Monday 22 June 2009

Worthy Winners - Both 20-20 Format & Pakistan

Blame the format? Maybe. Just that as Jonathan Agnew of BBC says, you can't comeback in this format. That is the only draw-back. Also as he says, this can be a cash cow managing the other two formats especially the Test Cricket. All 3 formats can survive in his view. I totally agree. They should - why not.

Test Cricket tests the resilience and patience. It gives you the opportunity to save the test if you can't win it. The only sport in the world which respects a 'draw'. It tests you session by session. It is like a patient game of chess.

On the other hand, the One Day Game makes you play to win. Nothing else. You can come back from setbacks and because of the One Day Game, Test Cricket became more exciting. 350+ scores in a day became the norm. Aussies led the way in the nineties after Allan Border's team won the '96 Reliance Cup in India. But to organize a world cup or any major tournament, it takes at-least 3-4 weeks of everyone's time.

Can one globalize the game of cricket with this format alone? I'm not sure. When you are competing with games like Tennis and Football, 2-3 hours maximum is what a busy person can afford in this stressful world. At-least in Test Cricket, one can choose and follow sessions live and then follow the score. But in One Day Game you can't do that.

Here comes the wonderful innovation of 20-20 cricket. It is not just great entertainment but also good value for money and time. One can globalize the game of cricket based on this format. Kids can be lured and initiated easily.

Of-course, 20-20 is not just smashing the ball. It tests one's skill and temperament. You need to be at the top of your game throughout to win. You need to take your chances and be creative and proactive. Adaptability is the key.

This was demonstrated by Pakistan team in general, Younis Khan's captaincy and Shahid Afridi's all round performance in particular. Well deserved win for Pakistan. Congratulations Pakistan Team for winning the 20-20 World Cup 2009.

Finally as Mr. Agnew says, if handled sensibly, this format can be a cash cow to bankroll not just the other formats but also to invest in the future of the game in general. The biggest boon is for a low investment everyone including the paying and watching public, the players, the sponsors and advertisers and the administrators gets high returns. Now everyone can play cricket. Welcome to the 21st century of cricket. Innovation and Tradition at its best. Who said, only Wimbledon can achieve that?

Pradeep Kabra

Thursday 18 June 2009

Re: Back on the Road???

This is a fantastic analysis of automotive sector in today's Financial Times.

Some facts:
1. The credit crunch hit carmaking first and hardest of any non-financial sector, sending sales down by one-quarter in Europe by the end of last year. In the US, sales fell from a pre-crisis annual rate of 16m to just 10m – so low that China came close to overtaking it as the world’s largest car market.
2. automakers have benefited from well in excess of $100bn of direct bail-out funds or indirect state aid, such as scrappage schemes, since global sales collapsed last October – in nominal terms, the biggest ever shortterm intervention in manufacturing. All this money has preserved jobs in carmaking, still the linchpin of many industrial economies. But the money has also prevented a necessary shakeout in an industry that has long had too many producers
3. Consultants at PwC estimate the industry has the capacity to build 86m units this year, almost a record – and 31m more than the 55m vehicles it will sell.
4. The shape of the industry looks all but the same, except that governments have tipped lots of money in and prevented Darwinian selection,” says Max Warburton, analyst at Sanford Bernstein. “It has been a good reminder of what this industry is: a government-supported job creation scheme.”
5. The scrapping incentives could have other unintended consequences, analysts warn. US Congress this week is set to approve a voucher worth up to $4,500 for trade-ins of older cars for new ones, making the world’s largest car market the latest to adopt a “cashfor-clunkers” scheme. Yet industry analysts warn that by artificially pulling forward consumers’ replacement of their cars, the incentives could lead merely to a market “hangover” in 2010.
6. Under pressure from his autos task force, which sent it back to revise its restructuring plan twice, GM has accelerated the downsizing of its operations. It is shelving four brands, closing 14 plants by 2012 and shedding about 50,000 staff this year.
7. In the fast lane - VW, Ford, Fiat, Hyundai
In the slow lane - Toyota (surprise-surprise), Tata Motors, Daimler, Renault

My view:
* What is clear is that after Banks/Finance, Automotive is the second largest recipient of govt. dole.
* No other company/industry in the world can survive with excess capacity of 56% especially in a capital intensive industry like automotive without consolidating or restructuring.
* The fact is, easy money led to easy credit which made everyone believe that they can keep living the lie for eternity.
* Since almost all the auto manufacturers think downsizing is giving away the initiative - it has become a game of who blinks first. For example, elite companies like BMW/Daimler still think they can keep on selling more than a million units per year.
* Even a great company like Toyota fell for the mirage of growth by building more than 10 new plants in the south USA.

* So what is the future? As this analysis explains lucidly, one cannot defy gravity for long.
With environmental pressure mounting, oil becoming dearer and pricey, public infrastructure creaking even in the developed world, the OVER-CAPACITY of the auto-sector has to be tackled. That's the only way ahead. Govt. dole can only slow that process - but as GM's bankruptcy/restructuring shows - for HOW LONG???

Regards,

Pradeep


Back on the road?

Cars Massive injections of public money have saved much of the industry from immediate collapse. But long-standing problems remain – and will still have to be addressed, writes John Reed

Figueruelas has stirred back to life. The General Motors factory in northern Spain is turning out nearly as many cars as it did before the global automotive industry hit the skids last year. The Opel Corsa super-mini it produces is in big demand because of state-funded scrapping incentives encouraging drivers to trade in cars in Germany, France, Italy and – as of last month – the UK. The low price means this car and rival small models such as the Fiat Panda and Renault Clio are selling briskly among the motorists of modest means who tend to drive cars elderly enough to qualify for the schemes. Since Berlin introduced its €2,500 per car bonus in January, monthly output has nearly tripled at Figueruelas, from 12,000 to 35,000. Opel’s own future looks much safer now, too, than at the turn of the year, with more than a bit of help from the German government. Last month, as Detroit carmaker GM prepared to file for Chapter 11 bankruptcy protection in the US, Angela Merkel’s government – worried about the collapse of a big German employer in an election year – stepped in with €1.5bn of bridge loans to rescue Opel. For anyone who has been following the industry’s near collapse in recent months, its comeback from its annus horribilis seems downright surreal. The credit crunch hit carmaking first and hardest of any non-financial sector, sending sales down by one-quarter in Europe by the end of last year. In the US, sales fell from a pre-crisis annual rate of 16m to just 10m – so low that China came close to overtaking it as the world’s largest car market. In December, as plants began to close for long holiday shutdowns, Sergio Marchionne, Fiat chief executive, predicted a shake-out that would, within two years, leave just seven mass-market carmakers standing. By February, Dieter Zetsche, Daimler’s boss, was predicting a “Darwinian year”. But instead of natural selection, something else happened: governments around the world, from Canada and Brazil to Russia and South Korea, stepped in with prodigious amounts of cash to keep car plants open and assembly lines running. All told, automakers have benefited from well in excess of $100bn of direct bail-out funds or indirect state aid, such as scrappage schemes, since global sales collapsed last October – in nominal terms, the biggest ever shortterm intervention in manufacturing. All this money has preserved jobs in carmaking, still the linchpin of many industrial economies. But the money has also prevented a necessary shakeout in an industry that has long had too many producers. Consultants at PwC estimate the industry has the capacity to build 86m units this year, almost a record – and 31m more than the 55m vehicles it will sell. “What appeared to be a unique opportunity to address the industry’s biggest issue – excess capacity – has been missed,” says Michael Tyndall, an analyst with Nomura. In Europe not a single plant has closed permanently since the industry slump began. GM and Chrysler, two of the most vulnerable carmakers when the crisis hit, filed for bankruptcy – but were guaranteed survival thanks to about $60bn from US President Barack Obama’s administration. BMW and Daimler are among carmakers discussing pooling costs in areas such as procurement, research and development, but there has been just one real merger – the partnership between Fiat and Chrysler, sealed this month. But Mr Marchionne was thwarted in his proposal to merge the two carmakers with Opel, Saab and GM Latin America to create a company as big as Volkswagen. “The shape of the industry looks all but the same, except that governments have tipped lots of money in and prevented Darwinian selection,” says Max Warburton, analyst at Sanford Bernstein. “It has been a good reminder of what this industry is: a government-supported job creation scheme.” Long-term observers of the industry point out that it has never operated on the pure free-market principles. Governments have always intervened in hard times. The status of many carmakers as national champions is bolstered by dynastic family owners at about half the big producers, who often rank continuity and control above shareholder value. Both they and governments form a big obstacle to consolidation. In this crisis, as in past ones, automakers made and won arguments that they deserved special treatment as some of their countries’ biggest employers and exporters. As credit markets closed and carmakers went begging to Washington and Brussels for emergency aid late last year, they reminded policymakers that the industry has one of the biggest “multiplier” effects: for every job created or lost, about six to eight downstream positions at suppliers come or go too. In France, Nicolas Sarkozy’s government explicitly asked Peugeot and Renault to preserve jobs and keep plants open as the price of the €6bn bail-out agreed in February. Both are losing money and some industry participants think the archrivals should merge. But Mr Sarkozy exacted a commitment that they would “do everything to avoid compulsory redundancies”. Germany’s government has also made job preservation its priority in GM’s ongoing talks on selling a controlling stake in Opel to the consortium led by Canada’s Magna International. Many analysts liked Fiat’s merger plan. But Mr Marchionne may have played his politics wrong by being too forthright about job losses – 8,000-9,000, and the possible closing of an engine plant in Kaiserslautern, south-west Germany. In the end, unions and premiers of the states where Opel has plants opposed Fiat, as did most members of Ms Merkel’s cabinet. GM, which despite its imminent move into US and German receivership was given a deciding role in the deal, also picked Magna, in part because it did not want to sell Fiat its Latin American operations. “Because of government intervention, we’re not going to see the same level of rationalisation that pure market forces could have driven,” says Paul McCarthy, head of PwC’s automotive strategy practice. “In the long run, we will pay for that.” he Obama administration has, by contrast, strived to exact painful restructuring as the cost of its unprecedented bail-out for Detroit. Under pressure from his autos task force, which sent it back to revise its restructuring plan twice, GM has accelerated the downsizing of its operations. It is shelving four brands, closing 14 plants by 2012 and shedding about 50,000 staff this year. The task force also played a big role in forging the alliance between Chrysler and Fiat. America’s tolerance for job losses and car plant closures has always been higher than Europe’s. Even before the current crisis GM, Ford and Chrysler were cutting tens of thousands of positions. Outlining his government’s decision to push GM into bankruptcy last month, Mr Obama said he “doesn’t want to own GM” and promised to keep the state out of day-to-day management, although the US government will own 60 per cent and Canada 12 per cent when the company emerges from bankruptcy. But administration critics are already warning of the inexorable rise of “Government Motors”. They claim Washington will find irresistible the urge to meddle in decisions on plants and models, at a potentially steep cost to the industry’s efficiency. In one move seen by cynics as a sign of things to come, GM this month agreed to delay shutting a parts distribution centre in Massachusetts for at least 14 months after Fritz Henderson, chief executive, met Barney Frank, the Democratic congressman from that state, who chairs the powerful House of Representatives financial services committee. “If this isn’t world-class politicking-turned-meddling, what is?” wrote Daniel Howes, a Detroit News columnist. More recently, GM began talks with the government and three US states on a new plant to build small cars after word emerged that the company planned to build them cheaply in China, creating uproar in the United Auto Workers union, which will own 17.5 per cent of a post-bankruptcy GM. America’s intervention in the car industry could have other costs too, critics warn. Many say Mr Obama’s strong-arming of Chrysler’s recalcitrant secured creditors – whom he denounced as “speculators” in April – was a blow to creditors’ rights and, with it, to the rule of law in the market economy. Ford’s willingness to survive without federal aid, although good for its image in the short term, could have costs in the longer term if GM and Chrysler emerge as stronger competitors with Washington’s help. John Fleming, head of Ford’s large European business, last month complained that bail-outs for Opel, Peugeot and Renault were tilting the playing field in favour of its competitors. As loans such as those made by the French government raise tensions within the European Union, he called on Brussels to be tougher about policing its own rules on state aid. The scrapping incentives could have other unintended consequences, analysts warn. US Congress this week is set to approve a voucher worth up to $4,500 for trade-ins of older cars for new ones, making the world’s largest car market the latest to adopt a “cashfor-clunkers” scheme. Yet industry analysts warn that by artificially pulling forward consumers’ replacement of their cars, the incentives could lead merely to a market “hangover” in 2010. Already, some including Toyota are calling for the measures to be extended into next year. “Because of government intervention softening the blow, we will have to go through restructuring over a longer period of time,” says PwC’s Mr McCarthy. “What might have happened in two years will happen in 10. We won’t be fixed a year from now.”


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