Is there a light at the end of the tunnel for General Motors?  The Harvard Business School faculty weighed in..

Robert D. Austin, Associate Professor:

When I worked in a U.S. auto company in the mid 1990s, we were doing many of the right things. But often, when we ran up against the really tough problems, when we started to feel the real pain associated with real change, we pulled back. We were so profitable then, it was hard to muster the will to make the hard choices.

Nancy F. Koehn, James E. Robison Professor of Business Administration:

Beginning in the mid 1920s, GM staged an astounding victory against Ford Motor Company. Alfred Sloan, Pierre Du Pont, and other GM executives placed a series of important bets on what American consumers wanted (different makes, models and prices; cars that were status symbols and identity holders as well as transportation sources) and they did so with careful, consistent attention to what the competition was—and was not—doing. As company leaders rolled out this daring strategy, they also created an organizational structure and culture developed to support a multi-product, vertically integrated enterprise. By the mid 1930s, GM’s market share had risen to 42 percent while Ford’s had fallen to 21 percent. And General Motors had laid the groundwork for decades of industry dominance, offering “a car for every purse and purpose” and pioneering the multidivisional structure that became one of the signal achievements of the modern corporation.

In this context, it is interesting to consider the root causes of General Motor’s decline, which has been under way for 30 years. Although there are many factors that contributed to the company’s long, slow bleed, the three fundamental issues are management’s consistent failure to do the very things that made the business so successful initially.

    * First, pay close attention to what is happening to consumers’ lives in the context of the larger environment—not only their stated preferences, but their hopes, dreams, wallets, lifestyles, and values.
    * Second, keep an equally close eye on the competition.
    * And third, understand how a company’s structure and culture relate to its strategy. Use all this understanding to place innovative bets. This is what the early leaders of GM did. And this is what several generations of executives—beginning in the 1970s with the first oil shocks and the entrance of Japanese imports—have consistently failed to do.

It has been a failure of leadership as astounding and momentous (and ironic) as the company’s early achievement.

A growing number of Chinese are joining tours organized especially for investors who want to take advantage of slumping U.S. real estate prices amid a financial crisis. While China’s ultra-rich have been buying property in the U.S. for years, the buying tours are new, made attractive by still-rising Chinese income levels and American real estate prices that have been falling for two and a half years.

More than 100 Chinese buyers have joined such tours since late 2008. The home-buying opportunities mirror a larger trend. Cash-rich Chinese companies are looking to buy resources made suddenly cheaper by the downturn or companies suffering under the global debt meltdown.

China had the world’s fifth-largest population of millionaires in 2008 with 391,000, up 20 percent from the previous year. Chinese buyers are looking at both commercial property and homes to rent out or use on business trips. And the U.S. has plenty of unsold homes to offer — 3.67 million as of the end of December.

In August, the Alabama State Employees’ Insurance Board approved a plan that will charge workers an additional $25 to cover their insurance premiums, if they don’t take advantage of free health screenings available to all state employees. The program, to begin in January, will require state workers to receive medical screenings for body mass index and health problems such as high blood pressure, high cholesterol and obesity.

Punishment or Opportunity? It is an important step toward better preventive care at a time when health costs are soaring and Americans are in increasing denial about their ever-ballooning weight. State employees are being asked to go to a free health screening, and if necessary, a free doctor’s consultation. If those screenings show that a person is predisposed to illness due to their weight or other conditions, they will be offered help to begin to address their health issues. Only if workers fail to take advantage of the free screening will they be charged the additional $25.

Varying reports place Alabama with the second or third highest rate of obesity in the country. Not the only thing the state is doing to reduce obesity. They will pay for 1/2 of the cost to enroll in Weight Watchers so that employees can learn to change their eating habits and feel better. Now is not the time to resist efforts to make us healthier.

Managing that money is more profitable than offering health insurance.

As if they weren’t screwing us enough already… WellPoint Inc., the nation’s largest health insurance company, ran into a snag last year while pursuing an important new business initiative.  Federal banking regulators insisted on classifying WellPoint as a healthcare company. And that was interfering with its efforts to open a bank. The Federal Reserve Board eventually agreed that the company’s core insurance business could be considered financial services. WellPoint finally convinced the Fed that its mail-order pharmacy and its program for managing chronic diseases were merely “complementary” to its main business — financial services. It pledged to limit them to less than 5% of total revenue.

Insurers are moving away from their traditional role of pooling health risks and are reinventing themselves as money managers — providers of financial vehicles through which consumers pay for their own healthcare. Like home and auto insurance, traditional health coverage is based on shared risks within broad populations of customers: a small proportion with big medical expenses and a large majority with few or none. Premiums paid by the latter help pay the costs incurred by the others and provide a margin of profit. In theory, this system serves everyone’s interests, because people generally can’t know in advance which group they’ll fall into.

Insurance companies began remaking themselves as administrators, providing employers with expert help in processing claims and negotiating rates with doctor groups and hospitals. Profit margins on these services are high because the companies can charge fees without assuming the cost of underwriting customers’ medical needs.

Among the signs of the change is the growth in health savings accounts, which allow individuals and families to pay out-of-pocket medical expenses from tax-exempt savings. As with individual retirement accounts and 401(k) plans, the money in HSAs tends to sit for long periods and can be invested in mutual funds and securities.

“There’s fees for managing the account, transaction fees, fees for investing the funds,” says John Casillas, director of the Medical Banking Project. “You’re going to see many billions of dollars moving from premium payments to professionally managed investment funds under HSA rules. Some people think that banks are going to threaten health plans by replacing them in the marketplace.”

Hence the rush by medical insurers to open their own banks. To help foster this change, the insurance industry developed a new form of health plan carrying a low premium and a deductible (the amount a customer must pay out of pocket each year before the insurance kicks in) of $5,000 or more.

Under the rules, contributions to HSAs are tax-exempt, as are their investment gains. Withdrawals are also tax-exempt if they are used for qualified medical expenses. Over time, HSA balances could grow to hundreds of thousands of dollars.

Parents are suddenly saying ‘no’ and their kids are saying, ‘What do you mean?’

Indulged. Entitled. Those labels have become hot-glued to middle-class and affluent teenagers born after the last major economic downturn, in the late 1980s. They were raised in comparatively flush times by parents who believed that keeping children happy, stimulated and successful, no matter the cost, was an unassailable virtue. A 2007 study found that nearly 75% of parents caved in to their children’s nagging for new video games, half within two weeks.

The annual discretionary spending by teenagers, whose money comes from allowance, gifts and part-time jobs, had dropped 27% to $2,600, from its spring 2006 peak of $3,560. Panicked, stressed parents are struggling to explain and impose restraints, just when teenagers are expecting more spending money, not less. Many adolescents respond with anger at what they see as a bait-and-switch world, fear for their families and confusion about budgeting.

American teenagers, many of whom have weak quantitative skills, are generally naïve about finance. Meanwhile many had debit and credit cards, some were hard pressed to explain the difference. Regardless of family means, most did not have after-school jobs.

Parents hardly relish these conversations. As they sit down with their teenagers, they are agonizing over their own feelings of failure. “Parents are going to feel they’re not giving their kids everything,” said Madeline Levine, a California psychologist. “The kids are going to be confused. They’ve never known not having what they want. And the parents are going to have to tolerate their kids’ anger.”

In familial relationships, money can be a proxy for love and trust. When money has to be limited, underlying tensions become exacerbated. For some families, the financial crisis has been a rallying point, compelling them to articulate values and priorities for the first time. Market researchers say that teenagers are, out of necessity, adjusting. Last week’s survey showed that the amount teenagers allocated for clothes had increased 1%, but that they were patronizing stores with lower-priced labels.

Anecdotes like these prompt economists and therapists to find something positive in all the economic turbulence. The sooner we have these conversations in the family and as a society, the sooner we can focus on core values, and have a more realistic dialogue about the meaning of happiness and money.

Economic inequality is growing in the world’s richest countries, particularly in the United States, jeopardizing the American Dream of social mobility just as the world tilts toward recession, states a 30-nation report. The gap between rich and poor has widened over the last 20 years in nearly all the countries studied, even as trade and technological advances have spurred rapid growth in their economies.

With job losses and home foreclosures skyrocketing and many of these countries now facing recession, policy makers must act quickly to prevent a surge in populist and protectionist sentiment as was seen following the Great Depression. The United States has the highest inequality and poverty rates in the OECD after Mexico and Turkey, and the gap has increased rapidly since 2000

Rising inequality threatens social mobility — children doing better than their parents, the poor improving their lot through hard work — which is lower in countries like the U.S., Great Britain and Italy, where inequality is high, than countries with less inequality such as Denmark, Sweden and Australia.

In the United States, the richest 10 percent earn an average of $93,000 — the highest level in the OECD. The poorest 10% earn an average of $5,800 — about 20% lower than the OECD average. Some Americans make only $5,800 a year?! Who are these people?

Another 1,600 workers at three General Motors Corp. factories will be laid off indefinitely over the next few months as the company tries to control its inventory amid a worsening U.S. sales slump.

About 700 workers at GM’s pickup truck plant in Pontiac will be furloughed starting Feb. 1, while another 500 at the Detroit-Hamtramck sedan factory will be laid off starting Jan. 12. In addition, 400 workers at a two-seat sports car assembly plant in Wilmington, Del., also will be out of work starting Dec. 8.

During the layoff, workers will get close to full pay and benefits through supplemental pay and state unemployment. After 48 weeks they go into a jobs bank in which the company pays 85% of their salaries, plus benefits. Within two years, the workers could lose pay and benefits if they don’t transfer to another plant. tsk tsk…

If your household income is $250,000, other people might consider you rich–even if it feels as if you’re just getting by.

Whatever the number, focusing on income alone overlooks many factors that affect whether people feel rich or not. Where you live is obviously one of them, since $250,000 buys a lot more in Milwaukee than it does in Manhattan. And as any parent knows, household income tends to evaporate when the bills for diapers, daycare, braces, and college come due.

So Yahoo Finance crunched some numbers to figure out what it takes to be rich in 40 cities across America–for a typical couple with no kids, and for a family of four. The average U.S. household is home to 2.54 people, so factoring in the actual size of your household produces a more realistic estimate of how much income it takes to live like the wealthiest 5% of Americans. For a family of four, nationwide, that’s $490,000.

By the same measure, here’s the household income required to be “rich” in the five most and least expensive cities in our sample:

New York. Couple without kids: $359,494; Family of four: $718,989

San Francisco. Couple without kids: $359,061; Family of four: $718,123

San Jose, Calif. Couple without kids: $354,513; Family of four: $709,025

Washington. Couple without kids: $347,917; Family of four: $695,833

Boston. Couple without kids: $316,613; Family of four: $633,227

U.S. average. Couple without kids: $245,218; Family of four: $490,436

Colorado Springs, Colo. Couple without kids: $207,472; Family of four: $414,943

Omaha. Couple without kids: $207,019; Family of four: $414,038

Fresno, Calif. Couple without kids: $205,349; Family of four: $410,698

Albuquerque, N.M. Couple without kids: $193,483; Family of four: $386,965

El Paso, Texas. Couple without kids: $175,161; Family of four: $350,321

To view the entire list.

Across the country, authorities are becoming concerned that the nation’s financial woes could turn increasingly violent, and they are urging people to get help. In some places, mental-health hot lines are jammed, counseling services are in high demand and domestic-violence shelters are full.

With nowhere else to turn, many people are calling suicide-prevention hot lines. The Samaritans of New York have seen calls rise more than 16% in the past year, many of them money-related. The Switchboard of Miami has recorded more than 500 foreclosure-related calls this year.

“The financial stress builds up to the point the person feels they can’t go on, and the person believes their family is better off dead than left without a financial support,” said Kristen Rand, legislative director of the Washington D.C.-based Violence Policy Center.

Rising mortgage defaults and falling home values are at the heart of it. More than 4 million Americans were at least one month behind on their mortgages at the end of June, according to the Mortgage Bankers Association. A record 500,000 had entered the foreclosure process. And that trend is expected to continue through next year, despite the current programs from the government and the lending industry to refinance delinquent homeowners into more affordable loans.

Adding to financially tense households is an air of secrecy. Experts said it’s common for one spouse to blame the other for their financial mess or to hide it entirely. Suicide is never the answer.

The National Debt Clock near Times Square in New York, shown yesterday, has run out of digits to record the growing figure. Great….

Finance chiefs from the world’s richest nations are set to meet in Washington for a crucial but uncertain meeting at a time of unprecedented fear about the global financial system.The Group of Seven meeting will bring together finance ministers and central bankers on Friday from the United States, Germany, Japan, France, Britain, Italy and Canada for some collective-thinking on the credit crunch and crashing stocks.

They are to be joined by counterparts from emerging markets including Brazil, Russia, India and China for an impromptu gathering of the expanded so-called G20 group. The United States finds itself in a rare position of weakness, facing many allies that have been highly critical of its economic policy and regulatory system blamed for the problems. US Treasury Secretary Henry Paulson said Wednesday the meeting would be a forum “to discuss the steps that each of us are taking to confront this crisis and ways to further enhance our collective efforts.”

“The USA will lose its superpower status in the global financial system. The world financial system is becoming multi-polar,” says Social-Democrat Finance Minister Peer Steinbrueck. Is anyone or any economy safe?

American interest in adopting foreign children is stronger than ever. So why is the United States adopting fewer of them? According to early projections by the State Department, foreign adoptions have dropped an estimated 10% from last year-the fourth straight year of decline since the high-water mark of 22,884 in 2004. Experts say the downward trend is likely to continue as countries such as Russia, Guatemala and China, which in recent years had been among the largest providers of orphans for adoption, have either dialed back their programs or ended them entirely.

In China, a process that used to take a year-and was lauded for being efficient, transparent and affordable-now takes 31 months and is expected to get longer. China says increased prosperity in the country means fewer abandoned children. Russia, Ukraine and South Korea, all facing declining birthrates, are encouraging domestic adoption and making fewer children available to foreigners. The average cost has also soared to $40,000, the most expensive in the world. At least 600 approved adoption applications submitted by Americans have been returned to their agencies without matches. Click here to view adoption graph.

The US has again topped a widely-watched index ranking country competitiveness, despite the financial crisis that has left it and other highly ranked nations facing market meltdown and a prolonged economic downturn.

Switzerland, Denmark and Sweden retain their second, third and fourth places respectively in the league table compiled by the Geneva-based World Economic Forum.

Oh boy… Like Bill Clinton, he refuses to just fade away. Vladimir Putin has released yet another display of his own masculinity: a DVD entitled ‘Let’s learn judo with Vladimir Putin’.

‘Let’s Learn Judo with Vladimir Putin’ is the product of collaboration between Putin - a black belt - and former World and Olympic judo champion Yasuhiro Yamashita.

Putin is a one-time judo champion of his home city St. Petersburg - called Leningrad at the time. At least the ex-president is in great shape at 56. Good for him.

Women With Only One Female Boss Have It Bad?

A new study finds that your boss’ gender can affect just how much pain he or she seems to inflict. Researchers at the University of Toronto used data from a 2005 national telephone survey of working adults in the United States and compared the stress levels and physical health problems of men and women working in one of three situations: for a lone male supervisor, a lone female supervisor, or for both a male and female supervisor.

The study found that:
Women who had only one female boss reported more psychological distress (such as trouble sleeping, difficulty focusing on work, depression and anxiety) and physical symptoms (such as headaches, stomach pain or heartburn, neck and back pain and tiredness) than women who worked for one male boss.

Women who reported to a mixed-gender pair of supervisors also reported more of these symptoms than their peers who worked for a single male boss.

Men who worked for a single supervisor, regardless of the supervisor’s gender, had similar levels of distress.
Men who worked for a mixed-gender pair had fewer mental and physical symptoms than those working for a lone male supervisor.

The findings, specifically those of female subordinates with females bosses, contradict theories suggested by previous studies that demographic similarities between a boss and their subordinate would promote harmony in the work place, while demographic differences would create problems.

The researchers speculated that these contradictions may stem from the stereotype that it is more “normal” for men to be leaders and display the typical leadership characteristics.

Something about the nature of the work itself is influencing these health differences. For example, women working with a woman supervisor might tend to be found mostly in the “caring sector or in jobs that tend to be under-resourced, under-funded and under-valued,” such as social work or education, creating stress both for the workers themselves and stress for the boss that might trickle down to her subordinates.