What’s Important in the Financial World (10/11/2012)

Siemens to Downsize

It is never a good sign when a global corporation with customers across almost the entire world and a broad array of businesses says it will cut workers because of the economic slowdown. But Siemens A.G. (NYSE: SI), arguably the world’s largest conglomerate after General Electric Co. (NYSE: GE), will begin the process to downsize. According to Reuters:

Germany’s Siemens may outline job cuts and office closures on Thursday to stop profits sliding as customers put off ordering engineering equipment because of Europe’s economic crisis.

Chief Executive Peter Loescher’s strategy of boosting growth with energy-saving and infrastructure products has not worked and analysts expect him to present managers with a plan of up to 4 billion euros ($5.2 billion) in savings.

Siemens claims that it does business in more than 150 nations. It is a leader in energy technology, health care products, the building of industrial facilities and the creation of infrastructure for governments and private enterprise. In other words, it operates across a large number of sectors. And, in terms of its mix of businesses, it looks like GE. Conglomerates may not be a perfect proxy for global business activity, but they are probably the closest one available.

Management Changes at J.P. Morgan

One more of Jamie Dimon’s key aides at J.P. Morgan Chase & Co. (NYSE: JPM) has been caught in the reorganization that began with a multibillion trading loss at the firm’s London office. The Wall Street Journal reports the Chief Financial Officer Douglas Braunstein will change jobs. He was involved, the paper reports, with the buyout of Bear Stearns, which has come back to haunt the bank. Bear created and sold mortgage-related paper that was part of the start of the financial crisis. The federal government has begun to scrutinized those activities, which could cause J.P. Morgan trouble and cost it in fines. The shuffling and dismissal of executives so close to Dimon means that the heat is on him to justify his own role in trading losses and M&A. He can say, perhaps fairly, that those directly under him made most of the mistake. However, so far, in public he has admitted “the buck stops here.” But the more people at J.P. Morgan who quit their jobs, the more its appears that Dimon wants to protect himself from the impressions that he was involved enough in the catastrophes to be pushed out.

Trade War with China Brews

The trade and business battles between China and the United States were ratcheted up again as the American government set tariffs on China made solar panels that will be as high as 30%. The action comes just days after congressional leaders said the activities of China telecom equipment makers Huawei and ZTE could be a security risk. The People’s Republic responded that the charges were no more than China bashing. But the two events — the tariffs and accusations — coupled with campaign rhetoric by both Obama and Romney, will only make tensions with China worse. That leaves China with a tough balancing act. It needs U.S. trade to keep its sputtering gross domestic product above 7%. But it knows it cannot appear weak without emboldening American interests that want to push harder and harder on China’s trade and currency practices.

Douglas A. McIntyre