Behind Lee Iacocca : The world's best CEO

I read an autobiography of Lee Iacocca, former President of Ford and then CEO of its arch-rivals Chrysler. First guy in the world to lead the top 2 car companies one after another. Here is a small book review/note on his life i've written for my readers:

If Business Executives had a Hall of Fame, Lee Iacocca would probably have a floor dedicated to him. Iacocca's life was wilder then a roller coast, his failures made headlines across the nation and his successes were ‘larger then life'. He came from an Italian immigrant family, and in the first few chapters speaks of his experiences in school, college and pre-Ford life. Initially an engineer, he switched to the sales force and is largely credited for the phenomenal Ford Mustang car and for his nationwide programs along with being credited with the revival of the Mercury Brand and making Ford Fiesta (older model) and was also the ‘moving force' behind Ford Pinto, Mercury Cougar and many other cars.

He rose through the ranks of Ford to become Ford Motor's youngest president and stay on for 8 years, only to fired by an arrogant boss Henry even when the company made record profits of $2 billion. He tasted sweet revenge in an almost capitalistic way by taking Chrysler out of bankruptcy and beating Henry Ford in the marketplace.

Lee Iacocca exemplifies the battered business executive who led a battle for a dying cause to bolster Chrysler, which made his name a symbol of integrity, grit, hard work, and guts for millions of people.

The one quote of his I really loved was

There are times in everyone's life when something constructive is born out of adversity. There are times when things seem so bad that you've got to grab your fate by the shoulders and shake it.

In one such adversity, he convinced the United States Congress to extend a $1.5 billion loan guarantee to the company (Chrysler). This propelled him to he set up his old management team at Chrysler, sell off their tractors division, and spend aggressively on advertising. In order to make the company profitable he was forced to take very tough decisions like introducing spending cuts, laying-off workers, closing plant divisions and personally taking home a $1 salary to give inspiration to employees to accept pay cuts.

If someone wants to learn and grow, read about leaders, and how to overcome adversities, then this book is a must read for them!

If you like this article, you'll love the book review/note I wrote on Sam Walton too - why not check it out...

Post your comments and interesting stuff on Lee iacocca on our comments page.

The silent assassin thats called HYPE - its importance over all spheres of life

In Today's world, it is not enough to create a good product and hope that thousands around you will flock to buy it. Competition has become fierce and advertising has taken a new exaggerated form: HYPE. 
 
 In the case of art, it is hype all the way. Take for example, a painting last year which sold for a whopping $86 million. No doubt that the artwork must have been a marvelous piece of high quality. But 86 million dollars only for quality? NO.

It was sold for such a princely sum for the simple reason that Sotheby's, the most celebrated auction house in the world, created a huge hype surrounding a painting by the deceased painter Francis Bacon prior to the auction. As a result, the rich and famous queued up to buy the painting and bid astronomical figures for the same.  Clearly the hype is a ‘better salesman' than quality.

With this example on art work, I don't imply that hype alone is enough to sell a product, but along with quality it gets the much needed added force. 

There are however, some exceptions in which the vacuum of hype alone acts as a facilitator for selling goods. Sometimes, products of lesser quality are sold like hot cakes. This is what happened with Reliance Power a little while ago. Banking on the ‘RELIANCE' brand, this newly formed company sold millions of shares in its Initial Public Offering. 
With a booming sensex and an aggressive advertising campaign over all forms of media, people who had never invested in shares got swept in this hype machine. Nobody was immune to this and bought hundreds of shares of Reliance Power, and fueled this ongoing hype. What was the result? A previously worthless company, whose first proposal will only start in 2010, spent Rs. 22 crore on an overtly hyped advertising strategy, which saw its market capitalization increase one thousand fold to Rs. 22,000 crore. This is what hype can do!

There are instances when hype creates all the difference between evenly placed products which are more or less of same quality.  It is manifest that Nike is qualitatively at par with Adidas and Reebok, if not better. But Nike Manages to find the best brand ambassadors that fits its image. Nike shot to fame in the 1985 Basketball Season when they sponsored Michael Jordan. In a dramatic break with the tradition where only white shoes were allowed in NBA matches before, Michael Jordan endorsed the Nike Brand in a rebellious fashion by wearing varied coloured shoes apart from white. This created a cult following for Nike and teenagers worldwide swore by the Nike Brand.

Owing to this hype, Nike became the top sports apparel company in the world and today, has revenues much more than Adidas and Reebok put together.  

I would like by saying that while you'll require a good quality product to market, this marketing initiative would inevitably require hype!  What do you have to say on this? Express yourself at our comments page.

Going green is really affordable, and can’t wait to get off the shelf

Bill Clinton once said and I quote -

We must get back in the world's fight against global warming and prove it is good economics that (we) will create more jobs to build a sustainable economy: An economy that saves the planet for our children and grandchildren. It is the only way it will work.

According to the Stern Review, compiled by Sir Nicholas Stern, Former Chief Economist of the World Bank, an investment of just 1% of the world's GDP is required to mitigate the effects of climate change. If not done so we could face a recession of up to 20% of the Global GDP.

Most countries in the world today spend atleast 5-10% of their GDP on arms, military and defense equipment - and yet we excuse ourselves saying that we do not have the funding to invest in environment policies, alternative energy or in advanced technologies for reducing carbon pollution in the air.

All we need is 1% !!!

Investing in alternative energy sources has a two-fold benefit. You can see that oil prices are increasing daily and fossil fuel reserves are depleting fast. What happens of our energy dependence then?

In coming decades, our situation will only get worse.

Alternative sources will help meet our energy demands in those times of crisis. Moreover, it helps in curbing global warming and reducing carbon content in the air. If we are to harness the power of markets and innovation, we will be able to create green products and services that will protect Planet Earth, secure our children's future and herald a new economic growth tomorrow.

Alternative Energy becomes even cheaper with the model of ‘carbon credits'.

Carbon credits are like any other commodity, which can be traded on stock exchanges and between people. For instance, an oil company that emits a lot of carbon content in the air has to pay ‘carbon credits' to organizations that work hard to reduce the world's carbon footprint. These carbon credits serve the purpose of taxing the wrongdoers and providing incentive to organizations and people who take the initiative/undertake activities to lessen the pollution in the atmosphere.

Time for euro to replace dollar as the de-facto world reserve currency

The de-facto world reserve currency refers to a currency in which the majority of international transactions take place.

Since the time after the Second World War, the de facto world currency has been the United States dollar. During that war, the U.S. provided support, medical help and ammunitions to its allies, demanding gold payments in exchange. By then, the Bretton Woods agreement was established by which banks of issue were required to redeem their currency in gold bullion or in U.S. Dollar- which in turn were redeemable in gold bullion at the rate of $35/troy ounce (1 troy ounce = 31.1034768 g). After the war ended in 1945, bulk of the world’s gold was lying in the U.S. vaults. Henceforth, the dollar became the undisputed global reserve currency. Some countries like Ecuador, El Salvador, and Panama have gone a step further and eliminated their own currency in favour of U.S. Dollar.

The United States took advantage of this fact and printed dollars in huge quantity. It exported large chunks of dollars, paying for commodities, tax cuts, wars abroad, spies and politicians world over. This measure could not affect the inflation back home. It got it all for free!! Outside U.S., 2/3^rd of most of the reserves of the other countries is in U.S. dollars. In 1971, when some countries tried to sell their dollars in return for gold, U.S. defaulted on its payment and the Bretton Woods Agreement was smashed. To regain the trust of the world in the paper dollar, U.S. bullied OPEC to sell oil in dollars only. Now the countries had to keep the dollars to buy the much-needed oil. Oil replaced gold as the foundation to stop dollar from sinking.

But, in late 1999, Euro was established and months later, Iraq announced that thereafter it would sell oil in euros only. Then, the U.S. for obvious reasons invaded it. In 2004, Iran proposed the setting up of an oil bourse to sell oil in euros only. India and China have also supported this decision. It makes sense for Europe and Japan too, to buy and sell oil in euros as the euro is far more stable than the debt-ridden dollar.

The world would now have to start stalking up euros and sell back dollars. But the U.S. can’t accept even 1/10^th of the world’s dollars as its economy would crash. What would happen to U.S. then? A re-run of Germany post 1929?

What do you have to say? Express yourself here!!

GM is bleeding from all sides- is it time to say a polite goodbye?

General Motors, once the biggest companies in the world is now on its knees in search of new capital, consumers, respite from oil prices and most importantly profit! The biggest car-marker which once accounted for half the cars in America now just occupies 20% of the market share.

What exactly happened to GM, the first company to post $1 billion in profit in a single year, way back in 1955 ?? Read on....

The last few weeks have been the toughest in General Motors' era, having seen their market capitalization succumb to only $5.6 billion - a ridiculous sum considering their assets almost 10 times that figure.

1. Credit crisis/Subprime Mortgage has taken its toll in the form of consumers defaulting on their car loans. SUVs and Pickup trucks' resale value have diminished as a result. In turn, the Company bears losses of cars returned after their lease has expired.


2. Gas prices in America have crossed $4 a gallon, which  has hit the auto industry very hard. The Big Three - GM, Ford, Chrysler have been the worst-hit as they generally made huge cars and fuel-swallowing trucks, and had only a few fuel efficient cars on production.


3. Roger Lowenstein has said in his article, that  GM  paid  their employees pension funds and health-care benefits so dearly, that they had little to pay to shareholders or design new cars  or research alternative fuels.  He estimates that GM have spent $103 billion from 1993 to 2007 just to pay GM workers  pension, a whopping $90 billion more than they paid shareholders dividends during that period!!

Latest news is that GM has closed 4 truck and SUV factories already, and is set to put its Hummer Brand for auction. Seeing things go too far in the near future, GM is set to make losses of atleast $1 billion a month.

I guess it'll have to got the Merrill Lynch way or Bear Sterns way if it has to save its reputation. Roger reckons that 'bankruptcy is not unthinkable for Detroit's former king'.

What do you have to say for this? Post your comments, opinions, or interesting trivia on GM here.

Follow up on the G8 Summit - India, China and the speak on climate change....

As promised, here is the follow-up to my last post on the happenings of the first 2 days on G8 summit in toyako in Japan.

After yesterday's session of the G8 summit, today, the leaders of the group of eight met with the leaders of eight other emerging economies, namely India, China, Brazil, South Africa, Mexico, Australia, South Korea and Indonesia. These sixteen countries together account for 80 percent of global greenhouse gas emissions.

Climate change has dominated the discussions at this year's G8 summit in Japan. Yesterday, the leaders of the Group of Eight countries had decided to half the global emissions by 2050. However, in today's discussions, only Indonesia, Australia and South Korea have supported the G8's vision. All developing countries argued hard that it was developed countries who sacrificed nature during their growth and industrialization and now they should bear the brunt of taking on the expenses of curbing carbon emissions.

However no consensus could be achieved on the proposed target of carbon emissions, and leaders ‘safely stuck to their target' of 50% less by 2050.

These countries have agreed to cut their greenhouse emissions but they avoided setting specific targets for the same. Chinese President Hu Jintao said that China being a developing country was on the path of industrialization and improving people's welfare. United States is already opposed to committing to firm targets without assurances that big emerging economies will act too. Experts are doubtful that any substantial steps to fight global warming will be taken unless the new U.S. president assumes office in January 2009.

Besides climatic changes, the meet also agreed on the need to address rising oil and food prices and global inflation. Most of the growth in energy demand is coming from emerging economies. However, other than Russia, the G8 does not include any major oil exporter. In contrast, Iran's OPEC governor said that there was no shortage of oil and blamed the G8 countries for the surge in prices. According to him, OPEC supplies crude oil at a rate that is more than the market needs.

Only time will tell about the effects of this year's G8 summit. Next year's G8 summit is scheduled to be held in Italy where the Group of Eight will hold talks with the eight booming economies.

Hear what others have to say about the G8 Summit, which took place in Japan. Also post interesting stuff on G8 or anything you'd like to say.

G8 SUMMIT 2008 – The happenings of the day…..Stage set for India tomorrow

The G8 summit 2008 is being held in Japan at the island of Hokkaido. Discussions include themes such as Climate change, soaring food & fuel prices and African development. The G8 countries include United States of America, United Kingdom, Italy, France, Japan, Canada, Germany and Russia.

On the first day, the leaders talked with the presidents of Algeria, South Africa, Nigeria, Senegal, Ghana, Tanzania, Ethiopia and UN Secretary-General Ban Ki-moon on doubling the aid to Africa by 2010 as promised in 2005. At the same press conference, leaders held discussions on a system in order to track that the commitments were honored.

On Tuesday, the second day of the talks, the G8 rich countries expressed their desire to work with 200 states associated with the U.N. climate change talks. They have an aim of halving greenhouse gas emissions by 2050. This move has been welcomed by the European Union. Though the Group of Eight leaders did not give precise targets, they said that mid term goals would be essential to achieve the goal set for 2050. U.S. President George Bush insisted that developing economies, China and India must keep their emissions in check as well. He further urged the G8 to encourage nuclear energy as a means of reducing the world's dependency on oil and also help in reducing greenhouse gas emissions.

In another statement released today, the leaders noted the risk that sharp rise in oil prices pose to the world economy. It was agreed to bring together major oil producers and consumers in a world energy forum to discuss output and prices.

The three-day summit culminates on Wednesday, 9 July with a meeting constituting the G8 and five Heiligendamm outreach countries, Brazil, China, India, Mexico and South Africa. Following this session, there will be a meeting of the major economies, that is, G8, plus the five Heiligendamm outreach countries, plus Australia, Indonesia and South Korea.

Do catch-up on the follow up on what India and China will do at the Summit tomorrow, 9^th July!!

Please post your comments or anything interesting here.

News has just 'flown in' that Inflation is up to 11.63 % !! With the world heading towards recession, and oil prices booming, inflation is bound to come. RBI responded last week by raising repo rate from 8% to 8.50%. The Reserve Bank also hiked the CRR (percent of deposits of banks kept with RBI) to 8.75% from 8.25%.

The G8 countries are to meet soon and obviously, this growing inflation will be on everyone's mind. Moreover, World Bank president Robert Zoellick has urged the G8 nations to work in tandem with OPEC countries to reach some decision/action to curb rising oil and commodity prices. ECB has already taken the bold step of raising interest rates from 4% to 4.25% to curb inflation(which has touched 4% in Europe - a high value, keeping in mind, their target of 2% inflation).

But are these measures enough?? Inflation has more factors than just a single-dimensional reason of interest rates. Take for instance, oil prices. Supply Demand are not the only essentials to it...even increased output did not push down prices, as I had written 2 weeks back.

Food crisis is also fueling rapid inflation. Prices of rice and wheat globally have gone up atleast by 2 times. Most developing countries were hit, with the African nations being the worst-hit victims. Food crisis was also not only triggered by increase in consumer demand in India and China, but by global practices of food use. Per capita food consumption have actually decreased in India and China.

Read more on the food crisis and also effects of truck strike on Indian economy and increasing inflation >>

This natural balance between demand and supply was hit primarily by using cereals like corn/maize and sugarcane for making bio-fuels like ethanol for use in petrol/diesel. USA use nearly a third of their maize production only for making bio-fuels. Adding bio-fuels enhances petrol/diesel in cars and vehicles and helps bringing down actual rates. Rising oil prices only mean that this figure[of usage of bio-fuels] is going to spiral up, as it already has since 2005-06 when it was just 6%.

I suggest that if countries are to protect themselves from food crisis, they are to isolate themselves from global markets in food and be self-sufficient in domestic production. Managing security of surplus of food-grains is really, really difficult for our Indian govt. since food grain production is increasing at a minuscule rate of 1 percent yearly.

I guess i'm ending on an abrupt note here. Please post your comments here or cast your vote!!

Conflict diamonds in Africa- an illegal money spindle,big bucks and names involved

On first december 2000,the United Nations General assembly unanimously recognized the role of conflict diamonds or blood diamonds in fueling wars and illegal sales of weapons.In 2003,a UN initiative called the Kimberley process vowed to end this illicit relationship between smuggling of diamonds and purchase of arms. The Kimberley process was designed to certify the origin of rough diamonds from sources which are free of conflict.It also prevented local warring factions from financing their wars by means of an illegal diamond trade.

Blood diamonds or conflict diamonds

Conflict diamonds first captured the world's attention during the brutal conflict in Sierra-Leone during the late 90's. Rebel groups such as the National Union for the Total Independence of Angola (UNITA) and the Revolutionary United Front (RUF) took control of diamond mines and used forced labour or slave labour to dig and scavenge for diamonds. These diamonds were then sold at a handsome profit to jewelry and luxury goods companies. It is suspected that Cartier, Bloomigdale's, Bulgari and Harry Winston were all part of this trade though it is very difficult to prove so as it becomes impossible to prove the origin of a diamond once it is cut and 'cleaned'. Top notch companies also bought blood diamonds in bulk quantities and stored them in underground vaults so as to keep the demand(and subsequently,the prices) at a perennial high.

The money earned by the rebel groups in this manner was channelized into several other illegal activities,particularly (in procuring) arms and ammunition. Entire cities and towns were bombed and many innocent civilians killed in the subsequent gunfire. Those who survived the battering were taken in-the young boys were recruited as troops in the RUF(they were young and could be trained and brainwashed),the strong adult men in their prime were used as 'hands' in the diamond mines. The onslaught continued and sent the African economy reeling-unable to cope with turbulent conditions.

Thus a continuos cycle of exchange and trade-a supply and demand chain was setup between the diamond  trade and arms and ammunition trade-both flourished financially and the sale of one fed the other-a symbiotic relationship was setup. Arms were used in battles to secure mines and diamonds were used to procure arms.

Truckers strike in India today

Its 1 July today and we start the month with news that truckers in Karnataka are calling an indefinite strike to raise their voice against a hike in sales tax on diesel.

Now truckers are intelligent too. Their argument is that sales tax should be done away with as it is not constant across the country. People might pay more in Punjab than Haryana. They have instead recommended putting VAT (Value Added Tax) as it levied equal across the country.

They feel the pinch of toll tax too. The toll tax, they argue, is based on two factors : price per km and number of vehicles. Naturally, they are inversely proportional -if one rises, the other must fall. But not in this case -because even as vehicles increase, government has increased toll tax from Rs. 1.35 per km to Rs. 2.40 per km. Thats really unfair for truck driver and transport agencies.

Its time for the main part - How do we get affected?

1. Logistics wouldn't move, people won't get their stuff on time and there will be huge delays in courier services and allied services.
2. This may also mean added loss for the government due to higher transportation costs they'll have to provide to make up the strike.
3. Less vegetables, fruits, FMCG products will hit the market. In fact, last time I went to the neighborhood market, I couldn't find any fresh fruits at all, leave alone fruits at high prices!!
4. Most manufacturing companies will be hit hard because they'll want quick transportation of goods/supply parts or inventory demands.
5. This 5th point is only for me - my Amazon books are going to get delayed by a couple of weeks maybe....i'm praying that they reach on time.

The truckers' strike in India is mainly due to high inflation levels, bigger taxes levied by the govt and the ongoing oil crisis. Strikes in other countries are also to follow. As you read this, French truckers are fighting for the same cause - citing their oil prices being higher than other neighboring countries.

What do you think of the latest truck strike? Is it just an attraction-seeker or truckers are really facing the axe? Let us know either by voting in our poll or commenting at our comments page.