http://news.bbc.co.uk/2/hi/business/7936397.stm
Summary
This article is about carmaker Toyota cutting employees' wages and working hours by 10%. The cuts will take effect on April 1st and will last for one year. This plan will affect 4500 workers in Britain. Also, the cutting plan causes 11 factories to reduce production and 3 factories stopped producing cars. Toyota has already suspended a night shift on its production line and will shut production for a total of four weeks in 2009. It has already cut 200 temporary jobs and opened a voluntary redundancy scheme last week but has insisted big layoffs would not be necessary. Toyota has already said it will post the first group-wide annual operating loss - totalling more than £3 billion - in its 70-year history.
Connection
Chapter 16 is basically about payroll to employees. The connection here is that since Toyato is cutting on pay and working time, workers' annual salary would be lower. Also, the cutting of the wages is called deduction which connects to the payroll equation: gross pay - deductions = net pay, which leads to a lower net pay. Although the article is talking about Toyota in Britain, I think there are still commissions or other government pensions for employees. However, due to net loss of the company, there might be less people getting less commissions. On the other hand, the government should provide extra pensions for old ages and unemployment.
Reflection
Recently, we can see many articles related to car companies encounting less sales causing net loss problems. Since the first blog entry until now, all my articles are related to the economic depression nowadays manly due to the stock market crash. However, car companies closing down factories and reduce production is always not a wise way because even they produce less cars, their sales will not increase. Thus, they start to cut employees' wages to reduce expenses. However, this might lead to a strike or other possibilities. Therefore, the companies should still produce the same amount of cars and keep the employees but at the same time reduce their selling prices. Although reducing selling prices will not increase the net income a lot but it is still better than getting a net loss like most companies are facing today.
Wednesday, March 11, 2009
Sunday, March 1, 2009
Buffett's Berkshire Posts Worst Annual Results Ever
http://www.foxbusiness.com/story/markets/buffetts-berkshire-posts-worst-annual-results/
Summary
On feburary 28th, Buffett sent his shareholders a letter. In the letter, Buffett claimed that the purchase of ConocoPhillips shares while oil and gas prices were near their peak was a terrible timing and mistake of his own. At the end of 2007 Berkshire Hathaway had $1.75 million shares of ConocoPhillips, and in 2008, Berkshire Hathaway had 8.49 million shares of ConocoPhillips. Buffett also said that he didn't predict that the oil prices would fall dramatically, this caused Berkshire Hathaway losing amost $2 billion. Berkshire’s net income in the fourth quarter of 2008 was $117 million, down 96% from $2.9 billion in the same period the prior year. That's why Buffett called 2008 the worst year of Berkshire.
Connection
The connection between this story and chapter 15 is the comparison of financial data. Buffett, as the insider executive of the company didn't do a good job on looking for danger signals and unfavourable trends this year. The owner would possibly decide to change the management if Buffett doesn't increase the profitbality next year. On the other hand, shareholders would not be happy and may be selling their interests in the company that seem to be heading for trouble. In Buffett's letter to shareholders, Buffett used trend analysis to compare Berkshire's performance. It's net income was 96% down and annual income declined to $4.99 billion in 2008 from $13.21 billion the prior year amid declines in the value of its stock holdings, as well as weak results from areas such as its insurance division.
Reflection
In this case, all we need to look at is Buffett's decision of investing ConocoPhillips. Buffett brought in many shares and become the largest shareholder of the company. Besides, Buffett also incresed the shares of NRG Energy Inc.. Because of the economy nowadays, Buffett thought that energy demand would be increasing throughtout the next decade. The International Energy Agency reported that the energy demand would inrease 25% in the next 20 years even under economic depression. However, the oil price was near the peak, the increasing demand must have lower the prices. Buffett qutoed,“I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking.” to show his attitude towards next year.
Summary
On feburary 28th, Buffett sent his shareholders a letter. In the letter, Buffett claimed that the purchase of ConocoPhillips shares while oil and gas prices were near their peak was a terrible timing and mistake of his own. At the end of 2007 Berkshire Hathaway had $1.75 million shares of ConocoPhillips, and in 2008, Berkshire Hathaway had 8.49 million shares of ConocoPhillips. Buffett also said that he didn't predict that the oil prices would fall dramatically, this caused Berkshire Hathaway losing amost $2 billion. Berkshire’s net income in the fourth quarter of 2008 was $117 million, down 96% from $2.9 billion in the same period the prior year. That's why Buffett called 2008 the worst year of Berkshire.
Connection
The connection between this story and chapter 15 is the comparison of financial data. Buffett, as the insider executive of the company didn't do a good job on looking for danger signals and unfavourable trends this year. The owner would possibly decide to change the management if Buffett doesn't increase the profitbality next year. On the other hand, shareholders would not be happy and may be selling their interests in the company that seem to be heading for trouble. In Buffett's letter to shareholders, Buffett used trend analysis to compare Berkshire's performance. It's net income was 96% down and annual income declined to $4.99 billion in 2008 from $13.21 billion the prior year amid declines in the value of its stock holdings, as well as weak results from areas such as its insurance division.
Reflection
In this case, all we need to look at is Buffett's decision of investing ConocoPhillips. Buffett brought in many shares and become the largest shareholder of the company. Besides, Buffett also incresed the shares of NRG Energy Inc.. Because of the economy nowadays, Buffett thought that energy demand would be increasing throughtout the next decade. The International Energy Agency reported that the energy demand would inrease 25% in the next 20 years even under economic depression. However, the oil price was near the peak, the increasing demand must have lower the prices. Buffett qutoed,“I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking.” to show his attitude towards next year.
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