Harley-Davidson Abondons India

Harley-Davidson announced that it was discontinuing manufacturing and sales in India, effectively abandoning the world's largest motorcycle market. Harley-Davidson joins the list of foreign manufacturers that have not been able to enter the Indian market, including General Motors, which stopped sales in India in 2017, and Ford, which entered a joint venture to scale back its Indian operations. These companies all exercised the option to abandon.

Dividend Comeback

 Dividends took a major hit during the early part of the COVID lockdown, with numerous companies cutting or eliminating dividends. Now it appears that dividends are making a comeback. In August, 13 S&P 500 companies announced dividend increases, but only two companies announced a dividend cut. Remember, a company will generally only increase dividends if it believes that it can maintain that dividend in the future. Overall, this appears to be an indication that these companies believe the worst of the economic crisis may be over.

Loyalty Backed Bonds

Delta announced that it would issue $6.5 billion worth of new bonds. What is particularly interesting is that the bonds will be backed by the company's SkyMiles loyalty program. Although Delta did not disclose the value of SkyMiles in the announcement, United Airlines issued debt in June backed by that company's MileagePlus program, which it valued at $20 billion.

NPR Goes Junk

 A recent podcast from Planet Money on NPR details the purchase of a junk bond issued by Hornbeck Offshore. Hopefully, the initial purchase was designed for the podcast, not as an investment. For example, the bond was purchased because it had the lowest price, which means the bond had the highest yield to maturity because it was likely the closest to bankruptcy. If you listen to the podcast, you will find out that the company did eventually go through a bankruptcy reorganization. One of the most perceptive comments made after the bond was initially purchased was that it would not likely make it to maturity. The podcast is worth a listen since it is an interesting journey of the purchase of a junk bond through the bankruptcy process.

Currency Fluctuations Damage Earnings

In its latest report, Kyriba estimates that North America companies earnings fell by $10.77 billion due to currency fluctuations last quarter. The most common currencies affecting earnings were the Brazilian real, the euro, and the Mexican peso. The industry that was most affected was Healthcare Equipment & Supply. In contrast, European companies had a negative earnings impact of $1.44 billion.

Kia's Home Run

When Kia debuted the Telluride, the company set production capacity at 60,000 units. Demand was so high that the company upped production to 100,000 units, but one couple has already waited 9 months for their SUV and they were told to expect another 5-6 month wait. A production shutdown due to COVID-19 has slowed delivery and once production restarted, a parts shortage still limited manufacturing. Obviously, sales of the Telluride is a best-case scenario for Kia, although production difficulties means the best-case has been limited to date. One other thing we want you to note is terminology. The article states that the turn rate was 11 days for most of the year, but it is currently at 0 days. The turn rate is the same as the days' sales in inventory ratio we discussed in the textbook.

Total Cost To Reward And Retain Employees

As we mentioned in the textbook, there are numerous other ratios that can be calculated and analyzed. The American Productivity & Control Center (APQC) is advocating a new ratio, the total cost to reward and retain employees (TCRRE). This ratio is calculated by summing costs for compensation, benefits, payroll processing, award/incentive administration, and employee assistance, divided by sales. In using this ratio, APQC argues that a low TCRRE ratio may indicate that a company may be spending too little on employees, which can result in lower morale or employee satisfaction. However, as with most other ratios, there is no absolute measure for this ratio. In this case, the ratio is determined in large part due to the company's size, culture, internal reward, and retention practices.