Tuesday, July 31, 2012

Stratagem-INTERNATIONAL : HEWLETT-PACKARD COMPANY: RESTRUCTURING

Nine months back, B&E had questioned whether Leo Apotheker was the right choice to fill Hurd’s shoes at HP (article titled, “Wrong person. Wrong place?”). With his recent announcement to restructure HP’s healthy business, the questions are back. Will his bet pay off; or is it a fatal move for HP?

Many debate that a move away from hardware will help HP’s operating margin (OM). True. But only in percentage terms. If we consider total revenue synergy of $320 million due to the acquisition, HP’s OM will improve from the currently estimated 10.5% to 13.1% in FY2012. But this would be missing the woods for the trees. Besides losing the crown of being the #1 revenue-generating IT company in the world (to IBM), its operating profits will show a decline of $1.46 billion (to $11.68 billion, given the decline in revenue base due to the PSG unit sell-off). What HP is trying at the moment is to become IBM, whose OM stands at a high 20.02%. But given the current economic scenario, when a diversified model is considered the need of the hour given the macroeconomic uncertainties, HP is doing wrong by putting its profitable hardware unit for sale and moving solely to services. Says NY-based Goldman Sachs Analyst Christina Colon to B&E, “The separation of the PSG division from HP comes with risks. For years, HP has argued that the PC business was tightly intertwined with its enterprise hardware distribution and supply chains. Furthermore, the supply-side scale provided by the division was a critical competitive advantage. Therefore, a spin-off and sell-out may bring some operational challenges that may not be immediately obvious.” Truth is: at present, HP’s OM is more than double of the industry (diversified computer systems business model) standard, which stands at a 5.12% (source: Capital IQ). HP’s present business model is therefore strong.

What is most surprising about the consumer business spin-off is that it happens at a time when HP’s Enterprise businesses are not having a smooth run. As Vlad Rom, Analyst at Credit Suisse, while talking to B&E from Manhattan, says, “The most pressing concerns, are that of Services margins taking another step down, and the enterprise business being affected by a deteriorating macro outlook. We are lowering EPS estimates for FY2011 & FY2012 by 1.6% & 11.4% to $4.83 & $4.56 respectively. It appears that the transformation in Services will take some time with margins declining further in the near term and market trends remaining lackluster.” At present, HP is being hit by a range of secular issues facing the business compounded by chances of a macroeconomic downturn. The overall results and near-term outlook from both Goldman and S&P have confirmed the rapid slowing in the Services & Enterprise Server, Storage and Networking (ESSN) units that account for 95.34% of its Enterprise revenues.

In the Services business which contributes to 34% of the group’s operating income, revenue grew only 4% y-o-y and OM declined by 2.1% during H1, 2011. While the company has appointed a new head of Services (John Visentin, previously head of HP Enterprise Services and GM of IBM Integrated Technology Services), experts opine that the deterioration in Services will continue, with the turnaround taking a further 4-6 quarters. HP’s ESSN business, that contributes to 25% of its income, faced both macro and structural headwinds in the first half of 2011, as OM remained flat y-o-y at a low 7%. Given the slower economic environment and weakness in the Public vertical (which accounts for 10% of revenues), and budget constraints in US and Europe (which are likely to continue until 2013-14), the outlook for ESSN sub-segments is not all about smiles. Even the high-promise-cloud-computing power-generating servers unit faces increasing headwinds from the adoption of virtualisation, a bifurcating x86 server market and a fading server refresh cycle. Worse, the key high-end x86 segment, in which HP has more significant share, is forecasted to decline at a CAGR of 3.4% (as per Credit Suisse). There is further bad news with industry watchers forecasting a slower growth trajectory despite pricing advantages over key competitors for HP’s networking and Imaging & Printing (IPG) businesses. Giving a quick prediction, Stephen Oshman, Analyst at Goldman Sachs, while speaking to B&E from NYC, says, “It appears that we underestimated the challenges HP is facing. Despite forecasts below guidance and consensus, it seems, HP faces more obstacles than even we expected. Given the numerous issues, both short term like continued supply chain disruptions and currency headwinds for IPG and long term like potential PSG divestiture, enterprise transformation, we lower our revenue and EPS forecast for FY2012 and FY2013.” There it is – trouble in all the units that Apotheker’s is betting his money on.


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Monday, July 30, 2012

Sanjay Kabra, Chief Financial Officer, Sunil Mantri Group

B&E: The cost of funding is going be higher as banks are bound to increase their lending rates, the industry is facing a crunch and the fund gap over the next five years alone as high as as $70 billion. Don’t you see these as ideal conditions for consolidation? What could be the potential targets?
SK: As for current valuations and potential targets, I do not foresee mergers & acquisitions kind of consolidation taking place in the real estate sector, so I am not commenting on valuations and targets. As a matter of fact, bank funding is still the cheapest source of funding for the realty industry.

With the prospects of raising funds from an IPO pretty much bleak, the industry is compelled to look at much costlier private equity, private finance, and NBFC’s to fund the land costs. The problem that sucks the industry is the denial of bank funding for land, which is an intrinsic raw material for the industry. Price/earning ratio of the real estate sector is 18 times the earnings per share. I don’t foresee any takeover targets.

B&E: What are the challenges to consolidation in the real estate sector? How relevant is it to the target of fulfilling the additional housing demand of 37 million units in the next Five-Year Plan, which would need around $3.2 trillion in investments?
SK: I reckon that industry players with the capacity would look at project acquisition opportunities rather than at M&A opportunities. It may be more prudent to do this rather than attempt wholesale takeovers and acquisitions of companies. The latter option could tag along lot of baggage that the acquirer may really not want or like. The chaos of urban explosion is already a reality. Chaos is very much a clear and present adjunct of economic growth story of India. So slums and high rises inevitably coexist in Mumbai. Traffic is and will continue to be a nightmare in all the metropolitans. The metros will arrive 5 years too late, except in Delhi, which alone has received a generous dose of infrastructure and was planned for rather well. Capacities of Indian real estate players may not be adequate to meet the overwhelming needs of housing & urbanization if the supply needs to be ramped up on a radical basis. FDI participation is forthcoming in FDI compliant projects, so there is already some degree of offshore participation. Urban developments may be small in size but they can involve huge investments.


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Saturday, July 28, 2012

“Public Trust Moves The Country”

Prof. Kishore Kulkarni, Metropolitan State College of Denver

It is now a common knowledge that India’s economy has been growing very impressively for the last 12-15 years. Recall that in the last decade, Indian economic growth rate was second only to that of Chinese. In 2010 and 2011, with 8.5% growth rate in a roughly $1.3 trillion GDP, India has taken some significant strides in becoming a major economy of the world. Compare that with 2 to 3% growth in the 1970s and 1980s, when – among other distressing things – Indian policymakers were in a confused state of affairs.

In terms of purchasing power of money, the Indian GDP ranks amongst the top ten national GDPs. India has increased exports significantly, which has helped her buy foreign goods and create a substantial stock of foreign reserves (roughly $280 billion worth in 2011).

This economic growth is made possible by a boost in the service sector, primarily in the software and computer industry. The increased demand for software and computer engineers has increased wages exponentially, and has created a wealth effect that has not only raised the need for better infrastructure and goods and services, but has also trickled down into other parts of the economy. The poverty level has moderately declined, and the increased per capita income is seen in many a places.

This improved economic condition has, therefore, brought much hope in the minds of frequent visitors, as well as in the minds of foreign investors who look at the Indian economy as a worthy destination for their investment. So, the main question is: Can this growth be continued in the near (2012-2013) and probably far-distant future?

Without reservation, and by any standard one wants to measure the growth, the Indian economy has been moving in an enviable fashion. But to some sociologists, this may seem only an exercise that has increased income inequality. A simple statistical fact is that when some sectors grow, even if others stay at the same level, the inequality of income automatically increases. The Indian case is not very different from this trend. When 33% of the population is still below the subsistence level (defined as an income of $2 per day), India needs to keep growing for a long time to reduce absolute poverty to a manageable level. Second, one can point out the “digital divide” that has created two separate population groups within India. The so called “skilled” (and elite) people live a whole different lifestyle than the poor and unskilled ones. Bridging this divide will be a challenging and a monumental task in the future.


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Friday, July 27, 2012

Massive Transformations in its Strategy & Branding

As Infosys goes Through Massive Transformations in its Strategy & Branding, Virat Bahri discusses what it would take to take The Next Leap

Infosys, which launched its cloud services recently, is on the brink of the transformation in comparison; a shift they refer to as Infosys 3.0. The company posted net profits of Rs.68.23 billion for the year ended March 2011, growing by 8.8% yoy, but the results have been quite disappointing on the whole. Fourth quarter revenue of $1.6 billion almost breached the lower end of its guidance and there was a 1.4% decline in volumes as well (Angel Broking). Sequential revenue growth was just around 1% compared to 5.9% and 10.2% in Q2 and Q3 of the previous fiscal year. In Q4, Infosys experienced a fall in its margin by 110 basis points to 29%, which is due to lower utilisation. The company also dropped 3 ranks in the Power 100 list in 2010 to be ranked 11. A greater concern is the expected margin hit in the coming quarters due to increased hiring of around 45000 people in the current fiscal as well as rupee appreciation. Infosys CEO & MD Kris Gopalakrishnan, however, comments on a positive note to B&E, “If growth accelerates resulting in higher utilization, margins can improve.” Large transformational deals are coming back, but Europe is still plagued by sovereign debt fears. Moreover, 2011 would see the ending of the tax holiday for Indian IT companies. But the company’s strengths of strong cash flows, with cash and cash equivalents totaling $3.8 billion by the end of FY 2011, a debt free balance sheet and strong client relationships keep it in good stead for the coming quarters. Morningstar stock analyst Swami Shanmugasundaram says that the company’s package implementation and system integration services will be particularly accretive to revenues and projects “compound annual revenue growth of 16% for a five year forecasting period (compared to 16% in the past five years)”.

Of course, there are a number of changes within the company that have taken place, and top executives are unanimous that the next few years will see a lot of transformation. A new team has been set up with K. V. Kamath being appointed as the co-Chairman (non-Executive) with Kris and S. D. Shibulal has taken up the position of CEO; changes that will be effective from August this year. N. R. Narayana Murthy has bid adieu to all executive positions in the company. The exit of T. V. Mohandas Pai has been a major blow, and his statements to the media have led to Infosys’ celebrated management practices and philosophies coming under heated debate.

Under the Infosys 3.0 drive, the new team will divide its verticals into four industry groups with each having a separate P&L account. Infosys expects to take some significant initiatives in terms of employee utilization rates, onshore hiring, consulting services, investment into more emerging economies and counter-cyclical verticals like healthcare & public sector, better utilization of existing and creation of new intellectual property and also ensuring a smooth succession to the first non-founder CEO in a few years. Critics would also want the company to look at inorganic growth. A lot has to change in its DNA if it has to compete with the likes of IBM and Accenture, particularly with respect to its relatively cautious approach. But the very fact that Infosys is showing an eagerness for tampering with a long standing status quo is a sign of a welcome beginning.


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Thursday, July 26, 2012

No Greater Catastrophe...

...Than a few High Profile Individuals Caught in Sex Scandals!

Economics can sometimes really go beyond conventional concepts. The financial markets that are said to be largely affected by human behaviour have proved the hypothesis yet again. The recent Dominique Strauss-Kahn sex scandal not only occupied prominent slots at late night talk shows, but has found itself being analysed by experts of pink papers and business channels. Not only did the incident apparently damage IMF’s global reputation – or whatever was left of it – and expose the prevalent office culture in the institution, but it also sent ripples across global financial markets.

Post the DSK scandal, oil prices behaved as if someone had pulled the rug from under their feet. Similarly, gold and silver prices also saw a southward trend and even the euro saw a fall in its exchange rate. Gold prices fell by $3 (0.2%) while silver prices fell by 88 cents (2.5%) and platinum prices fell by $9.30 (0.5%). Similarly, the US, Japanese and Chinese stock exchanges also went down by few points. However, this phenomenon of markets suffering from a popular individual’s indiscretions is understandable when the CEO singularly has incredible managerial value. The day after Hewlett-Packard’s CEO Mark Hurd was asked to resign after being caught in an ethics issue, HP’s market value fell by $10 billion in spite of the NASDAQ being up by 20%. Yet, how could the Tiger Woods’ sex scandal shatter the market? A study by two economics professors, Victor Stango and Christopher Knittel, University of California, 2009, concluded that the sex scandal of Tiger Woods reduced shareholder value in his sponsor companies by 2.3% – or a whopping $12 billion.

Undoubtedly, scandals unrelated to companies should not in reality have any link with their stock prices or even with commodity prices; but such scandals strangely do dent investor confidence and corporate stock performance severely.


Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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IIPM: Indian Institute of Planning and Management
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Wednesday, July 25, 2012

The Largest Rise in Market Capitalisation for their Shareholders!

With Exclusive Interviews and Incisive Insights, B&E brings The Annual listing of India’s top wealth Creators during The Financial year 2010-2011; Companies that gave The Largest Rise in Market Capitalisation for their Shareholders! 

However, considering that this is just the beginning of an even slower growth year, companies need to sharpen their input-cost-reduction strategies than focus on price discounting moves. At the same time they must not forget what Richard Zeckhauser, Professor of Political Economy, Kennedy School, Harvard University has to say. As per him, “Learning to invest more wisely in an unknown and unknowable world may be the most promising way to significantly bolster your prosperity.” Historically, a phase of recovery, which invariably is marked by slow growth, brings in a plethora of opportunities for the companies in form of new trends. Though many companies miss on the opportunities by underestimating them for the time that these trends take to build up before take off, the companies which hold on to these opportunities finally manage to pay their shareholders higher than others. BCG, which has been tracking 78 such trends (called megatrends) since 2005, reports, “Nearly 80% of those trends managed to grow during the downturn – with 23 actually strengthening in importance.” Last year, it also estimated that 44% of those megatrends represent a global market size of over $500 billion. So spotting such new and potential trends and making full use of them would be the idea that should be taken very carefully by India Inc. to stay in the race of the India’s biggest wealth creators for FY 2012.

But then, that alone will not suffice. As a natural add on to a slow-growth economy, as we mentioned above, the companies are bound to feel the pressure on their bottomlines. Hence, a comprehensive and fluent pricing policy and equally good implementation of the same is of utmost importance. To keep their topline steady during the prevailing slow demand conditions, companies may get tempted to adopt a discounted price model, but in the long run, this could hurt them more as revenue, apparently, is the single most important driver of shareholder value maximisation. A research conducted on S&P 500 companies suggests that while in a 3-year horizon, revenue growth carries a 50% importance in overall value creation, in a 5-year horizon, it amounts to 58%; and in a 10-year scenario, revenue growth has a 74% importance in overall value creation. Of course, statistics can be manipulated to support any point of view; yet, empirical evidence does allow a seat-of-the-pants benchmark to be set. While the future would continue seeing both philosophical and sociological questions on the relevance of placing wealth creation over social development, the fact is that till the time companies are set up by the moneys of shareholders, and till the time shareholders are given the status of being the owners, there is no way that in a capitalistic society, any CEO – a direct representative of shareholders – would dare to give less than the top priority to shareholders’ wealth creation. As a toast to that, we present to you India’s biggest wealth creators for the financial year 2010-11.


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Tuesday, July 24, 2012

Stratagem -HERO HONDA VS. BAJAJ AUTO: FIGHT FOR SUPREMACY

After Trailing behind its Bigger rival Tata Motors in The M&HCV Segment, The Company is now betting Big on The Lower-Tonnage Vehicles to reach out to New Markets and Consumers. 
 
But Leyland, it seems is bracing up to the challenge. The company will, in the second half of this year, launch its LCV. In fact, it has already started road-testing its LCV in Chennai. The vehicle does not bear Nissan logos. Apparently, Leyland has dubbed its new baby Dost (though it could not be officially confirmed). “Ashok Leyland will have to work hard to create its own space in the LCV category as players like Tata Motors and M&M are already very strong in this segment,” says Shamsher Dewan, Senior Analyst, ICRA. However, a report from Angel Broking is very bullish on Ashok Leyland and mentions that As Leyland has a small presence in the LCV space, the partnership with Nissan would be positive for it in the long run.

Both Leyland and Nissan will focus on manufacturing LCVs with capacity of 5-7.5 tonne. But the agreement, which states that there will be no cross-distribution of products, also stipulates the Japanese manufacturer will cater to the high-end of the LCV market while Leyland will focus on the volumes market. Company sources claim that the presence of Vinod Dasari, COO, Ashok Leyland ( Ex-JMD of Cummins India), who came on board almost five years ago, has infused a lot of excitement and brought in fresh talent for the company. In the meantime, veteran MD, R. Seshasayee, continues to offer his invaluable experience and steady guidance to the CV maker. A lot seems to be riding on Leyland’s LCV foray. If the LCV gambit pays off, the company will be able to improve its top line from Rs.74 billion at the end of FY 2010 to Rs.113 billion by the end of FY 2012 (based on analyst estimates). Similarly, PAT is expected to move from Rs. 38.3 billion at the end of FY 2010 to Rs. 63.4 billion by FY 2012. Meanwhile, RoE of the company is expected to move up to 16.1% by FY 2012 from a level of 11.9% at the end of FY 2010. Clearly, Leyland’s play in the LCV market will have an important bearing in driving its top line in the months ahead. Moreover, its partnership with Nissan will also help Leyland bone up on the latest technology and expand its international footprint as it will be able to use Nissan’s dealership for exporting LCVs to certain markets.

But before Leyland starts counting on its LCV payoffs, it will have to expand its distribution network aggressively beyond south India. Only then will it succeed in breaking into other geographies and engaging with consumers in markets beyond south India. Because as of right now, for whatever it’s worth, irrespective of pricing and positioning advantages, distribution does matter in India.

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Saturday, July 21, 2012

Welcome to The new Boeing 7-late-7!

The Worst start to building The new age Commercial Plane was not Airbus’. It was Boeing’s. Its biggest project – The Dreamliner 787 – has turned a Nightmare. There are other problems too. What went Wrong with Boeing? & can CEO Jim McNerney play Captain America?

Sixty-one year-old Walter James McNerney Jr. is quite accustomed to rough patches. He has lived through violent storms – some worse than the monster gale that flipped half the vessels at the Fastnet yacht race, off the coastline of South Ireland in the summer of 1979. But most, who have had the chance to conduct an anatomic diagnosis of his career – starting from P&G to The Boeing Co. – will agree that he has already lived through the biggest test of his character. It was while he was heading GE’s aircraft-engine business. The date: November 26, 2000. Late that afternoon, Jack Welch boarded GE’s corporate jet to fly from Palm Beach to Cincinnati. When he landed, the sun had set and the rainfall was heavy enough to fill a glass in a minute. It was 7pm on a cold Sunday evening. He met McNerney at the conference room of the Lunken Airport corporate hangar. Then, McNerney was a popular name in Corporate America. He was considered amongst the three most-likely to succeed Welch as the world’s most valuable company’s CEO. Welch had news. “You’re not getting the job. If there’s anyone to be mad at, be mad at me. Put my picture on the wall and throw darts at it. I can’t even tell you why,” said he. Nine days later, McNerney was named the new CEO of 3M.

A decade since that shocker of a sudden exit, McNerney today, finds himself in the cockpit of the $54 billion Boeing. His job: to steer the $64.31 billion-a-year revenue-earning maker of commercial planes, fighter jets, bombers, missiles, satellites et al, to the height of its glory. Not easy though. With repeated delays to the final delivery date of the 787 Dreamliner and the 747-8 passenger aircrafts (Intercontinetal) & 747-8 freighter, Boeing has hit an air-pocket. While Airbus (which replaced Boeing as the #1 supplier of commercial aircraft since 2008) sits pretty with its A380 double-decker jumbo dancing in the skies, Boeing’s big ticket bets are yet to find their way out of the workshop. Seven years back, the Dreamliner & the 747 families were supposed to give the American a clear supremacy in the commercial airline space, far outrunning its European rival Airbus. It wasn’t to be.

Boeing has an order book which gives-off a stench of backlogs, and this situation, thanks to the 787s & 747-8s, is here to stay for many years. This is not some doomsday call though. The pain is in the loss of revenues and opportunities. The manufacturer, which earns 50.33% of its revenues from the sale of commercial aircrafts has a total backlog of $321 billion. Of this total, $169 billion (847 units) is accounted for by the 787s (each priced between $185.2 million & $218.1 million), of which not a single unit has been handed over to the 57 airlines which placed an order for it as early as six long years back. Today, the 20% more efficient, 220-seater 787 is still under construction, and with the first delivery scheduled for Q3, 2011, will be about 4 years behind schedule. Another chilblain slowing down the American is the 747-8 family (priced between $317.5 million & $319.3 million respectively). Their deliveries have been delayed 4 times already, which implies a total business time loss of 2 years (now scheduled for H2, 2011). The backlog for the 747s is valued at $35.7 billion (112 units). So what is the magnitude of opportunity lost so far for non-delivery of the aircrafts? Assuming that being on schedule would have enabled Boeing to deliver as many 787s & 747-8s in the lost years (four and two respectively) as it is forecasted to roll out in as many years following the first delivery, the total revenue loss amounts to $85.26 billion ($67.75 billion due to the 787s and $17.51 due to the 747s). And we are not even talking of the cancellations yet.

There is much dissatisfaction brewing in the boardrooms of the airlines which expected on-time delivery of the planes. Boeing cannot choose to sweep these sentiments under the carpet. In the past two years (the first delay in deliveries was announced in 2007), Boeing has recorded a net loss in orders of the 787s. In FY2009 & 2010, it saw 60 cancelled orders, while only 11 new orders were placed. Since Q1, 2010, more than 100 cancellations of the 737, 747, 777 families have been received (cancellation figures in FY2011 alone touching 47). At the current net order rate, Boeing will only record a fresh order book of 304 aircraft in FY2011 – a y-o-y fall of 42.6%. That is a dangerous sign as far as new orders are concerned. The situation will worsen if another delay in any fleet is made public – and this is McNerney’s worst fear. While speaking to B&E from Chicago, S&P analyst Richard Tortoriello says, “Risks to Boeing include a worsening financing or economic environment and further delays or manufacturing difficulties on major programs.” Also adds New York-based Goldman Sachs’ Chun-Yai Wang to B&E, “The main risk to Boeing’s state currently includes new aircraft developmental milestones.”

Revenue, bottomline, deliveries and other key financial indicators, are already reflecting a weaker-than-usual Boeing. While topline for Q4, 2010, fell y-o-y by 11% (to touch $8.18 billion), profits fell by 39% (to $0.63 billion), and deliveries were down by 5% (116 units). For FY2010, the American delivered only 462 aircrafts (lower y-o-y by 4%), while its arch-rival Airbus delivered 10.4% more than Boeing. Assuming no new cancellations (which will be definite bad news) and no fresh orders, Boeing will require more than 9 years to erase all present backlogs. How bad is this? Airbus’ backlog will take 5 years to clean up, which is also the standard period used to show a healthy order-delivery equation. Translation: given that the manufacturers have to pay a hefty sum to airlines for late-delivery – ranging from hundreds of thousands to up to a million for each day – Boeing (with a comparative lag of more than 4 years) will either have to ramp up its production facilities in impossible time or will – in the absence of lobbying – be forced to forego many new multi-billion dollar orders. IATA (Global Market Forecast) predicts the need for 26,000 new aircraft (worth $3.2 trillion) over the next 20 years, and Airbus could well end up with the lion’s share of the new orders.


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Friday, July 20, 2012

Blaming Coalitions for Corruption is Laughable

Ever since Rahul Gandhi made a remark that coalitions are responsible for corruption, all Congressmen have accepted it as gospel and are busy parroting the same from every platform. It is a little more disappointing when a person of much acclaimed integrity (though I must say the behaviour of the Prime Minister in recent times could end up giving a new meaning altogether to the word integrity) like Dr. Manmohan Singh parrots the same line and says that the hailstorm of scams that have been hitting the headlines are because of the compulsions of coalition politics. It is absolutely shocking when many so called pundits in the media establishment swallow this nonsense hook, line and sinker and start giving it some legitimacy.

Let me first point out how we are collectively making a mockery of our democracy and our constitution. When visionaries like Dr. B. R. Ambedkar framed the Indian Constitution, they made two things very clear: the first is that it is purely the prerogative of the Prime Minister to appoint his or her Cabinet. The second is that the Union Cabinet must share collective responsibility. Bot these basic tenets of the Indian Constitution are being openly destroyed by this UPA regime and no pundit seems to be raising even a whimper of protest. When Manmohan Singh says that it is not him but the DMK which appointed the now arrested Raja as the Union Telecom Minister – and he says this without a qualm on live television broadcast across the world – he is openly admitting that the Constitution has been trashed. Earlier, at least there used to be some efforts to maintain a fig leaf of Constitutional sanctity when allies used to pressurise the Prime Minister for cabinet portfolios and appointments. Dr. Singh has – at one stroke – removed even that fig leaf. Virtually, everyone in India who has any sense knows that Dr. Manmohan Singh is not a Prime Minister in the sense Nehru, Shastri, Indira Gandhi, Narasimha Rao and Atal Bihari Vajpayee were. Everybody also knew he was more a courtier than a leader; India's first 'appointed' rather than elected Prime Minister. A few issues ago, our sister magazine The Sunday Indian had asked CVoter to conduct a major nationwide opinion poll to assess the attitude of voters towards this UPA government. In that poll, more than 3 out of 4 Indians said that Manmohan Singh is even more of a puppet now than he was earlier. There could be no more damning indictment of both Dr. Singh and the state of the UPA government.

The other manner in which this government merrily trashes the Constitution is the complete refusal to follow even the basic norms of collective responsibility when it comes to the Union Cabinet. We have the sorry spectacle of ministers shooting off their mouths and announcing policy decisions which are then publicly ridiculed by fellow cabinet ministers. Surely Dr. Ambedkar and other framers of the Indian Constitution would have thought of a different structure if they had even an inkling that matters in the Republic of India would come to such a sorry pass. Can you imagine Barrack Obama admitting on live television that he has no authority to make or unmake cabinet appointments? What is truly shocking is that all of us in the media are collectively letting this UPA government trample upon the Constitution without even pointing out how insidious and dangerous this is for the future of India.

That brings me to the point about how wrong and false spokespersons of the UPA regime and their fifth horsemen in the media are when they correlate coalitions with corruption as if it is a statistically proven certainty. In fact, if he had read the speech delivered by the late Rajiv Gandhi in 1985 during the centenary celebrations of the Congress and many subsequent remarks, Rahul Gandhi could have hesitated a bit because his father had a very different opinion on the real reasons behind widespread corruption in India. When Rajiv Gandhi publicly said that only Rs.15 out of Rs.100 spent on welfare and other government schemes actually reached intended beneficiaries, his party lorded over Lok Sabha with a brute majority and also ruled over much of India with huge majorities. Rajiv Gandhi kept saying that it was vested interests and power brokers who were responsible for corruption. Tragically for him, it was the same vested interests and power brokers who smeared his clean image with the Bofors scam.

Then again, a quick look at history will show that corruption increases manifold whenever there is a dictatorship or a brute majority. The latest example is the ousted dictator Hosni Mubarak of Egypt who is reported to have stashed away more than $3 billion during his 30 year reign. Most us would have forgotten a colourful Congress leader called Pratap Singh Kairon whose government ruling over Punjab was perceived to be so corrupt that it embarrassed even Jawaharlal Nehru. Then again, there was the Congress Chief Minister A. R. Antulay who was forced to quit his post because of the infamous 'cement scam'. Surely, we remember the allegations of massive corruption-and cases-against J. Jayalalitha who ruled over Tamil Nadu as Chief Minister with a brute majority? And of course, was it alliance partners and allies that resulted in the notorious fodder scam that implicated Lalu Prasad Yadav and his family? In Orissa, Chief Minister Naveen Patnaik rules with a brute majority. And despite his clean image, his government is literally swamped by scams.


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Thursday, July 19, 2012

Obsessively Stamping it Out!

Philately as a Hobby has not been able to Grab The Imagination of Indians. B&E meets up with Kavery Banerjee, Chairperson, WPE Secretariat to get The Softer side of this Field

The basic idea of stamps historically was their use as a token of appreciation that the sender has paid the postage in advance. Over a period of time though, stamps were collected as a hobby by many philatelists, and they gave creative expression a new height. However, India hasn’t travelled far in this regard. With a view to revive the love for stamps in the country, Indipex 2011, which will take place in the capital in February 2011, will aim to bring the international philatelic community together. And in congruence with the strategy of many renowned brands today, it also aims to capture the attention of the most lucrative target group – the youth. With over three decades of experience with India Post in her bag, Kavery Banerjee, Chairperson, World Philatelic Exhibition (WPE) Secretariat is at the forefront of the initiative to ensure that the goal of the government is achieved in time. Apart from the idea and the strategy to tap young Indians with the exhibition, she discusses the future of India Post with B&E

B&E: Philately as a hobby has not been able to gather a lot of steam in the country so far. What makes Indipex 2011 an important event in that context?
Kavery Banerjee (KB): The idea of this exhibition itself is to promote the love for stamps in India, wherein people from over 70 countries will be participating. A major part of the event is the competition, wherein philatelists from various countries will be showcasing their collections. These are people who have a certain stature as far as their collections are concerned, so you get to see some of the best collections in the world. While there are close to 500 exhibitors, there is a class of people, which is beyond competition and will be displaying their collection at the exhibition. The exhibition will also have several stamp dealers, postal administrations and stamp printers, who will be participating. The idea is that everybody gets a platform to interact and find out the latest trends, the new printing technologies and the new stamps that countries are bringing. As far as the competitive part of the exhibition is concerned, the collections will be judged by an eminent panel of 39 renowned philatelists, out of which seven are Indian. The exhibition carries accreditation from various international philatelic organisations with names like Fédération Internationale de Philatélie and Federation of Inter-Asian Philately. Philatelic Congress of India is also on board as far as the exhibition is concerned and it is after 27 years that an exhibition on philately is being organised in India on such a huge scale.

B&E: What kind of attractions have you planned to revive the love for stamps via this exhibition?
KB: At this exhibition, we will be coming out with two very special products. The first will be on Khadi as it portrays Mahatama Gandhi. In the past, a few countries have launched silk stamps, but we wanted to be different and there wasn’t a better option available. People have lost their love for letters (and consequently stamps) as a fallout of modern technology like e-mail and mobile phones. It (Khadi) will be a limited edition product and as the material is very rough and rugged, it is very different and unique in its own way. Moreover, we are also coming out with customised stamps, which offer an option of getting your mugshot on the stamp. We are hoping that with UID coming into picture we will be able to take this product to the masses, but we will be doing this at least for the seven day period of the exhibition. And as it is for children, the stamps have been priced very reasonably at Rs.150 for a 12-stamp sheet.


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Wednesday, July 18, 2012

Obama wants Repaid fast – can CEO Marchionne rescue Chrysler?

The Worst Start amongst auto-makers in 2010 was not Toyota’s; it was Chrysler’s! Ailing Bottomline, Steep sales targets, one new Product for The Next Two Years, and of course, The $14 billion in Taxpayers’ funds That Obama wants Repaid fast – can CEO Marchionne rescue Chrysler?

Chrysler’s short term problems are perhaps even its long term. Unlike the most troubled GM or the currently controversial Toyota, Chrysler does not have a great future product line; and even in contemporary terms, is very weak in small cars. Owing to the reduction in capital spending in new product development over the past half-a-decade at Chrysler, the only new vehicle set to be rolled out over the next two years – as Michelle Krebs, Senior Analyst at California- based Edmunds Inc. tells B&E – is an SUV – the Jeep Grand Cherokee (“The vehicle resides in a category, SUV, that is out of fashion with consumers. SUV’s have given way to crossovers, which have more nimble, car-like handling, a generally less aggressive appearance and fuel economy that is more like that of cars than trucks.”). No wonder, Cerberus (which bought Chrysler from Daimler AG in 2007) even forgave $2 billion in loans during Chrysler’s sell-off to Fiat, United Auto Workers and the US government. John Casesa, Analyst at Merrill Lynch, tells B&E, “Only 33% of Chrysler’s current product line will be replaced by 2013. At [this] time of turmoil, companies like GM, Ford, Honda, Toyota and other Korean auto manufacturers plan to replace their existing car models by 99%. Chrysler’s target falls short of even less than half of the industry’s 72% figure.”

Even American buyers, who were once patrons of Chrysler, have turned their backs on the Dodge and Jeep labels since 2007. As per estimates by Edmunds Inc., the sales of the two best-selling brands of Chrysler have fallen by 44% in 2009, thereby dragging the once proud Detroit native to number seven in US (its homeground) and number 13 in the world! Chrysler quotes to B&E the statements of Doug Betts, Chief Quality Officer, Chrysler, “We plan to match the best mass market competitors by end of 2012 through quality improvements. The old Chrysler was not organised to work effectively and the new models were launched with below average quality...”

There is another problem that Marchionne has to fix. 52% of Chrysler’s sales over 2007-2009 have been to fleet cars and rental services, a strategy which includes huge discounts, exposing Chrysler’s weakness is in compacts and hybrids (of which it has none) and mid-size sedans. At present, Chrysler’s product line does not seem fit for fuel-efficiency demanding masses in high-growth economies. And for Chrysler, the $4 billion in R&D investment (which it plans to make over 2010-12) has to count this time.

In the past eleven months, Marchionne has been sincere. He has cut down on the management layer and has taken central control at Chrysler – those who have argued with this Italian have been fired. Marchionne knows that to save Chrysler’s assets from liquidating (as the Obama admin. has warned in the past fortnight), he will have to sell 1.65 million vehicles this year alone. Three months up and he’s managed just 234,215 units. That brings the needed rate to 471,929 units per quarter over the next nine months, more than double the current rate. “Chrysler’s future is iffy. It may simply be folded into a small part of Fiat at some point. Its biggest challenge is surviving 2010,” says Krebs of Edmunds Inc. It is said Marchionne hates wearing ties and suits. In this war for survival where he will get his hands dirty, those are the two that he least needs.


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