231-922-9460 | Google +

Sunday, January 31, 2010

Setting Sail on a Haitian Pleasure Cruise

The moral and economic dilemmas of Royal Caribbean's Labadee Port.

In the weeks since the Jan. 12 earthquake that leveled Port-au-Prince, cruise ships full of mostly American tourists have continued to dock in Labadee, a private resort 60 miles north of Haiti's devastated capital city. "It was a bit surreal knowing that the center of the world's focus was only 100 miles away," says passenger Becky O'Connor, who visited the island on a recent cruise. On the television in her stateroom, Fox News broadcast the first airdrops over Port-au-Prince amid a background of apocalypse. Off the side of her balcony, she could see aid supplies—water, powdered milk, dried beans—being unloaded onto the pier and piled into trucks. But surrounding her and the other 3,000 or so passengers who had booked mid-January cruises on Royal Caribbean International (the only cruise line with a port in Haiti) were all the amenities one would expect of a luxury vacation. On board: 17 decks' worth of buffets, swimming pools, casinos, miniature golf, and a 1,200-seat theater. Ashore: a Dis-neyesque pseudotown with pristine beaches, lovely cabanas, and quaint cafés and shops.

At first, passengers were uneasy about the visit—mulling over safety concerns and discussing among themselves the ethical quandary of so much wealth and luxury amid such devastation. But by midday, most had overcome their reservations and were venturing ashore. "The idea to relax so close to the death and destruction was definitely awkward," says Daniel Melleby, another passenger. "But it became clear pretty quickly that the people there were very happy and relieved to see us."

While many have criticized the cruise line's decision to proceed with planned trips to the Haiti port just days after the quake, many more have argued that canceling scheduled stops would only hurt the already struggling Haitian economy. The passengers themselves have held both views. Some note surges of pride as they watched pallets of supplies being unloaded from the cruise ship, others say they spent more on local wares than they normally would have, and most describe the stop as more somber than others along the same route. "I believe it was the right decision to support Haiti financially," says one passenger, who gave her name only as Linda. "But I could not bring myself  to enjoy anything on Labadee." The ambivalence underscores what some say is a persistent, if not always obvious, uneasiness between wealthy vacationers and the struggling countries they like to frequent.

Labadee—a former slave plantation on the northern coast of Haiti, named for the Frenchman who settled it in 1600—is the only Haitian port open to cruise ships. In 1986 Royal Caribbean International leased the spot from the Haitian government and transformed it into a pri-vate resort, one of several stops along its Caribbean route. Last year, at the urging of President Bill Clinton, who traveled to Labadee to promote tourism in the region, the company spent $55 million upgrading the port to accommodate its newest fleet member, Oasis of the Seas, the world's largest passenger ship. The company made Labadee the ship's maiden destination.

After the earthquake, the Haitian government urged Royal Caribbean to proceed with its scheduled stops on the island. The company complied, and on Jan. 15 delivered nearly 40 pallets of food and water, along with roughly 3,000 tourists, who spent at least some of their money stimulating the local economy. More ships followed on the 18, 19, and 22; so far, the cruise line has brought nearly 400 pallets of ur-gently needed goods ashore. In addition, the company promised to donate all money made at the Labadee resort to the relief effort, at least until Feb. 1. Combined with passenger donations, they expect to reach $2 million in contributions. Royal Caribbean has also augmented an existing crew-welfare fund to provide up to $2,500 in grant money to any Haitian employee seeking to rebuild homes or find loved ones. Compassion leave has been extended from two weeks to indefinitely. But while no one disputes the value of sending food, water, and cash donations in the wake of a disaster, larger questions—about whether the company and its policies are the best option for Haiti—persist.

To be sure, Royal Caribbean is among Haiti's largest foreign investors. According to the company, it employs 200 locals at Labadee and allows another 300 to sell their wares on the premises. They also pay the Haitian government a "head tax" of $6 per tourist. With roughly 365,000 tourists visiting the site each year, that adds up to slightly more than $2 million in revenue for the beleaguered country, whose 2008 GDP was estimated at $6.9 billion. But critics say that a nonprivatized port could yield far more in publicity and profits for the local community. The tiny peninsula is currently sequestered from the surrounding area by a 10-foot-high fence and a private armed security force; passengers are not allowed to leave the property. And because the company owns all the restaurants and concession stations, most payments for food and beverages are made not in cash, but via room keys or cruise cards, which means no tips for employees.

Royal Caribbean is not the only company to turn a chunk of foreign land into a private tourist spot. Disney, Princess, and Norwegian Cruise Lines have each claimed various segments of beach in the Bahamas. Once bought or leased, experts say these tracts of land are typically recast as private beaches and staffed by private work-forces. "Unlike other port calls, on a private island [or in a private port like Labadee] the revenues and profits remain largely with the cruise line," says Ross Klein, a sociologist who has written three books about the cruise industry. "While it's quite profitable to the cruise line, the benefit to the local economy is relatively small and very limited."

The cruise industry in general has been subject to a rash of criticism over the years, for unfair labor practices, dismal environmental records, and shoddy safety practices. But Royal Caribbean Cruises has come under special criticism for its policies in Haiti. Labadee, with its high fences and armed guards, is far more closed off to the surrounding community than other resorts like it. And, as The Christian Science Monitor reported, advertisements for the port tend to avoid any mention of Haiti, describing it as a private island rather than as a peninsula contiguous with the rest of the country.

Given the scale of the current disaster, some passengers feel the company's contributions to the relief effort did not go far enough: "These ships hold thousands of customers and crew. They often have five different buffets at a time and huge amounts of food are wasted," writes one woman—who visited the port with her family last year—on an Internet listserv. "If Royal shut down just one eating option per boat and donated all the food, they could feed hundreds."

Still, most passengers and cruise enthusiasts seem to support Royal Caribbean's decisions: a company representative said that 85 percent of guests who docked at Labadee ultimately went ashore. And in a survey of some 4,700 people done by the Web site Cruise Critic, two thirds of respondents agreed with the company's decision to proceed with scheduled cruises. After all, as many have pointed out, Haiti was no oasis before the earthquake hit.

Friday, January 29, 2010

From Davos: Nike and Partners Launch The GreenXchange

Business Week

I mentioned in an earlier post that Davos can be a catalyst for great ideas, and one example is the GreenXchange conceived by Nike. This morning Nike formally launched the Xchange at a CEO breakfast in Davos.

The venue was a conscripted hairdressing salon that was pressed into service by the Forum as a meeting space. We were like sardines. But the energy in the tiny room was high.
To recap: The Xchange is a Web-based marketplace where companies can collaborate and share intellectual property which can lead to new sustainability business models and innovation. Ten organizations have already signed on. The Xchange is the first step in a journey towards more sustainable innovation, and the more companies that get on board, the faster we’ll all make progress. More info can be found here.

In Wikinomics co-author Anthony Williams and I argued that we’re living in a world where new approaches to collaboration enable new business models that empower companies to create better value for consumers. We said companies need a portfolio of intellectual property – some that they own and protect, some that they license and some that they share. The Green Xchange is all about achieving that.

Nike began this morning’s announcement with a cool video that made it clear that sustainability is not an obligation, it’s an opportunity. Companies can choose to be ahead of the curve or behind the times. The goal is to create an innovation community. No one is “giving away” their intellectual property; the exchange includes a licensing protocol.

“Nike is today committing to placing more than 400 of our patents on GX for research, demonstrating our belief that the best way to stimulate sustainable innovation is through open innovation,” said Mark Parker, Nike president and CEO. “Our hope is this will unleash new innovation to help solve current obstacles to sustainability issues.”

Example: Possible cross-industry benefits of making available Nike’s Environmentally Preferred Rubber. Used in Nike footwear the rubber contains 96 percent fewer toxins than the original formulation. By licensing the technology on GX it could be used in other company’s footwear, or it could hypothetically be used by Mountain Equipment Co-op for bicycle inner tubes. In this way Mountain Equipment Co-op could bring a greener product to market more quickly and cheaply than it could on its own.

Parker explained that initially the company’s lawyers opposed the Xchange. They felt intellectual property was always meant to be kept under wraps and guarded. But they’ve all come around to see the value of the Xchange, not only to the environment, but also bring competitive advantage to the company. When Nike’s patents are put into the commons, any improvements made to the patents will be available to Nike.

Parker said universities are a great source of intellectual property. What is needed – and what the Xchange provides – is a standard protocol whereby IP can bust out from the university and be helpful more broadly to business and society.

John Wilbanks, VP for Science at Creative Commons, said “There is so much duplication of effort and wasted resources when it comes to sustainability. We need to make it easier for individuals, companies, academia, and researchers to collaborate and share best practices.”

This idea of a patent commons came up at another session. Currently the planet has many commons like the ocean, air and space. Much of the Web is in the commons. It’s time we added a new area: know-how related to sustainability.

Wednesday, January 27, 2010

Davos: Sarkozy Calls for Global Finance Regulations

NY Times

DAVOS, Switzerland — France wants to use its presidency of the Group of 20 next year to create a new international monetary system, President Nicolas Sarkozy said on Wednesday, adding that he believed the U.S. dollar should no longer be the primary reserve currency in the global economy.

In an expansive and lofty speech to the business and political leaders gathered here at the annual World Economic Forum, Mr. Sarkozy also called for a “revolution” in international regulation that would make labor, health and environmental standards as enforceable as trade rules.

Like Prime Minister Gordon Brown of Britain, he backed a tax on financial market transactions. But Mr. Sarkozy, pursuing his call for a more moral form of financial capitalism, suggested the proceeds be used to combat climate change and create a World Environment Organization as powerful as the World Trade Organization.

Mr. Sarkozy also took a hard line on bankers’ bonuses, insisting that lavish rewards should be denied to those destroying wealth and jobs.

But before an audience that contained many Americans and many Chinese, his comments on currencies arguably had the greatest resonance.

“We need a new Bretton Woods,” Mr. Sarkozy told a packed auditorium. “We can’t have on the one hand a multi-polar world and on the other a single reserve currency on a global level.”

In a thinly veiled reference to China keeping its currency at an undervalued level, he added: “We cannot on the one hand laud free markets and on the other tolerate monetary dumping.”

During its 2011 presidency of the Group of Eight — the leading Western industrial powers plus Russia — and the wider G-20, which also includes several important developing nations, France “will put the reform of the international monetary system on the agenda,” Mr. Sarkozy said.

Mr. Sarkozy also warned that the economic recovery currently underway remains vulnerable, urging central banks against withdrawing monetary stimulus measures too abruptly, saying it could prompt a collapse of the world economy.

"We must take care to prevent too abrupt a tightening,” he said.

The powerbrokers at Davos were not Mr. Sarkozy’s only audience. Six weeks ahead of regional elections in France, which are widely seen as at least a partial judgment on his presidency, the president has tried to reverse a decline in his approval rating, currently at a record low.

“It was an effective, quite populist speech,” said Timothy Garton Ash, a professor at Oxford University and political commentator who was in the audience. “As always at Davos, national leaders are at least half talking to their own audience.”

In 2008, when France held the presidency of the European Union for six months, Mr. Sarkozy proved a dynamic — if controversial — leader, first negotiating a ceasefire that halted the war in Georgia with Russia, and then bringing together European leaders to coordinate their response to the financial crisis.

As president of the G-20, he could repeat that performance, and even observers who find his style at times overbearing applaud his tenacity and energy.

“The dynamism of the chair,” Mr. Garton Ash said, “may bring some more substance to the G-20.”

Mr. Sarkozy was the first French president to give the keynote address at the Davos forum, and it afforded him the chance to pit well-paid bankers against ordinary citizens.

He reiterated themes that have resounded in recent days, starting with President Barack Obama, who proposed a tax on banks’ liabilities, and then went further, suggesting that their size should be limited.

The French president said he agreed with Mr. Obama, but stressed that all regulation concerning banks should be dealt with at an international level, coordinated by the G-20.

Calling the current crisis a “crisis of globalization itself,” he urged broad coordination of regulation and accounting rules.

“If competition is distorted by accounting rules that remain very different from one country to another, and one continent to another, market actors will find it normal to return to pre-crisis habits,” Mr. Sarkozy said. “How, in a competitive world, can we demand of European banks three times more capital to cover their risks in their activities and not ask the same of American and Asian banks?”

His aim was not, he stressed, to do away with capitalism itself but to tame financial markets. To this aim, a tax, he said, was now unavoidable.

“We can’t escape the debate about taxing speculation,” Mr. Sarkozy said. “Whether you want to rein in frenetic financial markets, finance development aid or associate poor countries to the fight against climate change, everything brings us back to the taxation of financial transactions.”

Tuesday, January 26, 2010

New Novartis Chief Needs Surgical Skill

The Wall Street Journal

A fresh face for Novartis could be just what the doctor ordered. Investors took the Swiss drugs group's surprise decision Tuesday to replace incumbent Novartis CEO Daniel Vasella with pharmaceuticals head Joe Jimenez in their stride, as stronger than expected 2009 earnings helped push the share price 1.5% higher. Mr. Vasella will stay on as chairman in the new structure.

Mr. Jimenez inherits a solid set of full-year results, including a 54% rise in fourth quarter net profits, boosted by sales of swine flu vaccines that beat analyst forecasts by 20%. But concerns over future growth remain: the company faces imminent price cuts in U.S., Japanese and Turkish markets, as well as generic competition on key drug Diovan this year. There are also question marks over its pipeline, including worries over U.S. approval of the much-hyped multiple sclerosis treatment, and the huge cash drain of some 40 drugs in phase-III clinical trials.

There's also uncertainty over the ultimate cost of the $50 billion acquisition of U.S. eyecare group Alcon. Court action by minority shareholders could force Novartis to raise the almost $11 billion it offered in stock for their stake earlier this month. Given the minorities include many employees, a protracted dispute could undermine efforts to integrate the business. Novartis investors used to 13 consecutive dividend increases could balk if dividend growth is sacrificed to divert cash elsewhere.

Given these concerns, Mr. Jimenez's priority should be to cut costs. Inefficiencies in areas such as IT
remain, offering scope for savings across the board. Tuesday's management changes, which include the elimination of three executive positions, offer some encouragement on this score. Mr. Jimenez has already

helped deliver a three-year cost overhaul ahead of schedule while still achieving significantly higher operating margins in pharmaceuticals. New chief financial officer Jon Symonds, who joins from Goldman Sachs in February, also has a reputation as a cost-cutter.

Even so, Novartis shares now trade at 11.6 times this year's earnings—an 8% premium to the average of major European pharmaceutical groups, according to Credit Suisse. Plus the market is already pricing in further cost-cutting. In addition to a swift resolution to the Alcon deal, Jimenez will need to show he is a skilful corporate surgeon to justify any further re-rating.

IMF: World Economic Recovery Off to Fast Start

The Wall Street Journal

Countries have emerged faster than expected from the global recession, but the International Monetary Fund warned Tuesday that managing post-crisis growth is becoming complicated by the divergence in advanced and developing economies.

The IMF presented a much brighter outlook for this year, with the world economy forecast to expand at a 3.9% pace instead of the 3.1% estimate given in October. Global growth is expected to continue to pick up in 2011, with the forecast edging up to 4.3% from 4.2%.

But the rebound will increasingly be driven by developing countries as public stimulus recedes, with the IMF trimming some advanced economy forecasts for next year given continued weak private demand and credit constraints.

"The global recovery is off to a stronger start than anticipated earlier but is proceeding at different speeds in the various regions," the IMF said in its update to the World Economic Outlook.

"Policies need to foster a rebalancing of global demand, remaining supportive where recoveries are not yet well sustained," it said.

Most advanced economies will remain "sluggish," the fund said, with the group expected to expand 2.1% this year and 2.4% in 2011. Meanwhile, internal demand in many emerging and developing markets will provide "relatively vigorous" growth, the IMF said, forecasting 6% growth in 2010 and 6.3% in 2011 for that group.

The divergence in growth paths raises significant policy challenges, as some developing countries are facing the risk that surging inflows will cause new asset bubbles at a time when many advanced economies continue to rely on extraordinary monetary, fiscal and financial support measures.

That unprecedented policy support has raised concerns about sovereign debt risk, the fund said, but it continued to warn that "a premature and incoherent exit from supportive policies may undermine global growth and its rebalancing."

The IMF acknowledges the difficult task of timing exit strategies. Once private demand becomes sustainable, countries should take into consideration concerns about debt levels, as well as asset price bubbles and currency appreciation, it said.

Emerging economies dealing with surging inflows face a complex task and the policy response should depend on circumstances, such as tightening fiscal policy or allowing currency appreciation, the fund said. But it also reiterated that some buildup of reserves or capital controls may be appropriate to address large and transitory movements.

Given growing concerns about public debt levels, the fund recommends that countries fully implement fiscal stimulus for this year, while devising credible fiscal sustainability plans. Medium-term fiscal consolidation should protect spending on the poor and forming aid while overhauling entitlement spending, it said.

Regarding monetary policy, the fund said many central banks can afford to keep rates low this year given expectations of low inflation. Countries recovering faster will have to tighten sooner, it added.

On the financial front, advanced countries and the hardest-hit emerging economies still have to deal with bank restructuring and removing toxic assets. Policy makers should remove financial support gradually, while moving ahead with reforms that will both reduce financial risk and make the banking sector more effective and resilient, it said.

Among advanced economy forecasts, growth in the U.S. is expected to reach 2.7% in 2010 and 2.4% next year. The fund said new U.S. policies to create jobs could boost growth there and globally.

The euro area is forecast to grow 1% this year and 1.6% in 2011, while the U.K. is seen expanding 1.3% this year and 2.7% next. Japan is projected to grow 1.7% and 2.2%, and Canada's economy is seen rising 2.6% and 3.6%.

Regionally, developing Asia is forecast to grow 8.4% in 2010 and 2011, with China expanding at a 10% clip this year and 9.7% next. Central and eastern Europe economies are expected to rise 2% in 2010 and 3.7% next year, while emerging economies in the Western Hemisphere are forecast to grow 3.7% and 3.8%. Africa is expected to grow 4.3% and 5.3% over the next two years.

Leno - O'Brien Mess Offers Lessons in Management 101

The Wall Street Journal

NBC's handling of the Jay Leno-Conan O'Brien succession provides lessons in what not to do, management watchers say.

NBC made two critical missteps six years ago when the network signed Mr. O'Brien to replace Mr. Leno in 2009, say management consultants. It's a bad idea to promise someone a promotion in order to retain him, they say, and so is naming a successor too far in advance.

The moves came back to bite NBC this month, and offer a cautionary tale for managers in other industries.

Lesson No. 1: "Never try to staff an organization just to block the career options that follow from a talent surplus," says Jeffrey Sonnenfeld, a professor at Yale's School of Management, via email.

In 2004, NBC announced Mr. O'Brien would succeed Mr. Leno atop "The Tonight Show" in 2009. Mr. O'Brien's contract was set to expire, and NBC risked losing him to CBS or ABC. The deal meant that Mr. Leno's tenure would last 17 years, much shorter than predecessor Johnny Carson's 30-year run. By 2009, "Leno was not ready to go and his audience was not ready to let him go," Mr. Sonnenfeld says.

He argues that well-run companies can benefit when stars leave to fulfill ambitions elsewhere: The firm gains a reputation as a hotbed for talent. Ironically, GE, in its corporate ranks, is often cited as an example of this phenomenon. After Jeff Immelt won the horse race to succeed Jack Welch in 2000, runners-up James McNerney and Robert Nardelli left to land CEO jobs at other companies. 3M Co. wooed Mr. McNerney; Home Depot Inc. hired Mr. Nardelli. GE has long enjoyed a reputation as a sought-after place to develop a career.

Such companies "are a breeding ground for stars which is a magnet to attract … ambitious new talent," Mr. Sonnenfeld says.

Lesson No. 2: Don't wait five years between the engagement and the marriage. "There's a Goldilocks time frame for a succession: If it's too short, people don't have enough time to get acclimated," says Ben Dattner, an organizational psychologist. "If it's too long, the world can change."

Most well-regarded CEO handoffs are shorter – especially once the successor has been formally announced. Xerox Corp.'s transition to Ursula Burns from Anne Mulcahy is generally viewed as a model of good succession planning. Ms. Mulcahy signaled Xerox's plan in 2007 by naming Ms. Burns, a Xerox veteran, president. In May 2009, Xerox named Ms. Burns CEO, effective July 1.

An NBC spokeswoman said via email the Conan-Leno situation isn't analogous to other corporate successions, saying it's "a unique decision any company in the talent business faces." NBC named a successor far in advance because it has "a responsibility to protect our franchises." She added: "If you sign a sought after quarterback out of college with the promise he will start in a couple of years for the veteran, but when he does can't win a game, you have to decide if that decision you made then worked … Studios sign deals for film and TV projects, often well into the future, all the time. Sometimes they don't work out because things change."

Management watchers see one bright spot for Mr. Leno: Some corporate stars have returned to employers to complete successful second acts.

Steve Jobs is the most famous example. Apple's co-founder left in the 1980s but returned as an adviser in 1996 after Apple agreed to buy NeXT Software Inc., also founded by Mr. Jobs. A board member convinced Mr. Jobs to retake the helm in 1997, as the company struggled; Mr. Jobs was "interim" CEO until January 2000. He returned the company to profitability, launched Apple-branded retail stores and guided the development of the iPod, which transformed the music industry and Apple.

For Mr. Leno, it's key that he address the controversy, says Matthew Paese, vice president, executive succession management, at Development Dimensions International, a consulting firm. It "would be a mistake for Leno to come back and to not acknowledge that there's been a real hitch in his career," he says.

Congressman Says Freddie and Fannie Should be Eliminated

The Wall Street Journal

A top House Democrat on Friday said his committee was preparing to recommend "abolishing" mortgage-finance giants Fannie Mae and Freddie Mac and rebuilding the U.S. housing-finance system from scratch.

"The remedy here is...as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," said Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee.

His comments initially rippled through bond markets on concerns that the government might pull away from the mortgage market. Many believe that's unlikely and that any revamp would include continued government involvement. The government took over the companies in September 2008 as loan losses mounted.

Some Republicans have argued that the companies should ultimately be reduced in size and privatized, while at other end of the spectrum, some analysts have recommended turning the companies into government agencies. But several industry groups and academics have suggested that the government is likely to continue playing at least some role in the future of the companies.

One such report came from analysts at Standard & Poor's this past week. "It's hard for us to imagine" how enough capital could be attracted to replace Fannie and Freddie with stand-alone private companies that would be able to offer low-cost funding for 30-year fixed-rate mortgages, the analysts wrote.

Some analysts have argued that starting from scratch could create more problems than they would solve, in part because Fannie and Freddie own or guarantee around half of the nation's $11 trillion in home mortgages. "Blue sky ideas are great, but they take a long time to happen," said Mahesh Swaminathan, senior mortgage strategist at Credit Suisse, at a conference last month. "When you have $5 trillion of agency mortgages, you can't really orphan them."

Mr. Frank, who didn't elaborate on forthcoming recommendations, said last month that one possible revamp could merge some functions of Fannie and Freddie that overlap with the Federal Housing Administration into the government mortgage-insurance agency.

The Obama administration said it will weigh in on how to revamp the companies—and the entire housing-finance system—when it releases its budget next month. Republicans have increasingly criticized the administration for moving to overhaul the financial sector without spelling out plans for Fannie and Freddie.

In a PBS interview on Thursday, Treasury Secretary Timothy Geithner said the legislative process to overhaul Fannie, Freddie and the housing-finance system was unlikely to begin this year. "It's just a complicated thing to get right," he said. "But we are completely supportive and agree completely with the need to make sure that we take a cold, hard look at what the future of those institutions should be in our country."

Monday, January 25, 2010

Haiti Cruise Stops: 'Without This, We Don't Eat'


With the Celebrity Solstice cruise ship anchored just offshore this beautiful expanse of white sand Friday, vacationers stretched out on beach chairs in the sun, sipped cold beer and pina coladas with pineapple slices on the rim and listened to Haitian folk music.

The beach resort of Labadee is just 60 miles (100 kilometers) from Port-au-Prince, but it's a world away from the devastation of the Haitian capital, where some 200,000 people are believed dead in an earthquake.

The cruise ships that stop here have become the center of a controversy: Should vacationers relax and have fun with so much suffering elsewhere on the island? Or would it be worse to halt the port calls and deprive locals of what they earn from tourism?

Royal Caribbean is also donating $1 million, delivering food and water on every call and pledging net revenue from Labadee to the relief effort

Jameson Charitable, 20, stood near the pier with a sign offering tours. "Without this," he said, motioning toward the boat, "we don't eat." He said he makes $15 every time a Princess Cruises ship comes in.

About 200 people work here, and a few hundred more vendors and service providers are allowed in whenever ships arrive. The resort enclave, which has a beach, a zipline in the mountains and other activities, is leased by the Haitian government to Royal Caribbean International, which also owns the Celebrity cruise line.

Royal Caribbean allowed a team of journalists from The Associated Press to visit Labadee on Friday, but the cruise company's spokeswoman, Tracy Quan, would not allow them to interview or photograph cruise passengers.

Carol Myers, 53, a nurse from New Jersey, was not on the cruise ship but was enjoying the beach. She had spent an intense week tending to earthquake victims in a hospital in the nearby town of Milo, and was decompressing for a few hours before her scheduled return to the U.S. on Saturday.

"I almost feel guilty for being here after what happened," Myers said, sitting in a beach chair in blue scrubs. "But the people need a job, the people need to eat."

Royal Caribbean President and CEO Adam Goldstein said the decision to continue with scheduled stops in Labadee was an easy one. The site sustained no damage, and he said the Haitian government welcomed the ship. The country reaps a fixed cost per passenger, plus annual fees and the cash tourists spend on local goods at a marketplace where artisans and artists sell trinkets and crafts.

Royal Caribbean is also donating $1 million, delivering food and water on every call and pledging net revenue from Labadee to the relief effort. Maryse Kedar, president of Royal Caribbean's Haitian subsidiary, SOLANO, said the cruise visits are "the only substantial commerce taking place in northern Haiti."

But the cruise line found itself on the defensive after criticism spread online. Melissa Bacchus, a Brooklyn, N.Y., teacher, was among several veteran cruisers to dominate message boards on sites like Cruisecritic.com with the debate.

"I do think morally it is wrong for Carnival Cruises to go (to Labadee), where less than 60 miles away people are suffering," Bacchus said in an interview. "And because we have the resources, we have the wealth, we can frolic using the beauty of their island?"

Bacchus suggested Royal Caribbean pay Haiti its regular port fees, but not actually stop there. She said they could also give local artisans money to go back home and assist in the relief effort.

Haiti Tourism Minister Patrick Delatour said Royal Caribbean continuing the trips was "courageous" and important to his nation's recovery. "We applaud this decision and feel the criticism they are receiving in the media is not only unfair but conveys a complete lack of understanding of the overall condition in Haiti following this horrific disaster," he said.

Still, public relations experts quoted by AdAge.com said Royal Caribbean Cruises had made a mistake by mixing leisure business with humanitarian efforts. "The brand will take a hit," Paul Gallagher, managing director of WPP's Burson Marsteller's issues and advocacy practice, was quoted as saying.

Haiti shares the island of Hispaniola with the Dominican Republic. The Dominican Republic suffered no damage from the earthquake, but the government is clearly worried that vacationers may cancel trips on Celebrity Cruises here because of the disaster on the other side of the border.

The Dominican Ministry of Tourism has issued repeated statements that it was unaffected by the quake, including pointing out that Port-au-Prince is hundreds of miles (kilometers) and several mountain ranges away.

That message was lost on travelers like Debbie Ulin, a 39-year-old mother of two in Hillsdale, N.J., whose family and two others canceled a group trip planned to the Dominican beach resort of Punta Cana for February.

"With everything happening as it did, we sort of all came to the realization that it's probably not the best time to be traveling to the Dominican right now," Ulin said. "As selfish as I feel when I say that, it's not so important, my vacation. We didn't feel like it would be the safe place to go with the families this soon after the devastation has occurred."

Arthur Applbaum, a Harvard University professor of ethics and public policy, said that while it shows "moral sensitivity to be disturbed by the thought that one is vacationing on the beach when others are suffering nearby ... it also shows insufficient moral reflection to think that proximity makes a moral difference.

"The people of Haiti are suffering whether you take your beach vacation in the Dominican Republic or in Hawaii," he said, "and it is a failure of the moral imagination not to be equally troubled in Waikiki."

Rehab Clinic Trots Out Tiger Look-a-Like -- But Nobody's Fooled

National Enquirer

In a laughable effort to cover up Tiger Woods' stay in a sexual addiction clinic, a Tiger lookalike was trotted out in front of a group of paparazzi at the Gentle Path rehab center Friday in Hattiesburg, Miss. The bizarre  and ridiculous ruse was a clear attempt to make it look like The ENQUIRER's exclusive photo of Tiger in rehab is not him.

And even though one photo agency Web site fell for it immediately, the differences between the two Tigers ARE obvious to even a casual observer.

Tiger's stand-in was paraded in front of a swarm of photographers and he was wearing EXACTLY the same clothing as the real Tiger when we photographed him days ago.

We're pretty sure the alcohol rehab clinic makes them change their clothes.

Would-be Tiger clearly has a different build, is taller, lighter skinned and has a rounder face.

The Tiger imposter wears his socks much higher than Real Tiger, who wears only ankle socks, not only in The Enquirer photo but on a regular basis.

Magnification of the photos also shows the two men have distinctly different noses, to the point where any comparison is a joke.

Fake Tiger also has much longer arms, is stockier than Real Tiger who, while muscular, is far more lean.

Fake Tiger is clean shaven, which could simply be explained by saying Tiger shaved. What can't be explained however, is that Tiger seems to have faded in just a matter of days. Fake Tiger's skin is much lighter than Real Tiger.

Fake Tiger's legs are also much hairier than Real Tiger.

Fake Tiger is even outfitted with Stanford baseball cap (Real Tiger went to Stanford).

So kudos to whoever dreamed up the idea of Fake Tiger, but as you can tell by reading this, it's the details that count. Plus we're willing to bet everything that Fake Tiger can't break par.

 Tiger's reps have not denied that it is the Real Tiger in The ENQUIRER's exclusive photos of the golf great in sex rehab.

Gentle Path is a treatment center featuring drug rehab programs and other behavioural modification treatments.

Economic Indicators: Shipping Industry is Picking Up

New Orleans Business News

If shipping volume is any indication of the health of the retail industry, then Elroy Pinkins says 2009 has given retailers reason to celebrate.

"Last year was the worst year out of the 17 years I've been doing this, but this year volume is bouncing back," Pinkins said. "I'd say it's up 45 or 50 percent over last year."

A FedEx subcontractor whose trucks operate out of a central terminal in St. Rose, Pinkins believes that next year will be better still.

"Fedex hasn't provided us with specific percentages, but they've done projections and let us all know to expect things to continue to improve," Pinkins said.

The recent holiday shipping period helped end 2009 on a high note, according to Pinkins and the small neighborhood-based mailing and packaging businesses that help many individuals and businesses with their shipping.

"Business has been way down this year, but it's picked up a lot since the end of November," said Trevail Thomas, whose family owns Royal Mail in the French Quarter. "From what I've seen, the volume (during the holiday season) was about the same as it was in the past, except people got packages out earlier and didn't wait until the last minute when they have to spend more to send things by air."

However, Thomas reports that customers who rent post office boxes don't seem to be receiving as many packages as in the past.

"I guess in other parts of the country, they aren't sending out as much as they used to and so my mail box holders aren't receiving as much as they used to," Thomas said.

At Pack Rat on Magazine Street in the Irish Channel, owner Marielou Ray says she was relieved that the volume of holiday business matched that of the 2008 season.

"Overall, my business has been down about 10 percent this whole year compared to 2008, so I was expecting the same for the holiday shipping," she said. "But I've been tracking volume since the end of November and it's flat with what we had last year. That's good, because it could have been down 10 percent like the rest of the year."

Ray says that her customers economized in their shipping during the recent holiday period.

"I noticed that a lot of packages are smaller in size than we usually see, so they are cheaper to ship," Ray said. "Some people figure that if something isn't breakable, they can probably send it in a padded envelope instead of a box and save money that way. And people sent packages out early so they could go ground. They didn't want to bite the bullet and pay a premium for air."

Even the record-setting rainstorms that swept through New Orleans in mid-December failed to deter consumers from shipping early to take advantage of ground rates.

"Weather was not a factor for them. Through rain, sleet or snow, they felt like they had to get that package out in time for it to be sent ground," Thomas said. "They'd rather go through horrendous rain conditions than pay an extra $10 for air."

For Pinkins, this year's healthy holiday shipping season meant adding three trucks to the five he normally runs to routes in Metairie and Baton Rouge.

"Come October, I start advertising for people who can qualify to drive the extra trucks and then I train them," he said.

On a recent day, during the heaviest shipping period of the year, one of Pinkins' eight drivers was out so Pinkins himself took the wheel.

"I like to do it every now and then. It shows me what my drivers have to deal with," he said. "I like keeping in shape and seeing people."

With online retailers capturing a larger part of the holiday shipping business, Pinkins says that FedEx keeps an eye on promotions like "Cyber Monday" or "Free Shipping" days so that the company can prepare for the added volume.

"The national sales office works with retailers in advance of their promotions," he said. "That way, we aren't caught off guard by unexpected volume and the retailer knows they have a dependable shipper lined up."

Pinkins' drivers make an average of 1,200 stops a day during holiday season, or about 150 stops per day per driver.

"It can be stressful for them, with traffic and weather conditions," he said. "On average, drivers usually stay with it about two-and-a-half years before they move on to something new or become a subcontractor themselves."

Snowy conditions in the Northeast last weekend concerned Pinkins, who said that a major weather event like a snow storm can easily disrupt all of his careful planning and use of shipping software.

"It could be weather or an accident or someone getting sick -- you just have to be prepared for whatever comes your way and know from the start that something will come up you will just have to adapt to," Pinkins said.

Signs of Recovery in the Furniture Industry

Sarasota Herald-Tribune

Southwest Florida furniture retailers are experiencing a renaissance after the deepest recession since the 1930s.

Though the official turn in their fortunes has yet to show up in sales figures compiled by state government, furniture sellers are reporting a big jump during the last several months.

With its deep reliance on the retail trade and real estate, the upturn in sales is a good sign for the region. As with other big buys, furniture purchases tend to be a leading indicator of an economic downturn -- something people cut out first when they are feeling less wealthy or are nervous about their job prospects -- and then a trailing thermometer for a recovery.

Michael Bush, who owns the contemporary furniture store Home Resource in Sarasota's Rosemary District, said his December sales were the best in the company's 15-year history, representing a 135 percent increase when compared with last year's dismal results.

Other furniture retailers were more reluctant to reveal their specific performance, but all said business has been improving as their new numbers cycle over 2008 figures that were dismal.

"We are undoubtedly seeing an uptick and are definitely optimistic about the future," said Jeffrey Seaman, chief executive of the Tampa-based Rooms to Go furniture chain. "But Florida sales have fallen so far since the boom that current sales don't even approach what they were back then."

Still, in a market in which year-over-year sales have declined every month from April 2005 through October 2009, and have fallen more than 50 percent during that period, any positive news is a cause for celebration.

Other promising signs include growth at some furniture stores in spite of the recession.

Rooms to Go, which operates in nine states, is expanding its Cortez Road showroom in Bradenton from 13,000 to 25,000 square feet, and is spending more than $6 million to build a new 30,000-square-foot showroom on Tamiami Trail in Sarasota.

Bacon's Furniture recently opened a Room Solutions showroom on Tamiami Trail in Sarasota for bargain-seeking customers.

"Room Solutions is more of an economy store," said Bill Bacon, who runs his family's three-store chain from Port Charlotte. "It's like having Chevys in one store and Cadillacs in the other. You can't always mix them together. They have two different sets of customers."

Both retailers and analysts say the increased sales of foreclosed and short sale properties is the main reason behind the rising demand for furniture, and stores offering lower price points are tending to do better than higher-end chains.

"There's a lot more traffic. But shoppers are competitively comparing prices," said Ed Kalin, the owner of Kanes of Sarasota. "It's hard to make any money because margins are so thin."

Kalin has been loading up on furniture that he has been able to buy from manufacturers at a discount.

For example, he was recently got a good deal on barrel chairs that usually sell about $500. He bought a shipment, advertised them for $199 and sold them all within a month.

"People are looking for value," Kalin said. "Stores that can't diversify are having more trouble than stores that the ones that can change gears."

The increase at the lower end of the market does not necessarily mean that the upper end is suffering, though. Higher-end retailers say they are also benefitting from both increased home sales and a reinvigorated remodeling trend.

Bush, who sells Knoll, Herman Miller, Vitra and other iconic brands from his Rosemary District store, said he is seeing an increasing number of Canadian and Midwestern baby boomers tour his showroom.

"These are smart people," Bush said. "They know home prices in our area are still relatively depressed and are taking advantage of the market."

There are a lot of baby boomers and lot of foreigners, agreed Bacon of Bacon's furniture.

"I'm a firm believer that the uptick was caused by the weather up north and the fact that home prices here are so low," he said. "The summer was tough for everyone but we're starting to see things turn around."

Not every furniture retailer will be able to enjoy better days ahead.

Simon's Quality Used Furniture Store on Tamiami Trail has been vacated, and DeSears, which had a small furniture line, shut down after Thanksgiving.

Steven's Furniture in Venice, which opened for business in 1983, also appears to be in trouble. The company's answering machine at its Venice store refers customers to its Sarasota operation, and its Sarasota answering machine has stopped taking messages.

E-mails sent to both stores, asking whether they are still open for business, went unreturned.

Sarasota resident Alice Richey, who bought a living room set from Steven's Furniture in December, said she has been unable to get in touch with company employees and is now planning to file a small claims suit that will cost her just over $200.

After trips to the Sarasota Police Department and Sarasota County Sheriff's Office, she was told that was all she could do.

A 50 percent drop in sales is tough for any business to absorb, and that is what Southwest Florida furniture retailers have been through during the past five years.

In Sarasota County, sales of all furnishings, including school furniture, have dropped 54 percent to $151.4 million from $326.9 million over the same period, while in Manatee County, they have fallen 47 percent to $63.7 million from $119.5 million.

In Charlotte County, sales have dropped 55 percent to $44.7 million during the first 10 months of 2009 from $98.8 million during the first 10 months of 2005.

"The drop has been huge," said Seaman, the chief executive of Rooms to Go. "When you start comparing the latest numbers to last year, you're comparing to extremely easy numbers. But at least the market is stabilizing."

"Things are starting to turn," he said. "I'd call it the beginning of a new beginning."

Scotts Strikes Sponsorship Deal with MLB


The No. 1 U.S. lawn care company is staking out new turf by offering baseball fans a chance to replicate the lush, green playing fields of such iconic ballparks as Wrigley Field and Fenway Park in their own yards as part of a sponsorship deal.

ScottsMiracle-Gro Co has signed a multiyear, multimillion-dollar sponsorship with Major League Baseball that includes licensed products such as grass seeds and fertilizers, baseball-themed advertising, in-park signage and partnerships with several teams.

Terms were not disclosed, but a source close to the deal said Scotts' annual commitments are in the high seven figures. The source, who asked not to be identified, said overall annual spending on baseball will be in the eight-figure range.

Baseball trumpets the deal as a move into a new product segment it has been pursuing for the last four to six years in a sponsorship market battered by the weak economy, while Scotts sees it as a move to strengthen its brand and boost sales.

"It's a powerful feeling when you walk through the concourse and see that emerald green field in front of you," Scotts Brand Manager John Price said of entering a ballpark.

"I don't mean to get 'Field of Dreams'-ish, but it's a powerful emotion for consumers and really tapping into that emotion and showing off what Scotts products can do, there's no better product showcase," he told Reuters.

The MLB deal is the largest and most integrated sports sponsorship for the Marysville, Ohio-based company, known for its Miracle-Gro, Ortho and Roundup brands. Scotts also has deals with NASCAR and the University of Florida sports program.

Price said there is a large overlap between Scotts customers and baseball's fan base. He said the sport could even help expand the U.S. lawn-care market, which totaled $9.6 billion in 2008, according to the National Gardening Association.

Sports leagues and teams have been hurt over the past year as corporate sports marketing budgets declined. In 2008, such companies as General Motors Co [GM.UL], Bank of America Corp (BAC.N) and Deutsche Post AG's (DPWGn.DE) DHL unit walked away from some team-level sponsor deals after they expired, but the league stemmed the losses last year.

"The sponsorship environment is flat out tougher than it ever has been in the last 10 years," said Tim Brosnan, MLB's executive vice president of business. "This speaks volumes about the health of our brand."

Brosnan said MLB expects sponsorship revenue this season to rise by double digits on a percentage basis.

Under the deal, Scotts in early April will begin selling grass seed blends and fertilizers featured in such iconic ballparks as Wrigley Field and Fenway Park, the respective homes of the Chicago Cubs and Boston Red Sox, as well as venues in Cincinnati, Philadelphia and St. Louis.

If the initial products sell well, others like Scotts push reel mowers will be rolled out down the road, Price said.

In addition to licensed products, Scotts also negotiated sponsorship agreements with eight teams -- the ones whose names are on the seed products as well as the Atlanta Braves, Los Angeles Angels of Anaheim and Texas Rangers.

Scotts also has made a "significant" media commitment to MLB's national broadcast partners to run TV and radio advertisements around the product launch, while MLB and team logos will be featured prominently on a wide range of the company's in-store marketing materials.

Sunday, January 24, 2010

Ariens Acquires Kee Mower

Lawn & Landscape Magazine

BRILLION, Wis. – Ariens Company has acquired the intellectual assets of the Kee Mower brand of products. The high-wheel walk-behind mowers are used by rural property owners, landscape contractors and municipalities to cut underbrush, remove heavy overgrowth of tall grasses or weeds, and conduct tight trimming around and under structures such as fences.

The company plans to sell Kee Mowers under the Gravely brand of products available through independent power equipment dealers.

“We plan to rationalize the product line-up with input from our dealers to ensure we have the right specifications for the market,” says Dan Ariens, president. “Because production of these products stopped nearly eight months ago, we also will have to take some time to re-establish the supply chain.”

Ariens will produce the Kee products at its manufacturing facility in Opp, Ala. The company expects to have the program complete in 60 days and start production within the next 90 days, according to Ariens. The company did not acquire any product inventory as part of the sale and, therefore, will not be able to fill any outstanding orders that may exist.

Kee Mowers have a 50-year history in the outdoor power equipment segment. The products were most recently manufactured by Hoffco Power Equipment.

Ariens’ commercial brands also include Gravely, EverRide and Great Dane commercial lawn equipment for professional landscape contractors, as well as Gravely Turf products, Parker debris handling equipment and Locke reel mowers for the sports field sector. Ariens’ affiliates, Stens Corporation and its Australian counterpart, Bynorm Group, supply replacement parts to the outdoor power equipment industry.

Wal Mart to Cut 10,000 Sam's Club Jobs

The Wall Street Journal

Wal-Mart Stores Inc. is cutting 10,000 jobs at its Sam's Club warehouses nationwide, mostly part-time employees assigned to demonstrate products and hand out samples to shoppers.

The move comes as Wal-Mart outsources its product-demonstration teams to an independent marketing company, Shopper Events.

In a memo to employees, Brian Cornell, president and chief executive of Sam's Club, said Shopper Events would develop a new demonstration program, "Tastes and Tips," covering not only food and beverages but also electronics and other products.

Sam's Club employees laid off because of the shift can apply for jobs at Shopper Events.

The move comes shortly after Wal-Mart said it would close 10 underperforming Sam's Club stores, eliminating 1,500 jobs.

McDonald's Fourth Quarter Profit Rises 23%, Sales Up

CNN Money

McDonald's Corp. (MCD) fourth-quarter earnings rose 23% as the restaurant giant increased same-store sales across all regions despite a global downturn, offering hope for the struggling fast-food industry.

McDonald's also reported stronger results in December, with same-store sales rising 1% in the U.S. after two months of decline, and said trends continued to improve in January, with customers responding favorably to the chain's mix of value and premium items.

Shares of the world's largest restaurant chain rose 1.5% in recent trading to $64.16, and helped lift other fast-food players like Burger King Holdings Inc. ( BKC), up 2.5% to $18.20, and Wendy's/Arby's Group Inc. (WEN), up 3% to $4.78.

McDonald's executives tempered budding signs of improvement with gloomy environment for jobs. Chairman and Chief Executive Jim Skinner said on a call with analysts that until job creation materializes, "we're not going to see enormous pickups or a big change relative to trends in consumer spending."

Still, the chain is taking the downturn as an opportunity to widen its lead in the fast-food market, which it sees as shrinking. It's attracting customers with value, including a new Dollar Menu at breakfast that it is making permanent, and also new snack items, like Mac Snack Wrap - a version of a Big Mac in a tortilla - priced around $1.49.

Unlike some other chains who have slashed prices on existing items, McDonald's hasn't let its low-priced food eat into margins as much as other fast-food chains. Goldman Sachs restaurant analyst Steven Kron noted that McDonald's was able to increase U.S. same-store sales and improve its margins, a feat that's "a pretty rare occurrence these days in" the fast-food industry.

"There's very little not to like here," Kron said. "Traffic-driving initiatives aren't coming at the expense of margins."

McDonald's is complementing the value-items with premium products, like espresso-based coffee and Angus burgers, which are helping avoid having its average check decline. Such a strategy has grown in importance as McDonald's says is losing the ability to raise prices annually, as restaurant chains have typically done to keep pace with inflation. McDonald's says that avoiding price increases helped it add customer traffic in 2009.

"Our consumers today around the world deserve a break," Skinner said.

For the quarter, McDonald's profit rose to $1.22 billion, or $1.11 a share, from $985.3 million, or 87 cents, a year earlier. The latest period included an 8-cent benefit related to the resolution of a 2007 license transaction while currency changes added 7 cents to the bottom line.

Revenue increased 7% to $5.97 billion. Same-store sales, or sales at restaurants open at least 13 months, rose 2.3% globally. The company hasn't posted a quarter of global same-store sales declines since early 2003.

Analysts polled by Thomson Reuters most recently forecast earnings of $1.02 on revenue of $5.94 billion.

Two New Bank Failures Bring Year's Total To Six

The Wall Street Journal

Regulators seized two banks Friday, in Missouri and Florida, lifting the total number of failures this year to six.

The Florida bank, based in Miami, was sold to an investment group that received a so-called shelf charter last year to acquire failed financial institutions. The Federal Deposit Insurance Corp. estimated the closings will cost the agency's cash-strapped deposit-insurance fund a total of $93.1 million.

In the first seizure Friday, the FDIC sold Premier American Bank's four branches, $326 million in deposits and some of its assets to a subsidiary of Naples, Fla.-based Bond Street Holdings LLC, the group granted a preliminary shelf charter in October 2009 to establish a new national bank. Regulators have been encouraging investors to apply for such charters as a way of expanding the pool of potential buyers, and this is the first time a group was successful in using the tool to pick up a failed institution, according to the Office of the Comptroller of the Currency.

Bond Street Holdings was allowed to keep Premier American's name, and it will reopen Monday as Premier American Bank NA.

Bond Street Holdings has about 70 mutual funds, hedge funds, private-equity firms and individuals as investors, according to Bond Street attorney David Katz. One is former North Fork Bancorp finance chief Dan Healy, who will be chief executive and chairman of the new Premier American. Another investor is Stuart Oran, a senior managing director of advisory firm FTI Consulting and former executive with United Airlines.

The FDIC and the new owner also agreed to share losses on $300 million of the failed bank's assets.

In the second failure Friday, state regulators closed Leeton, Mo.-based Bank of Leeton and the FDIC sold the sole branch and all $20.4 million in deposits to Salina, Kan.-based Sunflower Bank. The FDIC will retain most of the assets.

Since 2008, regulators have closed 170 banks, and the expectation is that failures will continue to accelerate in 2010 as financial institutions struggle with residential and commercial loan defaults and heightened regulatory scrutiny. FDIC Chairman Sheila Bair has predicted that failures will "peak" this year and then "subside."

Saturday, January 23, 2010

Burger King to Become First Fast-Food Chain to Serve Beer


Now having it your way at Burger King will also include the chance to grab a brewski ... at least at one Miami Beach location.

The fast-food chain said Friday it's about to open a restaurant that will serve beer along with burgers and fries. It's the chain's first U.S. location with alcohol.

At the Whopper Bar South Beach, guests can pair a Whopper sandwich with Anheuser-Busch (yes, the "King of Beers" will be available at Burger King) and MillerCoors brews.

You want fries with that? A Whopper/beer/fries combo will run $7.99.

The restaurant will offer outdoor dining, a walk-up window and delivery service.

It's scheduled to open in mid-February.

Morningstar analyst R.J. Hottovy says adding beer at selected locations around the world is part of Miami-based Burger King's effort to reinvent itself as a fast-food restaurant with a sit-down feel.

Hottovy said making the new image resonate could be a challenge in some locations.

Harley-Davidson Reports First Loss In 16 Years

NY Times

Harley-Davidson, the motorcycle maker, reported a fourth-quarter loss Friday, its first quarterly shortfall in 16 years, hurt by restructuring costs and the sluggish economy. Harley-Davidson has come under pressure over the last year as the tight credit markets and the weak economy led consumers to shun purchases of its high-end, heavyweight motorcycles. The company has been reorganizing its business through layoffs, factory closures and closing or selling unwanted brands.

Harley said shipments of its bikes to dealers in 2009 fell 27 percent, to 223,023. For 2010, Harley said it expects shipments to fall another 5 to 10 percent to 201,000 to 212,000 motorcycles. Harley-Davidson said it lost $218.7 million, or 94 cents a share, during the fourth quarter. That marks its first three-month loss since the fourth quarter of 1993 and contrasts with a profit of $77.8 million, or 34 cents a share, a year ago. Revenue tumbled 40 percent, to $764.5 million from $1.28 billion a year ago.

Friday, January 22, 2010

Google Founders Plan Big Stock Sale

CNN Money

Google founders Larry Page and Sergey Brin plan to sell off 5 million Google shares each over the next five years, a move that could see them surrender majority voting control over the company they created.

Google has an unusual dual-stock structure. "Class A" shares are publicly traded on the Nasdaq exchange, while "Class B" shares are reserved for insiders and carry 10 times the voting power of other shares.

Brin and Page plan to dip into their deep reservoir of Class B shares, selling up to 17% of the 57.7 million shares they currently hold, according to a regulatory filing submitted Friday. Those sales would reduce their voting power over Google's stock from 59% today to around 48%, depriving them of majority control.

But CEO Eric Schmidt currently holds shares accounting for almost 10% of Google's voting power. Together, the trio would continue to control Google, as they have for nearly a decade.

"We run Google as a triumvirate," Page and Brin announced in an "owner's manual" included in Google's 2004 IPO filing. "The three of us run the company collaboratively with Sergey and me as presidents. The structure is unconventional, but we have worked successfully in this way."

Google created its two stock classes because of the founders' desire to keep control vested with their management team. It's a risk to shareholders that Google discloses routinely in its regulatory reports.

Schmidt, Page and Brin "have significant influence over management and affairs and over all matters requiring stockholder approval," the company wrote in its most recent annual report. "This concentrated control limits our stockholders' ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial."

Page and Brin's stock selloff will take place through gradual, pre-arranged sales over the next several years. Such trading plans are commonly used to diversify the portfolios of executives with significant holdings in their own company stock.

Google's stock closed Friday down 6%, at $550.01 per share. At those prices, Page and Brin would each fetch $2.75 billion from their stock sales.

Obama's 'Volcker Rule' Shifts Power Away From Geithner

The Washington Post

For much of last year, Paul Volcker wandered the country arguing for tougher restraints on big banks while the Obama administration pursued a more moderate regulatory agenda driven by Treasury Secretary Timothy F. Geithner.

Thursday morning at the White House, it seemed as if the two men had swapped places. A beaming Volcker stood at Obama's right as the president endorsed his proposal and branded it the "Volcker Rule." Geithner stood farther away, compelled to accommodate a stance he once considered less effective than his own.

The moment was the product of Volcker's persistence and a desire by the White House to impose sharper checks on the financial industry than Geithner had been advocating, according to some government sources and political analysts. It was Obama's most visible break yet from the reform philosophy that Geithner and his allies had been promoting earlier.

Senior administration officials say there is now broad consensus within the White House and the Treasury for the plan advanced by Volcker, who leads an outside economic advisory group for the president. At its heart, Volcker's plan restricts banks from making speculative investments that do not benefit their customers. He has argued that such speculative activity played a key role in the financial crisis. The administration also wants to limit the ability of the largest banks to use borrowed money to fund expansion plans.

The proposals, which require congressional approval, are the most explicit restrictions the administration has tried to impose on the banking industry. It will help to have Volcker, a legendary former Federal Reserve chairman who garners respect on both sides of the aisle, on Obama's side as the White House makes a final push for a financial reform bill on Capitol Hill, a senior official noted.

Advocates of Volcker's ideas were delighted. "This is a complete change of policy that was announced today. It's a fundamental shift," said Simon Johnson, a professor at MIT's Sloan School of Management. "This is coming from the political side. There are classic signs of major policy changes under pressure . . . but in a new and much more sensible direction."

Industry officials, however, said they were startled and disheartened that Geithner was overruled, in part because they supported the more moderate approach Geithner proposed last year.

"His influence may have slipped," said a senior industry official who spoke on the condition of anonymity to preserve his relationship with the administration. "But you could also argue that it wasn't Geithner who lost power. It's just that the president needed Volcker politically" to look tough on big banks.

Geithner agreed with Volcker that banks' risk-taking needed to be constrained.

But through much of the past year, Geithner said the best approach to limiting it is to require banks to hold more capital in reserve to cover losses, reducing their potential profits. Geithner said blanket prohibitions on specific activities would be less effective, in part because such bans would eliminate some legitimate activity unnecessarily.

The shift toward Volcker's thinking began last fall, according to government officials who spoke on the condition of anonymity because the deliberations were private.

Volcker had been arguing that banks, which are sheltered by the government because lending is important to the economy, should be prevented from taking advantage of that safety net to make speculative investments.

To make his case, he met with lawmakers on Capitol Hill and gave numerous speeches on the subject, traveling to at least nine cities on several continents to warn that banks had developed "unmanageable conflicts of interest" as they made investments for clients and themselves simultaneously.

"We ought to have some very large institutions whose primary purpose is a kind of fiduciary responsibility to service consumers, individuals, businesses and governments by providing outlets for their money and by providing credit," he said during one speech in Toronto. "They ought to be the core of the credit and financial system. Those institutions should not engage in highly risky entrepreneurial activity."

Gradually, Volcker picked up allies. John Reed, the former chairman of Citigroup, expressed his public support. So did Mervyn King, governor of the Bank of England.

His ideas began gaining traction within the administration in late October, when the president convened a meeting of his senior economic advisers in the Oval Office to hear a detailed presentation by the former Fed chairman.

There was no immediate change of course. But after the House passed a regulatory reform bill on Dec. 11 that was largely based on the Geithner's vision, the administration began to warm to Volcker's ideas, which had the political value of seeming tough on Wall Street, said sources in contact with the Treasury and White House.

At the time, administration officials were growing concerned that government guarantees designed to spur lending by letting banks borrow cheaply were instead funding banks' speculative investments and fueling soaring profits, said Austan Goolsbee, a member of the president's Council of Economic Advisers.

"We started coming out of the rescue and you saw some of the biggest financial institutions . . . who had access to cheap financing . . . use that money without lending or anything, just doing their own investments," he said. "That clearly started putting [the issue] on the radar screen for us."

Goolsbee said that Vice President Biden became a particular advocate for Volcker's approach.

In mid-December, the president formally endorsed Volcker's approach and asked Geithner and Lawrence H. Summers, the director of the National Economic Council, to work closely with the former Fed chairman to develop proposals that could be sent to Capitol Hill. The three men had long discussions about the idea, including a lengthy one-on-one lunch between Geithner and Volcker on Christmas Eve.

Summers and Geithner had been reluctant to take on battles that weren't at the heart of the problem that fueled the crisis. But ultimately, an administration official said, the two men concluded that reform needs to be about more than just fighting the last war -- it needs to address sources of future risk as well.

The World Economy: Pulling Apart

The Economist
The world's big economies were all hit by the recession. Now the field is spreading.

A YEAR ago almost every economy in the world was being walloped. The degree of pain varied. In rich countries output plunged; in China and some other emerging economies growth slowed sharply. But the slump was as striking for its synchronicity as its severity.

The opposite seems true of the recovery. China’s rebound began earliest and has been the most spectacular (see article). America’s economy began growing in the middle of 2009 and seems to have accelerated sharply in the final months of the year. Initial GDP estimates for the fourth quarter are due on January 29th, and many analysts expect annualised GDP growth to have shot up to 5.5% or more. News from the euro zone and Japan is rather gloomier. Germany emerged from recession before America, but its number-crunchers recently suggested that growth fell back to zero in the fourth quarter. The Japanese recovery also seems to be fading.

Shifting growth patterns could have big consequences for asset prices. Sustained strength in emerging economies, for instance, could push up commodity prices further, while a rapid rebound in America’s economy relative to Europe’s could strengthen the dollar more against the euro. So a lot rides on what is driving the divergence, and whether it lasts.

In America soaring GDP growth is likely to be a one-quarter wonder, driven by a rebuilding of firms’ shrivelled inventories. Output growth will slow in 2010—the question is by how much. Optimists argue that every deep post-war recession has been followed by a vigorous recovery and that growth will be well above its trend rate in 2010. But a gloomier outcome seems all too plausible. There are few signs of job growth. Much household-debt reduction still lies ahead. And there is the risk of a correction in stockmarkets.

But even a sluggish American recovery will outpace other big rich economies. The euro zone faces two different but equally painful problems. Former bubble economies such as Spain and Ireland are suffering a painful hangover. Germany, like Japan, is bedevilled by chronically weak domestic demand. Consumers are reluctant to spend and, so far, buoyant export growth has not incited firms to invest, despite hopes to the contrary.

The degree to which America outperforms the others will depend, in large part, on whether, and how, different countries tighten monetary and fiscal policy. There is a lot of talk about fiscal discipline within the euro zone, not least because financial markets are punishing Europe’s peripheral economies for their profligacy. Greece this month announced an unprecedented fiscal squeeze over the next three years. But Greece makes up only 3% of euro-area GDP, and rapid fiscal consolidation is much less likely in the big economies. The junior partner in Germany’s coalition government is pushing for tax cuts in 2011; France is railing loudly against the idea of cutting its deficit any time soon.

America’s budget outlook is rather more uncertain, especially in the light of the Republicans’ unexpected Senate victory in Massachusetts. The current stimulus package will stop boosting GDP growth by midyear. Thanks to the requirement that they balance their budgets, states are furiously cutting spending. Although the House of Representatives has passed an additional $150 billion-worth of job-boosting stimulus, the Senate has not yet done so. And if Congress does nothing, the Bush-era tax cuts expire at the end of the year. That seems unlikely, but political gridlock could cause America’s fiscal boost to fade unexpectedly sharply.

Policy decisions will also influence the relative strength of the recoveries in the emerging economies versus the rich world. Though China’s private demand strengthened a lot in the second half of 2009, growth is still largely driven by a government-directed lending boom. China’s short-term prospects thus depend on how quickly the government damps down the lending frenzy. Fears of tighter credit in China weighed on stockmarkets this week but the signs still point to very gradual tightening—and scant dampening of growth—in China and the rest of the emerging world.

Powerful structural factors will continue to reinforce the relative strength of the emerging world. Jonathan Anderson of UBS points out that even if you exclude China and India, emerging economies grew some four percentage points faster than rich economies during the recession, about the same growth gap that existed before the crisis. Some emerging economies, especially those that relied on foreign debt finance, will face prolonged problems. The World Bank argues in a new report that tighter financial conditions, thanks to tougher regulation and higher risk aversion, could reduce developing countries’ trend growth by 0.2-0.7 percentage points over the next five to seven years. Even so, the hit to potential growth in the rich world is likely to be bigger.

Persistent relative strength in emerging economies, especially China, suggests that commodity prices will stay stable or firm. It also means their currencies should rise against the dollar, though the pace will depend, more than anything, on China’s decisions about the yuan. Within the rich world, the growing transatlantic growth divide has helped buoy the dollar versus the euro: it is up by more than 5% from its lows in November. Will that rally continue? The answer depends as much on the likely policy mix as today’s growth differentials. Other things being equal, tighter fiscal policy suggests loose monetary policy for longer and a weaker currency. So relative fiscal discipline in America would push the dollar down, and vice versa.

A multi-speed recovery could also affect imbalances between countries’ current-account surpluses and deficits. America’s current-account deficit and China’s current-account surplus have both halved from their peaks as a result of the crisis, to around 3% and 6% of GDP respectively. Whether that reduction continues depends first on oil prices and second on the pattern of global demand. Imbalances will only stay low as the global economy recovers if surplus economies, especially China but also countries like Germany and Japan, rely on domestic demand while the big borrowers, especially America, cut their budget deficits and save more. Economies are now growing at different rates. They must also grow in different ways.

Thursday, January 21, 2010

Big Shots Go Down at Gun Show

Business Week
FBI arrests in a bribery scandal may leave the firearm industry wounded

The setting was Las Vegas, but no one was expecting fireworks at this year's Shot Show, the annual gun industry trade convention. Sure, sales of firearms and ammunition rose in the wake of Barack Obama's victory, as Second Amendment buffs—fearing a Democratic Administration would push new restrictions on weapon ownership—rushed to stock up. Yet what the industry calls the "Obama stimulus" had already started to tail off by the time gun marketers converged on Las Vegas.

Then the feds crashed the party. The FBI used the convention to round up 21 industry executives who allegedly fell for an undercover sting in which they agreed to pay illegal kickbacks to the defense minister of an African nation. In exchange, the small arms marketers thought they were securing the opportunity to sell millions of dollars in weapons and body armor. Unfortunately for them, they were transacting business with FBI operatives posing as middlemen, according to indictments unsealed by a federal judge in Washington. A 22nd suspect was picked up in Miami. "This is one case where what happens in Vegas didn't stay in Vegas," said Assistant Attorney General Lanny Breuer at a news conference.

One of the men arrested in Las Vegas was Amaro Goncalves, a vice-president of sales for Smith & Wesson (SWHC), the largest U.S. manufacturer of handguns. A federal grand jury alleged that Goncalves agreed to pay a 20% kickback to clinch the sale of 1,825 pistols for use by the presidential guard of the African government (the name of the nation is not revealed in the court filings). Goncalves and the others stand accused of violating the Foreign Corrupt Practices Act, which prohibits bribery in seeking overseas business.

Goncalves' employer has not been charged, and neither has any other company. Smith & Wesson said in a written statement that it has "no information beyond what has been reported" and is "prepared to cooperate fully with law enforcement."
"Obama Stimulus" Fizzles

The arrests created a stir among attendees at the Shot Show. The FBI gave the organizers no warning and caught everyone by surprise, says Mark Thomas, spokesman for the National Shooting Sports Foundation, the show's sponsor. But Thomas denies the raid cast a pall over this year's proceedings. "It's business as usual," he says.

The gun industry still faces the fizzling of the Obama sales rally. While Smith & Wesson and competitors such as Sturm Ruger (RGR) and Glock reported strong financial results in 2009, many executives expect a cooling off in 2010, especially in sales of semiautomatic rifles, which had surged last year.

Reliable statistics are hard to come by in an industry where many players are private companies, but one set of data confirms that a shift is already under way. The federal government reported that mandatory criminal background checks, which gun retailers must carry out in advance of a sale, dropped 7.6% in December, to 1.41 million, from the previous year. "Things are getting back to normal, meaning they are slowing down," says Cameron Hopkins, a gun marketing consultant based in suburban Las Vegas who attended the Shot Show. "The good times never last forever."