Archive for December, 2012

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German wind conference

Thursday 20 December, 2012

The German American Chamber of Commerce of the Midwest hosted a Wind Energy Business Conference with a focus on supply chain & service industries.  Nico Heinemen, of the Federal Ministry of Economics & Technology, greeted everyone & provided the 20 year history of wind energy in Germany & how the German government has supported it’s development.  They had 4 objectives:  1.  disseminate expertise 2. advance renewable energies  3.  boost the wind energy market  4.  provide comprehensive support for German companies.  60% found partners & they reduced the cost of entering the market by 30%.

Janos Buechner, of Energiewaechter, added that an additional aim was knowledge transfer.  His organization sponsors trips to Germany for research which lead to pilot projects.  In reaction to the Fukishima disaster, Germany will eliminate nuclear power by 2022.  72% of energy is used to simply heat space, so more R&D is needed on energy storage, efficiency, & grid expansion.  12.5% of energy consumed is of renewable energy, wind provides 2%, biomass 8.4%.  Renewables are 20% of the electricity market.  The benefits of more wind energy are less fossil fuels & more jobs.  40% of owners/investors in renewable energies are private individuals, 11% are farmers.  93% of Germans want an intensified energy turnaround.

Tom Lange, Policy Advisor to the German Wind Energy Association (DWEA), noted that DWEA is the largest wind association in the world with 20K members.  Cumulatively by 2012, the German wind industry has provided 30,016.47 MW of power with 22K wind turbines.  Germany has an installed capacity of 29K MW;  Spain is next in Europe with 22K MW, & then France @ 7K MW.  In 2012, Germany had 102K jobs in the wind sector.  Germany has led a big media campaign for wind energy & creating new standards for grid expansion & storage.  Europe has a pilot grid, but needs a common EU energy policy.  Improvements in wind-turbine technology have resulted in turbines growing from 100m high which produce 600kw of power in 1995 to 180m which produce 2K kw of power now.  German expertise leads in forecasting in complex terrains like forests, using new materials, technology integration, & test facilities.  Challenges in offshore wind production are logistics, cable connections, grid expansion, & financing.  The outlook for wind energy depends on Germany’s 2013 elections &  common EU wind energy growth decrease.

Dr. Nancy Dahlke, of Key Wind Energy, discussed operations & maintenance (O&M) of wind farms in Europe.  The main difference is inthe costs between being reactive to solve problems or using reliability-based service which seeks to eliminate problems before they occur.   Condition-based maintenance requires CMS, a Condition Monitoring System.  The best is to combine a reliability-based system with CMS.  Siemens earns the highest grades for service & Enercon the worst.  Full maintenance contracts are being required by banks.  Costs vary by manufacturer.  An energy information/distribution center provides status reports, scheduling of maintenance tasks.  All this requires highly-qualified staff, so it helps to minimize employee turnover.  This increases predictability & accuracy.  Wind farm operators are becoming energy traders.  As quality requirements increase, maintenance is becoming more important than repair.

Luke Lewandowski, of Make Consulting, offered an overview of the American wind energy market.  The long-term policy outlook is unclear while macroeconomic trends create headwinds.  Services markets are optimistic.  Comprehensive tax reform is expected soon.  Growth is supported by renewable energy standards programs.  2007-2012 were big building years.  A new comprehensive energy policy is needed.   2-5 year warranties which have been driving the market are set to expire.  As the installed base grows, it slows growth.  As the serviceable market grows, so does competition.  The US market can be divided into 3 segments with advantages & disadvantages for each:  2011->2016

  1. 1. independent service providers 16%->12%
  2. 2. turbine OEM’s (GE, Siemens) 48%->42%
  3. 3.  self-performers 36%->46%

For all, financial & technical risks must be balanced.  Wind service business models evolve into hybrids of those just mentioned.  The largest US owners favor self-performance service.  It’s the owners who are learning service that are driving warranties.  Overcapacity is driving OEM’s to diversify & focus on O&M.  Turbine OEM’s are serving warranty extensions.

Kimberley Smith informed us that Acciona Energy works in 13 countries on 5 continents with 225 wind farms, 6K wind turbines.  They’ve achieved this by using a global multi-sourcing strategy.  The US challenge is how to excel when going from a Boom market to a Gloom market.  Supply chain management points to increasing globalization over localization, systems overcoming tiers, & necessitating industrial standards.

Martin Lubahn, of Winergy Drive Systems, let us know US content in wind turbines is 70%.  Growth in Canada & Latin America are offsetting weakness in the American market as service’s importance grows.  Supply chain management requires 90% uptime in North America & ISO 9001 certification.  The life cycle of services logically leads to a focus on costs.  Should a town provide service?  What about spare parts & quality assurance, & reporting?  Decreasing visibility, investment & reaction time come @ the same time as increasing volatility & currency risk in the industry.

The following German companies also made presentations:

  • Rewitec GmbH
  • cmc gmbh
  • Directtech global GmbH
  • windigo GmbH
  • Saarteco GmbH
  • Trendelkamp Technologie GmbH
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workplace differences between Chicago & Shanghai

Tuesday 18 December, 2012

World Chicago hosted a delegation from Shanghai for the past 2 months, & as a grand finale, they made a presentation on their comparisons between workplaces in Chicago & Shanghai.  The experienced interns worked primarily in human resources & real estate with firms such as US Cellular, Exelon, the Chicago Public School system, the city of Chicago, Arcelor Mittal, Flying Food Group, & a real estate company or 2.  To sum up Shanghai in a few words, it has a 700 year history & links inland China with the west.  Shanghai has been a sister city of Chicago’s since 1985.

Chicago & Shanghai are similar in that they are both cities of immigrants, which results in a great inflow of new ideas.  Only 3 in the delegation were born in Shanghai.  Ostensibly both cities encourage fair & open markets, have substantial regulations on international business, & are proud of a spirit of innovation.

The 2 cities differ in a number of ways as well, starting with corporate culture.  Those from Shanghai like big offices, with a welcome board for guests, are friendly, reserved, & there is little public praise.  Chicago employees focus on efficiency, walk through open doors, voice their opinions, & have simple relationships, pay for themselves, are independent, & solve their own problems.  Specifically, business management skills differ in HR strategy, lean HR, channel management, succession plans, leadership building, mentoring, feedback, & safety.  Communication methods differ:  Chicagoans prefer e-mail & conference calls.  Shanghai workers like face-to-face conversations, less e-mail, & sharing stories over lunch & dinner.  Diversity is a much bigger issue in the US, in terms of providing fair opportunities regardless, of race, nationality, & gender.  Many from the delegation were employed by state-owned enterprises, of which Chicago has none.  Most employees are represented by trade unions in Shanghai with whom much information is shared & good relationships are collegial, but not in Chicago.  Infrastructure & utilities differ as well.  By the numbers, Shanghai real estate goes for $800/ft2, transportation & food are cheaper, but eating out is more expensive.

The delegation agreed more government support is needed for these programs in the future to fund more exchange programs.

Here are some of the personal impressions of the delegation:

  • 1 took a business trip to Indiana by train, found not taxis @ the rural train station & was very impressed when a woman helped him find his hotel.
  • Specifically in real estate, English is different from Mandarin.  In China, developers are the boss, while in Chicago, it’s all about efficient networks of architects, brokers, etc.
  • Lean HR is more efficient, creates confidence, & inspires employees.  She was impressed when it was raining, a receptionist dropped her off @ the train.
  • Lake Michigan & the Chicago River tour are impressive.
  • Pregnancy is treated differently in Shanghai.  It was open to question if Diversity departments really lead to equal employment opportunities.
  • Airports are going green,  There are more meetings here.
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ecuador ambassador to u.s. in chicago

Friday 14 December, 2012

Nathalie Cely Suárez, Ambassador of the Republic of Ecuador to the United States, was in town to talk about ECUADOR AND LATIN AMERICA: NEW HEIGHTS, which was hosted by the Chicago Council on Global Affairs.

Ecuador’s economy is vibrant & growing @ 4% per annum as they are focused on sustainable environmental responsibilities & investing in their young people with education.  10% of the world’s foreign direct investment (FDI) or $150B has been invested in Latin America.    They are trying to think “out of the box” about a 3rd way of development.  The country is rich in minerals, such as copper, gold, & oil, but the question is “How to develop the economy where there is still so much inequality?”  The economy is well managed, with debt <20% of GDP, thus with low leverage.  They are investing in their talent & infrastructure, specifically roads & airports.  Trade has doubled in the last 5 years.  They’ve invested 1% of GDP in health care, but that has risen to 2 1/2 %

Ecuador is a complex country which cannot be understood by the mainstream by just reading the headlines.  They have taken on a transformational agenda as a national project.  It’s 1 of the most bio-diverse countries in the world, with protected areas the size of the country of South Korea.  Their current president is from the left & has transformed elementary & secondary education.  Their Excellency Program pays tuition for Ecuadorian students to the top 100 universities in the world, which helps level the playing field.  Changes in production methods & the energy sector have led the country to be powered 90% by hydroelectric power in 2018.

Chicago does have direct flights to Ecuador.    Ecuador is working on strengthening ties with America in general & in Chicago specifically.  There are big projects which have potential for local firms in architectural design & knowledge transfer.  A new airport is being built near Quito with a convention center.  Government City is also an opportunity.  Knowledge City is being built in the north.  The Ecuadoran government has changed 3 articles in their constitution to change the role of the private sector in their economic model, resulting in expropriations in only rare exceptions.  They are trying to make the private sector more complementary to the public sector.  Oil & mining are still strategic sectors which still do require regulation.

Q&A

  • Those who export natural resources from Ecuador are required to pay taxes, comply with environmental rules, & follow codes for investment, for which there are many incentives
  • Ecuador has a track record of compliance in the rule of law & has avoided all arbitration.  They have their own recompensation channels or fall under international jurisdictions.
  • Despite abolishing taxes to build a rural telecom infrastructure, telecom taxes are still high.
  • Ecuador has opened a new embassy in Qatar to diversify it’s supply markets, just as Chicago is doing.  They are doing outreach in Asia too to seek complementary economies.
  • Taking in Julian Assange was a difficult decision which took 60 days to make.  Ecuador has a history of defending human rights.  England’s threat to enter the small country’s embassy was a threat to their sovereignty.  Ecuador doesn’t defend Assange’s methods, but wants to make sure he is guaranteed a fair trial.  They are in discussions with the Swedes as well.
  • While the US takes the high ground on freedom of the press, free speech is not taken too seriously in Ecuador.  They try to balance honor with freedom while imposing no censorship.  Public officials convicted of breaking these laws must pay double penalties.  Go to the 40 newspapers from Ecuador on the internet to see for yourself.  Ecuador has done a lousy job prosecuting those who persecute the media.  The government isn’t always right, so they are working with US organizations to form some regulations which make sense.
  • Ecuador has 0 tolerance for the FARQ in Colombia, but does target Venezuela as a strategic market as a growing market, but not with an ideological agenda.
  • Ecuador is investing $12B in water & waste-water management projects, so there is plenty of business to be had.
  • China’s influence in Ecuador is huge & the US needs to match the investments of the Chinese.
  • Ecuador is blessed with a pleasant climate which makes modern, efficient, & sustainable agriculture possible there.  The food sector is a priority as they seek to literally move up the food chain to provide more value-added services in that supply chain.

I’ve never been to Ecuador, but my dad has.  1 of his travel bags was knifed & he was cut slightly as it happened.  Otherwise, he didn’t have much else to say, good or bad.

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11th Annual Dominick L. DiCarlo U.S. Court of International Trade Lecture

Wednesday 12 December, 2012

The John Marshall Law School Center for International Law hosted the 11th Annual Dominick L. DiCarlo U.S. Court of International Trade (CIT) Lecture, A Conversation with Judge Jane A. Restani of the U.S. Court of International Trade (NY) . Judge Restani was appointed to the court by Ronald Reagan in 1983.  Rather than hold a lecture with Q&A @ the end, the organizers opted for a more conversational format where moderator Lawrence M. Friedman, Partner, Barnes Richardson and Colburn (Chicago), simply posed questions to Judge Restani on current topics facing the court, such as anti-dumping laws, countervailing duties, etc.

The hard part about anti-dumping laws is to compare foreign & domestic market prices because many adjustments have to be made.  The US Dept of Commerce wants to calculate an average price & compare it to specific transaction prices.  Transaction prices below the average would be considered dumping, but this case lost @ the World Trade Organization (WTO).  They then compared domestic average prices to foreign average prices,-this investigation in methodology is now under review.  Statutes don’t specify the math.  There is no right methodology-the court of appeals must simply choose.  The agency made a mess by not complying with the WTO & the court of appeals hasn’t helped.  The WTO has no binding affect on these proceedings.  The US can flaunt that, but is subject to retaliation.  The US Trade Representative must make a change, but there is little discussion with the WTO.  How cases are analyzed doesn’t help.  The civil law approach says they should seek 1 meaning.  Some words are interpreted nebulously.  There is an international block which is loathe to fight the WTO.  But the US can’t be bound by the WTO.  In a countervailing duty case vs. China, the WTO borrowed from the CIT.

There are many trade cases with many interested parties, but the best issues to raise with the CIT depends on the rates being charged.  The CIT will not say “You can’t raise an issue.”  It’s important to understand the losers & the standard of review.  The court must weigh a lot of lousy data, so throw away issues you can’t win.  Enough time should be allocated to give the facts, use the record appendix method, & explain the appendices.  Many in customs waste time with facts that don’t matter, but customs cases are all about the law.  There is a classification issue, for example, old cars don’t fit in the harmonized system.  The water bottles carried in a backpack called a “Camelback” could be considered luggage, which is taxed with a high tariff, or as a water bottle, which is taxed with a low tariff.  Some cases from the pre-NAFTA era are still waiting for $ settlements, but you must win now to win in the future.

Most who work with the CIT are bar-educated, so there are only a few bad lawyers who present before this court, as opposed to other circuit courts which are all over the lot.  There are only 400 customs lawyers & only 150 of those practice before the CIT.  Their quality is good & their behavior is good.  There are no breaths of fresh air-you must know the techniques & customs of the CIT.