Tag: Business and finance

THE factory of the future will be a building stuffed full of robots making robots. A factory in Amberg, a small town in Bavaria, is not quite that, but it gets close. The plant is run by Siemens, a German engineering giant, and it makes industrial computer-control systems, which are essential bits of kit used in a variety of automated systems, including the factory’s own production lines.

The Amberg plant is bright, airy and squeaky clean. It produces 15m units a year—a tenfold increase since opening in 1989, and without the building being expanded or any great increase in the 1,200 workers employed in three shifts. (Production is about 75% automated, as Siemens reckons some tasks are still best done by humans.) The defect rate is close to zero, as 99.9988% of units require no adjustment, a remarkable feat considering they come in more than 1,000 different varieties.

Such achievements are largely down to the factory’s “digital twin”. For there is another factory, a…Continue reading

Freddie Laker saw it coming

A DECADES-old dream of many low-cost carriers (LCCs), to break into the market for long-haul flights, has also been a long-standing nightmare for executives at full-service airlines, who earn their corn chiefly on such routes. So a series of setbacks for Norwegian, the latest LCC to try its hand at long-haul flights, has set off a round of Schadenfreude at established airlines across Europe. On July 13th, Norwegian revealed a disappointing set of results for the three months to June. A week earlier its chief financial officer of 15 years, Frode Foss, resigned with immediate effect, sending the share price down by 8%. Over the past year the shares have lost a third in value, as investors grow nervous.

The worries go back to Norwegian’s decision to begin long-haul flights. Founded in 1993 by Bjørn Kjos, still its CEO and biggest shareholder, it took over some domestic routes in Norway from a bankrupt charter…Continue reading

Hot to trot

A GOOD fit is everything, stylists often counsel, but in assessing its market America’s fashion business appears to have mislaid the measuring tape. A frequently-cited study done a few years ago by Plunkett Research, a market-research firm, found that 67% of American women were “plus-size”, meaning size 14 or larger. That figure will not have changed much, but in 2016, only 18% of clothing sold was plus-size, according to NPD Group, another research firm.

Designers and retailers have long thought of the plus-size segment as high-risk. Predicting what these customers will buy can be difficult, as they tend to be more cautious about styles. Making larger clothes is more expensive; higher costs for fabric cannot always be passed on to consumers. In turn, plus-size women shopped less because the industry was not serving them well. “We have money but nowhere to spend it,” says Kristine Thompson, who runs a blog called Trendy Curvy and has nearly…Continue reading

An inspector Quarles

DONALD TRUMP promised to unshackle America’s financial firms from mounds of stultifying regulation and the grip of bureaucrats with little practical experience of capitalism. One way to put that pledge into practice is to appoint officials with business backgrounds and deregulatory agendas. This element of the Trump strategy was on show this week, with a presidential nomination for a critical job at the Federal Reserve and the first public address by the new head of the Securities and Exchange Commission (SEC), another financial regulator.

Buried in the voluminous pages of the Dodd-Frank act, an Obama-era law passed in response to the financial crisis, was the creation of a new supervisory job at the Fed. Thus far, this powerful post has been informally delegated to an existing Fed board member, first Daniel Tarullo and, since his departure, Jerome Powell. That is set to change. Randal Quarles was formally nominated for the…Continue reading

A WIDELY read cover story on the impact of global warming in this week’s New York magazine starts ominously: “It is, I promise, worse than you think.” It goes on to predict temperatures in New York hotter than present-day Bahrain, unprecedented droughts wherever today’s food is produced, the release of diseases like bubonic plague hitherto trapped under Siberian ice, and permanent economic collapse. In the face of such apocalyptic predictions, can the world take solace from those who argue that it can move, relatively quickly and painlessly, to 100% renewable energy?

At first glance, the answer to that question looks depressingly obvious. Despite falling costs, wind and solar still produce only 5.5% of the world’s electricity. Hydropower is a much more significant source of renewable energy, but its costs are rising, and investment is falling. Looking more broadly at energy demand, including that for domestic heating, transport and industry, the share of…Continue reading

ON JULY 12, the Larsen C ice shelf in Antarctica disgorged a chunk of ice the size of Delaware, a small state on America’s east coast. America’s government seems unfazed by the possibility that such shifts might one day threaten Delaware itself. Its climate defiance grows not only from the power of its fossil-fuel industry and the scepticism of the Republican party, but also from a sense of insulation from the costs of global warming. This confidence is misplaced. New research indicates not only that climate change will impose heavy costs on the American economy, but also that it will exacerbate inequality.

Calculating the economic effects of climate change is no simple matter. It means working out how a given increase in global temperature affects local weather conditions; how local weather affects things like mortality and crop yields; how those changes add to or subtract from regional GDP; and how thousands of local-level changes in GDP add up nationally or globally. No…Continue reading

POLITICS in America may be an arena of mutual incomprehension with few settled facts, but the debate about the health of American firms’ balance-sheets is, if anything, even more bewildering. Ranged on one side are those who complain that America Inc is hoarding $2trn of idle cash and that this acts as a powerful drag on the economy. On the other are those, including the IMF, who yell that firms are bingeing on debt, with borrowing hitting an all-time high of $8.4trn last year. As a result firms are simultaneously accused of being timid wimps and reckless idiots.

In fact, the numbers show that they are by and large a sensible bunch (especially compared with the country’s bankers and politicians). What is more, the debate over debt, as framed, misses the most intriguing thing about their balance-sheets. These have been radically reshaped to adapt to three national economic sicknesses—a financial system that companies still mistrust after the crisis; a broken tax code; and monopoly…Continue reading

AT THE start of this year, two straws in the wind caught the attention of those who follow the development of artificial intelligence (AI) globally. First, Qi Lu, one of the bosses of Microsoft, said in January that he would not return to the world’s largest software firm after recovering from a cycling accident, but instead would become chief operating officer at Baidu, China’s leading search engine. Later that month, the Association for the Advancement of Artificial Intelligence postponed its annual meeting. The planned date for the event in January conflicted with the Chinese new year.

These were the latest signals that China could be a close second to America—and perhaps even ahead of it—in some areas of AI, widely considered vital to everything from digital assistants to self-driving cars. China is simply the place to be, explains Mr Lu, and Baidu the country’s most important player. “We have an opportunity to lead in the future of AI,” he says.

Other…Continue reading

CONGRESS is sick and tired of unfair competition to America’s airlines from the three big Gulf carriers, Emirates, Etihad and Qatar Airways. So on June 28th, 17 representatives from the state of Illinois wrote a letter to the secretaries of State, Transportation and Commerce complaining about the subsidies these airlines receive from the United Arab Emirates and Qatar. Illinois is home to one of the America’s biggest hubs, O’Hare International in Chicago. Nearly 25,000 people in the state are employed by American Airlines, United and Delta.

The letter followed similar ones from congressional…Continue reading

WHAT is the best way to kill a zombie? Fans of Daryl Dixon, a character in “The Walking Dead”, a television series, will know the answer: a crossbow bolt to the brain. Getting rid of corporate zombies, however, is a much more complicated process.

Ageing populations mean that the workforces in developed economies are likely to stagnate, or even shrink, in coming decades. That means almost all the burden of economic growth is likely to fall on productivity improvements. There has been a lot of focus on labour-market flexibility as the key to solving this problem, but the flexibility of the corporate sector may be just as important. Indeed, there is a growing belief that the persistence of zombie firms—companies that keep operating despite a poor financial performance—may explain the weak productivity performance of developed economies in recent years.

An inability to kill off failing companies seems to have two main effects. First, the existence of the…Continue reading