Chapter Five

"Goodyear cuts 1,000 jobs in Quebec"
by Ross Marowits
January 4, 2007
http://cnews.canoe.ca/CNEWS/Canada/2007/01/04/3156369-cp.html

Nearly 1,000 employees have been fired from Goodyear Tire and Rubber Co. after they announced that they would stop producing tires at its factory in Valleyfield, Quebec. It is also adding to economic troubles in a province already suffering from forestry industry layoffs. Looking at this the Akron, Ohio-based company said that they will create 200 jobs by opening a materials mixing centre at the location near Montreal in June. No one understood why Goodyear was firing so many employees when they have made many technological improvements and investments in recent years that helped the company a lot. Actually, the tires they made no longer fit into the demand of the American market, so Goodyear decided to stop making the products that the American market does not demand for. The company also got an offer of several million dollars, from the Quebec government officials, to help modernize the plant, but Goodyear chose a different path. The Liberal government has earmarked nearly $825 million to help the battered forestry sector, including $400 million in new money. It also provided hydroelectric and water rights to entice aluminum giant Alcan Inc. to invest US$1.8 billion to expand its smelter operations in Quebec's Saguenay-Lac-St-Jean area. This letting go of so many people in Goodyear recently saw T-shirt maker Gildan Activewear close its textile factory in the city as part of a massive restructuring that affected 546 jobs in Canada and the U.S. The decision to discontinue tire production at Valleyfield is one of those necessary steps to make Goodyear more competitive. In the forestry industry, there have been more than 10,000 layoffs in Ontario and Quebec and almost 2,000 in Atlantic Canada since January 2003. The Valleyfield closure will result in total charges estimated to be between US$ 115 million and US$120 million for restructuring and accelerated depreciation. Between $70 million and $75 million of the charges will be applied in the fourth quarter of 2006, with the balance of the charges affecting 2007. When complete, the closure is expected to generate annual cost savings of about $40 million.

Relationship to Chapter 5 - Unemployment Rate

This article gives us an example of demand-deficient unemployment, which results from a lack of overall spending in the economy. Goodyear is one of the world's largest tire companies and makes engineered rubber and chemicals in more than 100 facilities in 29 countries around the world, employing about 80,000 people. They are just the latest automotive parts company to struggle with high-cost facilities, especially in the United States. Auto parts giant Delphi Corp. threatened huge wage cuts and plant shutdowns as it sought ways out of bankruptcy. In addition to reducing overall capacity, the Valleyfield plant was targeted because Goodyear wants to get out of the low-margin, private label product manufactured at the facility. The elimination of tire production in Valleyfield will reduce manufacturing capacity by an additional seven million units. The company plans to cut production by 21 million units, compared with original targets of 15 to 20 million units by 2008. The reduction in both capacity and labour in Valleyfield is related to the company's global strategy to reduce excess high-cost manufacturing capacity.

Personal Reflection -

It is surprising that Goodyear would just close down because there's not enough demand for their product in the American market. It is shocking that instead of making a new product, they decided to fire people. On the other hand, in today's intensely competitive and increasingly global business environment, we face some very difficult choices. The tire maker, which settled new contracts with Canadian and U.S. workers just last week, has already announced closures of tire plants in Britain, New Zealand and Texas. It would make a little sense that the Goodyear Company just close down in one spot, but all over the world! That is amazing. They should try to come up with a new kind of tire to promote their tire company since it was one of the best tire companies out their. I have also noticed that there are less number of commercials of the Goodyear tires on T.V. than how many commercials of it we saw before. The owner probably got old and too tired of thinking of another idea that he/she thought that could be so great that it would bring the demand for their tires back up to high numbers. At a time when there was not as much competition, you could protect your pricing and cost and your margins a little bit better and that model is really breaking down quickly.

Chapter Four

" IRS Attacks 'Charitable' Cheats"
By Dan Caplinger, February 1, 2007
http://www.fool.com/personal-finance/taxes/2007/02/01/irs-attacks-charitable-cheats.aspx?npu=y

This article talks about how when people find a good method for cutting their tax bills, they tend to use it as much as they can, for example making gifts to charitable organizations. Judging from the amount of money and effort that businesses and individuals expend, it's clear that paying less in taxes is a top priority throughout the nation. Many taxpayers have found ways to push charitable strategies beyond the limits of the law, which has attracted the attention of the IRS. The IRS is currently focusing on a special charitable-giving strategy known as a donor-advised fund, to ensure that taxpayers are not exploiting its loopholes to dishonestly save some cash. If you just write a check to charity, you get a current tax deduction, but you give up control over how your donation will be used. Some wealthy donors, preferring to retain this control, establish private foundations that allow them to get similar tax benefits without having to decide immediately which charities will receive the donated funds. Private foundations can be expensive to establish, and they require significant attention from their donors. These funds are set up by independent charities. For each person who donates, the charity sets up a separate donor-advised fund. In return, the donor can take an immediate deduction for the amount of the gift. Unfortunately, taxpayers can use donor-advised funds to make gifts that will benefit them personally. In the wrong hands, a donor-advised fund can use its operating charity almost like a money-laundering scheme, making it harder to link any gifts to their ensuing personal benefit. That's what the IRS is trying to stop. Unfortunately, this pattern is not likely to change. Taxpayers can only make the best of available deductions and other tax benefits as long as they are available, and hope that no one will abuse the system and ruin it for everyone.

Relationship to Chapter 4 - Income tax

The book talks about all the types of taxes that we have in BC write now and much more. For example, direct tax, progressive tax, proportional tax, regressive tax and marginal tax. These all are, in some way or another, related to income tax. The article is about how the people are trying, illegally, to cut their taxes so they do not have to pay any taxes or they pay less taxes. The book goes into how the taxes are calculated and how large or small a tax cut can or can not be. It tells us how some people are in debt because of the high tax rates that BC is not going to put down for a long time, and even if they do, they will still increase something to keep the high debts that the people already have. Eventhough Canada is trying to be fair to everyone with putting the progressive form of taxtion on income, the people are still trying to get rid of the taxation by donating to charities or doing something else that is illegal or not right for them and the economy.

Personal Reflection -

I never knew that you coud decrease the amount of tax that you pay jsut by donating something to an organization. It is nice that their taxes go down when they donate something to a charity, but beacause of this they are trying to, illegally, cut all their taxes off by donating something and writing down something else. I do not think that the government should even allow this, meaning allow the reduction of the amount of tax that should be paid by donating something to a charitable organization. When giving something to charity , you are supposed to have an open and kind mind, but because of this reduction by donating law the people just pay something for their own greed. They give away something little to an organization, but at the end the profit goes to the donator. The donator will have more money left over to spend or to save. This is not fair to the poor, who can not give anything to the charitable organization, so they get stuck with paying their full tax. They should outlaw this rule, because it is not equal among everyone in the province/country and it makes people even more selfish about money than they already are.

Chapter Three

"A 15% raise? Try China or India"
Jubak's Journal, 1/5/07 12:00 AM ET
http://articles.moneycentral.msn.com/Investing/JubaksJournal/A15RaiseTryChinaorIndia.aspx?GT1=8995

This article is talking about how the workers in other countries where labour costs have been low are getting double-digit raises these days. They are far from catching up, but the change is another reason fewer U.S. jobs will be heading offshore. Rising wages in countries such as China and India, while not enough in themselves to slow the movement of jobs overseas, are making the logistics crisis much worse at a speed that few companies can successfully manage. The average worker in India's manufacturing and service sectors got a raise of 13.8% in 2006, according to Hewitt Associates. Wages are projected to climb an additional 12.3% to 15% in 2007. Workers in the Philippines are getting raises of 8.6% to 9.3% projected for 2007. In China, wages in Zhu (or Pearl) River Delta between Hong Kong and Guangzhou have climbed 20% in the past three years. United States workers saw raises of 3.5% to 3.7% on average in 2006 and are looking at another year of sub-4% raises in 2007. Jim Jubak says that U.S. just needs to be patient and very soon the wage gap will be gone. He says that after 32 years of 10% raises, a Chinese worker making $100 a month will have closed the wage gap now separating the Chinese worker from the U.S. worker making $2,000 a month. This is only if the U.S. worker will not have received a single raise in those 32 years. Rising wages in areas such as the Zhu river Delta are pushing Chinese and overseas companies to move factories and jobs to lower-wage regions of the country. These regions have two things in common. The first thing is that they are farther away from the ports that send parts, sub-assemblies and finished goods to the United States, Europe, Japan, and the rest of the world. Second thing is that the infrastructure of roads, rail lines, warehouses, terminals, shipping expediters and the like that's required by the global economy these days is less developed and sometimes virtually nonexistent in these more distant lower-wage manufacturing centers. Some companies are handling the rise in wages in counties such as China and India by moving operations to even lower-wage "platforms" such as Vietnam. Vietnam beat out China, Malaysia and the Philippines in the contest for the 1,200 worker plant. Wages wouldn't be rising so quickly in areas such as Bangalore and the Zhu River Delta if the same logistical problems hindering the efficient movement of gods weren't impeding the movement of workers. It's not just that wages are rising in the Zhu River Delta, for example. the region, which employs 2.5 million workers in 15,000 plastics factories alone, is suffering an acute labour shortage.

Relationship to Chapter 3 - Minimum Wage and Poverty

At the present time, all ten provinces as well as the federal government in Canada have minimum wage legislation. There are several reasons for introducing a minimum wage into the labour market. In this article, the author, Jim Jubak, introduces us to some of the leading countries in terms of wages, that are beating the U.S. in increasing the percentage of increasing wages. This article tells us that the 'low' minimum wages are forcing the jobs offshore. He says that their have been low minimum wages for some number of years, but now are getting double digit raises these days. The book has an article the talks about Minimum Wages and Poverty in Canada and other countries, and this article, by Jim Jubak, is just giving us some statistics of the minimum wages and how the percentage increased and is still increasing throughout the new year.

Personal Reflection -

The minimum wage is low in Canada, and other countries too. For example, I work in McDonald’s and you would think that it would be rich and that it would be able to pay to better than other fast food restaurants, but it does not. For making food, taking order, keeping the floors clean, etc., we only get paid $6.50/hour which makes you feel worthless. I mean even the high school students work because they want to save up for their post secondary or university education and making $6.50/hour won’t help. They would have to start pretty early in their life to save up for that. Even the Shift Managers get paid $9.00/hour, which is not nice at all considering that they take the whole responsibility in their hands for their shift. The minimum wage should at least be $10/hour if not more, so that the Shift Managers can get paid way better than what they are getting paid now. I do like one thing out of this, if I was the store owner, I would like it if there was more money left over for the company and less money towards the hundreds of employees that are employed at that restaurant. But I would think twice before giving my employees low minimum wage, because if I were in their shoes I would want more money. Maybe they should keep the 500 hours law, which is that you have to be at minimum wage- $6.50- for 500 hours, if you have never worked, until you get to 501st hour then you get paid $10/hour. Which I would think is fair enough for every one. But the restaurant should not try make the $6.50/hour employee work as hard as the $10/hour employee.

Chapter Two

"Oil Supply and Demand."

Trading Today, 2005

http://www.tradingtoday.com/26-oil-supply-demand

This article is talking about how oil demand will continue to increase despite the high price of oil. There are more than one sources of demand for oil. As the countries grow, their economy grows so the oil consumption grows with their economy. India and China are some examples of growing economies. The oil demand has already began to increase with the economic growth in China and India. This article also says that the developed countries should change their oil habits, but will likely adapt at a faster pace if oil prices continue to rise. The oil companies are trying to find some oil replacement, but they definitively haven't found one yet. Biodiesel is probably been the most grass roots oil replacement so far. They are run on greases like the ones thrown out everyday by the fast food chains. But there is one issue with biodiesel it is the fact that it still releases emissions similar to gasoline, just lower levels. There are serious issues with biodiesel running at low temperatures, because it thickens easily and requires additives at temperatures below 40 degrees. Ethanol is probably the most well known gasoline alternative. In Brazil sugar is converted to ethanol and nearly half of the fuel sold is ethanol. In the US only about 3% of the fuel sold is ethanol, but the number has been growing.

Relationship Chapter 2 - Change in Demand, and Price

This article relates to chapter two because of the change in demand. They are basically saying that consumer demand for a product is not likely to stay constant over time. The factors that influence consumer demand are always changing. Individual tastes do not remain the same. The demand for oil is really high even though the prices are high. Lead by GM and Ford, most vehicles sold in the US today can run on the E85 mixture and those that are not compatible can be converted for less than $200. While today ethanol in the US is mostly profitable because of subsides, in the future ethanol grown from more fibrous plants instead of corn is predicted to have a better yield. Also pipelines like the oil industries it would become much cheaper.

Chapter One

"Worsening Global Water Quality and Scarcity Problems Drive Need for Improved water Infrastructure, Filtration, Treatment and Delivery."

Market Wire, June 2006.
http://www.findarticles.com/p/articles/mi_pwwi/is_200606/ai_n16500170

This article is talking about how the water quality and scarcity problems are concerns that are showing up. Economic and social demands, and political realities - are driving the overall expansion and consolidation of the broader water industry. These drivers, in turn, give rise to various trends and effects which will likely be key features in the water business for years to come. Water quality and scarcity problems are clearly the ultimate concern and driver behind the challenges, all of the regulations, the opportunities and ultimately, the projected growth for the water business over the coming decades. It also tells us that China and India's significant economic development, escalating the demand for water supply, quality, technology and infrastructure across residential, industrial and commercial segments. China is really a significant player in the water market last 2 years and is planning to spend $250 billion over the next 2 to 3 years on their water infrastructure. It says that India and China needs a large amount of water because it is a developing country. The main point of this article is that the Water Challenge needs a global solution, and Hendrx Corporation intends to be a part of that sloution.

Relationship to Chapter 1 - Scarcity, Land (water)

In economic terms, anything that has a limited supply is referred to as scarce. So this article talks about how the water is a scarcity problem in China and India. But, in reality, everything is scarce because very few things are available in unlimited qualities. The only things that are not scarce are air and sunshine, but water is a real scarce item. When I said land is a resource, you are probably thinking that water is not land. But land is just more than the ten million square kilometers that comprise Canada's land mass. We include such natural resources as mineral, wild animals, vegetation, and WATER. In chapter one it talks about everything that I have written above. India and China are in an immense need of water right now, because they are both developing countries. Their requirement is from the potable, to agriculture, industrial and wastewater treatment. The long term objective of the company that was mentioned above is to supply solutions in each of those areas. In short term, they are concentrating on the potable water, suitable for drinking having no harmful bacteria, more specifically in the Atmospheric Water Generation area.