What's Important in the Financial World (3/19/2012) Starbucks Juice Bar, China’s Arms

The repair problems that Airbus faces for its A380 superjumbo are far from over. The manufacturer’s executive vice president, Tom Williams, told Der Spiegel that “The problem will keep us busy for years.” He estimates the total costs of repairs and special maintenance on the planes will be in the hundreds of millions of euros. Since it appears that the entire fleet of the planes has been affected, that estimate may be low. His comments are also a red flag about Boeing‘s (NYSE: BA) problems with its 787 Dreamliner, which has had structural issues as well. Some carriers have asked for compensation for the late delivery of the 787. Those same firms may seek more payment for repairs. Boeing’s issues with the 787 could be only at their beginning, if they are at all similar to those of the A380.

Starbucks Juice Bar

Starbucks (NASDAQ: SBUX) will get to find out what happens when a company diversifies beyond its core business. It soon will open its first juice bar, under that name of Evolution Fresh. The coffee store chain has moved into other businesses before, such as the sale of its coffee in bags at grocery stores. There was also the introduction of its Via instant coffee line and new single-serving products for coffee machines. But all of these “extensions” are part of its core coffee franchise. Juice is not. Management consults often say the most successful companies over long periods are those that “stick to their knitting.” Starbucks has decided to ignore that.

Gasoline Prices Up Again

Another day and another uptick in gasoline prices. The AAA Fuel Gauge places the nationwide average price for a gallon of gas at $3.842, up from $3.838 the day before. That is the 10th daily increase in a row. A month ago, the price was $3.538. So the jump over the period is 8.5%. Gas is close to the record high it set in 2008 when the price of a gallon briefly rose above $4. And the price is already higher than that in some states. The price is $4.350 in California and $4.014 in New York.

China’s Arms Imports

The Stockholm International Peace Research Institute reports that China went from the world’s second largest arms importer in 2007 to the fourth in 2011. The reason for this is not a rise of pacifism in the People’s Republic, though. The sharp increase in its military budget includes a greater ability to make its own weapons.

Douglas A. McIntyre