Randomly Noted

Federal Express reported an 18% decline in second quarter earnings today. At first blush, that might appear to indicate that maybe the economy isn’t on the road to recovery after all. That’s because FedEx, and fellow shipping company UPS, are looked at as proxies for the economy. When businesses are building more products, they need to ship in tools that help them do that. And when consumers are opening their wallets, they buy products that are often shipped to them.

But read above the bottom line numbers at FedEx and you see some positive news.

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If you are looking for reasons to be optimistic about prospects for the American economy, and that search these days requires real effort, spend some time with the proponents and practitioners of clean technology.

For a layman, it’s a bit like going to the world’s fairs of yesteryear, filled with whizbang and excitable notions of how different technological advances, now at various stages of development, will dramatically alter our future daily lives.

From electric cars to the possible creation of synthetic organisms that would eat carbon dioxide to ‘clean coal,’ to wind and sun power and oilman T. Boone Pickens’ nationalist campaign to use U.S.-drilled natural gas in trucks to replace some imported crude oil, it was on display at The Wall Street Journal’s ECO:nomics conference in Santa Barbrara, Calif.

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President Obama announced $8 billion in high-speed rail grants today. (As a quick aside, that $8 billion is part of the $787 billion stimulus package that simply HAD to be passed immediately last year to help improve the economy in 2009.  The $8 billion is part of the majority of the $787 billion that wasn’t spent in 2009. But I digress.)

Who can be against high-speed rail? It brings distant cities closer together, making for more mobile populations, and presumably, easier access to high-job-growth areas from population centers; it’s greener than driving or flying; and of course, the point of the stimulus, it creates jobs.

The first point is true, the second not as true as it first appears, and the third true mainly in the short term. But as the states continue to fight their way through a persistent economic slowdown, let’s focus on the cost of these projects, which is enormous.

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Ed Whitacre has decided to be GM’s permanent CEO, in addition to serving as its Chairman. Can he do for GM what Alan Mulally did for Ford? WSJ.com’s Deal Journal blog observes that having the same guy serve as CEO and Chairman is generally frowned on in corporate governance circles. Ironically, it was GM itself which advocated splitting the Chairman’s role from that of CEO – but that was in the early 1990s, when the auto maker’s straits weren’t quite as dire as they are now. Whitacre and his team must move fast to extricate GM from the U.S. government’s grip by making profitable cars people want to buy. If I were advising Whitacre, I’d tell him to follow Mulally’s lead and continue to slim down GM’s array of brands. The brilliance of Mulally’s Ford is it’s focused and disciplined, both internally and in the public mind. One quick step Whitacre could take is to kill the Buick brand – except in China, where it’s GM’s dominant marque. In the U.S., Buick’s musty image serves only to confuse potential customers. Whitacre should also fold the GMC brand into Chevrolet. GM’s product line-up in the American market should be trimmed to a Mulally-esque duo: Chevrolet for mainstream vehicles (cars and light trucks) and Cadillac (upscale vehicles.) “We have a lot of work to do everywhere, be it purchasing or development or quality,” Whitacre told a press conference this morning. Indeed.

The management disarray at EasyJet is shameful and sad. The European budget airline was once a no-frills trend-setter. Now it’s a poster child for how not to run a company. As DJN colleague Kaveri Niththyanathan writes (here’s her story; and blog), EasyJet’s founder, Stelios Haji-Ioannou, appears to be a big part of the problem. If you’ve met Stelios, you’ll know he’s nothing less than a dynamo;  this was overwhelmingly positive when the airline was up-and-coming but has become a negative as the company matures. It’s a wonder EasyJet is still going strong, transporting 12.2% more passengers in November than a year earlier – compared with British Airways’ 3.4% decline in the same period. What EasyJet, its employees and its shareholders now need is for its founder and 15.5% owner to take a back seat and just enjoy the ride for a change.

General Motors was never the kind of place where things happened fast. It is now. With CEO Frederick “Fritz” Henderson out the door, the auto maker’s post-bankruptcy board of directors has moved quickly. Directors could have given Henderson, who had been in office a mere nine months, more time to prove himself. But Chairman Ed Whitacre and the high-powered directors whispering in his ear recognize the urgency of the situation. Here’s the situation: As the global economy recovers and emerging economies speed up their growth, Whitacre & Co. want people to buy GM cars because they’re well-made, fuel-efficient and attractive –  not because they’re cheap, which has often underlined a GM buyer’s thought process. “GM cars are so boring but the quality is just about okay and the price is rock-bottom so I’ll hold my nose and buy one” – this has been that thought process. Whitacre’s board wants customers to think like Ford buyers – “Wow. This car is getting great reviews, it’s fuel-efficient, it looks really good. I want this Ford.” So, who will succeed Henderson? Who can extract brilliance from GM’s peculiar cultural mix of stodgy complacency and severe low self-esteem? Can a one-in-a-million CEO candidate afford to take a pay cut? One must remember that GM owes taxpayers lots of money; the federal government’s pay czar, Kenneth Feinberg, won’t let Whitacre offer a world-class salary. And besides, who will want to run a company with the White House looking over her shoulder? This will be a labor of love for a man or woman with a visceral affection for General Motors and America’s automotive history; the wherewithal to read, digest and comprehend the statistics behind the marketing glitz – monthly sales, pricing levels, incentives, labor costs and so on; and the brains to ask the right questions and demand rigorous responses from the many thousands of GM workers who have been waiting for just such a leader. GM directors may opt for a non-automotive outsider along the lines of Alan Mulally, Ford’s CEO, who came from the aerospace industry. Mulally has presided over Ford’s resurgence. GM needs a Mulally. Alternatively, it might benefit from a Carlos Ghosn. The spark atop the Nissan-Renault success has been in a demanding dual role since 1999. Does a Detroit assignment appeal to Ghosn? Within GM’s ranks there may be some shining stars a couple of rungs down the hierarchy, but the board may be hard-pressed to find a seasoned change-agent within Henderson’s circle of top executives. Continue reading…

… on General Motors, Opel and Germany’s Angela Merkel; Fiat and Chrysler; the future of luxury cars in China; and the generally sorry state of the global automotive market, circa 2009.  He also engages in some self-criticism about his time at Chrysler. Here are some tidbits from our interview with Daimler CEO Dieter Zetsche today in NY; the full text is on the Dow Jones Newswires. Also, here’s a video of a shorter chat with Zetsche.

INVENTORIES: Daimler’s inventories have never been as “cleared out” as they are now. He plans to maintain or even reduce the days of supply Daimler is carrying, even though he acknowledged that low stocks of Mercedes-Benz cars have had “some negative impact on sales” at certain dealerships.

THE EURO: The German company is planning for a year in which the euro, which accounts for a huge chunk of its overhead costs, remains as strong as it was this year, “which would be a major burden,” the CEO said.

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I realize Warren Buffett is buying Burlington Northern because he believes it’s a good business opportunity for his holding company, Berkshire Hathaway. But it feels like – and indeed is – an act of optimism which comes at an opportune time. If you read Peggy Noonan’s WSJ column, “We’re Governed by Callous Children,” over the weekend, you’ll know that she’s deeply worried about the future of the United States. Specifically, Noonan frets that America’s promise is more fragile than many of us realize, and there’s a real risk it could succumb to the “endless abuse” being inflicted by the political establishment. The piece’s tone is a bit overwrought but it does ring true, as so much of Noonan’s writing does.  So, when one of the world’s greatest investors spends a pretty penny on a storied American railroad, we feel good, proud and relieved. We are energized by the fact that a man with an exceptional business mind and temperament has faith that an investment in America’s ability to haul stuff at great distances will deliver sound returns. Buffett has a knack for P.R.; by describing his purchase as “an all-in wager on the economic future of the United States,” he is attempting to pierce the aura of anxiety and depression which Noonan described. “I love those bets,” he said this morning as news of the $34 billion investment poured out. We love them, too, because they suggest that there’s work to be done, businesses to build, money to be made, an economy to be nurtured, coal to haul. Continue reading…

Airlines have a number of different financial variables they have to worry about to remain profitable – filling seats (not easy in a recession), controlling fuel costs (they try to at least partially hedge but when oil prices whip around, that’s problematic) and funding large pension plans.

Delta Airlines offered us a reminder this morning to the challenges of pension plan obligations when it said its pension costs are expected to rise by $450 million next year.

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Call it another sign that the economy is showing a slow recovery.

FedEx said today its earnings, while lower than a year ago, should be better than previously thought when it reports them next week. (It expects earnings to be 58 cents a share, which is higher than the guidance of 30 cents to 45 cents a share). The pre-announcement sent it’s shares 6% higher and added 4.5% to its rival, UPS.

FedEx cited in particular international priority shipping services, which are packages sent not only from this country overseas but between foreign countries

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