There’s a interesting new report out from BCG this morning on “Industry 4.0” – the German’s preferred term for how big data, cloud computing, sensors, advanced analytics, augmented reality and improved robotics are dramatically changing the world of manufacturing (known in GE land as the “Industrial Internet”).
BCG surveyed 380 U.S.-based manufacturers, and found that a majority – 53% – see Industry 4.0 as a priority, but not yet a “competitive threat” to their business. The main focus for now seems to be cost reduction, and change is happening fastest in the most cost sensitive industries: semiconductors, electronics, oil and gas. The potential for product innovation, improved client service, increased revenue, etc., is so far taking a back seat.
The BCG folks argue many manufacturers are “moving too slowly to adopt Industry 4.0” and that companies taking a “wait-and-see” approach do so at their peril. The report highlights some interesting examples – for instance:
–A manufacturer of truck engines that has managed to reduce tooling time from 20 weeks to 2 weeks, and tooling costs from $10,000 to $770, by using a 3D printer to create prototypes for a water pump housing used to perform heat and pressure tests on new engines.
-A tire manufacture that has installed wireless sensors on its tires to gather data on temperature, speed, fuel consumption, and location, and will ultimately sell “tires as a service” – where customers pay by the mile, rather than the tire.
You can read the full report here.
Meanwhile, on the Trump watch: the President-elect continues to be the major force moving markets these days. Biotech stocks took a nosedive after he told my colleagues at TIME that he was “going to bring down drug prices.” And a union leader got the full brunt of a Trump twitter attack after saying on cable TV that Trump’s claim of keeping 1,000 Carrier jobs from moving to Mexico was exaggerated.
More news below.
• Stocks Surge on Hopes for Trump, ECB Support
Stocks surged to new record highs on expectations of reflationary policies from the new administration, and helped too by expectations that the European Central Bank will extend its quantitative easing program for at least another six months at its governing council meeting today. That will offset some of the liquidity lost as the Federal Reserve tightens policy next year. The outlier was pharma stocks, which reacted badly to comments from TIME’s newly-crowned Person of the Year that he would try to bring down drug prices. In a break with the pattern of a lot of recent trading, bond prices were largely stable yesterday, although they’ve come under pressure again overnight.
• Trump Taps Climate Skeptic for EPA
President-elect Donald Trump tapped Oklahoma Attorney-General Scott Pruitt, an outspoken skeptic of Climate Change science and advocate of coal mining and shale drilling, to head the Environmental Protection Agency. The choice disappointed hopes for a more consensus-minded candidate that had risen after seemingly conciliatory comments on Climate Change in the wake of his election victory. It also underlined Trump’s determination to rein in a regulator whose influence expanded greatly in the last eight years. Trump also picked WWE founder Linda McMahon to head the Small Business Administration.
• Glencore’s Helping Hand to Putin
In the biggest energy deal of 2016, Qatar’s Sovereign Wealth Fund and Glencore agreed to buy a 19.5% stake in Rosneft, Russia’s national oil champion for $11.3 billion, in a move that will inject some badly-needed cash into the Kremlin’s coffers. Nothing, after all, says “Make Russia Great Again” quite like hawking the crown jewel of your economy at a 5% discount to market to a bunch of traders (who will take a nice cut of the profit margin on 10% of your output) and to a government that you’ve accused of sponsoring terrorism in Syria. The deal undermines western sanctions against Russia, insofar as it relieves the financial pressure on the Kremlin (financing for the deal from a bank understood to be Italy’s Intesa Sanpaolo many attract scrutiny). It’s also a heck of a way for the world’s biggest mining and commodities company to announce its return to an expansion path after two years of retrenchment.
• Wal-Mart’s Crime Problem
Wal-Mart is under pressure from its workforce to clamp down on a nationwide security problem at its stores. An investigation by Bloomberg BusinessWeek, based largely on police data, showed an average of one violent crime a day and hundreds of thousands of incidents of petty crime in 2016. It’s Wal-Mart, so of course the numbers are big. But the problem is worse, proportionally, at Wal-Mart than at Target, which suggests that at least some elements of the problem are within the company’s control. Workers’ rights group Making Change at Walmart accuses the company of failing to invest in proper security. Walmart says it’s working on it.
Around the Water Cooler
• Microsoft Teams With Qualcomm On Tablets
Microsoft and chipmaker Qualcomm are to team up on a new venture in tablets and notebooks. According to The Wall Street Journal, the partnership will result in an update of Windows 10 that runs on one of Qualcomm’s Snapdragon chips, which in turn use technology developed by ARM. The deal will dilute Microsoft’s traditional reliance on Intel chips and create new opportunities for Qualcomm in a segment with higher prices and margins. To some, it looks like a re-run of Microsoft’s ill-fated venture into using ARM technology with ‘Surface RT’, a project that it ended after three years of mediocre sales and a $900 million charge.
WSJ, subscription required
• Italy Leans on its BF in Frankfurt
Italy is begging the European Central Bank for another month to sort out its biggest problem bank, Monte dei Paschi di Siena. The Financial Times said the Treasury in Rome had written to the ECB, which wants MPS recapitalized by the end of the year, to say that Matteo Renzi’s failed referendum gambit has made that deadline politically impossible. Mario Draghi is sure to face pressure from German journalists later Thursday to defend the ECB’s credibility as a supervisor. Italy’s zombie banks, whose main function in recent months has been to finance Rome’s budget deficit while reselling their bonds to the ECB as fast as decency permits, remain a key pressure point in the Eurozone. That’s one of the main reasons the ECB is expected to extend the safety net of QE at its policy meeting today.
FT, metered access
• Slack Signs up Google to Help Fight off Microsoft
Slack and Google are now officially working together to connect Slack’s popular corporate messaging product more closely with Google’s cloud storage services, executives from both companies said. Teams in development, engineering, and sales will work together to serve shared customers, said Brad Armstrong, Slack’s head of business development. The subtext here is that both Slack and Google share a big rival in Microsoft. The Google G Suite competes with Microsoft Office. Google Drive competes with Microsoft OneDrive. And Slack’s flagship service is squaring off against Microsoft Teams, the company’s long-rumored “Slack Killer” that was finally announced last month.
• SpaceX Aims for January Launch as Business Starts to Leak
Elon Musk’s SpaceX said it was aiming to resume launches in early January, four months after one of its Falcon 9 rockets exploded on the launch pad, an incident that the company still hasn’t publicly explained. The targeted launch date, for satellite specialist Iridium Communications, is about a month later than it originally planned. The hiatus has put significant commercial pressures on the company: Inmarsat, another operator of communications satellites, said Thursday it would move the launch of one of its satellites to Europe-based Arianespace, according to The Wall Street Journal.
Summaries by Geoffrey Smith Geoffrey.email@example.com;