Starbucks CEO Howard Schultz changed how America drinks coffee. Now, he wants to change the political system.
The leader of the world’s largest coffee company says U.S. political leaders have created a “crisis of confidence” with their political wrangling that is wreaking havoc on the economy. He said he wants to give a voice to all citizens by hosting a national telephone forum on Tuesday.
He’s also running ads in the New York Times and USA Today ahead of the event, featuring an open letter that urges Americans to participate in the forum and insist politicians end their hyper-partisan behavior.
“We must send the message to today’s elected officials … that the time to put citizenship ahead of partisanship is now,” Schultz said in the letter.
The forum comes weeks after Schultz called on other CEOs to halt contributions to U.S. political campaigns until the nation’s leaders become financially disciplined and stop their political wrangling. The CEOs of more than 100 companies, from AOL to Zipcar, joined Schultz in his pledge to halt contributions and do what they could to stimulate growth in their industries.
Schultz said he was moved to hold the forum after receiving hundreds of emails and letters from citizens who were struggling to find jobs, keep their homes or send their children to school given the economic conditions.
“It looks like we struck a nerve with so many people,” Schultz told the Associated Press. “I feel a personal responsibility to create a public dialogue and make a voice for people who feel like they can’t be heard.”
The forum will be hosted by nonpartisan group No Labels and held the same week as the GOP presidential debate and the President’s address to a joint session of Congress to share his plan for job creation.
“America is at a fragile and critical moment in its history,” Schultz said in his letter. “We must restore hope in the American Dream.”
Thousands of striking Verizon workers will return to work starting Monday night, though their contract dispute isn’t over yet.
Both the company and the union say they have agreed to narrow the issues in dispute and have set up a process to negotiate a new contract. But the talks are likely to be contentious. The two sides still disagree on touchy subjects such as health care benefits, pensions, and work rules.
About 45,000 employees went on strike on Aug. 7, after their previous contract expired. They work in the company’s landline division in nine states from Massachusetts to Virginia.
Verizon says that it needs to cut costs in the traditional landline phone business, which is in decline as more Americans switch to mobile phones. The company has proposed freezing its pension and switching union workers to its non-union health plan, which has higher costs for employees.
The unions counter that the landline business supports the growing wireless business and that Verizon, which earned about $3 billion in the first half of the year, can afford to maintain the benefits in the contract that expired on Aug. 6. They also say Verizon put too many proposals on the table.
Of the 45,000 striking workers, 35,000 are covered by the Communications Workers of America, while 10,000 are covered by the International Brotherhood of Electrical Workers.
Jim Spellane, a spokesman for the IBEW, said the strike occurred because Verizon “came in with an extreme set of proposals and never really moved off of them.”
But after the 14-day strike, “I think they realized the unions are serious,” he said. “It’s in everybody’s best interest to get back to work.”
Verizon spokesman Richard Young said that many of the benefits and work rules were put in place when Verizon faced much less competition in its landline business. “The contracts are not reflective of today’s marketplace,” he said.
Spellane said that much of the traditional phone network helps support the faster-growing wireless business. And many of the technicians that went on strike install and maintain the company’s new fiber optic network, FiOS, which provides Internet, video and phone services.
Verizon has 196,000 workers, with 135,000 of those non-union. The wireless division, which wasn’t affected by the strike, is mostly non-union.
Nearly 30 percent of U.S. homes have dropped landline phone service and rely on mobile phones only, according to the National Center for Health Statistics.
Verizon Wireless added 1 paperless payday loans.3 million wireless customers in the April-June quarter, for a total of 89.7 million. That growth has been helped by the addition of Apple Inc.’s iPhone in February. The company owns 55 percent of Verizon Wireless, with Britain’s Vodafone owning the rest.
Meanwhile, total voice connections, which measures FiOS digital voice connections in addition to traditional landlines, declined 7.9 percent to 25 million. But the company has seen increases of more than 20 percent in customers subscribing to both FiOS Internet and TV services over the past 12 months.
Candice Johnson, spokeswoman for the CWA, said Verizon is asking $20,000 per worker in annual concessions. The company has disputed that but hasn’t offered its own figure.
Johnson said earlier this month that the union’s best-paid Verizon workers get about $77,000 a year in New York. The company puts the figure at $91,000 and said benefits average $50,000.
“These are very important issues” being negotiated, she said. “They are issues that help families ensure a middle-class life.”
While union workers walked the picket lines, managers and non-union employees performed their duties.
Verizon’s Young said the company began training managers and non-union workers at the beginning of the year to prepare for the strike. Thousands of employees were brought in from as far away as Texas, California, and Colorado, he said. They have worked 12 hours a day, six days a week, he said.
The company also used newer technologies to resolve 50,000 problems a day remotely, Young said, such as resetting set-top boxes and routers and testing lines.
Peter Thonis, Verizon’s chief communications officer, acknowledged there was “a little bit of a slowdown” in installing new services like FiOS, but said replacement workers largely kept up on repair work.
The company said in its statement that it will “quickly address any backlog in repairs and unfulfilled requests for service.”
While customers who will now get their FiOS services installed on time may be winners, Verizon’s Thonis said neither the company nor the workers could claim a victory.
“We still have a lot of hard and difficult bargaining to do. None of the major issues that were on the table before the strike, are off the table,” he said.
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AP radio correspondent Julie Walker contributed to this report.
WASHINGTON
Already among the top companies in St. Louis, Express Scripts could rocket into the U.S. corporate elite with its proposed blockbuster deal to buy Medco Health Solutions, the nation’s largest pharmacy benefit manager payday loan lenders.
The combined revenue of the two companies
Google Inc. has temporarily shut down a search engine feature that allows users to find real-time updates from Twitter, Facebook, FriendFeed and other social networking sites.
A message posted early Monday on Twitter by the team behind Google Realtime says the search feature has been temporarily disabled while Google explores how to incorporate it into its recently launched Google+ project. The tweet tells readers to “stay tuned.”
Google+ is the search giant’s latest stab at entering the social networking segment of the Internet free business cards. The project was unveiled last week and lets users share things with small groups of people.
Google did not immediately respond to an e-mail seeking comment on Realtime.
Eurozone finance ministers say Greece could get a key next installment on its bailout loans by mid-July only if it passes key laws on spending and privatization.
The ministers met Sunday over Greece’s debt crisis but did not announce a final deal on the euro12 billion loan installment, needed to avoid an imminent default.
They also said they would welcome “informal, voluntary” renewals of bond holdings as a contribution by private investors. But any measure must not lead to Greece being ruled in default.
Greece got a euro110 billion in bailout loans last year, but is still struggling. The government admits it will need another bailout of about the same size. No deal on that was announced.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
LUXEMBOURG (AP) _ A European official says that finance ministers from the Group of Seven rich countries were discussing Greece’s debt crisis on a conference call early Monday loans for people with bad credit.
The official said that the call was designed to update the finance ministers of United States, Canada, Japan and the U.K. on discussions taking place in parallel among the eurozone’s top financial officials.
The official said the ministers _ who were joined in Luxembourg by the heads of the IMF and the European Central Bank _ were also working on a statement on Greece. He was speaking on condition of anonymity because discussions were still ongoing.
The two-day meeting is key to signing off on a vital loan installment for debt-stricken Greece and discussing the terms of a second bailout for the country.
As companies like Sony and Citibank identify the causes of recent security breaches and try to remedy network weaknesses, area businesses are well aware of potential threats.
Yet, improving security is more than beefing up firewalls or installing better encryption technology. The weakest link remains the individual employee, who may be using less secure email services or carelessly leaves sensitive data unsecured, analysts say.
Boeing experienced this first-hand when, in 2006, an employee’s unattended laptop was stolen. Though password-protected, the laptop contained Social Security numbers, home addresses and other personal information on 382,000 workers and retirees.
The theft spurred the Chicago-based aircraft maker to implement better plans to safeguard such data.
Diane McClain, operations manager of the cyber security division at the Newberry Group, stressed the importance of employee training to ensure that information can be seen by only those who need to see it, protecting it from “the bad guys.”
Newberry Group, which began with contracts to the federal government to staff data centers, expanded from information technology to cyber security in 2005. This element of its business has been growing ever since. The company, based in St. Charles, now investigates breaches, examining hacks with digital forensics and turning evidence over to law enforcement.
McClain’s focus has remained consulting with companies to find and repair holes in their networks. She said it was balancing security measures with availability
The Greek government endorsed an accelerated asset-sale plan and 6 billion euros ($8.4 billion) of budget cuts to win extra aid and stem a market slide that threatens to swamp debt-laden euro-area nations.
Belgium had the outlook on its AA+ investment-grade credit rating lowered to negative by Fitch Ratings yesterday as the cost to insure Greek debt against default rose to a record and the yield on its 10-year bonds increased to a euro-era high.
Europe’s debt crisis has deepened as euro political leaders clashed with central bankers after floating the prospect of extending maturities on Greek bonds. That “soft” restructuring may also be accompanied by more loans to Greece, which received a 110 billion-euro bailout last year, now that the government has delivered the additional budget cuts and pledged to speed asset sales.
“There may be slipping, sliding into some sort of re- profiling of Greek debt,” Simon Johnson, an economist at the Massachusetts Institute of Technology, told Bloomberg Television’s In the Loop yesterday. “They may be about to face their own special European Lehman moment.”
To avert that possibility, Greek Prime Minister George Papandreou’s Cabinet agreed yesterday to sell stakes in Hellenic Telecommunications Organization SA (HTO) by the end of next month, as well as Public Power Corp SA (PPC), Hellenic Postbank SA, and the country’s ports.
Stakes’ Value
The state’s stakes in those three companies currently have a market value of 2.1 billion euros. The government also said it would create a fund comprising assets to accelerate the sales, intended to raise 50 billion euros by 2015. The bulk of that will come from selling 35 billion euros of real estate.
Greek 10-year yields were little changed at a record 17 percent, while yields on two-year notes slipped 18 basis points to 26.07 percent. Contracts on Greek default insurance jumped 27 basis points to a record 1,400.
The government plans to complete the sale of Postbank by the end of the year, and to sell 75 percent stakes in Piraeus Port Authority and Thessaloniki Port Authority SA. It also intends to extend the concession for Athens International Airport this year.
Greece owns 20 percent of Hellenic Telecommunications, or OTE, which has a market value of 3.2 billion euros. It has the right to sell a 10 percent stake to Deutsche Telekom AG, which already holds 30 percent. The government is seeking financial advisers to exercise the put option, and for the sale of a further 6 percent of the company, the finance ministry said.
Budget Cuts
The Cabinet also announced the additional budget cuts worth about 2.8 percent of gross domestic product needed to reach a 7.5 percent deficit target for 2011 even as its economy contracts for a third year, Finance Minister George Papaconstantinou said.
“With an economy still in recession, it’s very difficult to keep piling on larger amounts of fiscal tightening,” said David Mackie, London-based chief European economist at JPMorgan Chase & Co. on a conference call yesterday. “I think instead we are moving to an environment where asset sales are going to be used as the key means of signaling Greece’s commitment here.”
Greece has a “refinancing hole” of 30 billion euros for both 2012 and 2013 each, according to economist Nouriel Roubini. The nation could restructure by issuing debt with lower interest payments and extend maturities as it’s unlikely the nation will “regain market access for the next five to 10 years,” he said in an interview last week.
Deficit Forecasts
The European Commission on May 13 said that the deficit would be 9.5 percent of GDP this year, more than three times the EU limit, without the additional budget cuts approved yesterday. Debt, already the euro area’s biggest relative to economic output, may reach 158 percent of GDP this year and peak at 166 percent next year.
Investment-grade Belgium also took a hit as Fitch followed Standard & Poor’s in saying that political deadlock complicates efforts to cut the euro area’s third-highest debt load.
Fitch may cut Belgium’s grade, the second-highest rating, should the country fail to adhere to its deficit targets, according to a statement. Belgium needs to reduce its shortfall to less than 3 percent of GDP next year and balance its books by 2015, as agreed with the European Commission.
A caretaker administration has ruled Belgium since elections last June as tensions in the linguistically divided nation led to the longest postwar political stalemate in Western Europe. A strengthening economic recovery has helped shrink the deficit to an estimated 3.6 percent of GDP this year from 5.9 percent in 2009, though reducing the debt will require political resolve, Fitch said.
Jim O’Neill, chairman of Goldman Sachs Asset Management, said investors should shed their pessimism and stop hoarding cash amid prospects for a global stock rally that could start in China.
The view that “the West is in trouble” is wrong when nations including Germany, Sweden, Australia and Canada are performing strongly, O’Neill said in an interview with Bloomberg Television in Hong Kong, recorded yesterday and broadcast today. Investors should “stop worrying so much,” said O’Neill, known for coining the BRIC acronym for Brazil, Russia, India and China.
Global investors have tempered their optimism about the U.S. and world economies and plan to put more of their money in cash and less in commodities over the next six months, a quarterly survey of Bloomberg subscribers showed yesterday. The poll, conducted May 9-10, also found that investors’ enthusiasm for stocks is cooling.
O’Neill, 54, said his strongest hunch is that China’s inflation may be close to easing, meaning the Chinese stock market may “go crazy” in the second half of the year. The central bank yesterday raised banks’ reserve requirements by half a percentage point to lock up cash that threatens to fuel gains in consumer prices.
‘Every Little Problem’
In the aftermath of the 2008 financial crisis, investors are overly concerned at the possibility of so-called black swan events, said O’Neill, using a term sometimes used to describe unlikely occurrences with severe consequences.
“Every little problem that crops up somewhere in the world is not going to create another black swan,” he said, adding that “there’s far too much conservatism,” in terms of investors holding cash.
O’Neill reaffirmed his view that Russian stocks are cheap, on the same day the nation’s Micex Index (INDEXCF) slid to a five-month low on falling commodity prices. He also said that a global stock rally “could start in China.”
His positive comments on the outlook for China came as two people with knowledge of the matter said Goldman Sachs plans to set up a yuan-denominated private equity fund in the nation. Chief Executive Officer Lloyd C. Blankfein attended a ceremony for Goldman Sachs in Beijing yesterday, the people said, declining to be identified before an announcement.
After a 40 percent drop in sales from October 2008 to February 2009, Materials Processing Inc. laid off workers, changed the way it sets prices and took fewer risks in the volatile commodities markets.
The efforts returned the Logansport, Indiana-based metals- processing company to profitability starting in March 2009, and sales are back to pre-crisis levels, said Chief Executive Officer Clay Barnes.
“We aggressively restructured and are going to be around for our customers for a very long time,” he said.
Once-ailing manufacturers are enjoying a robust rebound as cost-saving moves from job cuts to a greater reliance on technology help drive stronger-than-forecast growth. The shift has helped set the stage for a potential “manufacturing renaissance,” says James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management. He predicts the industry will set the pace for U.S. expansion and the American stock market during this decade, as technology did in the 1990s.
“Manufacturing is leading the whole economy,” said Paulsen, whose firm oversees about $340 billion. U.S. manufacturers “had to find religion. They’ve really cleaned up their balance sheets. What is left is the cream of the crop.”
Investors’ confidence in the industry is evident in the Industrial Select Sector SPDR Fund (XLI), an exchange-traded fund made up mostly of manufacturers including Peoria, Illinois-based Caterpillar Inc. (CAT) and Boeing Co. (BA) in Chicago. The fund has climbed 37 percent since Dec. 31, 2009, compared with a 20 percent rise in the Standard and Poor’s 500 Index.
‘Global Strength’
Cooper Industries Plc (CBE), Deere & Co. (DE), Kennametal Inc. (KMT) and Timken Co. (TKR) are among businesses that “have emerged quite strongly and are able to benefit not only from the domestic recovery, but the global strength of markets,” said Eli Lustgarten, a senior research analyst at independent investment- research firm Longbow Securities in Independence, Ohio. While he recommends all four companies, Lustgarten said neither he nor Longbow owns their shares.
Timken, the Canton, Ohio-based maker of roller bearings and steels used in tools, cars and farm equipment, hired back all 3,500 manufacturing workers it had laid off in the recession and is creating 200 new jobs at three plants in its hometown, said spokeswoman Lorrie Paul Crum. It’s also added new product lines in areas such as wind energy, she said.
“The company is now on pace to achieve record earnings this year, and sales are growing substantially around the world,” Crum said.
Falling Dollar
The rebound in manufacturing — buoyed by a falling dollar — “has been much faster and stronger than companies anticipated, and they’ve been able to ramp up production without having to dramatically increase hiring,” Lustgarten said.
IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against currencies of six major trade partners including the euro and yen, has dropped 12 percent in the past year as emerging-market wages rise. China’s private-sector pay in urban areas increased 14.1 percent on average to 20,759 yuan ($3,197) in 2010, according to the country’s National Bureau of Statistics.
“We’re seeing quite an uptick in our exports from the U.S. because of the low dollar,” said Eric Spiegel, president and chief executive officer of Siemens Corp., a subsidiary in Washington of Munich-based Siemens AG. (SIE) Siemens exports $2 billion to $3 billion a year from the U.S.
Shrinking Trade Gap
The Obama administration is counting on manufacturers to help double shipments to foreign markets by 2015 and reduce the trade deficit. Rising exports have helped shrink the trade gap 24 percent to $45.8 billion as of February, the most recent month available, from $59.9 billion in January 2008, a month after the recession began.
U.S. companies “recognize there are tremendous opportunities overseas” and have made “some pretty impressive productivity gains,” said Chad Moutray, chief economist for the National Association of Manufacturers, an industry trade group in Washington. “You’ve started seeing a lot of pent-up demand.”
Signs of a robust rebound are reflected in the Institute for Supply Management’s factory index, which shows the industry expanding for 21 consecutive months through April. Manufacturing led “moderate” growth across much of the U.S. in February and March, according to the Federal Reserve’s Beige Book regional survey released April 13, with nine of the 12 Fed banks citing improvements in production, orders or revenue.
Rising Profits
Manufacturing productivity rose 5.9 percent last year, the third fastest increase since Labor Department records began in 1987, behind gains of 7.3 percent in 2002 and 6.3 percent in 2003. Profits from current production jumped 72 percent in 2010, the biggest annual increase since 2004, according to Commerce Department data.
At the same time, companies have added just 250,000 jobs since December 2009, when employment dropped to a post-World War II low of 11.5 million; the peak was 18 million in the late 1980s, according to Moutray.
“We are still a ways away from getting back to where we were,” said William Strauss, a senior economist and adviser at the Federal Reserve Bank of Chicago, which represents most of Illinois, Indiana, Michigan and Wisconsin. While production eventually should return to pre-recession levels, “I would question to a degree whether employment levels go back to where they were in late 2007,” he said. Still, “if you believe the industries hit hardest come back the strongest, that’s definitely true for manufacturing.”
Plummeting Sales
Sales at privately held Materials Processing’s three units plummeted during the recession because of falling orders and a decline in commodity prices that saw copper go from $4 a pound to $1.50 a pound within months, said Barnes, 45.
The company laid off half of its 600 employees and began setting prices when a customer placed an order, in anticipation of further declines in metal values, instead of when a product shipped, Barnes said. It initiated a third step: using futures contracts as a hedge against falling prices for copper and brass, which it was buying on the open market.
“We took the approach that things would not get better at the trough of the downturn and we needed to re-size our organization to what we considered to be a new reality,” Barnes said. “The recession forced everyone to get leaner.” The company has since rehired 150 of the 300 people laid off, he said.
Cheaper than China
Foreign companies increasingly see the attraction of having operations in America. Siemens is spending $170 million to expand a gas-turbine factory in Charlotte, North Carolina, that will manufacture the turbines “at the end of the year cheaper than we can make them in Shanghai,” Spiegel said. “It’s a good time to be adding new production capability in the U.S.”
Subsidiaries of overseas businesses consider America’s skilled workforce an important reason to invest in the country, according to a survey last year by the Organization for International Investment.
“For some of the European companies, the U.S. has become a cheaper source of labor,” said Nancy McLernon, president and chief executive officer of the Washington-based organization.
The downsizing of manufacturing during the last decade also has left what Spiegel called a “void in a lot of areas,” including wind energy. Siemens opened a new 300,000-square-foot wind-turbine facility in Hutchinson, Kansas, in December. Rising transportation costs, on the back of surging oil prices, have enhanced the attractiveness of setting up shop in the U.S. rather than importing such heavy items as blades for wind plants, according to Spiegel.
“You’re going to see more people like us starting to put manufacturing back in the U.S.,” he said.
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