Business Pivot Point

Two years back, General Motors – USA, has been rated as the best company in the world, with the tag of being the largest automobile company in the world. The tag was held y GM for decades and was snatched away by the Japanese automobile giant Toyota only last year.

But since 2007 middle, General Motors has been facing a big crash in sales month after month, due to which it ended up losing money at break neck speed. In the last twelve months alone, it has lost over 24 billion dollars and has now been forced to file for bankruptcy.

The new US government has said that there will be no blanket support for General Motors, unless it strikes better deal from its bondholders and employees. The official bankuptcy filing under Chapter 11 is expected to happen in the next few days.

This is expected to lead to close to half a million job losses over the next few quarters, which can push back the US economic recovery further.

North Korea went out of the five nation group, two months back. A month back it sent out the UN nuclear inspectors out of its nation, and followed it up with a long range nuclear capable missile testing two weeks back.

Now it has conducted two underground nuclear tests which is expected to communicate a tough message to South Korea / Japan and US. Unconfirmed reports say that North Korea is planning to conduct testing of many short range missiles over the next two weeks.

Reports also say that North Korea has resumed production of nuclear missile material by processing spent fuel in one of its closed factories.

The Sri Lankan army has offically declared victory over the Liberation Tigers of Tamil Eelam, popularly known as LTTE, few days back. The country’s President has announced the victory and celebrations are seen all across the Sri Lankan capital for the last few weeks, and is expected to continue for some more time.

The Sri Lankan army has been battling the Tamil terrorists for over 25 years, and in the last one decade alone they have lost over two billion dollars due to the fighting. Till two years back over 40% of the Sri Lankan coastal area was under the control of the LTTE and the Sri Lankan government even gave up the fight and sought peace talks with the LTTE two years back.

But with the global fight against terrorism growing fast, the Sri Lankan Government saw the end of access to sophisticated weapons by LTTE, and went on the offensive. It paid off with total destruction of the LTTE network over the last 15 months and now the entire country is under the government control.

The Sri Lankan government has assured India and the UN that the Tamils will be able to lead a peaceful and prosperous life in Sri Lanka alongwith Sinhalese.

The US bank Stress tests which were released two weeks back indicated a massive 75 billion dollar shortfall in the capital requirement of the top banks of the country. The US government gave them till till June 1^st week to confirm their fund raising plan, with a execution deadline of August 2009.

But most of the banks have already spun into action and have so far raised over 55 billion dollars in the last two weeks alone, and the balance fund is expected to be raised over the next few weeks, well ahead of the government deadline.

The banks have rushed to the market and raised fund, more because of fear that any further market crash might make it difficult for them to raise funds. And the government has made it very clear that they will not provide any financial assistance to any bank for the capital shortfall.

The initial stress-Test results were relaxed post discussions with the various banks involved. The banks are rushing to raise the money from the market, and return the money borrowed from the US TARP fund, so that they can take independent decisions in terms of salaries and also key business issues.  Once the US government hold on any bank goes up, then it is bound to come under indirect control of the US FED which is not good from management independence point of view.

The Parliament elections for India are over and the results were announced few days back which was totally unexpected. All the leading news channels had predicted a hung parliament with neither of the two largest parties getting majority.

But the results were a surprise shocker, and the Congress party came out victorious with over 202 seats on their own. That helped them to get the support of few other regional parties and surpass the 272 seats mark, to claim for government formation.

Given the history of the Congress party, in managing coalition government, we can expect India to have a stable government for the next five years. That confidence has made many foreign institutional investors waiting in the side lines to rush to India, which lead the stock market index to hit 20% gain in the first two days after announcement of the results.

The previous government was also lead by the Congress party, but it was at the mercy of the Left front which had over 60 members supporting it from outside. That forced the government to avoid any major reforms, which were long pending in insurance / finance and also infrastructure.

In the latest elections, the Left parties have been reduced to non-relevant level, and the Congress party has gained enough clout individually. That is expected to help it in taking reforms in an aggressive manner.

Pakistan government is under tremendous pressure from the US government which is using both carrot and stick approach towards Pakistan.

Pakistan took the risk of officially handing over the Swat Valley region to Taleban terrorists, under a peace deal two months back which was vociferously rejected by the US government. The US government threatened them with direct military action inside Pakistan if it is not able to dismantle the terrorist network inside Pakistan.

Also the US government announced a massive 3 billion dollars financial aid to Pakistan to tide over the current issues. Now the Pakistan government has started taking military action against the Taleban and is said to be successful in pushing the militants out of parts of Swat valley in the last few days.

Unconfirmed reports say, that in the next few weeks, Swat Valley could come back under Pakistan control. Both Pakistan and the US were responsible for creating these terrorist groups, as per Pakistan President Zardari.

The Taleban has over 70000 fighters as per US and Pakistan report published two months back, but now Pakistan government says that it has regained good part of the Swat Valley by killing less than 4% of the Taleban fighters. Does this mean that there is a tacit understanding between the Taleban and the Pakistan army, to temporarily keep Taleban out of Swat Valley.

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Crude oil prices which were hovering in the 40 dollars to 50 dollars mark for the last two months, have started inching up slowly towards the 60 dollars mark, thanks to hops given by the US banks of improved profits in the current quarter. Also reports of slow recovery in the Chinese and Japanese economy aided the sentiments.

Russia and US have thousands of nuclear weapons with them aimed at each other. Over the last one decade, both the countries have been able to successfully work in reducing the arms pile by around 10%. But still a huge task is left behind.

The new Obama administration has now got into the task of starting fresh negotiations with the Russian government on the nuclear arms reduction issue. Special teams have been formed to carry out the micro level negotiations, and it is indeed going to be a tough task for US to convince Russia to reduce the nuclear stock pile, in the current fragile global environment.

Swine Flu started in Mexico few weeks back, and as on date over 30 people have died in Mexico alone and over 2000 cases of infection has been reported there.

The Swine Flu has spread thick and fast in the last few weeks, and it is now reported in over 14 countries across four continents including Japan and Europe. As on date over 10000 people have been reportedly affected by the Swine Flu across the globe.

WHO has already raised the alarm level of the infection to level four, which means that it is close to becoming an epidemic. As per the WHO report, except US and Japan most of the other countries are not medically prepared to handle the disease, and if it spreads into China and India, it might lead to millions of human deaths.

The global meltdown is pushing down more economies into deep recession. The United States has reported a 6 % decline in the first quarter of 2009, while Japan has reported a sharp drop of 4% in the first quarter. The Japanese government has now predicted a 3.3% decline for the full year 2009 against the earlier estimate of 0% growth.

Thailand economy which depends mostly on exports has also declared a 7.1% decline in the first quarter. The Singapore economy has contracted by a whopping 17% in the first quarter, due to crashing exports and imports through the country.

UK is expected to report a steep decline in the economy, may be the lowest in the last several decades, for the first quarter. The continuing job losses and the crashing real estate prices are cited as key contributors to the economic debacle.