August 2007 Archive
If you have kids and haven’t had to perform the panicked check of the toy box for recalled toys this summer, count yourself lucky. In the last week, four more recalls of toys with potentially hazardous levels of lead paint, all made in China, have been announced. And there is no end in sight as increased safety checks will likely produce even more recalls.
While toy makers scramble to gain control of the situation, the US government and toy retailers have also stepped up to offer additional scrutiny. China says it too is increasing quality controls.
The US government is taking a closer look at American safety standards. A hearing on toy safety will be held in September by a House subcommittee and a Senate committee on Homeland Security and Governmental Affairs is investigating whether the Consumer Product Safety Commission has enough resources to protect the public.
Wanting to reassure customers before the important holiday season, Wal-Mart has asked all toy manufacturers to send testing documentation for toys in shipment or on the shelves. The world’s largest retailer says it also has increased its independent reviews, now checking 50% of all toys, or about 200 each day. The company plans to share its test results with the manufacturers as well as other retailers. Another idea being bounced around is that of a “safety seal” that proves that a toy has passed independent safety tests.
On a personal note, our family thought we owned one of the 70,000 toys in last week’s Schylling recall — a Thomas and Friends top. While we later were relieved to discover that we had one of the safe newer versions with a plastic handle, I was underwhelmed with the response from the company. I had e-mailed Schylling, as the company president said to do in a letter posted on the company’s Web site, to find out next steps for recalled items. That was one week ago and I’ve not received a response, not even an auto-generated reply. It turns out that the company possibly knew about the lead problems back in 2002 but didn’t issue a recall then, so Schylling probably has bigger things to worry about.
**An update: I did get an e-mail back from Schylling two weeks after I contacted the company, giving me the information for how to return a recall and a direct phone line to call. Weirdly, while our top ended up not being a recalled item, the toy did break in the meantime. What are the odds?
After numerous trials and tribulations, Swiss industrial giant ABB Ltd is taking the final step in its restructuring plan by shedding its last downstream oil and gas assets. In a deal worth nearly $1 billion, energy engineering and construction firm Lummus Global will go to Chicago Bridge & Iron (CB&I), leaving ABB to live its dream as an automation and power systems guru.
The Swiss firm, which has a long and colorful history, is going back to its late-1800s roots as an electrical equipment manufacturer for utilities and other industrial companies. After over-diversification in the 1990s led to financial strife in the next decade, the company began shedding assets, including its upstream oil and gas business (Vetco Gray), financial and insurance firms, and transportation assets.
Lummus has been a pain point for ABB in recent years due to its involvement in sticky asbestos litigation in the US. The engineering firm entered and exited Chapter 11 bankruptcy protection during 2006 to settle liabilities, paving the way for ABB’s planned divestiture. Asbestos woes from Lummus and other operations have cost ABB billions, but the company’s swift restructuring moves have kept the tide from pulling it under.
In fact, ABB has ultimately reversed its fortunes and intends to use its newfound cash surplus (estimated to be around $3 billion) to fund acquisitions aimed at bolstering its streamlined industrial technologies empire. The company has said that it will target acquisitions of all sizes in the US and emerging markets. A thorn in its side remains, however, as ABB has admitted that suspected bribery payments are under investigation.
The company plans to host a strategy session on September 5th in which those curious about ABB’s future may receive some juicy tidbits. My thoughts are that the firm has a deal waiting behind the curtains to woo shareholders and spend that dough!
Now that the excitement and hype over the Apple iPhone have died down, let’s look at one of the big winners among the component suppliers for the new smart phone: ARM Holdings.
ARM is an interesting case. It’s not just a fabless semiconductor company (a term used to describe chip companies that don’t have their own manufacturing plants, or wafer fabrication facilities, as they’re called in the industry) — you could call it a product-less semiconductor company. ARM doesn’t sell products; it licenses semiconductor intellectual property (or SIP) designs to other chip companies. Those chip companies then incorporate the ARM designs (known as SIP cores) into their semiconductors. SIP cores are building blocks for creating chips. Semiconductor companies can choose cores for a variety of chip functions from dozens of developers.
ARM is the biggest SIP company in the world, well ahead of leading competitors MIPS Technologies and Rambus. While the SIP market is growing rapidly — Gartner has forecast it will rise from $1.8B in 2006 to more than $2.7B in 2010 — profits in the SIP business have been elusive for many companies. ARM is consistently profitable, in comparison.
Back to the iPhone — product teardowns have shown there are three or four chips in the Apple product that incorporate the ARM architecture, including the main processor made by Samsung Electronics and the baseband processor supplied by Infineon Technologies. The more iPhones sold, the more licensing revenue and royalties due to ARM. The company isn’t counting only on the iPhone to sell, however. ARM licenses its cores for chips that go into digital still cameras, digital TVs, set-top boxes, and video game consoles, among other products. Those products are made by many well-known manufacturers of consumer electronics, such as Canon, Eastman Kodak, Hewlett-Packard, LG Electronics, Microsoft, Panasonic, Samsung, Sony, and Toshiba.
East is east and west is west, and never the twain shall meet. — Rudyard Kipling
It will give us more of a global presence. It is to give us scale and global reach as we take ourselves away from subordination to a single economy. — Tata Chairman Ratan Tata
Tata’s interest in buying nameplates Jaguar and Land Rover from Ford has certainly put a smile on my face (although I promise not to burst into song again). As I’ve written before, Tata is one of my favorite companies. It’s eclectic, humanistic, and profitable; it has a colorful and controversial history (even if that history put it on the wrong side of the Opium Wars — boo!); and it is the poster child for where I think the world of business is heading: East.
Tata showed its audacity when it acquired Corus Steel, and there’s no reason it can’t take these struggling luxury car brands off Ford’s books as well. Jaguar and Land Rover were never really a good fit for that most plebeian of car companies. Even Ford’s top sportscar nameplate is the quintessential American animal, the Mustang — would Steve McQueen drive a Jaguar in Bullitt? I don’t think so.
With its British Raj past, Tata will be a much better owner of these British brands. Tata has automotive operations itself, and these luxury brands will fill the space at the top of its product line, which primarily consists of buses, trucks, SUVs, and low-end cars. Although the company’s goal is to move into the European market with this acquisition, I think that’s a rotten idea (it didn’t really work out for Ford either). Instead, it should be focusing on the opportunities at home. As India’s economy — and its middle class — grow, so will the demand for high-end vehicles.
While the deal is far from done (Indian competitor Mahindra & Mahindra is also rumored to be interested, and it already has a relationship with Ford) it shows how fast business has moved in India.
To Westerners trying to troubleshoot their computers or upgrade their phone service the country might still be synonymous with outsourcing and help desks, but the times have changed. Opportunity is moving both ways now. I expect to see a lot more deals like this one coming out of India over the next few years.
The long list of lenders in peril is well-documented. (Added to the drumbeat was last week’s news that already-troubled Accredited Home Lenders and NovaStar will close offices and lay off hundreds of workers and Lehman Brothers will close its subprime wholesale unit, BNC Mortgage.)
However there was a ray of hope for the largest residential lender, Countrywide, which received a $2 billion equity investment from Bank of America. Countrywide’s stock price leapt while CEO and co-founder Angelo Mozilo proclaimed the company a “survivor”. (A similar deal was struck earlier this year when Citigroup provided ACC Capital Holdings, the parent company of Ameriquest, an infusion of capital.)
But the big banks are getting buffeted, too. So what happens when they need money? They go to the government, naturally. The four largest banks in the US, Citigroup, Bank of America, JPMorgan Chase, and Wachovia, tapped the Federal Reserve’s discount credit window to the tune of $2 billion — $500 million apiece —- after the Fed lowered the primary credit rates and temporarily lengthened the terms of the loans from one day to one month. (It’s not a government bailout, exactly, though some are suggesting that it’s time for one. Maintaining liquidity is one of the Fed’s mandates, and the short-term loans have already been repaid, for the most part.)
Still, where does that leave folks with so-so credit who want their piece of The American Dream? The government assistance isn’t going only to the big boys. Increasingly, consumers are returning to the Federal Housing Administration, which, after a three-year decline, is seeing a spike in loan applications. Borrowers, of course, won’t get a too-good-to-be-true, interest-only, adjustable-rate jumbo loan and must endure some bureaucracy, but a bill is in the Senate that will allow the FHA to offer loans with no down payments and make its loans available through mortgage brokers. Predictably, some members of Congress are grousing that increased government backing of home mortgages will hurt the private sector lenders. Seems like the lenders already took care of that themselves, though.