The Most Important Economic Challenge of Today — CEO Daily, Tuesday, 10th October
I had dinner last night at Fortune‘s Most Powerful Women summit in Washington, a gathering of 400 of the most interesting women in business. The topic for the evening was workforce training and development—which I would argue is the most important economic issue facing the country. Fears that trade and immigration are undercutting the middle class are largely misplaced; and fears that technology will lead to a dearth of jobs ignore the lessons of history. But concern that our workforce doesn’t have the skills it needs to fill available jobs, both now and in the future, is a serious cause for concern.
To her credit, Ivanka Trump, who took part in last night’s panel, has made this one of her top issues. “We have six million vacant jobs in this country,” she said. “That’s both an enormous challenge and an enormous opportunity.” She called on industry and trade organizations to create apprenticeship programs to help develop the necessary skills.
Lockheed Martin CEO Marillyn Hewson said “there are jobs today we are out seeking candidates for—autonomy jobs, human-machine engineering jobs, advanced manufacturing jobs.” She said there are other jobs “we know will be needed in the future—data, data analytics, sensor engineers.” And yet the country isn’t adequately training the people necessary to fill them.
Deloitte CEO Cathy Engelbert told the group that “65% of today’s grammar school kids will end up in jobs that don’t even exist today.” Continuous learning “is something we need public-private partnerships around to drive results.”
The focus on training echoed what we heard last month at the the Fortune and TIME CEO Initiative in New York. This is close to a national crisis, and business and government need to work together to solve it.
You can read more news from the summit here. Tomorrow’s featured guest: Canadian Prime Minister Justin Trudeau, who joins me in the minority.
More news below.
• California Ablaze
Wildfires fanned by strong winds swept through northern California’s wine country on Monday, killing at least 10 people, destroying hundreds of homes and businesses, and forcing some 20,000 people to flee. Governor Jerry Brown declared a state of emergency for Napa, Sonoma, and Yuba counties, encompassing some of the state’s prime wine-making areas. He later extended the declaration to include four more northern California counties and Orange County in Southern California. Fortune
• GE Yields to Peltz’s Pressure
General Electric added Edward Garden, chief investment officer of activist investor Trian Fund Management, to its board, responding to Trian’s pressure for a more thorough restructuring. GE’s share price has fallen nearly 20% since June and is now at a four-year low. The move came on the eve of a vote by Procter & Gamble shareholders on whether to appoint Trian CEO Nelson Peltz to the company’s board, against the wishes of management. Fortune
• May Revives Hard Brexit Specter
U.K. Prime Minister Theresa May revived the threat of walking away from talks over future relations with the EU, a concession to hardline “Brexiteers” in her own party who don’t like her proposal for a two-year transitional period starting in 2019. The EU continues to refuse to discuss post-2019 issues until talks on a financial settlement—the so-called Brexit bill—have made “sufficient progress.” The prospect of trade and investment falling off a cliff in 2019 has pushed sterling down to a three-month low, and also unnerved the Federation of German Industry. BBC
• Trump Prepares to Smite the Solar Industry
Following on from the scrapping of the Clean Power Plan, the Trump administration could be on the verge of doubling down in its efforts to rebalance energy policy in favor of the coal industry. In a column for Fortune’s Insiders, Justin Talbot-Zorn argues that proposed tariffs on imported solar cells will roughly double the cost of most solar installations. Greentech Media estimates this would stop two-thirds of U.S. solar installation through 2022, jeopardizing some 88,000 jobs. For comparison, the coal industry employs 54,000 jobs nationwide. President Trump is due to take a decision on the tariff proposals soon. Fortune
Around the Water Cooler
• AIG Puts a Price on Storm Damage
AIG said it expects to book pretax catastrophe losses of around $3 billion in the third quarter, due mainly to Hurricanes Harvey, Irma, and Maria. Earthquakes in Mexico make up most of the balance. Chubb, the world’s largest listed property insurer, has already estimated after-tax losses of up to $1.28 billion, while reinsurer Munich Re has warned it may miss its profit target for the year. Ratings agencies have so far said the hurricanes wouldn’t affect the sector’s capital base materially, but the temptation to raise premiums will grow with every piece of evidence showing how widely the financial damage is spread. Fortune
• LVMH Basks in the Glow of an Improving Economy
The good times are back for luxury goods makers, a reflection of how global growth has broadened and quickened this year. LVMH, the largest player in the sector, said third-quarter sales rose 12% in constant currencies, well ahead of analysts’ expectations. All of its divisions, with the exception of wines and spirits, posted revenue growth above 10%. The figures were the first to include the full consolidation of Christian Dior Couture. Bloomberg
• China’s Central Bank Head Lifts the Spirits of Real Estate Developers Everywhere
China’s outgoing central bank governor Zhou Xiaochuan has called in an interview for the country to scrap its capital controls, warning that the cost of reform will rise in future if China’s structural problems are allowed to fester behind the current ringfence for too long. Zhou is best known for his program to internationalize the renminbi. But his plan was blamed by his opponents for a flood of capital outflows in 2015 and 2016 that threatened the stability of China’s financial system. The backlash against those outflows is still in full swing as the Communist Party approaches a convention that will determine its leadership for the next five years. FT, metered access
• Honeywell to Unveil Makeover
Honeywell International is expected to unveil a corporate makeover on Tuesday that ties its growth more strongly to aerospace technology—the opposite of what activist investor Third Point Capital has urged since April. CEO Darius Adamczyk, like his peers at other conglomerates, is under pressure to pull apart a portfolio of disparate businesses spanning automotive turbo chargers, burglar alarms, and fishermen’s boots. The results of the “comprehensive portfolio review” will be out before New York markets open, probably accompanied by new profit targets. Reuters
Summaries by Geoffrey Smith; email@example.com