Today's wrongness

Big 3 face ominous sales gridlock

Column -- Eric Reguly writes that supermarket economics are straightforward. The profit margins on everything from tinned soup to hot dogs are wafer thin. Pile the items high and deep and push them out the door on a conveyor belt and the profits roll in. It keeps working so long as sales don't fall. Think of the Big Three auto makers as supermarkets. The margins on your dad's Buick Roadmaster or Electra were as plump as their chrome bumpers. No more. Margins have fallen, which in itself is not a disaster so long as sales remain high. But look what's happening now: Sales are in decline. If the decline goes from shallow to deep, Detroit could turn into the new Rust Belt. GM's tentative deal with the United Auto Workers to reduce its health care bill is a good start at hammering down costs but it won't be enough if sales go into the tank. There are some ominous signs that the next downturn in the industry could be gruesome. The first is that incentives may be losing their punch. The next thing to worry about are fuel costs, and not just to fill the tank. The US Department of Energy recently said it expects households to pay 71% more for natural gas this winter. Heating oil costs might go up by a third while the price of electricity might go up by 17%. Scotiabank's economics team says overall energy costs in the US will chew up 8% of household disposable income. That's the highest level since 1981 and almost double the amount of the early 2000s. Combine this little reality with the fact that household debt-servicing costs are at a record level compared with disposal income and you have a scenario where discretionary purchases are put on hold. The softening economy and skittish investor wouldn't be so bad for the Big Three were it not for the barrage of competition from Japanese and South Korean auto makers. The Asian players are taking sales away from Detroit in every auto product category. Reguly concludes that any progress on cost reduction is good news. But trimming costs - and so far it's just trimming - doesn't address the revenue side of the equation. The consumer is showing signs of stress and the current sales slump could turn into a 1970s- or 1980s-style collapse. Whoever is buying GM shares needs his cranial oil changed.
(Globe and Mail 051018)

Stupid lazy North American car companies. They're doomed.

Canada lags, productivity ranking says

Canada is sliding in global stature, partly because of sagging productivity and because governments are doing little but talk about improvements, the Conference Board of Canada says in its annual report on the country. “Our story is that we're kind of snoozing,” said Anne Golden, president of the Conference Board. “In this world, snoozers are losers.” The board ranks Canada and other industrialized countries for their performance in economy, innovation, environment, education, health and society. While Canada has gained in environment and education, it has slid in the other areas. In the economy area, Canada has dropped from third place in 2003, to sixth in 2004, and now 12th. Canada's economic position is deteriorating because of its lagging productivity, a lack of investment and because other countries are improving. "Canada's relative size and status in the global economy is slipping. With an aging population and our economic growth potential slowing, Canada will find it hard to avoid falling farther in the global rankings," warns the Conference Board report, to be released today. While the report stresses that Canada is one of the best places in the world to live, and is a better place to live now than a decade ago, "Canada is not living up to its brand as a wealthy, environmentally responsible, socially conscious, healthy society."

Meanwhile, recent polling and focus groups conducted for the federal Finance Department suggest the country's lagging productivity growth does not weigh heavily on the minds of Canadians and many are skeptical about whether it's really a problem. More than half of Canadians surveyed, or 55%, believe "the level of productivity is high," according to polling conducted by Decima Research this August. In fact, Canada's productivity growth has been anemic in recent years. Only one in 10 respondents polled rated the level of productivity in Canada as low. Focus groups found people didn't readily accept the suggestion that Canada's productivity is at risk. "A significant challenge lies in actually convincing Canadians of the productivity issues that lie ahead," an executive summary says of July research. "For the most part, participants were ready and willing to challenge any claim that suggested that low productivity was a problem for Canada."
(Globe and Mail 051018)

Stupid lazy Canucks. They're doomed too.

Flu pandemic 'catastrophe' for Canada

A bird flu pandemic could paralyze Canada's manufacturing sector for more than a year and cost the country hundreds of millions of dollars in medical costs, the Conference Board of Canada says. Sketching a worst-case scenario, the board warns up to 1.6 million Canadians - and between 180 and 360M people worldwide - could die if a global pandemic is triggered by the H5N1 avian influenza virus. Hitching a ride on migrating birds, the virus has already travelled from Asia to Europe and yesterday, in preliminary testing, was identified in Greece. The steady westward creep prompted the World Health Organization to say yesterday that, while the virus can be expected to spread to other countries, the biggest threat of it mutating into a human virus that could kill millions remains in Asia. The Conference Board's forecast far exceeds other casualty estimates, including those by Frank Plummer, lab director of the National Microbiology Lab in Winnipeg, who said yesterday a human strain of the avian flu will kill up to 50,000 Canadians. Despite the uncertainty over the numbers, experts agree the threat is enormous. "There seems to be a consensus - there is a catastrophe coming," Conference Board president Anne Golden told a Toronto Star editorial board meeting yesterday.

Last July, Ontario's chief medical officer, Dr. Sheela Basrur, told delegates to the 15th World Conference on Disaster Management that an influenza pandemic could affect between 15 and 35% of Ontario's population, resulting in 2,900 to 19,700 deaths. Efforts to wall Canada off from the global pandemic will be futile, the Conference Board warns in its report, Performance and Potential 2005-06. "This long-awaited flu virus is expected to be so contagious that any attempt to close off borders and control migration would be ineffective," the organization said in its 10th annual performance report, which identifies steps Canada should be taking to increase economic productivity. The report came as leaders in the worldwide fight against avian flu warned yesterday of the need for global co-operation in stopping the virus from spreading, and eradicating it. Dr. Michael Ryan, director of WHO's department of epidemic and pandemic alert and response, warned the world's oceans will provide no safety. "There's no question that we will expect further outbreaks of avian disease in different countries," Ryan said. "The Americas, Africa and the Middle East are also very much in our minds." US Health Secretary Mike Leavitt, too, sounded a warning. "It would be my assessment that no nation is adequately prepared for a pandemic avian flu," Leavitt said. But, he added, "I believe that most nations are improving, and preparation is increasing."
(Toronto Star 051018)

Stupid mutating viruses. Stupid host birds. Viruses are the only others ones that consume, destroy, change -- much the same way as humans exist as well...