Dean Barber

Archive for July, 2011|Monthly archive page

Remembering Buzz Gunderson

In Uncategorized on July 31, 2011 at 9:04 am

I’ve been thinking a lot about Buzz Gunderson lately.

To refresh your memory, Buzz Gunderson was the local bully in the 1955 classic movie “Rebel Without a Cause.”

Buzz challenged fellow teenager Jim Stark (James Dean) to a “chickie run,” in which they would race two stolen cars towards a cliff, with the winner being the last one to jump out. The game ends in tragedy for Buzz when a strap on the sleeve of his leather jacket becomes looped over a handle on the car door, preventing him from jumping out before the car goes over the cliff.

Fast forward to today. There has been a whole lot of brinkmanship taking place in our nation’s capital, with a minority group in the House of Representatives – I’ll call them the redhots – making all kinds of noises that they are willing to drive the economy off a cliff if they don’t get their way. They are playing their own version of a “chickie run” by vowing to vote against raising the debt ceiling and thereby threaten the nation with default.

President Obama announced Sunday night that Republican and Democrat leaders in the U.S. House and Senate reached an agreement to increase the nation’s debt ceiling by $2.1 trillion and cut government spending by $2.4 trillion or more. The House passed the measure 269 to 161 early Monday evening. The Senate votes Tuesday and is expected to affirm the agreement.

Now I have avoided delving into the political realm, concentrating on matters of business and the economy, hence the name of my blog. And I would hope that my readers have not a clue as to my political leanings. And I say leanings because I am not a devotee to any political party.

And while I have no desire to alienate those few loyal readers that I have, this issue is just too big for me to remain quiet.  If you disagree me, that’s fine. Just don’t kick me to the curb as being the member of some enemy camp, which seems to be the norm today. I’m just a concerned citizen, a business owner, who wants stability and things to improve.

Now back to the kerfuffle in Washington.

Even if this tentative deal is approved, it may be mild relief for an economy at risk. It does not remove the risk of a credit downgrade, which would raise the cost of borrowing across the board. There’s little consensus on what exactly will happen if Standard & Poor’s decides to downgrade the U.S. from AAA, which is the gold standard, to AA. It could be something big that our children and grandchildren will read about.

It is likely that the U.S. government will have to pay more every time it borrows. How much more it’s impossible to know. But with $14 trillion worth of debt, every little more interest hurts.

And if you have a second-rate credit rating, it means in the eyes of the world you’re a second-rate country. It will be an embarrassment, with the U.S. rated lower than Canada, Australia, Germany, France and Britain.

Economists were stunned on Friday with data showing the economy grew just 0.4 percent in the first quarter and only 1.3 percent in the second quarter. Meanwhile, manufacturing growth hit its lowest level in two years, according to figures released Monday by the Institute for Supply Management.

Aside from a terribly weak economy with no job growth, what is also clear is that there is a real gulf between Tea Party activists and establishment Republicans and the business community.

The redhots suspect House Majority Leader John Boehner as being too moderate, too willing to cut a deal with a demonized socialist enemy (the White House), and that Boehner just wasn’t pushing hard enough. To appease them and probably save his job, Boehner added a balance budget amendment provision to his bill, knowing full well it would not fly in the Senate. And naturally it didn’t.

But the not so dirty little secret is that any future deal will be largely on Republican terms, with spending cuts and no tax increases. Still, the redhots have continued to overplay their hand and have pushed the country to the brink.

The late Bill Buckley said that thoughtful conservatives respect and acknowledge reality. This minority element of radical republicans do not control the White House and they do not control the Senate, which is where a workable deal will be reached.

The market has been jittery that no deal has been reached on raising the debt limit, but also the prospect of nation’s credit rating being downgraded. The agreement reached Sunday would raise the debt ceiling in two installments, sufficient to serve the nation’s needs into 2013. The framework would cut $917 billion in spending over a decade, raise the debt limit initially by $900 billion and assign a special congressional committee to find another $1.5 trillion in deficit savings by late November, to be enacted by Christmas.

Nobody knows with certainty what happens if Congress fails to raise the nation’s $14.3 trillion debt limit by Tuesday midnight. Default is a place where we have never been before. The Treasury says that after Tuesday, it cannot borrow any more money, so it will only be able to pay out what it has in cash and what it takes in taxes. And the problem is that in August, the Treasury has commitments to pay $130 billion more in bills than it anticipates receiving in tax receipts.

Democrat House Majority Leader Tip O’Neal accommodated Republican President Ronald Reagan 18 times in raising the debt limit. National crisis was averted because these two men, with substantial philosophical differences on the role of government, knew that governing responsibly meant compromise. At the 11th hour, let us hope that a thoughtful grownups have taken control and brought order to disorder.

It is clear now that we underestimated the Tea Party. The business community, who helped elect these knuckleheads, thought they could control and tame this crowd. The consensus was that these idealists would become practical. But the redhots believe in a different reality.

Now my criticism is not solely leveled at GOP radicals who have been holding the nation hostage. Our faculty-lounge president has not come close to providing the needed leadership to diffuse this crisis. Democrats on the Hill grumble that he has largely been the invisible man. Certainly, he has been outmanuevered. He never really came up or pushed a plan.

And while he holds news conferences to demonstrate that he is a reasonable man and willing to compromise, it appears to me that President Obama had n0 desire to wade into the fight and get dirty. He sought to stay above the fray. But he loses by his very absense. This aloof president will not come out of this unscathed. Certainly, his base is not happy with him.

Again, there is still no guarantee as of yet if the credit rating agencies will give their stamp of approval for this tentative agreement. Those private agencies may still downgrade the ratings of U.S. debt, on the belief that the proposed spending cuts are not enough.

When George W. Bush became president, we had a debt of about $6 trillion. Projections from the Congressional Budget Office were that we were going to run a $6 trillion surplus. In short, the national debt could have been paid off in full.

But it didn’t happened. During the Bush Administration, Congress enacted about $3 trillion of tax cuts. We lost about $3 trillion of revenue because of the slower economy. And then we added about $6 trillion of spending, largely due to two unfunded wars and a Medicare drug benefits program. We ended up with about a $12 trillion debt. Yes, this actually took place under a Republican president and a Republican Congress.

Why the GOP abandoned its tradition of fiscal restraint, I cannot begin to tell you. But it happened. And now we face the consequences, with both parties acknowledging that deep spending cuts must be made. Because when debt is approaching 100 percent of our gross domestic product every year, that is a big problem.

As he was about to embark on his death race with Jim Stark, Buzz Gunderson stood at the edge of the cliff. As Jim questioned why they are going ahead with this, Buzz responded, “You got to do something, don’t you.”

The thing you don’t do is go over the cliff. Default in not an option. So let’s stop the “chickie run” and back away from the abyss.

In hindsight, I think Buzz would agree.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Red Oak, Texas — www.barberadvisors.com You can reach him at dbarber@barberadvisors.com or at 972-890-3733.

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The Problem with Strategic Plans

In Uncategorized on July 24, 2011 at 8:18 am

The fallacy of strategic planning is in the likelihood that anything real and substantive will come from it. I make this rather harsh and heretical statement because a strategic plan typically serves as a testament that something seemingly important has been accomplished when usually very little has.

More often than not, considerable time and money has been marshaled into an endeavor that may be impressive by outward appearance, but often does not provide for real-world solutions as how to get from Point A to Point B. In other words, no grounded action is spelled out or recommended.

As a result, few strategic plans are truly the meaty documents that they are billed. (I cannot help but recall the 1984 Wendy’s commercial – “Where’s the beef?”) In 150-page reports that some consultants so dearly like to charge for, there are perhaps 10 or 15 pages of meat. The rest is a whole lot of bun.

But it makes for good appearances. Indeed, that two-inch thick strategic plan will often be presented as evidence that a local economic developer is making a meaningful contribution to his or her community.

A Misguided Trophy

“A lot of communities will have a definition of success by simply developing a formal strategic plan. That is their end game,’ said John Turner, who heads economic development for Entergy Mississippi, Inc.

“But you don’t get true value out of a strategic plan unless you implement action to go with it. It’s almost like a trophy to some communities. Hey, this is my strategic plan. I have done something. But they are not focused on a return on investment.”

That is not to say that planning or strategic thinking is irrelevant. Truly I am not that much of a heretic. But I would submit that a shorter-term action plan or even, and this may sound vulgar to some ears, a sales plan is the most practical solution.

Now you might argue that this is all a matter of semantics, that one man’s strategic plan is another man’s action plan. But to my thinking, besides being shorter term in nature, an action plan  is more tactical in nature. It sets out clear, tangible steps that have to be taken with boots on the ground. (Don’t forget, I live in Texas.)

Busy Work vs Real Work

The emphasis is execution. We plan so that we can execute. We plan in order to act. Anything less is spinning your wheels, which unfortunately can be the norm for some economic development organizations.

“A failing of the economic development profession as a whole is that we get excited by the low-hanging fruit of activity rather than working harder to identify and act upon truly meaningful measures of impact and accomplishment,” said Mark Waterhouse with Connecticut-based Garnet Consulting Services. “Strategic planning often means you are just busy doing something.”

In other words, strategic planning can fall into that realm of busy work rather than real work.

Common Strategic plan: Further study should be undertaken to properly evaluate and coordinate a diverse group of stakeholders on the possibility of examining whether the resources are present and in sufficient strength that would enable Smallville, USA to become the Nightcrawler Capital of the World

Action plan: Let’s tear up Main Street tomorrow and start worm farms, and join the National Bass Anglers Association so we can market to all their members and tournaments.

Having lofty long-term visions are not bad things. But given the choice, I would rather bet on a horse that is running and winning than on a breeder who is planning to create the next Secretariat.

I have seen too many organizations get bogged down with planning to the degree that they are not doing much more than that. They want to study, plan and engineer, but not venture into any sort of outreach. For these folks, the journey is more important than the destination.

For most economic development organizations, a SWOT analysis is a good starting point. Knowing your strengths, weaknesses, opportunities and threats gives you great insight on action that is to follow. Waterhouse modifies the SWOT formula somewhat by addressing strengths, weaknesses, issues and opportunities.

“First, that lets you end on an up-note (opportunities) rather than a down-note (threats). Secondly, not every issue is a threat – many are just issues that need to be acknowledged,” he said.

A Friend’s Way

One of the most talented local economic developers that I know, a friend in Alabama, said he authored what he calls a strategic plan only because he had to do it.

“I’ve been told that I must have a strategic plan. So I wrote one, and my board approved it. It’s one page long. I also prepare an annual plan. It’s also one page long.”

Now this economic developer has a track record of winning. I have no doubt that he plans out his work day and work week. But he doesn’t spend an inordinate amount of time fixated on planning. He is not caught up in doing busy work. Rather, he is busy doing real work. And he has the confidence of his board. My friend is a strategic doer.

Turner said communities will often pay consultants to develop strategic plans that are based on a SWOT analysis that accurately determines a community’s strengths, weaknesses, opportunities and threats, but it ends there.

“They never go to the next step. And the problem is that they pay for this study. They probably read it once and then put it on the shelf or their desk and they never take the next step,” Turner said.

“When we work with the community (in Mississippi), we will ask if they have a strategic plan. If they do, that’s great, but we don’t ever recommend that they go out and actually do a formal strategic plan. We do say that you have to have an idea of where you want to go. And a lot of times by facilitating what becomes a working plan, their strategies will come out.”

Action Agenda

Waterhouse also emphasizes the action component to the plans that he helps communities develop. Rather than a strategic plan, he develops an “action agenda,” based off the findings from his modified SWOT analysis. The action agenda features specific initiatives that communities are essentially directed to pursue.

“You really shouldn’t have more than 15 initiatives for any one place, but that should keep you busy for the next three to five years,” he said.

Coming up with meaningful recommendations entails time consuming data collection, interviewing, analysis and “poking around in peoples’ heads,” Waterhouse said.

“In the end, the question is then whether putting it down on paper is of great value,” he said.

My take as a consultant: If your investigative findings lead to a call for action with attainable results, which is the basis for Waterhouse’s philosophy on planning, then by all means put it down on paper. By doing so, you probably are providing great value.

Turner says the blame for ill-fated strategic plans without strong action components does not always lie with consultants.

“I have watched and listened to the dynamics that have taken place. And often it is the case that the communities force the consultants to do it the way they want to do it,” Turner said. “I have heard consultants try to get to more tangible results, but that is not what the community wanted to pay them for.”

Rather, the economic developer was seeking that trophy, a report by which to impress by the fact that is was done.

In the end, it is real results that matter. Periodically, I catch myself revisiting a quote from a historic strategic doer, President and General Andrew Jackson, aka “Old Hickory.”

“Take time to deliberate; but when the time for action arrives, stop thinking and go in.”

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Red Oak, Texas — www.barberadvisors.com  You can reach him at dbarber@barberadvisors.com or at 972-890-3733.

The Auto Industry is Spending and Hiring Again

In Uncategorized on July 17, 2011 at 8:42 am

Despite a touch and go economy, automakers in North America are doing something rather extraordinary – they are investing billions of dollars on upgrades and plant expansions and actually hiring people.

And the list of foreign-owned automakers with assembly plants may grow. Earlier, this week, I received a telephone call from a producer from CNBC in London who, for reasons not absolutely clear to me, wanted to get my take on the prospect of Audi building a plant in North America.

I told her that I did not have inside knowledge about Audi’s plans, but that it was hard for me to get excited about an Audi project that has been rumored to be on again and off again since the mid 1990s.

Recent remarks by Audi’s CEO would suggest that he wants to take the plunge. “It is totally clear that we need new production capacity in the U.S.,” Rupert Stadler is quoted as telling Automotive News Europe. “The question only is when.” He said a decision is unlikely before 2013.

Audi sold 1.1 million vehicles worldwide in 2010, 101,629 in the United States. It has a plan to sell 150,000 by 2015 and 200,000 a year by 2018. If Audi does build a plant in North America, again it will come at a time when other automakers are making substantial capital improvements and bracing for a future with increased sales.

A Frenzy of Spending

Just 30 minutes from my home, General Motors will spend $331 million to expand and modernize its Arlington, Texas, plant, which turns out sport utility vehicles. The Arlington plant is one of 17 GM facilities where the company will pump in an estimated $2 billion.

Ford, which has seen sales rise 12 percent through the first six months of 2011, will spend $600 million upgrading its Louisville, Ky., assembly plant to house the next generation Ford Escape. This move will add 1,800 jobs to the 1,100 person plant, which is capable of making five other vehicles, according to Bloomberg. As of July 12, 12,500 people had sought applications at the Louisville plant.

Earlier this month, Toyota announced that it will invest $545 million to expand two Ontario plants. The Government of Canada and the provincial government of Ontario have each pledged nearly C$71 million to sweeten the deal. Combined, the plants in Cambridge, Ont. and Woodstock currently employ around 6,500 people.

Farther south, Toyota Corollas will be coming off the assembly line in the fall at the company’s yet-to-be-completed plant in Blue Springs, Miss. The factory now employs 840 people, but will employ about 2,000 workers at full capacity when it can produce 150,000 vehicles a year. Suppliers will employ an additional 2,000 workers. Toyota restarted work on the $1.3 billion plant last year after suspending construction during the recession.

Nissan has been preparing a $1.6 billion production complex in Smyrna, Tennessee, to begin rolling out EVs in the masses by late 2012. The plan is to have the plant assemble about 200,000 battery modules and as many as 150,000 Leafs each year. Nissan has gained market share on both Toyota and Honda, both of which were more deeply effected by the March 11 tsunami and earthquake.

Watch the Koreans

But I would advise that you watch the Koreans. Hyundai-Kia Automotive Group’s share of the U.S. auto market exceeded 10 percent in May for the first time since it entered the market in 1986. The Korean automaker has already beaten Japanese rivals in China, India and Europe and in South America. The only market left is North America, and they’re making progress.

Hyundai North America set an all-time monthly sales record in June, selling 59,209 vehicles. The June sales were a 16-percent increase from the same period a year ago. Overall, sales are up 26 percent from last year. The Hyundai plant in Montgomery, Ala., plant has been running at full capacity to keep up with consumer demand, turning out Elantras and Sonatas. Year-to-date, production is up 13.2 percent from 2010. Based on projections, the Alabama plant will likely produce 330,000 units by the end of the year.

In May, Hyundai said Tuesday it would spend $173 million to double production capacity at its engine plant in Alabama.

Prediction: While Audi is currently getting speculative headlines, Hyundai, which sells as many vehicles in the U.S. in two months as Audi does in 12, just might pull the trigger first to build yet another plant in North America.

I told that to the CNBC producer. She didn’t seem overly impressed. To prove to her that I knew something at all, I said the Audi project, if it were to happen, would likely go to the Southeast or Ontario. There are reasons why both areas have been successful for automotive investment.

The influx of foreign auto manufacturers started in 1982 when Honda built a plant in Marysville, Ohio. Since then, most of the German, Japanese and Korean transplants have located assembly plants in the Southeast, which is comprised of right-to-work states. In a right-to-work state, an individual worker is not forced to a join a union, even if a majority on the shop floor votes in favor of union representation.

To date, the United Auto Workers has yet to win the hearts and minds of nonunion workers in the southern transplant auto plants. Probably most of those workers count their lucky stars for even having a decent-paying job. It is also noteworthy that the tax and regulatory climate in the Southeast is also generally more business friendly than other parts of the country, although there certainly are exceptions to this broad-brush statement.

Options for Audi

If Audi looks in the Southeast, it has a number of options. There is room for a second plant to be built on the same 1,340-acre site in Chattanooga where parent company VW is now turning out Passats. Another possibility is a site near Huntsville, Ala., which was the runner up to the Chattanooga site.

Some Volkswagen officials told Alabama economic developers they liked the Huntsville site better, but in the end Alabama did not match Tennessee’s $577.4 million incentives package.

Whether Audi co-locates in Chattanooga with VW or in nearby Huntsville, either location would permit the sharing of existing suppliers, a cost savings measure to be sure. Workforce availability may be the key here. Just as Kia located Georgia in relative proximity to the Hyundai plant in Montgomery, the two Korean plants do not compete for the same labor base. The Germans may take the same tact, which may or may not give the edge to Huntsville.

Other possibilities include the two remaining TVA mega-sites. One is a 2,100-acre site adjacent to Interstate 24 at Hopkinsville, Ky, about an hour west of the Nashville airport. The other is a 1,720-acre site next to Interstate 40 in West Tennessee about 30 minutes east of Memphis. Both sites are served by CSX.

Don’t Forget Canada

Audi may also consider Ontario, which has had its own success at attracting automotive transplants. The big cost advantage there is that health care costs, a continued burden for U.S. industry, are largely picked up by Canadian government. Also, Ontario is noted for its skilled workforce and an automotive tradition, with Ford, GM, Chrysler, Toyota, and Honda operating plants there.

The Toronto Globe and Mail reported on Thursday that Ford has approached Ottawa and Ontario for financial assistance to retool the Oakville plant to broaden the types of vehicles it can manufacture. The paper said the project could cost between C$500 million ($521 million) and C$1 billion. As evidenced by the recent Toyota announcements, the Canadians are willing to deal.

And so is the UAW. Recent agreements allow managers to assign workers to various jobs to keep the line running. New hires are paid about half what veteran union workers get, giving a new factory the chance to pay lower wages. The UAW’s new flexibility has incentivized Ford, GM and Chrysler to make future investments.

Is Audi coming? Heck if I know. I’ve been down that road a few times before. What I do know is that the existing automotive manufacturers in North  America are now spending and hiring. And that is good news.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Red Oak, Texas — www.barberadvisors.com  You can reach him at dbarber@barberadvisors.com or at 972-890-3733.

It’s All Risky Business

In Uncategorized on July 10, 2011 at 6:53 am

Earlier this week, I put together a PowerPoint presentation that I will give to a regional economic development group later this month. They wanted me to talk about site certification, a topic which I have written about for Site Selection magazine.

Now I am not going to steal my own thunder here by writing about the intricacies and requirements of site certification, but I will share with you the underlying factor that makes this marketing tool meaningful at all.

And that is the principle of risk.

It is something that we cannot escape. And while we are no longer dodging mastodons, one has to be careful crossing a busy street. In short, life is chock full of risks.

If you want to live a life of fear (and I don’t), there is risk in the air we breathe, the water we drink and the food we eat, much less coming into contact with other people who are just crawling with all sorts of germies. I would suggest you just wash your hands and go ahead and eat that occasional hot dog. Lean forward.

Risk is inherent in business. No one is going to guarantee you a profit or a successful enterprise. Starting a business entails risk. (Tell me about it.) Expanding a business has its risks. Even contracting or closing a business has its risks as there are always costs to be weighed.

What’s more, expanding a business in any location means risk.  And the process of site selection, which is a subject near and dear to my heart, is about reducing risk (and thereby eliminating sites.)

There is No Nirvana

Despite marketing claims on websites by some economic development organizations, there is no nirvana. There is no perfect place for business. But there are better places and sites where the risks are acceptable or at least manageable and where business operations can be optimized. But betting on any (your) community will always remain a risk.

This is a fundamental principle that I think some economic developers just don’t get. Careers and jobs are on the line when mistakes are made. Indeed, entire companies can crash and burn by expanding too fast or expanding in the wrong place.

I have seen it firsthand. The risks were not correctly calculated. The company overextended itself with debt by its new expansion. The newly opened plant did not last nor did the established parent company, which was dissolved in bankruptcy.

Last November, I did not correctly figure that an Ohio State Trooper would be laying in wait while I zoomed along on little used rural highway. I was aware of the risks involved to a degree. I was wearing a seat belt. But the trooper was not amused that I was traveling 12 miles above the speed limit. My miscalculation proved costly.

What I am about to tell you is something that you already inherently know, but risk management is all about identifying, assessing and prioritizing risks and then figuring out where to go next. And that, in a nutshell, is what site selection is all about. It’s what my consulting business is all about.

In the end, the best laid plans of mice and men are based on educated opinions and available statistics.

A Risk System for Fighting Wars and Site Selection

The U.S. Department of Defense should know something about risk as it frequently finds itself in the business of conducting wars, which are always risky ventures. It has a system of managing risk called ACAT, which stands for Avoid, Control, Accept, or Transfer.

It is not particularly difficult to see how this system could be applied to site selection. Some companies want to avoid high-tax states or places where labor unions are particularly active. Certain companies want to control or reduce transportation costs by being situated within close proximity of customers or suppliers.

Most companies will accept and budget for a prevailing wage for a particular type of job in an area. Finally, many companies will transfer or share risk by accepting workforce training programs offered by various states as an incentive for locating there. Alabama built training centers adjacent to the Mercedes, Honda and Hyundai plants.

These are just some simple examples that come to mind. There are more, mind you.

Changes in procedures, technology, schedules, budgets, market conditions, political environment, or other factors typically require companies to re-assess risks. As the automobile assembly plants in Alabama are modern and are operated by relatively healthy companies, the risk of them closing any time soon is small.

But there will be the day, it may be 30 or 40 years from now, that any or all of these plants will be closed because it is judged that the risks outweigh the benefits. Some person or group within the company will decide that this particular plant is no longer the efficient profit center that it once was and that shut down is a better option than rehab.  Ford and GM are no longer building vehicles in Atlanta for that very reason.

So risk assessment, risk management is the root to corporate downsizing as well as corporate expansions. I would suggest that many if not most of the 14.1 million unemployed in this country are the recipients of business decisions based on risk assessment. That is not an indictment of business. Far from it, businesses usually do what they have to do to remain in business. It has been a matter of self preservation.

Playing Russian Roulette

Speaking about risk, the economy remains very much at risk. Part of this is due to a dysfunctional nature of our federal government, which appears to be far removed from life in America. The fact is that Congress should not even be thinking about playing Russian roulette with the national debt. The United States simply cannot default on its national debt. Doing so is uncharted territory where things could get really ugly fast.

Now the good news is that there is a basis for an agreement to be reached. Both parties agree for a reduction in spending. As I write this blog, the latest news reports would indicate that a deal is being hammered out in Washington to raise the debt ceiling while reducing the deficit by trillions. This simply has to be done. Default in not an option.

Whether the deficit-cutting measures are to include increased tax revenues, well, that is the big question. Frankly, I don’t see how it can be done simply with spending cuts alone. Indeed, most economists tell us that taking such a course could imperil what little economic recovery that has taken place.

We Need Grown Ups

Having said that, I would favor lowering corporate tax rates, but only if certain loopholes are closed that currently allow certain saavy corporations to effectively pay no federal taxes.

Yes, we need to reign in our deficit. Yes, we need to create new jobs. Both are possible if grown ups in Washington (yes, Mr. Congressman, I am referring to you) do their jobs and not let ideology get in the way.

The news Friday that the unemployment rate rose to 9.2 percent only underscores that an economic recovery remains at risk. Only 18,000 jobs nationwide were created in June. These are dismal, almost jaw-dropping numbers.

The risk to the nation is real. The risk to sustainable business growth is real. The risk to how we lead our lives is all too real.

Let us hope that politics can be set aside and a deal is reached that serves as a blueprint for future economic growth and prosperity. While there is no such thing as absolute certainty in business, companies in America want a stable framework from which to operate. They don’t have that right now.

Here’s a radical idea: Let’s give it to them. Let’s reduce the risks.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Red Oak, Texas — www.barberadvisors.com  You can reach him at dbarber@barberadvisors.com or at 972-890-3733.

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Up Off the Matt

In Uncategorized on July 3, 2011 at 7:42 am

You have heard the old saying that you can’t keep a good man down. Well, the same is true for a country. Japan may have been knocked to its knees by a massive earthquake and tsunami, but it has proved that it is not out for the count.

Japanese factory output jumped by the most in almost 60 years in May as manufacturers continue to restore damaged supply chains.

Industrial output rose 5.7 percent in May, above the median market forecast for a 5.5 percent increase and a 1.6 percent gain in April, the Ministry of Economy, Trade and Industry said. It was the second-biggest increase on record after a 7.9 percent rise in March 1953.

The rebound in output lends further support to the prevailing view that the economy will recover by the end of this year. Mind you, this is also good news for the United States. Japanese supply chain disruptions were one of the “transitory” factors holding back the U.S. recovery, according to Fed Chairman Ben Bernanke.

Automakers in Japan led the overall increase with output of transport machinery up a hefty 36.4 percent as they quickly mend supply chains hit by the March 11 quake. But output of chip and other electronic parts fell 0.6 percent showing that the recovery was still patchy.

Japan is one of the most important nodes in the global electronics supply chain. According to a report released by iSuppli on Wednesday, the electronics industry in Japan should rebound to pre-quake levels by the end of the third quarter.

Rethinking Supply Lines

But a senior manager at a Japanese bond fund warned that it may be hard for Japanese industry to return to pre-crisis output levels. That’s because manufacturers worldwide are re-evaluating their supply chains.

“Global manufacturers need to think about diversification of supply chains. Some Japanese parts production could be replaced by other Asian countries,” said Tomoya Masanao, managing director at Pimco Japan, said while addressing a Reuters summit devoted to Japan’s reconstruction.

Even before the natural disaster struck, certain U.S. manufacturers were considering “re-shoring” certain operations back to North America because of the costs associated with extended supply chains.

The world’s third-largest economy is expected to grow 1.0 percent in the third quarter after contracting for three consecutive quarters and suffering its second recession in three years, according to a Reuters poll.

Even if the worst effects of the tsunami/earthquake disaster are past, the Japanese economy is still marred by political instability, with new elections looming. Furthermore, deflationary pressures, which have been hurting the performance of Japan’s economy for two decades, are not resolved.

The Institute for Supply Management’s factory index report on Friday showed  that U.S. manufacturing unexpectedly expanded at a faster pace in June, a sign the industry is rebounding after shortages of parts and components from Japan slowed production. The Institute for Supply Management’s factory index rose to 55.3 last month from 53.5 in May.

A mending of supply chains in Japan and a recovery of that country’s economy should breathe life into our own economy as the global supply chain goes back into full capacity. At least that is the hope of the Fed Chairman Bernanke. Let us hope he is right.

It Really Is Spooky Out There 

Anyone with any walking around sense soon figures out that life entails all sorts of risks that come your way. You live and learn.

Now whether you like it or not, if you are using online systems, and who isn’t these days, your data is out there. And depending where that information resides, it could be vulnerable to being pilfered. Now there is some debate on whether this whole issue of cyber attacks is an inflated creation of the news media or if it’s the real deal.

I tilt to the real rather than to the invented simply because of the anecdotal evidence. And while the chances of you individually being damaged may be fairly remote, it is absolutely clear that cyber attacks are costing businesses worldwide billions.

Just this past week, Citigroup, the third-largest U.S. bank by assets, told government officials that about 3,400 of the customers whose credit-card information was hacked have suffered about $2.7 million in losses, The Wall Street Journal reported. The good news is that bank customers are not liable for any unauthorized use of their accounts.

The company said a total of 360,083 North American Citigroup credit card accounts were affected by the cyber attack in May, the latest in a spate of attacks in recent months targeting high-profile companies like Sony, Google Inc. and Lockheed Martin.

The Wrath of Shareholders

Also this past week at the annual shareholders meeting for Sony in Tokyo, Sony execs found themselves the target of shareholder wrath. Investors were angered over a data breach in April, which compromised personal data from more than 100 million online gaming and entertainment accounts.

Sony has been criticized for lax security and acting too slowly to inform customers, which prompted one shareholder at the meeting to call for CEO Andrew Stringer to step down, generating scattered applause.

Sony’s stock price has fallen 30 percent this year, compared with a roughly 6 percent decline in the benchmark Nikkei 225 stock average. The company estimates the hacks will cost $173 million in increased customer support costs, freebie packages to welcome back customers, legal fees, lower sales and measures to strengthen security.

The total worldwide market for desktop and mobile security clients is forecast to top $7 billion by 2015, according to Campbell, California-based Infonetics Research. Now that is some real jack.

With increasing use of mobile devices coupled with a move o distributed cloud-based computing, traditional security methods, such asfirewalls, may likely become less effective.

Analysts predict that the number, scale and sophistication of cyber attacks targeted at corporations — and the data they hold — will continue to grow. And though companies may fortify their defenses after each successful breach, the hackers are often one step ahead.

A Helplessness

These cyber attacks underscore how powerless consumers are. Once we have provided a company with certain data, like credit card account information, there is not much we can do but hope that the company will be able to adequately safeguard it. Citi and Sony customers, no doubt, thought that their account information was sufficiently protected and secure. They were wrong.

Consumers cannot verify that a company is doing everything in its power to protect their information by encrypting the data, using updated software and maintaining logs of everything going into and out of its servers. But they can show up at annual shareholder meetings and berate the CEO, which is probably a good thing.

I think that the scary part is that we are not talking about Fred’s Bait Shop here, but major corporations and government agencies. Oh yea, I almost forgot to tell you, a cyber attack shut down the CIA’s site for several hours last week.

And the International Monetary Fund, you know, those folks who have great influence on how money actually works worldwide, said it had been targeted by a sophisticated cyber attack. Bloomberg quoted an unnamed security expert as saying the hackers were connected to a foreign government.

Then CIA Director and now Secretary of Defense Leon Panetta told Congress last month that a large-scale cyber attack which would cripple power, finance, security and governmental systems was “a real possibility in today’s world.”

There is even some amateur cybervigilantism taking place. Reports are circulating that hackers “wiped clean” an online communications channels used by the terrorist organization Al-Qaeda.  Published reports suggest that anti-jihadi hacker going by the name of “The Jester” may be responsible.

If this is true, then I guess my only response would be: “Hey, Jester. This Bud’s for you.”

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Red Oak, Texas — www.barberadvisors.com He can be  reached at dbarber@barberadvisors.com