crib or pacifier in a discount store and be confident that their children would be as safe as if they were in a $270 Cybex Aton car seat or a $4,495 Roddler custom stroller.

The baby market is essentially a commodity market. And because it is extremely difficult to make money in a highly competitive commodity market, manufacturers look for ways to justify higher profit margins. There isn’t much profit in corn, but a company that produces a popular organic blue-corn tortilla chip can make serious money. In the baby business, the challenge is persuading parents that a product has a unique feature worthy of a price premium. A glance at the shelves indicates just how narrowly baby-product companies have divided parents into subgroups. Some will pay extra for conveniences like a light, easy-to-fold stroller; others want aesthetic luxuries, like leather trim. Many respond to fear. (Is my child safer in Baby Trend’s Inertia car seat for $179.99 or with Safety 1st’s Air Protect+ system, which costs $189.99? Or should I just buy a cheap one for $50?) Others are willing to spend an extra $250 or so for an organic-cotton car-seat cover to minimize baby’s contact with artificial fabric.

Emily Oster, an economist at the University of Chicago and the mother of Penelope, 2, told me that the baby business is “a classic example of a perfectly competitive industry.” Nearly every product we buy — from coffee and cereal to hotel rooms and cars — is a commodity dressed up in premium packaging, Oster pointed out. But with baby products, the process is intensified. Kellogg’s, Ford and Starbucks can spend years tempting a consumer, but baby companies have a short window — often just the few weeks before a due date — to capture expecting parents’ attention. These campaigns often try to simultaneously scare and reassure. One dominant marketing strategy is to list all the features a product has (and, by implication, the competitors don’t) that will guarantee a healthy and happy a child. My favorite is the ubiquitous announcement that a product is phthalate-free because 1.) most people don’t know what phthalates are; and 2.) U.S. law prohibits the use of phthalates — a plastic softener associated with birth defects in rats — in all products for children. (That said, I was reassured that my son’s sippy cup has no phthalates whatsoever.)

Article source: http://www.nytimes.com/2013/06/16/magazine/the-sippy-cup-1.html?partner=rss&emc=rss

Chevron Profit Down 4.5 Percent on Lower Oil Prices

Chevron, the second largest U.S. oil company, has delivered better profit margins than the other energy majors in recent years because a big part of its production mix is oil, which has been fetching high prices. Rivals, like Exxon Mobil, produce more natural gas in the U.S, where gas prices have been low.

But crude prices fell across the globe in the first three months of this year as Europe remained mired in recession and growth in China slowed. That reduced Chevron’s revenue and profit.

Chevron, based in San Ramon, Calif., reported Friday that net income fell to $6.18 billion, or $3.18 per share, on revenue of $56.82 billion. Last year the company earned $6.47 billion, or $3.27 per share, on revenue of $60.71 billion.

The profit exceeded analysts’ average forecast of $3.09 per share. Shares rose $1.53, or 1.3 percent, to close at $120.04 Friday.

Chevron did manage to boost production, although just slightly. Output of oil and gas rose to 2.65 million barrels per day from 2.63 million barrels per day in last year’s quarter.

But Chevron’s average sale price for a barrel of oil slipped to $94 from $102 last year in the U.S., and to $102 from $110 abroad. Natural gas prices edged up around the world, but not enough to offset the decline in oil prices.

Chevron hopes to increase production by 25 percent to 3.3 million barrels per day by 2017. The company is developing 50 projects that will each cost it $250 million or more, and 16 that will cost at least $1 billion each.

Production at Chevron’s bigger rival Exxon Mobil has been slipping, but Exxon produced 4.4 million barrels per day in the first quarter, two-thirds more than Chevron.

Chevron’s has been partly constrained by the shutdown shut production at an offshore Brazil platform after two spills last year. Earlier this month, Brazilian regulators gave Chevron permission to restart production.

Pat Yarrington, Chevron’s chief financial officer, told investors Friday that the operation in Brazil’s Frade field would restart in the second quarter, but that it would ramp up slowly and contribute only about 5,000 barrels per day this year.

Yarrington said a liquefied natural gas project in Angola will also begin operating in the second quarter and will add 20,000 barrels per day in production this year, then 60,000 barrels per day next year.

Performance at Chevron’s refining operations slipped because of maintenance and upgrades at refineries in El Segundo, Calif. and Pascagoula, Miss. and continued repairs at its Richmond Calif. refinery in the wake of an August fire.

Refinery output fell 38 percent to 576,000 barrels per day.

“It was just a very heavy first quarter maintenance schedule this year,” Yarrington said. She said output will be “substantially back” in the second quarter.

Yarrington said the El Segundo and Pascagoula refineries are operating at normal levels again. The Richmond refinery has begun taking in crude and is expected to restart in the second quarter.

Brian Youngberg, an analyst at Edward Jones, said Chevron’s disappointing U.S. refining results were the only “hiccup” in an otherwise solid quarter.

Follow Jonathan Fahey on Twitter at http://twitter.com/JonathanFahey .

Article source: http://www.nytimes.com/aponline/2013/04/26/business/ap-us-earns-chevron.html?partner=rss&emc=rss

Apple Stock Sinks as Profits and Products Are Questioned

But this year, even though Apple’s iPhones and iPads don’t seem to have lost any of their allure for holiday shoppers, its stock seems headed straight for the discount rack.

On Wednesday, Apple’s shares slid 3.8 percent. They outpaced a broader decline in the stock market set off by investors’ uncertainty about how the outcome of the presidential election will affect taxes and consumer demand for the types of products Apple sells.

During the campaign, President Obama proposed increasing capital gains tax rates for people earning over $250,000 to 20 percent from the existing rate of 15 percent, and his re-election Tuesday night may have prompted some investors to unload shares in anticipation of a broader sell-off in stocks ahead of a tax increase, analysts said.

Owners of Apple shares would have good reason to fear higher taxes on capital gains. Apple shares have appreciated mightily since 2005 when they were about $35 apiece; they began this year at $411 and peaked at more than $700 in late September. The drop on Wednesday only added to what has been a grim few weeks for Apple shares, which have fallen over 20 percent from that peak, to $558 on Wednesday.

The decline has followed a sequence of seemingly unrelated events, including a broader-than-normal overhaul of its product line that is expected to hurt profit margins in the near term and a rare shake-up in Apple’s senior ranks.

“It has just been wave after wave of bad news,” said Gene Munster, an analyst at Piper Jaffray.

The events also do little to diminish the questions reflecting longer-term concerns with which investors pepper analysts like Mr. Munster. How much bigger can Apple — with a $525 billion market value, the biggest of any corporation — get? Won’t Apple soon run out of people to sell iPhones, iPads and Macs to?

Those concerns have been one of the biggest reasons Apple’s stock has long traded at a discount, strange as that may sound, to its peers in the tech business. Apple’s forward price-to-earnings ratio — the value of the company’s stock divided by its expected earnings per share for the coming year — is just under 10.

That figure is 14 for Google, 32 for Facebook and 131 for Amazon. Steve Dowling, a spokesman for Apple, said the company generally did not comment on its share price.

Apple executives have said they still see huge opportunities for the company and it is still growing at a remarkable clip for a company its size. During its last fiscal year, which ended Sept. 29, Apple’s revenue jumped 45 percent to $156.51 billion and its profits rose 61 percent to $41.73 billion.

While Apple’s most recent financial report was mostly in line with Wall Street forecasts, the company warned that its profit margin would most likely decline in the holiday quarter because of a sweeping refresh of the company’s iPad, iMac and MacBook laptop lines.

Apple products often cost more to make during their first months on the market, but those costs come down as the process becomes more efficient and volumes increase. The company said its new iPad Mini would be among those products with low profit margins, raising concerns that Apple will make less money as it competes in lower-priced segments of the mobile market.

Apple’s worrisome financial report came just days before Apple announced the departure of Scott Forstall, the head of its mobile software development, in a move that it said was aimed at increasing collaboration between departments at the company. Apple split the responsibilities of Mr. Forstall, who was a divisive figure at the company, among an array of other Apple executives.

The surprise firing of Mr. Forstall was unusual for Apple, where turnover in its senior ranks is rare compared to other big technology companies.

Then late last week, the research firm IDC reported that 75 percent of smartphones shipped in the third quarter were Android phones, the main rival to Apple in mobile software. A year earlier, Google, the maker of Android software, had market share of 57.5 percent. The iPhone’s share rose at a much slower pace, jumping to 14.9 percent of shipments from 13.8 percent, IDC estimated.

But Apple is still making huge profits from the mobile market, far more than Google is. Even with the recent decline in its shares, Apple’s stock is still up 38 percent for the year.

David Rolfe, chief investment officer at Wedgewood Partners, which counts Apple as its biggest stock holding, said he remained confident that Apple was one of the best investments around.

“The bears think Apple is in the eighth inning,” Mr. Rolfe said. “We think they’re still in the fourth or fifth inning.”

This article has been revised to reflect the following correction:

Correction: November 7, 2012

An earlier version of this article misstated Apple’s increase in profit in its last fiscal year. The company’s profit rose 61 percent, not 70 percent.

Article source: http://www.nytimes.com/2012/11/08/technology/apples-stock-sinks-as-profits-and-products-are-questioned.html?partner=rss&emc=rss

You’re the Boss Blog: Introducing Creating Value

Creating Value

Are you getting the most out of your business?

Business owners start businesses for a variety of reasons. A few do it to make a lot of money, but a vast majority do it for other reasons.

Some have an idea they believe the world needs. Some have a social mission in mind. And some just can’t work for anyone else (I include myself in that group). Whatever the motivation, at the end of the day, it all comes down to creating value, whether it’s business value or personal value. Surprisingly, though, not enough business owners think about this.

When they start a business, they know they have to fill a market need, and they know they have to make a profit. But in many cases, they have had no formal business training, and they don’t speak the language of business, which is finance. And they very likely haven’t stopped to think that they might one day want to leave the business. Instead, at first anyway, they concentrate on keeping their customers happy and having enough cash in the bank to pay their bills.

Here’s another problem: Most owners know more about running their businesses than anyone else in the organization. When it comes time to sell or transfer the business, prospective buyers aren’t interested in the skills of the buyer; they’re interested in cash flow. Buyers want to see regular growth and profit margins and a business that has systems that work without the owner.

I’ve been trying to understand how businesses build value for more than 35 years. One of the things I’ve learned – from the businesses I’ve owned, from reading a book a week for 35 years, from developing seminars for others and attending several educational sessions a year – is that value is in the eye of the beholder.

I grew up in a family business, a vending and food service company. I joined the business after college and within a year had bought a branch of the company from my father. At the time, the branch was grossing $75,000 a year in annual revenue. Twenty years later, when I sold the business, it had grown to four branches, 90 employees and $6 million in revenue. During that time, I made a zillion mistakes and even learned a bit along the way.

After the sale, I tried working for a large mutual life insurance company for a couple of years but learned that I’m a lousy employee. And after that, I helped found Stage 2 Planning Partners, a wealth management firm. My specialty in the firm is working with owners of privately held businesses. In fact, they are the only people I work with.

Some of the things I help clients examine are whether they are on the road to financial independence, whether they are moving from active management to passive management of their businesses and of course whether they are creating value in their businesses.

This fits nicely with the title of my channel on this blog, Creating Value. I believe creating value is a keystone in making one’s life better. And I find that helping clients find out what will create value in their life helps me fill my personal mission of doing interesting things with interesting people.

My goal in writing for this blog is to help the people who read it ask themselves good questions about what’s important to them. In these posts, I expect to explore the importance of passive ownership, performance indicators, cash flow, developing a niche business and hiring and developing employees.

One of the defining events in my life has been my cancer experience. Three and half years ago I was diagnosed with non-Hodgkin lymphoma, Mantle cell variety. This is a nasty and rare lymphoma. Luckily, I’m in remission, which has allowed me to focus on leaving a positive footprint as I move through life. I see the opportunity to write this blog as part of leaving a positive footprint.

Thanks for reading, and I hope you’ll share your thoughts as we go through this journey together.

Article source: http://boss.blogs.nytimes.com/2012/09/13/introducing-creating-value/?partner=rss&emc=rss

Your Money: In Search of an App to Monitor Average Bank Balances

Just 45 percent of checking accounts that don’t earn interest are free, according to the latest Bankrate.com survey of the largest institutions in each big city. That’s down from 65 percent in 2010 and 76 percent the year before.

Forget your outrage for the moment. On one hand, many of these institutions received federal bailout funds or other assistance. On the other, your representatives and others imposed new overdraft and debit card rules that made checking accounts less profitable. And if you invest in mutual funds, you’re probably one of the shareholders whose implicit pressure is pushing banks to raise fees to maintain profit margins.

Instead, consider the practical implications. The average minimum balance to avoid a monthly checking account fee rose to $585 last year from $249 the year before, according to the Bankrate survey. That’s a whopping 135 percent increase.

Banks do the balance math in several ways, using different minimums and fees and waivers, dangling carrots and wielding sticks. Many of the biggest banks will take figures from each day of the month and average them out.

Here’s the problem with that approach, though. Few if any banks give you a running total of your average balance for that month. Instead, they do the math at the end of the month and you find out then if you qualified for free checking. If you want to know how close you are in the middle of any given month to being assessed an $8 or $10 or $20 fee when the month ends, you need to do the math each day yourself.

The resulting effect is this: Many banks have built free-checking scoreboards for people who want to avoid fees, but they’re not putting the numbers up until the monthlong game is over.

Here’s what would be ideal: An online banking widget on the banks’ Web sites that tells you what your average balance has been that month. This could go in the same place on the page where you see your transactions and current balance. Even better would be a second figure that tells you what you need to average for the rest of the month to avoid a fee. A mobile banking app should provide the same information, too.

One reason that banks haven’t produced something like this yet is because of the constraints of their existing technology, according to Robb Gaynor, co-founder and chief product officer of Malauzai Software, which creates apps for financial institutions.

“Most core software products that banks and credit unions use don’t allow you to look back,” said Mr. Gaynor, who has also worked full time at banks. “If we ask a bank, give us a balance from four days ago, a lot of their systems can’t do it.”

So what often happens, he said, is that at the end of the month, some separate system that has been pulling and storing daily balances does the math to compute the average for the month. Then, it assesses monthly fees accordingly.

Why don’t banks just fix this and give us all running tallies? “Most banks are focused on your budget and expenses and looking backwards,” said Jacob Jegher, a senior analyst at Celent who specializes in online banking and has tracked consumers’ interest in third-party sites like Mint that help people manage their finances.

As for a more forward-looking feature that would tell you the balance needed to avoid fees, he said that he had not seen it on any list of financial institutions’ priorities. “Banks have historically tried to make money on fees, and they are desperate for fees,” he said. “Would it be in their best interest to offer it?”

Whatever you may think of banks’ motivations, there are some big institutions that make it easy to avoid fees without daily entries on a home-brewed spreadsheet.

Banks are quick to note that if you use direct deposit, there are in many cases no fees and thus no need for any average balance calculation. That is nice, except that unemployed people and many others don’t collect and store their income that way. Even people on a salary don’t always have access to direct deposit or use it. A survey in 2010 by the electronic payment specialists Nacha found that just 72 percent of full-time and part-time salaried employees received their pay through direct deposit.

All that a Wells Fargo spokeswoman, Richele Messick, would tell us is that a “majority” of checking account customers manage to avoid monthly service fees through direct deposit. The bank, which is still sorting out all the accounts it inherited when it took in Wachovia’s customers, has three ways of calculating the minimum balance: taking 31 daily snapshots and dividing by 31; looking to see if you’ve fallen below the stated minimum on any given day and levying the fee the first time you do each month; and taking just one snapshot at the end of the month.

Article source: http://feeds.nytimes.com/click.phdo?i=7d79ddf3e430227cf34000a79b062a5d

Ford Posts Third-Straight Annual Profit

Ford made an accounting adjustment in the fourth quarter worth $12.4 billion that increased its 2011 earnings to $20.2 billion, the second-highest total ever for the carmaker.

The one-time gain, which eliminates most of a tax allowance created when the company was bleeding billions of dollars in 2006, indicates that Ford expects to continue earning substantial profits in the coming years, according to Ford’s chief financial officer, Lewis W. K. Booth.

By region, the company earned an operating profit of $6.2 billion for the year in North America but lost a total of $119 million in its Europe and Asia-Pacific regions. Its fourth-quarter operating profit fell slightly.

“We delivered strong results for the full year as we continued to serve our customers around the world with best-in-class vehicles and make progress toward our mid-decade goals,” Ford’s chief executive, Alan R. Mulally, said in a statement. “Despite the continued uncertainty in the external environment, the strength of our North American and Ford Credit operations allow us to continue to invest for future growth.”

The net profit was equal to $4.94 a share, up from $1.56 a share a year earlier, when Ford earned $6.6 billion.

Excluding the accounting change and other special items, Ford earned an operating profit of $8.8 billion for the year, or $1.51 a share, 6 percent more than its 2010 operating profit of $8.3 billion, or $1.91 a share.

Revenue increased 13 percent to $136.3 billion, but profit margins declined to 5.4 percent, from 6.1 percent in 2010.

The North American results mean 41,600 hourly workers in the United States will receive $6,200 in profit-sharing bonuses for 2011. Those workers already received a $3,750 advance on that amount after signing a new four-year labor agreement last fall and will receive the remaining $2,450 in March.

In the fourth quarter, Ford reported an operating profit of $1.1 billion, or 20 cents a share, down from $1.3 billion, or 30 cents a share, a year ago. Analysts were expecting earnings of 25 cents a share. Including the accounting gain, Ford had net income of $13.6 billion, the most ever for a fourth quarter.

Fourth-quarter revenue rose 6 percent to $34.6 billion.

Ford ended 2011 with $13.1 billion in automotive debt, $400 million more than at the end of the third quarter but $6 billion less than it had a year earlier.

It had $22.9 billion in automotive cash, up $5.6 billion for the year.

Mr. Booth said the challenging economy in Europe and flooding in Thailand hurt fourth-quarter earnings. Commodity costs also ended up being higher than expected, he said.

“The quarter was really driven by North America,” he told reporters at Ford’s headquarters on Friday. “We saw the external environment deteriorate, and that really affected most regions other than North America.”

The accounting gain means that, on paper, Ford has recovered nearly all of the $30.1 billion it lost from 2006 through 2008. In the three years since, the company’s profit totaled $29.5 billion.

Ford created the tax valuation allowance in 2006, when Mr. Mulally joined the company as its performance was in a downward spiral and it mortgaged most assets to raise money. The losses meant Ford could no longer keep many deferred tax assets on its books, but after posting 11 consecutive profitable quarters it was able to release nearly all of that allowance.

With the automotive market in the United States improving, Ford said it expected operating profit to increase in 2012 and for profit margins to be equal to or better than 2011. The company said it planned to contribute $3.5 billion to its underfunded pension plans, including $2 billion in the United States.

Ford sold 11 percent more cars and trucks at American dealerships in 2011, with big gains for its redesigned Explorer sport utility vehicle and year-old Fiesta subcompact car. This year, it is bringing out revamped versions of the Fusion midsize sedan and Escape crossover vehicle, along with several plug-in vehicles and hybrids.

Mr. Booth said Ford would be able to improve its performance in the years ahead not only by increasing sales but also by operating more efficiently, which is a central focus of its turnaround plan, known as One Ford.

“We’re really only at the beginning of getting the benefits of One Ford,” Mr. Booth said.

Article source: http://feeds.nytimes.com/click.phdo?i=4dfa095bed8d9787fdff85fb59ce04cc

Economix Blog: How the Fed Rescue Benefited Banks

A report by Bloomberg News offers a new way of quantifying the Federal Reserve’s vast efforts to save financial companies from collapse during the crisis that peaked in 2008.

The central bank provided emergency loans, asset purchases and other aid totaling roughly $7.8 trillion during a two-year period ending in March 2009, easily the largest component of the government efforts to bulwark the financial system.

In an article in the January issue of Bloomberg Markets, published online Sunday night, Bloomberg offers an estimate that the aid allowed financial companies to book profits of roughly $13 billion during that period, largely by borrowing from the Fed at low interest rates and then using the money to make loans and investments with higher rates of return.

The benefit for the six largest American banks was about $4.8 billion, according to Bloomberg’s calculations, or roughly one-quarter of their total profits over the two years.

The profit estimate is based on the simple expedient of multiplying the amount each firm borrowed from the Fed by its net interest margin – a key indicator of bank profitability that measures the difference between the amount the bank pays to get money and the amount it charges to provide money. In other words, the Bloomberg calculation basically assumes that banks invested the money they got from the Fed at roughly the same rate of profitability as money they acquired from other sources.

The estimate may well overstate the direct value of the Fed’s loans, as banks used much of the money for short-term purposes that tend to have lower profit margins. Importantly, however, it also greatly understates the broader value of the loans: The money helped many recipients to survive.

Citigroup is a case in point. Bloomberg estimates that the Fed’s loans increased the bank’s profits by $1.8 billion. The real story, of course, is that government help saved the troubled bank from collapse.

Article source: http://feeds.nytimes.com/click.phdo?i=a0061e4cce9dae006c31092877c8cf48

Letters: Letters: Spending, Taxes and the Infrastructure

To the Editor:

Re “Making the Most of Our Financial Winter” (Economic View, Oct. 16), in which Robert J. Shiller advocates increased spending on infrastructure to provide jobs — with all of it made possible by taxes:

Have we not learned from the failed stimulus that both the Bush and Obama administrations have tried? And do we really think the wealthy who will be the target of the taxes won’t find ways around them? And won’t the higher taxes give them less incentive to engage in the economic activity that will generate the required revenues?

Let’s also not forget about the alternative minimum tax, another levy intended to force the rich to pay more taxes. This tax now afflicts many middle-class taxpayers and has required frequent fixes by Congress so it doesn’t impact even more.

Why trust our government, which is responsible for such fiscal travesties as the “Big Dig” and the “bridge to nowhere,” to wisely and efficiently spend the additional taxes that would be extracted by the jobs proposal? The main beneficiaries won’t be the American people, but a favored few unions and politically connected corporations.

David Kelson

Scarsdale, N.Y., Oct. 17

To the Editor:

To Robert J. Shiller’s case for infrastructure spending now, I would add the following:

As an architect with 40 years of experience, I know that the best time for infrastructure work is when the economy is weak, because labor and material costs, contractor profit margins and financing costs are lowest then. 

Delaying necessary maintenance and repairs can increase their costs exponentially, and excessive delays can turn manageable repair work into a costly replacement project. 

Timely infrastructure spending provides a powerful damper on inflation. Unfortunately, the common response to a severe economic downturn is to defer capital projects and maintenance, resulting in a construction bust. That creates pent-up demand, leading to a construction boom as economic times improve. And that, in turn, drives inflation with higher construction and borrowing costs.

We have ample evidence that many crucially important projects are now long overdue. Democrats and Republicans may disagree on many issues, but providing funds now for essential infrastructure projects shouldn’t be one of them. Joseph C. Rizzo

Spring Lake, N.J., Oct. 19

To the Editor:

In arguing for President Obama’s jobs proposal, Robert J. Shiller says it would be comparable to farmers using their winter downtime to work on their farms’ infrastructure — repairing buildings and equipment, for example, in preparation for future crops.

While time is an asset that is completely lost if not used, those who use their time to work need food, tools, etc. The food may come from seeds to be planted in the spring (savings) and the work may not be very productive if the repairs are temporary or poorly done (typical of government projects).

So here is the important question: Shall we deplete our seed stock (savings) to produce something of questionable value, especially when the seed is crucial to our future survival? While we can “print money,” we cannot as easily replace seeds that have been consumed to “look busy.”

Gunther Geiss, Ph.D.

Southold, N.Y., Oct. 16

The writer is a professor emeritus in the School of Business at Adelphi University.

Article source: http://feeds.nytimes.com/click.phdo?i=191e99212f21d21e8ba794e5ffa5d542