Vets Dying in Line is No Fairytale – VA Secretary’s Absurd Disney Comparison a Disgrace to Heroes
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The ongoing marketing effort known as The Obama Presidency held a Jobs Summit yesterday. Unemployment appears to have dropped from 10.2% to 10.0%. Congratulations, Mr. President! Keep your calendar open, Sir. If you were to hold future job summits from 1 to 20 January 2010, unemployment would definitely reach 0%!
Not having taken my stats classes at East Anglia University, I’ll admit my analysis above is a wee bit shoddy. What President Obama really intends to do about double-digit unemployment is throw more money at the problem in the amount of $300Bn. This sounds good and it looks good. Two out of three isn’t bad.
The one thing missing, is the fact that it totally won’t work. A look at the annual share holder presentation of The Emerson Company, Incorporated, tells us all we need to know about why this program will fail. Their ppt. is a tour through the wreckage of the once great American Economy.
Slide number three of their presentation compares their net operating statistics from 2003-2008 to those of 2004-2009. Unsurprisingly, they entitle this one “What a Difference a Year Makes.” Their five-year operating profit went from 16% to 7% after just one year. Their Five Year Operating Cash Position dropped from 13.7% to 7.1%. Their Earnings Per Share declined from 19% to 9%. 2009 caused them to lose their cash position and not earn any return on their investments.
Their next slide shows that YoY G7 industrial production declined by 20% in 2009. The leading indicators of the G7 economies went down by 12% over the same period. Emerson clearly could not get a return on investment with everybody broke and no one manufacturing anything.
In response to this recession (slide 5) Emerson whacked 15% of its workforce and shut down 55 facilities. This cost them $540M to execute. This is predictable corporate behavior. The economic conditions partially dictate it. No bucks, no Buck Rodgers. It’s why audiences fill theatres for polemic attacks like Michael Moore’s Roger and Me.
But slide 6 gets into some topics that the Obama Administration should have put on the agenda if they really wanted to hold a jobs summit instead of a sales call. In 2001, 15% of Emerson’s business was done in emerging markets. In 2009, 32% was done there. In 2001, they worked out of 360 manufacturing plants with only 21% of these being located in “Best Cost Countries.”
By 2009, they only manufactured out of 210 locations with 36% of these in so-called “Best Cost Countries.” They brag this total will soon reach 40%. I didn’t have the latest edition of The Corporate Report Euphemism Dictionary handy when I wrote this blog, but I get the distinct impression that “Best Cost Country” implies “Union No!”
Slide 11 gets into some of the particulars of why Emerson doesn’t eagerly rush in and buy cheap industrial real estate in Flint, MI to build new plants. They examine 5 recent recessions and draw some fairly startling statistical conclusions. The length of our last five recessions has gone from 11 months in 1980 to 47 months in 2001 to ????, on the one we are in now.
The job loss in 1980 was 1Mn workers. We lost 2.7M in 2007. We’ve jettisoned 7.3M to date in this one and the retailers haven’t whacked the part-time Christmas Staff yet. A mega-trend seems to be emerging regarding US Recessions over the past 30 years. The trend is not our friend, and it features a resonant worsening on both the time scale and the employment impact which our people suffer.
The Emerson Corporate Board faces a difficult future without hesitation or remorse. They acknowledge the facts that the US has expensive labor rates, more intrusive regulation and increasingly high entrepreneurial risk. They do what all business enterprises that no longer feel welcome have done throughout history. They leave.
In 1999, Emerson did 73% of its infrastructural investment in the US, Western Europe and Japan. Now, they only conduct 57% of these activities in the aforementioned three regions. By 2014 this will be down to 53% and by 2019 it drops to 47%.
They are leaving the so-called Functional Core before they are faced to pay the health care cots and retirement pensions of its baby boom generation. I somehow doubt Paul Krugman invested much time or analysis in predicting that this would ever come to pass. He probably also failed to notice that their efforts to leave America as fast as possible are receiving condign reward.
On slide 14 of this anti-Kaynesian manifesto of a briefing, Emerson describes the benefits of ditching Uncle Sam and riding the Asian Tiger. Emerson is currently getting 73% of its sales growth out of its emerging markets. That means the 43% of their construction budget that currently doesn’t get spent in the developed world drives 73% of their corporate growth.
The 57% that still gets spent in USEURJAP drives 27% of their corporate growth. A discerning corporate analyst, not born on the 4th of July, could be reasonably expected to grow highly pissed off if Emerson built their next foundry in Cleveland or Peoria. That same analyst would even suggest that large capital investments should be made in companies that shun large, post-industrial nations with political leadership and sociological attitudes towards entrepreneurship that parallel those currently found in the Good Old US of A.
So this explains why the first stimulus failed to keep unemployment under 8% like Barack Obama promised. The US had become an increasingly user-hostile place for a corporation to build and operate a plant. Out workforce expects remuneration far beyond its productive and intellectual capacity. Our consumers rightly fear expanded personal debt and are limiting their largesse to the confines of their actual budgets.
All of these suckage factors align to make the operations a well-capitalized and highly mobile international corporation run in the US into loss leaders. Intelligent corporations don’t hang around and lose money out some sense of obligation to give our workforce paychecks. Predictably unemployment skyrockets. Predictably the layoffs are permanent; not temporary.
Yet the hide-bound leadership, ensconced in our seats of power, have invested emotions, careers and their entire accounts of political capital in the unflagging support of most the failed policies. These policies that make corporations like Emerson run screaming for the welcoming ports of China, Singapore and the newly emergent South Korea. This is just conjecture, but when the AARP, the SEIU and the NEA Flunkycrats all converged on DC for a jobs summit, the real work, to solve the problems Emerson’s ppt. describes above, never made it within a country mile of President Obama’s working group agendas