Tuesday, May 17, 2016


Are we headed into a recession in 2016-2017?

The decline in the key drivers of economic growth say yes:

Business investment and employment are critical factors in economic growth.

As a result of these negatives:

China’s struggles area concern. Its growth has consistently slowed. 2015 was its slowest year in 25years. This is a factor in the global decline in the demand for commodities and the 55% reduction in commodity prices since 2014 negatively affecting capital investment and employment. Unfortunately 2016 growth is difficult to accept as real as it has been stimulated by debt in an economy that is seriously overleveraged.

Will this result in the Big Three’s costs being higher than its competitors? Probably. It will most likely lead to lower unit sales and lower overhead absorption resulting in lower operating profits, lower cash flows, less capital investment and lower employment.

Adding to the puzzle about General Motors’ viability is its $500 million investment in Lyft – a Uber competitor. Lyft is a business outside of GM’s vehicle manufacturing core. Is GM losing disciplined strategic focus?

Follow-up articles: 

Business Insider, May 26,2016, “Japan's prime minister is warning world leaders about a 'Lehman-scale crisis'” He interprets economic data as pointing to the reemergence of the global financial crisis of 2007-2008.

InvestmentWatch, May 26, 2016: Interview with former Federal Reserve Chairman Alan Greenspan: “Greenspan: Western World Headed for a State of Disaster”. “…have a very profound long-term problem of economic growth…(not) on the verge of a market…collapse…”

Monday, March 14, 2016

A Worthwhile Management Book

Thomas E. Ricks’ book, “The Generals”, is the history and essentially a performance evaluation of more than a dozen US Army Generals from World War II through 2012. It is not very flattering for some generals.

It is a well-written management and leadership book. Although not intended to be a textbook its examples of what led to successes and failures may be helpful for civilian business managers - including members of Boards of Directors and Chief Executive Officers.

Although the entire book is interesting, its reading can be limited to the first chapter. It covers General George C. Marshall, Army Chief of Staff, and describes how he built the Army into an effective fighting force in World War II. Marshall was faced with two equally daunting issues – people and equipment.

In 1939 the Army was too small in the total number of officers and enlisted personnel. Its leadership was poor and needed to be overhauled. There was not enough equipment and what was available was too antiquated to be effective - most of it dated from World War I. He started in 1939 with an unqualified for battle 197,000 soldiers led largely by inept senior officers and ended in 1945 with 8.3 million and victory.

General Marshall’s leadership and management tenets included a “brutally” straightforward style with everyone including President Roosevelt – he practiced “speak truth to power”. He employed the management practice of “removal” of any senior officer with substandard performance – he fired hundreds to build a successful organization. He was a "tough taskmaster" - but consistent, rational and respected throughout the Army's ranks.

For a more complete summary of the book click on this link: “The Generals: American Military Command from World War II to Today” by Thomas E. Ricks.