Sunday, September 27, 2015

Focusing on the Pope, a Catepillar and some Beetles

  • Last week, during Pope Francis’s U.S. visit, his comments included “It goes without saying that part of this great effort [to address poverty] is the creation and distribution of wealth. The right use of natural resources, the proper application of technology and the harnessing of the spirit of enterprise are essential elements of an economy which seeks to be modern, inclusive and sustainable … Business is a noble vocation, directed to producing wealth and improving the world. It can be a fruitful source of prosperity for the area in which it operates, especially if it sees the creation of jobs as an essential part of its service to the common good."
  • Separately, as industrial equipment manufacturer Caterpillar, Inc. announced it would reduce its staff by 9% over the next four years, CEO Doug Oberhelman said "We are facing a convergence of challenging marketplace conditions in key regions and industry sectors – namely in mining and energy … we have to manage through what can be considerable and sometimes prolonged downturns … as these market conditions have emerged, we are taking even more decisive actions now.
  • In addition, responding to Volkswagen’s diesel emission scandal, its newly appointed CEO Matthias Müller said “My most urgent task is to win back trust for the Volkswagen Group – by leaving no stone unturned and with maximum transparency, as well as drawing the right conclusions from the current situation.” 
  • Note: the diesel problem 1) was identified in a May 2014 study “In-Use Emissions Testing of Light-Duty Diesel Vehicles in the United States” at West Virginia University, 2) likely involved 11 million JettaPassatSportWagenBeetle and Audi A3 diesel engine vehicles worldwide, and 3) could result in up to $18 billion in fines by the U.S. Environmental Protection Agency; as well as other regulatory, criminal and civil actions around the world.
MY TAKE
  • Regarding the Pope – While there have been concerns that the Pope has a negative view of capitalism, his message seems more focused on the potential for business, government and community leaders to address the challenges of income inequality and job creation.
  • Regarding Caterpillar – The company’s actions are another indication of a fragile global economy.
  • Regarding Volkswagen – This problem will likely result in significant business disruption at VW in the short/medium term, but a focused management response could result in a stronger business franchise (although the diesel car market may be permanently impaired.)

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