|Bid||11.68 x 36200|
|Ask||11.79 x 28000|
|Day's range||11.61 - 11.80|
|52-week range||7.65 - 12.24|
|Beta (5Y monthly)||1.17|
|PE ratio (TTM)||N/A|
|Earnings date||28 Jan 2020|
|Forward dividend & yield||0.04 (0.34%)|
|Ex-dividend date||18 Dec 2019|
|1y target est||10.85|
(Bloomberg Opinion) -- If investors want a better world, they’ll have to pay for it.The world’s uber-elite converged on Davos, Switzerland, on Tuesday for the World Economic Forum’s annual meeting. The group of more than 2,000 is worth an estimated $500 billion and includes at least 119 billionaires. This year’s theme is “Stakeholders for a Cohesive and Sustainable World” and includes panels such as “Averting a Climate Apocalypse” and “Balancing Domestic and Global Inequality,” so you can count on plenty of chatter about the world’s most pressing problems.Aside from the obvious point that no one wants to hear about wealth inequality and climate change from a gaggle of billionaires whose carbon footprint dwarfs that of an ordinary person, the gathering comes amid growing suspicions that many of the corporate titans expected at Davos aren’t just casual observers of the world’s ills but actively perpetuate them in the pursuit of profits. Corporate executives seem to be coming to that realization themselves. The Business Roundtable, an association of U.S. CEOs, abandoned the principle of shareholder primacy last August, pledging instead to “lead their companies for the benefit of all stakeholders,” including customers, employees, suppliers and communities. The move is an implicit — if not explicit — admission that, as my Bloomberg Opinion colleague Joe Nocera put it last week, “Shareholder value has caused much harm in the three decades since it became the core value of American capitalism: diabetics who can’t afford insulin; students ripped off by for-profit universities; patients gouged by hospital chains; and so much else.”That singular focus on profits has also been an undeniable windfall for shareholders of U.S. companies. Consider that from 1871 to 1979, earnings per share for the S&P 500 Index grew 3.4% a year, according to numbers compiled by Yale professor Robert Shiller. In the late 1970s and early 1980s, a new generation of executives, including most famously General Electric Co.’s Jack Welch, made profit maximization their single-minded priority. Since 1980, earnings have grown 5.6% a year.Earnings are the invisible hand that drive stock returns. The S&P 500 returned 11.8% a year during the four decades from 1980 to 2019. Of that, nearly half came from the 5.6% of earnings growth. Dividends contributed 3% and change in valuation kicked in the remaining 3.2%, as measured by change in the 12-month trailing price-to-earnings ratio. Earnings have been even more of a workhorse in recent years as dividend yields have declined and — contrary to popular perception — investors have been reluctant to pay more for stocks. Of the 13.6% annual return from the S&P 500 from 2010 to 2019, a whopping 10.2% came from earnings growth and just 3.4% came from dividends and change in valuation.It’s hard to see how that pace of earnings growth — and the return from stocks by extension — is sustainable if companies decide that shareholders are no longer their only concern. Sure, some efforts to broaden the base of stakeholders may contribute to future growth, or at least not detract from it. Germany, for example, has a decades-old tradition of co-determination in which workers are represented on corporate boards, and German companies have generated higher earnings growth than their U.S. counterparts since Germany enacted co-determination in 1976.But the scale of the problems contemplated at Davos this week is likely to require more drastic intervention. Taking on inequality is likely to mean retraining millions of workers for higher-value jobs and paying them accordingly. Confronting climate change will require significant spending on research and in some cases abandoning whole lines of business. Those costs will be borne by shareholders big and small, from the bigwigs gathered at Davos to university endowments to pension funds to ordinary retirement savers. And not just in the U.S. The swell of protest and populist movements around the world is in part a reaction to the negative effects of shareholder primacy. Executives appear to be listening. Days after the Business Roundtable ditched shareholder primacy in the U.S., Business for Inclusive Growth, a coalition of 34 multinational companies, announced an initiative to tackle inequality with help from the Organization for Economic Cooperation and Development. There will be no shortage of observers calling the gathering at Davos an empty gesture this week, but the billionaires are right about one thing: Ignoring inequality and climate change is no longer an option. Now let’s see who’s willing to pay for it.To contact the author of this story: Nir Kaissar at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
A total of 18.5 gigawatts of wind capacity is scheduled to come online by the end of 2020. Expiration of PTC at the end of 2020 seems to be the primary driver of this wind capacity addition.
Brazilian planemaker Embraer is in the advanced stages of studying the launch of a new turboprop aircraft to be developed through a venture it is planning with Boeing, subject to corporate approvals, a top executive said on Monday. The aircraft would be in the same size range or even larger than the 70-seat ATR-72, a Franco-Italian aircraft that currently dominates the market, Embraer Commercial Aviation Chief Executive John Slattery told Reuters. Embraer agreed in 2018 to fold its commercial aircraft activities into a venture to be controlled by Boeing.
(Bloomberg Opinion) -- Manchester United Plc is the General Electric Co. of soccer.Both are storied giants used to dominating their respective fields, who enjoyed their heyday in the 1990s. In Alex Ferguson and Jack Welch respectively, they had dominant leaders who set an all-but-impossible standard to follow (even if there are questions about what they left to their unfortunate successors). And in recent years, both have a track record of poor capital allocation that has seen them underperform their rivals.Where Man Utd has spent hundreds of millions of pounds over the past eight years buying players such as French midfielder Paul Pogba and Belgian attacker Romelu Lukaku, GE went on a spending spree that included the 12.4 billion-euro ($13.8 billion) acquisition of Alstom SA’s power generation business. That deal’s entire value was ultimately written down.When Jeff Immelt took over as GE’s chief executive officer in 2001, it was the biggest company in the S&P 500. Over his 16-year tenure, he spent some $200 billion buying companies, yet shareholders enjoyed annual returns of just 0.5%. In the same period, the S&P 500 was averaging returns of 7.4% a year.Man Utd is much the same. After winning 12 English Premier League titles in 20 years, the club has won just one championship since its 2012 initial public offering. That’s even as it spent a net 740 million pounds ($965 million) through June 2019 buying new players. In the same period, its bitter rival Liverpool FC spent spent less than half that amount, yet was crowned European champion last year and is running away with the Premier League this season.Soccer fans will argue all day that their club owners under-invest in the playing squad to milk the club for cash. Man Utd is owned by the American Glazer family and chants of “Glazers Out” are regularly heard at the team’s Old Trafford stadium. Fans accuse them of leveraging up the club and keeping the IPO proceeds for themselves.The story for investors is just as grim. Since the IPO, Man Utd has returned 5.8% a year. Italy’s Juventus Football Club SpA, Germany’s Borussia Dortmund GmbH and AFC Ajax NV in the Netherlands, all publicly traded, have averaged returns of 22% in the same period.Adding to the ignominy, the consulting firm Deloitte expects revenue at Man Utd, which has long challenged Spain’s Real Madrid and Barcelona for the title of the world’s most valuable soccer team, to fall as much as 11% this year, as failure to qualify for the European Champions League hurts sales. That could allow domestic rivals Manchester City FC and Liverpool to overtake it, knocking the Red Devils off the top spot in England for the first time since Deloitte began its Money League report on soccer 23 years ago.The problem isn’t that Man Utd has skimped on player investment — the numbers show that it hasn’t, at least in recent years. But it has invested poorly. A useful point of comparison is Juventus, which occupies a similar status in Italy, having won more Italian championships, known as Scudettos, than any other team.After the Turin-based club, run by the same Agnelli family that controls Fiat Chrysler Automotive NV, sold Pogba to Man Utd for 89 million pounds, it reinvested the proceeds in a string of players who subsequently led the team to the final of the Champions League, Europe’s top club competition. In the 12 months after Pogba’s departure, Juventus’s share price climbed 141%, although admittedly this was from a very low starting point.Since the Italian team signed Cristiano Ronaldo, a five-time winner of the FIFA Ballon d’Or award for the world’s best player, for 100 million euros in 2018, stock increases have added almost 800 million euros to its market capitalization. That’s a very good return on investment, regardless of how Ronaldo plays.The comforting news for Man Utd is that it differs from GE in one key respect: its problems are easier to solve. In aviation, power generation, and oil and gas equipment, GE makes products for markets that face an extremely uncertain future. The Manchester giant just needs to invest its capital more shrewdly. The best way to do that is to improve its long-term recruitment strategy, and for that it will need more effective management structures in place. Ed Woodward, the club’s executive vice-chairman, is the man in the firing line for increasingly angry fans. Immelt would no doubt commiserate.\--With assistance from Elaine He.To contact the author of this story: Alex Webb at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
High-dividend stocks can be misleading. Here's a smart way to find stable stocks with high dividends. Watch these nine dividend payers on IBD's radar.
(Bloomberg Opinion) -- The 2019 column I most wish I could take back was about Boeing. In May, two months after the second deadly 737 Max crash, I compared Boeing’s current troubles to other times when Boeing had stumbled badly, including 2013, when the new 787 — which had come to market four years behind schedule —had a problem with its lithium ion batteries, which burst into flames several times. The Federal Aviation Administration even grounded the plane temporarily.Airplanes are fiendishly complex, and new planes almost always have kinks that need to be worked out (though, admittedly, those kinks don’t usually include fatalities). In any case, my working assumption was that the company had always overcome its problems and would do so again. “Boeing’s history strongly suggests that it will recover from this fiasco and do so quickly,” I wrote. “It will emerge stronger than ever.” Ouch.Within a matter of months, I could see that I was wrong and that Boeing was not the same company I had followed two decades earlier. In October, Chief Executive Officer Dennis Muilenberg testified before Congress. He was awful. He kept saying that safety was part of Boeing’s DNA, yet the evidence angry legislators confronted him with — internal emails, for the most part — suggested just the opposite: that safety was no longer high on Boeing’s list of priorities. What was ascendant was maximizing shareholder value, with catastrophic consequences.The company cut corners to get the plane on the market quickly. It used the least expensive suppliers regardless of how inexperienced they were. Its manual contained only one sentence about the system that was the root cause of the crashes. Worst of all, it persuaded the F.A.A. — and its airline customers — that pilots didn’t need flight simulator training to fly the 737 Max. The release of a devastating batch of internal Boeing emails late last week — showing engineers rushing to get a plane to market despite knowing it had serious problems — only reinforced the notion that Boeing’s culture had been compromised. A company that had long been run by engineers for engineers was now a company run by corporate bureaucrats whose primary goal was to please Wall Street. That’s the underlying story those emails tell.Which begs the question: How did this happen?In the Atlantic not long ago, business writer Jerry Useem suggests an answer. He marks May 2001 as the beginning of Boeing’s cultural decline; that month, top executives announced that they were moving the company’s headquarters to Chicago. More than 30,000 engineers would remain in Seattle, mind you. But the top 500 executives would move 2,000 miles away.“When the headquarters is located in proximity to a principal business — as ours was in Seattle — the corporate center is inevitably drawn into day-to-day business operations,” CEO Phil Condit said at the time. How he could view removing the top brass from the “day-to-day business operations” as a net positive is beyond comprehension. But he did. Useem wrote: “The present 737 Max disaster can be traced back … to the moment Boeing’s leadership decided to divorce itself from the firm’s own culture.”Condit was ousted in 2003 (in part because he had a series of affairs with female employees) and was succeeded by Harry Stonecipher. Stonecipher, who had been CEO of McDonnell Douglas when it merged with Boeing in 1997, had spent the bulk of his career at General Electric, including seven years under Jack Welch. As I’ve noted before, Welch’s stated goal was to make GE “the world’s most valuable company,” which meant focusing first and foremost on finding ways to increase the company’s share price. As his underlings took over other companies, they brought that mindset with them.Stonecipher was no exception. At Boeing, he gained a reputation as a ruthless cost-cutter and expressed pride in the way he was blowing up the company’s engineering mindset. (“When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm,” he once said.) Wall Street loved it; the stock price rose fourfold.When Stonecipher was fired in 2005 (also for having an affair with a subordinate), the board passed over the obvious internal candidate, Alan Mulally, the head of the commercial airplane division and Boeing’s last great engineering executive, and brought in another Jack Welch protege, James McNerney. So now Boeing had a CEO who knew nothing about how to manufacture an airplane. And this lack of engineering know-how was compounded when McNerney named Scott Carson to succeed Mulally, who left in 2006 to become CEO of Ford Motor Co. True, Carson was a Boeing lifer, but he was a salesman, not an engineer.In 2007, McNerney inaugurated a series of stock buyback plans, which lifted the stock price; it repurchased $6 billion worth of shares in 2014 alone. The CEO and other top executives received tens of millions of dollars’ worth of stock options and stock grants. Dividends were doubled. The stock bottomed out at $30 a share in the aftermath of the financial crisis, but by the time McNerney stepped down, it was approaching $150 a share.Meanwhile, Boeing was putting the screws to its unions, eliminating their pensions and moving some production to a nonunion facility in South Carolina. Richard Aboulafia, the well-known aviation consultant, thinks this was a critical mistake — and another example of how little McNerney understood about the business of building airplanes.“Aviation is not like other industries,” he wrote in Forbes after McNerney announced his retirement. “There are certainly cost pressures, but this is a capital-intensive business with very high barriers to entry. Labor costs just don’t matter as much compared to other industries.”Aboulafia concluded: “An experienced and motivated workforce, therefore, is the most important asset a company has. McNerney failed to recognize this important fact, and the company has suffered as a result.”In that same essay, Aboulafia noted that the incoming CEO, Muilenberg, was an aviation engineer, and though he had spent his career on the defense side of the company, there was hope that he could reverse some of McNerney’s emphasis on the stock price. But it wasn’t to be. Instead, he ratcheted up the company’s stock buybacks, retiring 200 million shares — a quarter of the company’s stock — at cost of $43 billion.How could Boeing afford to do that? As Jonathan Ford pointed out last August in the Financial Times, it was precisely because it was saving so much money on the 737 Max. Instead of starting from scratch and building a new plane, it simply “bolted new fuel-efficient engines onto a tweaked existing airframe.” Ford concluded: “Boeing was able to redirect some of those ‘savings’ to repurchase stock instead.”By the time Boeing decided to cobble together the 737 Max, its engineering culture was completely broken. Here’s how Aboulafia described it to Useem in the Atlantic:It was the ability to comfortably interact with an engineer who in turn feels comfortable telling you their reservations, versus calling a manager [more than] 1,500 miles away who you know has a reputation for wanting to take your pension away. It’s a very different dynamic. As a recipe for disempowering engineers in particular, you couldn’t come up with a better format.You can see that disempowerment — and its consequences — in the recently released emails. Instead of bringing their fears and complaints to superiors, the engineers grouse to themselves about the problems they see with the plane. They are bitter about management’s unwillingness to slow things down, to build the plane properly, to take the care that’s required to prevent tragedy from striking.There is one email in particular(1) from an unidentified Boeing engineer that I can’t get out of my head. It was written in June 2018, about a year after the company had begun shipping the 737 Max to customers:Everyone has it in their head that meeting schedule is most important because that’s what Leadership pressures and messages. All the messages are about meeting schedule, not delivering quality… .We put ourselves in this position by picking the lowest cost supplier and signing up to impossible schedules. Why did the lowest ranking and most unproven supplier receive the contract? Solely based on bottom dollar…. Supplier management drives all these decisions — yet we can’t even keep one person doing the same job in SM for more than 6 months to a year. They don’t know this business and those that do don’t have the appropriate level of input… .I don’t know how to fix these things … it’s systemic. It’s culture. It’s the fact that we have a senior leadership team that understand very little about the business and yet are driving us to certain objectives. It’s lots of individual groups that aren’t working closely and being accountable …. Sometimes you have to let things fail big so that everyone can identify a problem … maybe that’s what needs to happen instead of continuing to just scrape by.Of course that’s exactly what happened: the 737 Max failed big — at a cost of 346 lives. Shareholder value has caused much harm in the three decades since it became the core value of American capitalism: diabetics who can’t afford insulin; students ripped off by for-profit universities; patients gouged by hospital chains; and so much else. But none worse than this.(Corrects the given name of aviation consultant Richard Aboulafia in the 13th paragraph.)(1) The email in question can be found on page 24 of this document.To contact the author of this story: Joe Nocera at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
GE Renewable Energy’s Grid Solutions business has been awarded a multi-million dollar project for the Neart na Gaoithe (NnG) offshore wind farm.
Lockheed's (LMT) C-130J variants are designed for night operations. Its proven on-board navigation system guides pilots to proper landing site quickly and safely.
(Bloomberg Opinion) -- Boeing Co.’s new CEO shouldn’t need an extra wheelbarrow of money to do his job.David Calhoun officially took over the top role on Monday following the December ouster of Dennis Muilenburg over his ham-handed management of the crisis engulfing the 737 Max. With the plane having now been grounded for 10 months in the wake of two fatal crashes, Boeing decided to promise its new CEO a $7 million special long-term incentive award contingent on certain “key business milestones” including the successful and safe return of the Max to service.It’s hard to overstate the importance of getting the Max flying again for Boeing. Jefferies analyst Sheila Kahyaoglu had estimated the airplane maker was on track to burn through $4.4 billion of cash every quarter that the Max was grounded before it decided to halt production entirely starting this month. The work stoppage likely only cuts that cash burn in half, though, while increasing the overall cost of the program and significantly complicating the process of ramping it back up. Every passing month also means more in compensation that Boeing owes to the airlines scrambling to adjust their schedules for a lack of Max jets. As CEO, the Max’s return is Calhoun’s top priority.The thing is, a mechanism already exists that compensates executives for doing what’s expected of them in their job. It’s called a salary. Calhoun already is getting one of those to the tune of $1.4 million annually. He is also due to receive a yearly bonus with a target value of 180% of that salary – or about $2.5 million. That bonus will pay out at “no less” than the target in 2020, seemingly regardless of whether the Max is flying again. Calhoun will also receive long-term incentive awards — which are separate from the Max-related bonus — with a target value of 500% of base salary (about $7 million) and a supplemental award of restricted stock units valued at $10 million meant to compensate him for rewards he forfeited at Blackstone Group Inc. in order to take this job.Occasionally, you will hear the argument that executives need to be showered with money to make them willing to take on especially complicated situations. General Electric Co., which agreed to pay former vice-chairman John Rice $2 million a year plus health and equity benefits for a part-time role, comes to mind. I am skeptical that companies would have that hard of a time finding capable people willing to be the CEO of a major entity like Boeing or GE, no matter how much it is struggling. Most of the time, they are simply paying for the value of a well-known name. But regardless, those arguments have no place here. Calhoun has been on Boeing’s board since 2009. What happened with the Max is just as much a reflection on him as it is on Muilenburg. Salvaging his own reputation should have been incentive enough.The special $7 million bonus also drew the ire of three Democratic senators who called Monday for Boeing to scrap the payout, warning that it “represents a clear financial incentive for Mr. Calhoun to pressure regulators into ungrounding the 737 Max, as well as rush the investigations and reforms needed to guarantee public safety.” For a company that just last month was publicly dressed down by the Federal Aviation Administration for its overly optimistic timelines on the Max return and the regulator’s concern that Boeing was trying to pressure it into speeding up the process, this is an extraordinarily bold and tone-deaf move. Certainly a key part of returning the Max to service is smoothing over relations with the FAA and with Congress. So one could conceivably argue that just one day into his role, Calhoun is already not doing the job for which he is being so highly paid.The other directors on Boeing’s board blessed this compensation arrangement. To my knowledge, none of them have offered to pay back the fees they received while watching this train wreck unfold, even as they (rightly) canceled Muilenburg’s 2019 bonus. For all of Boeing’s protestations about how it’s finally turned over a new leaf when it comes to transparency and accountability, all you have to do is follow the money to know the truth.To contact the author of this story: Brooke Sutherland at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- “If I’d had more time,” the French mathematician Blaise Pascal once wrote, “I’d have written with more brevity.” Joe Kaeser, the chief executive officer of German industrial giant Siemens AG, should have heeded that dictum.His 1,800-word open letter this week explaining Siemens’s decision to provide rail signaling for the controversial Carmichael coal project in Australia must count as one of the strangest pieces of executive communication since Elon Musk last opened his mouth. Almost twice the length of “The Love Song of J. Alfred Prufrock,” it’s a stream-of-consciousness that veers in the space of a few paragraphs between lecturing, grovelling, evasion and soul-searching. The effect, which you should really experience yourself, doesn’t resemble the blandly polished platitudes issued by corporate boardrooms so much as an anguished love letter. The reason for all this is the storm of protest that Siemens has run into since announcing its contract with Carmichael, a thermal coal pit being developed by Adani Enterprises Ltd., part of the sprawling ports-to-power conglomerate run by Indian billionaire Gautam Adani.The project, as we’ve argued, doesn’t really make sense economically. Its product is too low-quality and expensive to find a place in a global thermal coal market that’s in terminal decline. Generation division Adani Power Ltd., the likeliest destination for the soot, has lost 92.4 billion rupees ($1.3 billion) over the last three years, despite paying around 4,500 rupees ($64) per metric ton for its fuel — prices well below what it would cost per ton to develop Carmichael, on our estimates.Still, as someone who’s been cheering the decline of coal power for some time, I have to confess to finding Kaeser’s dark night of the soul almost more disturbing than a forthright defense of his decision-making would have been.Siemens has been central to the fossil-fired electricity industry since its inception in the late 19th century, with a role providing turbines for coal, oil and gas-fired power plants scarcely less significant than that of its U.S. rival General Electric Co. As recently as 2014, the gas and power unit accounted for about 30% of operating income and was presented as a key future profit-maker in the company's vision of itself in 2020. “We are very, very positive about gas,” Kaeser told one 2014 investor conference.That bullishness turned out to be badly mistaken. Both GE and Siemens have struggled in recent years as the slumping cost of renewables cratered the market for conventional power plants. Kaeser has cut nearly 10,000 jobs from the power and gas division in recent years. With 2020 now dawning, the unit has fallen so far from his vision of Siemens’s future that he plans to spin off as much as 75% as a separate company.Still, at least he has owned that mistake, and acted decisively to correct it.The Carmichael decision is more mysterious. The contract is worth 18 million euros ($21 million) and margins for the transport division tend to bounce around 10%; against all the revenue lines in Siemens's expansive business operation, this contract is likely to account for a fiftieth of 1% or so of operating income.That may not amount to much — but it's the responsibility of a corporate boss to set a direction and pay attention to the detail of getting there. Carmichael already has a history of open-ended delays and disputes with contractors that should have raised red flags with any potential business partner. Given Siemens’s attempt to position itself as a pioneer of sustainable industry in an era of climate change, it shouldn’t have needed Greta Thunberg and Fridays for Future protests to draw the boardroom’s attention to the damage such a minor contract could do to its attempted green makeover. Kaeser’s defense — that having signed the contract, he was obliged to uphold it — is reasonable. That doesn’t absolve him from the lack of foresight of signing in the first place, given the agreement was inked just over a month ago.The rapid changes we’re seeing in power technology and the politics of climate change are likely to wrong-foot many executives and politicians in the years ahead. The collapse of the gas turbine industry is a potent demonstration that falling behind the curve as the world’s economy decarbonizes isn’t just a moral failing — it’s a business risk, too. That’s what's most egregious about Kaeser’s handling of this case. What should matter to Siemens's shareholders is not the state of his soul, but whether he’s making the right decisions to safeguard the future of the company. The motivated reasoning and hand-wringing of his letter suggest that's in shorter supply than you’d hope.“Securing our planet for the future is not just about experts,” he writes at one point, in a wounded valediction to climate activist Luisa Neubauer, who turned down his offer of a place on the board. “This is mostly about leadership.”There’s a lesson in that for Kaeser, too.To contact the author of this story: David Fickling at firstname.lastname@example.orgTo contact the editor responsible for this story: Rachel Rosenthal at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- And you thought Boeing Co. couldn’t possibly have another “what were they thinking” 737 Max moment.Late Thursday, the airplane maker released a stunning batch of internal messages that paint a disturbing picture of employees’ efforts to avoid more rigorous scrutiny of the troubled Max and ensure only minimal training was required for pilots. The employees derided certain airline customers, spoke of deceiving the Federal Aviation Administration and expressed concern about technical issues with the simulators for the Max. “This airplane is designed by clowns,” who in turn are “supervised by monkeys,” said one company pilot in a message to a colleague. A 2013 document emphasizes the need to downplay the impact of a new flight-control software system to avoid greater certification and training requirements; that same software system has been blamed for two fatal crashes of the Max, which prompted a worldwide grounding that still persists.In a statement, Boeing said it regrets the content of these messages and apologized to the FAA, Congress, airline customers and the flying public. There’s no way to sugarcoat the contents of these messages; they’re terrible. It’s another black eye for Boeing’s alleged dedication to safety and quality.Both the company and the FAA indicated that there were no new safety issues raised by these messages, and while that’s a relief, it misses the point. I almost had to laugh at other lines in the Boeing statement where the company says it “proactively” brought these communications and other documents to the FAA’s attention in December and that it did so “as a reflection of our commitment to transparency and cooperation with the authorities responsible for regulating and overseeing our industry.”In October, Boeing handed over a similar batch of messages to regulators from what appear to be some of the same employees. That disclosure came about a year after the first Max crash and eight months after the company reportedly turned in the documents to the Department of Justice, with then-CEO Dennis Muilenburg unfathomably disclosing at his Congressional testimony that he wasn’t fully aware of their contents until the messages were disclosed publicly. It defies reason that no one at Boeing knew in October that the company was sitting on another mountain of troubling messages. Regardless, there is nothing remotely “proactive” or transparent about handing this latest batch of messages over to authorities and releasing them to the public at this point in time. This strikes at the heart of the deep-rooted cultural problems at Boeing. I think one of the employees described it best in a June 2018 message: “It’s systemic. It’s culture. It’s the fact that we have a senior leadership team that understand very little about the business and yet are driving us to certain objectives. It’s lots of individual groups that aren’t working closely and being accountable. It exemplifies the ‘lazy B.’ Sometimes you have to let things fail big so that everyone can identify a problem.” That employee likely didn’t foresee the crash of a Lion Air-operated Max jet in October of that year or a subsequent Ethiopian Airlines crash in March, but Boeing has in fact failed big and everyone has identified the problems. The question now is whether the company is in a position to fix things. This latest batch of troubling messages was reportedly turned in to regulators on the same day that Muilenburg was ousted as CEO and replaced with board member David Calhoun, who officially starts in the top job next week. Calhoun has been a Boeing board member since 2009 and previously spent nearly three decades at General Electric Co., so the culture of profit-driven aloofness that the employees describe reflects just as much on him as it did on Muilenburg. If the board didn’t know about these messages before they were turned over to regulators and Congress in December, it suggests they weren’t asking tough enough questions. Boeing earlier this week reversed course on training and said it would recommend that pilots of the Max spend time in flight simulators, rather than relying solely on computer-based programs. I said at the time that it was hard to give the company too much credit for this recommendation more than a year into the Max crisis. I now wonder if it wasn’t the damning nature of these messages that tipped Boeing’s hand. Far from being “proactive,” Boeing amazingly is still finding itself caught flat-footed by the twists and turns of the Max saga, and it has no one to blame for that but itself. To contact the author of this story: Brooke Sutherland at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- What was going on at Nissan Motor Co. for the last two decades?With all his complaints about Nissan subordinates and the “depth of deprivation” he endured at the hands of the Japanese justice system, Carlos Ghosn didn’t really answer that at a news conference where he portrayed himself as a victim of human-rights abuses. Ghosn didn’t want to talk about his dramatic escape, of course, and again denied the charges leveled against him, including misuse of company assets and under-reporting his income.Here’s what Ghosn really needed to address, and still does: Why was Nissan’s performance so poor for the better part of the last decade and why, if he was such a revered leader, didn’t he make the company a role model for corporate governance in Japan?Ghosn showed himself to be good at deflection and blaming others. He accused his former protege, Hiroto Saikawa, of running Nissan into the ground as chief executive officer, a role shared with Ghosn from November 2016 to April 2017, after which Saikawa took the reins and his mentor continued to hold the chairmanship. The Brazilian-born executive, who had experience juggling top roles at Renault SA and Nissan for years, said he was moving on to help Mitsubishi Motors Corp. recover from a mileage scandal after Nissan completed its acquisition of a $2.3 billion stake.But Nissan had been struggling well before then. Saikawa was taking over a company that was showing early signs of imminent trouble. Margins shrank to 11% by the end of 2017 from 16% in June 2010, coming down faster than some peers as the global market started peaking. Sales incentives coupled with dated models such as the Rogue and Sentra were eating into profits in the vital U.S. market and eroded the brand. Ghosn should have noticed the strategy was running astray. If anything, he was a man of targets, especially global market share and operating margins. Those often fell short. Saikawa said Thursday that he felt “betrayed” by the way Ghosn portrayed him.This leads to corporate governance. If Ghosn was truly the corporate czar portrayed in books on management, something he touted from his Beirut podium, then why such poor results in reforming oversight at Nissan? The automaker resisted adding outside directors for two years after Japan introduced its governance code in 2015, one of 11 companies to hold back. As of 2017, it still hadn’t joined most international companies in creating committees on accountability and transparency. You’d think a pioneer would have been out front before the issue went mainstream.And, crucially for a company ruled so long by one man, how much time was spent on succession planning when Ghosn moved on to fix Mitsubishi? Was it responsible for him to keep one foot squarely in Nissan while managing two other carmakers? Nissan has lost billions in value since Ghosn was arrested in November 2018, which he blames on management’s preoccupation with him and apathy for shareholders. But Nissan had already underperformed Japan’s Topix 500 for years, while return on equity dropped between 2011 and 2016 — when Ghosn alone was in charge. It actually rose a bit after Saikawa assumed the joint CEO role. The legendary executive may have brought Nissan back from the financial brink as the millennium turned, but that didn’t seem to be his priority over the past 10 years. Cementing his legacy focused his mind on the alliance with Renault, and pulling off a new big, spectacular deal. Does anyone really believe that a merger of Renault and Nissan with Fiat Chrysler Automobiles NV was in fact viable, as Ghosn insists? It’s clearly a flawed strategy in a global market suffering weak demand and a poor success rate for large-scale mergers. Already struggling with culture clashes with Renault, would that have left Nissan in better hands?And a final question: Where did Ghosn’s world end and Nissan’s begin? As with the likes of General Electric Co.’s Jack Welch, long-ruling, dominating CEOs often end up operating in gray areas. Ghosn made it abundantly apparent at his press conference, whether he meant to or not, that there wasn’t a clear line. Versailles, c’est lui. Studies have shown long tenures hurt companies because the longer CEOs reign, the more reliant they become on internal networks and information, losing sight of market conditions. Nissan executives were surprised Ghosn wasn’t able to explain his alleged misdeeds. For Saikawa, Ghosn “could have just said it in Japan.” Before Nissan can make perhaps an existential case with investors, it needs to shed the baggage of Carlos Ghosn. It’s far heavier than the musical instrument case he supposedly escaped in.To contact the author of this story: Anjani Trivedi at firstname.lastname@example.orgTo contact the editor responsible for this story: Patrick McDowell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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(Bloomberg) -- Larry Culp is bringing some Jack Welch mojo back to General Electric Co.’s stock.The beaten-down shares soared 53% in 2019, Culp’s first full year as chief executive officer. With the close of trading Tuesday, the annual performance was GE’s best since the beginning of Welch’s CEO tenure almost four decades ago.It’s a sharp turnaround for the company, which has been rocked by several years of management turmoil, deteriorating cash flow and flagging demand for key products. Since taking the helm in October 2018, Culp has sought to bolster the balance sheet and regain investor confidence.The shares closed Tuesday at $11.16 after ending 2018 at $7.28. The one-year gain was the best since 1982, when GE rose 65%.To be sure, the stock was poised for a big bounce after starting 2019 well below recent highs. It’s recovered only a portion of the $214 billion in market cap losses accumulated during 2017 and 2018.Nonetheless, GE managed a mostly steady year that avoided the missteps of the recent past. Culp made changes to the company’s portfolio in 2019 while tackling debt and cash flow concerns. He also navigated a bumpy few weeks after financial investigator Harry Markopolos accused the company of fraud -- accusations the company has denied.To contact the reporter on this story: Richard Clough in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Brendan Case at email@example.com, Susan Warren, Tony RobinsonFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.