Last week, Ford abruptly changed its CEO. Moody’s reported that the move reflects potentially negative developments inside the automaker. The credit-rating agency declared that the ascension of Jim Hackett is credit-negative for Ford . Meanwhile, Tesla has overtaken both GM and Ford as the most valuable automaker in the US. Let us try to place this in perspective. Last year (2016) GM sold 10 million cars and earned a profit of $9 billion. Tesla sold 76,000 cars and suffered a loss of $776 million. Investors seem to view Tesla more favorably than either GM or Ford . Beyond the sensational headlines, it is worth noting that if we consider enterprise value instead of market capitalization, we get a different picture: Tesla’s enterprise value (debt + equity – cash) is about $66 billion . Ford’s enterprise value is about $238 billion . GM’s enterprise value is about $216 billion . One way to understand Tesla’s valuation is to realize that equity
Showing posts from May, 2017
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Addressing shareholders recently, Warren Buffet defended 3G Capital’s method of cutting costs and shoring up short-term profits. The comments came in the aftermath of 3G’s $143 billion failed bid for Unilever . It is worth examining the two models of capitalism that 3G and Unilever represent. 3G’s last success was with Kraft Heinz . Kraft Heinz today is notable for its clock-like efficiency. The company has closed many of its plants, sold off non-productive assets and has waged war on costs. Fortune magazine has reported that the company has been able to shrink overhead costs from 18% to 11% in two years . As noted by Professor Julian Birkinshaw of London Business School , the executives at Kraft Heinz (mostly planted by 3G) have transplanted the performance culture of an investment bank to the world of fast-moving consumer goods. The culture transformation is nothing short of breathtaking . If you perform well, rewards and bonuses await you. If you are slo
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Design Thinking is a problem-solving approach that uses a combination of empathy , creativity , and analysis to tackle unique problems. At a macro level, the approach can be used by governments and organizations. An emerging economy launching a hundred smart cities project or an organization looking for the next big business idea can both use design thinking. Design Thinking can be applied equally well at a personal level . Bill Burnett is an adjunct professor at Stanford and leads the Design Thinking program. In a distinguished career spanning decades, Bill has used the principles to generate dramatic new designs in a variety of domains. In the last decade, he has also pioneered the “ Design Your Life ” course at Stanford. The course, among the most popular at Stanford, is now offered at the freshman, graduate, and doctoral levels. Bill is the co-author (with Dave Evans ) of the book “ Designing Your Life: How to Build a Well-lived, Joyful Life .” (Knopf, 2016).