Hard Disk Drives Returning

The flooding in Thailand might have been worse than forecast, but the hard disk drive factories are bouncing back faster than anyone expected. Some factories have already resumed production, and near-normal production levels are expected around April.

Demand for desktop computers continue to be soft, so widespread shortages of hard disk drives are not so likely. However, the potential for shortages did put something of a damper on price promotions for desktop computers during the Christmas season.

The S.T.E.M. Scam

In the past two weeks there has been a big push for “S.T.E.M.” — training in science, technology, engineering, and mathematics. The United States, it is said, is falling behind the rest of the world in these technical areas. Supposedly, large number of jobs in these fields are going unfilled. Handpicked commissions are calling the situation a crisis.

Don’t fall for it. If it is true that the United States is falling behind, it is not because of lack of training, but because of lack of interest from business. Plenty of people, millions actually, have all the training you can get in an area of science, technology, engineering, or mathematics, but aren’t working in their field because the jobs aren’t there. How many jobs are there really? Go to any major job site and search for “mathematician” as a job title. Good luck finding anything at all, anywhere in the United States. Nor do botanists have it much better. I found 1 job for a mathematician and 2 for botanists when I searched at Monster.com. Were you thinking of becoming an astrophysicist, seismologist, or oceanographer? Where would you work? When I searched, I could not find a single job opening with those words in the job title. A search for “Geologist” turned up 70 openings, but still, that is 70 jobs for the thousands of unemployed and underemployed geologists in the country to fight over.

A search for “scientist,” “technology,” or “engineer” is more fruitful, but these words are mostly found in combination with other words and long lists of required skills and experience. It is not enough to be an “engineer” or even an “electrical engineer” if you want a job. If you are an electrical engineer with experience in automotive safety, there may be a job for you, but that is not a skill combination you can qualify for based on education alone. It is the same story with most S.T.E.M. jobs. They require rare combinations of very specialized skills. When you look at the jobs available within any specialty, the numbers are small. And when technical workers apply for jobs outside of their area of specialty, they have the same chance that a dishwasher or taxi driver would have applying for those openings.

As a society, we shouldn’t be trying to push people who have an apprehensive feeling about technical work into technical fields. As an individual, you will do better, financially and otherwise, working in a field that appeals to you. If you really, really want to be a scientist, you will find a way to make it work. But if you go into a technical field just because of the promise of large numbers of jobs, you are likely to be disappointed. And for businesses, the skilled workers with advanced degrees are there for the taking, whenever they decide they are really interested in hiring.

This Week in Bank Failures

The discussion surrounding the financial condition of the failed hedge fund/brokerage MF Global shows that many people don’t recognize the prominent role that off-balance sheet accounting plays in banking. These creative accounting techniques hide bad assets and worryingly large liabilities outside the company, often in shell companies nominally owned by independent investors. Recent commentary suggests that some observers and journalists had imagined that this was merely an accounting fraud employed by the likes of Enron and Worldcom. In fact, though, off-balance sheet accounting is a recognized and pervasive part of the banking industry. Among other things, the U.S. credit card business would not exist without off-balance sheet accounting.

MF Global’s accounting maneuvers appear to be legal, at least in their details released so far, and not so different from accounting practices at its competitors. MF Global hid, or at least deemphasized, the extent of its exposure to sovereign debt. Other banks, brokerages, and funds, you may safely assume, use the same approach to hide other categories of weak assets, and the public may never notice until the company goes under.

Too big to jail: The term “bankster” used by political activists to describe shady and self-serving bank executives is often an exaggeration, but not in Spain. The government there has decided to pardon a convicted criminal, Alfredo Saenz, so that he can continue to serve as CEO of Banco Santander, that country’s largest bank. Santander’s holding company is also the parent company of Boston-based Sovereign Bank, one of the United States’ banking giants. The presence of a felon in the executive suites of a bank is not as significant as the specific crime Saenz was convicted of. In the 1990s, Saenz and two other bank executives fabricated accusations to send four customers to jail (though all were released when the truth was discovered) in an attempt to squeeze an extra €4 million out of them. Banking regulators in Spain could still take action to bar Saenz from the banking industry based on his criminal record, but that would have been automatic if Saenz had been sent to jail.

On Wednesday, the NCUA liquidated BCT Federal Credit Union, of Binghamton, New York. It had 3,900 members. Member accounts were transferred to Visions Federal Credit Union.

Another credit union was liquidated tonight. It was O.U.R. Federal Credit Union of Eugene, Oregon, with 1,379 members. Member accounts were transferred to Northwest Community Credit Union.

Deja Vu: General Motors Kills the “Electric” Car

The advertising line for the Chevrolet Volt, “Somebody has to be first,” takes on a whole new meaning with the recent revelation that the car’s battery pack has a strong tendency to smoke or catch fire. No one has been hurt, but it is just a matter of time. General Motors is worried enough to recall the car before it has had time to think about a fix. Supposedly it is removing the Volt from the road temporarily, but it also has not made any promises about how soon the car could be redesigned and rebuilt.

At the time that General Motors released the Volt, it appeared as if it was rushing to release a second-round prototype design that hadn’t been meant for production. Two recent revelations about the battery pack reinforce that perception. First, as mentioned, the finding that the battery pack is fairly consistent about generating excess heat, smoke, and fire when damaged. This suggests that General Motors had not had time to test for this before or at any point in the first year of the car’s release. Competitors have been testing their cars in this manner for more than a decade, so it’s hard to escape the conclusion that the Volt was released very early in the product development cycle. Second, that there was no published procedure for discharging the battery pack after it is damaged. That is the kind of maintenance procedure that would be normally be written and tested for a year or two before a car’s release. For it not to still not exist a year after release is hard for automobile industry observers to understand. It creates the impression that the product design work is not very far along at this point.

General Motors had little choice but to trot out the Volt a year ago to support its stock offering. But it did not have to ship it by the thousands while the design engineers were still working. Now, a noticeable fraction of the funds from the stock option must be used to repair the cars that were shipped prematurely, along with the damage done to the Chevrolet brand and General Motors’ reputation. With a flurry of actual electric cars coming to market in the coming year, boasting the kind of thorough product testing that the Volt obviously did not have, General Motors looks a lot like the new kid on the block, trying to catch up with an industry that has a several-year head start on it. Which, of course, it is.

It does not help that General Motors insists on calling its hybrid vehicle an “electric.” General Motors famously killed its actual electric car in the 1990s. Now it has killed its ersatz “electric” car. It’s like it just can’t help itself.

Upsell Kills Bally Total Fitness

In the end, Bally Total Fitness did not survive the upsell strategy it put in place five years ago.

Bally planned to boost revenue by getting more members to hire personal trainers. To this end, it reminded its members of the availability of personal trainers about 20 times on each visit to the facility. Members who did not have personal trainers were put off by this approach, and membership numbers and attendance both plummeted. Bally went bankrupt twice. It closed and sold many of its locations, especially in the center of the country.

Now Bally is selling most of its remaining locations, covering its best facilities, most of its geographical areas, and more than half of its members, to LA Fitness, in a deal that closed late yesterday and takes effect at the start of business today. Bally will retain just 100 locations, along with its exercise equipment products and other product lines. The deal appears to be structured so that LA Fitness is buying just under half of Bally’s assets.

LA Fitness is purchasing the assets of 147 Bally locations but will be selling or closing some of them this month.

The majority of the acquired clubs will remain open, but some will be closing before the end of the year.

LA Fitness plans to hire the employees from the locations it is acquiring, including the locations it will be closing. It will be moving equipment from the clubs that close to its other locations.

Bally will continue in a sense, but faces an uncertain future after its transition from a national brand to a local one. More important in a business sense, its serial bankruptcies ensure that its previous owners and creditors will not profit from its continued operation.

It is a cautionary tale for executives who would imagine that upsell is a risk-free way to grow a business. Sometimes upsell is an appropriate strategy, but the risks are greater than with most marketing strategies. If your marketing approach alienates prospective customers, that is a problem, but if it alienates your existing customers, you could lose your whole business.