What's Important in the Financial World (6/28/2012)

“What is at stake is not only the economic integration, it is also the overall economic confidence in the euro area, and indeed, our commitment to the European project,” said European Commission president Jose Barroso, in a speech Tuesday. “This is why we need to be bold and define the way forward.” Barroso will not get what he wants. The divisions among the leading nations in Europe are too deep. Some countries that can afford to make loans want to. Germany, which can make the largest ones, will not. That leaves the issue of how funds at hand — almost a trillion dollars in bailout funds and another $456 billion held by the International Monetary Fund– will be loaned. They will be, but Germany will make sure the terms are onerous. Countries that get money will be monitored, and their budget management will hardly be their own.

Apple Labor Practices

Apple’s (NASDAQ: AAPL) labor practices in China have been questioned again, just as the company seemed to have gotten criticisms about lead supplier Foxconn behind it. Fortunately for Apple, none of the past complaints about its supply chain have cut into sales. Future ones are unlikely to either. Brand overcomes bad habits. China Labor Watch put out a large document that accuses Apple of not following labor practices at other suppliers based in China. Tim Cook, who visited China to show the company’s commitment to fair labor, may have to go back again. China Labor Watch reported:

The report found the following problems to be common in the ten factories:

• Excessive Overtime: The average overtime in most of the factories was between 100 and 130 hours per month, and between 150 and 180 hours per month during peak production season, well above China’s legal limits.
• In most factories, workers generally work 11 hours every day, including weekends and holidays during peak seasons. Normally they can only take a day off every month, or in the peak season may go several months without a day off.
• Low wages compel workers to accept long overtime hours. Most of the factories pay a basic salary equal to the minimum wage stipulated by the local law (around $200/month), so low that workers have to work long hours to support themselves.
• Workers are exposed to a variety of dangerous working conditions. Workers in all the factories reported safety concerns such as metal dust and hazardous working environments.
• All too often, workers find the food offered in the factory cafeterias unsanitary. Their housing conditions are frequently overcrowded, dirty, and lacking in facilities.
• Most workers are not familiar with unions and their function. They have little ability to push for reasonable working conditions.
• Some factories do not pay for workers’ social insurance, work injury insurance, and other insurance required by law.

Airbus in Alabama

Airbus, the primary rival of Boeing (NYSE: BA), will open a plant in Alabama. It may have made the decision to counter American politicians’ belief that Airbus works in the interests of its European owners. In part, that means keeping manufacturing jobs in Europe. Members of Congress have attacked the company because, while Boeing employees tens of thousands of people in the United States, Airbus has nearly none. There may be another explanation. Like Japanese car companies, Airbus may have discovered it is economical to make some parts of its planes in the U.S. Labor is usually cheap in the deep South. States are willing to provide rich subsidies, often in the form of tax breaks. Airbus might not care about perceptions at all. It may just want to increase its profits.

Douglas A. McIntyre