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CEO Daily: Tuesday, September 15

September 15, 2015

If you read just one story this morning, make it David Sanger’s news analysis in the New York Times, which shows how thoroughly befuddled the U.S. government is in devising an effective response to cyber attacks from China, Russia and Iran.


For weeks, there have been reports that the administration was on the verge of sanctions against Chinese hackers responsible for a recent wave of intellectual theft and espionage. But action has been stymied by disagreements within the administration, both over whether acts of espionage – like the theft of 22 million personnel records from the Office of Personnel Management – should provoke sanctions, and also over the danger of sparking a diplomatic blow up with Xi Jinping before his state visit this month. Talks last week with a high-level envoy from China to the White House were “pretty ugly,” Sanger reports. But the White House appears to have dropped the idea of sanctions prior to Xi’s visit.


The Chinese leader, meanwhile, seems to be playing this one well, planning a stop in Seattle to meet with tech leaders before making his way to Washington, and offering new inducements for U.S. tech businesses in China.


At Fort Meade on Friday, the President said: “There comes a point at which we consider this a core national security threat.” But where is that point? In testimony to Congress last week, Intelligence Director James Clapper said the following:


“Cyber threats to U.S. national and economic security are increasing in frequency, scale, sophistication and the severity of impact. And although we must be prepared for a large, Armageddon-scaled strike that would debilitate the entire U.S. infrastructure, it is not our belief that that’s the most likely scenario. Rather our primary concern are the low to moderate level cyber attacks from a variety of sources that will continue and probably expand. This imposes increasing costs to our businesses, to U.S. competitiveness, and to national security.”


A host of cyber security firms are helping companies try to defend themselves from cyber attack. But business can’t fight this war alone. Ultimately, the government has to devise an effective deterrence strategy to manage the threat.


Enjoy the day.






Alan Murray

Top News

• Fiat Chrysler, UAW continue negotiating 

Fiat Chrysler and the United Auto Workers union extended their current contract on an hour-by-hour basis as the parties continued to hash out the details of a new four year-agreement. The contracts cover around 140,000 U.S. factory workers, when also tallying up those held at Ford and General Motors, which each extended their contracts with the UAW indefinitely on Monday. FCA CEO Sergio Marchionne canceled plans to attend a major auto show in Germany to stay in the U.S., a sign to some a deal was near.  New York Times (subscription required)

• Target enters grocery delivery wars

Target is joining forces with startup Instacart to pilot a delivery program in Minneapolis, where the big box retailer is based, the latest chain to explore how to tackle a growing business that could be worth $18 billion in three years time. Target now joins the ranks of Walmart, and Whole Foods in competing in the fast-growing market. It is also part of CEO Brian Cornell’s broader push to overhaul Target’s grocery business. Fortune

BMW CEO faints at auto show

BMW CEO Harald Krueger collapsed during a news conference at the Frankfurt Auto Show in Germany on Tuesday, falling as he was presenting the automaker’s new lineup. USA Today and others report he was conscious when he left the stage, and the roundtable he was set to hold with reporters was conducted by the company’s chief financial officer. The 49-year-old executive saw a doctor after he fainted and who recommended he cancel his appointments, though BMW said the medical team ruled out anything serious.  USA Today

• Why China reforms disappoint

Over the weekend, China generated headlines when it was reported the nation would pursue some tepid reforms for its massive state-owned companies. But the scope was narrow: the government will allow SOEs to accept private investors. As Fortune points out: no talk of replacing managements run by politicians and no discussion about making those firms accountable to anyone besides the Communist Party. “In the process of deepening reforms of state-owned enterprises, the leadership of the party can only be strengthened, not weakened,” said Zhang Yi, who runs the commission that oversees Chinese SOEs.  Fortune

• Oil firms brace for financial pain

U.S. energy companies, which have borrowed and spent billions of dollars to pump oil even as crude prices tumble, are expected to face a financial reckoning this fall. Experts say that small drillers are prepping for cuts to their credit lines in October, as banks re-evaluate how much energy firms’ oil and gas properties are worth. And as WSJ reports, some of the smaller firms are already negotiating with their lenders in a bid to preserve cash.  WSJ (subscription required)

Around the Water Cooler


• Trump is right about unemployment

Donald Trump could be a fact checker’s worst nightmare: not only do many of his sweeping statements seem full of hot air, but he’d argue with the person checking the facts. But in sweeping comments he made out the job market while on CBS’ Face the Nation, an argument can be made Trump is spot on. While claiming Americans are living in a “false economy,” Trump said the unemployment rate is actually 40% rather than the 5.1% reported by the government. As Fortune notes, that’s accurate when looking at the broadest definition of unemployment: 40.6% of the population over the age of 16 is unemployed.  Fortune

• CEO charged in horoscope scheme
The CEO of a mobile aggregator that wasn’t identified by federal prosecutors was among six executives that were charged with running an alleged fraud scheme that charged customers millions of dollars for unsolicited text messages with horoscopes, celebrity gossip and trivia. The scheme reportedly affected “hundreds of thousands” of customers. The feds say the defendants used the cash to pay for gambling, vacations and other lavish expenses.  Bloomberg
• The untried Fed rate changers

Fortune points out that many of the individuals that could potentially vote to raise short-term interest rates haven’t had any experience making such a move throughout their entire careers – a quirk that comes to light as the Fed hasn’t raised federal funds rates since 2006 (nor cut them since late 2008). Of the five current Board of Governors, the longest-serving member only joined in 2009. And among regional Fed presidents – only Richmond Fed President Jeffrey Lacker voted to raise rates, just once nearly a decade ago.  Fortune