Twelve Global Executives to Watch in 2012

Zina Saunders

(Left to right) Tom Horton of AMR, Fu Chengyu of Sinopec, Tim Cook of Apple, and Ginni Rometty of International Business Machines.

Reputations, money, survival. A lot hangs in the balance in 2012 for the prominent heads of many global companies. Here's a rundown of a dozen of the more intriguing business scenarios and the executives who will need to navigate through them in the coming year.

Tim Cook | Apple

In his 10-plus years with Apple Inc., Tim Cook has proved he's a whiz at running the technology giant's operations. In 2012, the world will learn how comfortable he is being the frontman too.

In August, the 51-year-old was appointed CEO, replacing Apple's co-founder Steve Jobs, who died in October after suffering from pancreatic cancer. So far, Mr. Cook has received high marks from employees and investors who say he's affable but demanding and who add that he has dug into Apple's operations and products with a similar attention to detail as did Mr. Jobs.

Executives to Watch in 2012

A dozen of the more intriguing business scenarios and the executives who will need to navigate through them in the coming year.

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Next year will bring another set of tests: Mr. Cook will likely take the stage as Apple trots out new versions of old devices, like the iPhone and iPad, and possibly some brand-new products, like a much-anticipated Apple television.

—Jessica E. Vascellaro

Akio Toyoda | Toyota

For Akio Toyoda, the president of Toyota Motor Corp., 2012 may be a make or break year.

The head of Japan's largest auto maker has pledged to keep domestic production at 3 million vehicles a year, even as his Japanese rivals race to offshore. The yen's surge to record highs against the dollar has eroded profit margins on exports from Japan.

Mr. Toyoda, 55, entering his third year since taking over the quasi-eponymous company founded by his grandfather, has vowed to prevent the hollowing out of Japan's industrial base. But with Toyota's stock at 15-year lows, his commitment raises a question echoing a former General Motors Corp. CEO: Is what's good for Japan good for Toyota and vice versa?

—Chester Dawson

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Reuters

Merck CEO and Penn State trustee Kenneth Frazier talks to reporters.

Kenneth C. Frazier | Merck

In his first year running Merck & Co., Kenneth Frazier defended the pharmaceutical company's heavy spending on drug research in the face of Wall Street critics.

He vowed to protect his company's labs from the deep cutbacks that rivals likePfizer Inc. were embracing, and in the process the general counsel-turned-CEO became the leading advocate for the pharmaceutical industry's science.

Merck's Frazier Will Tackle Inquiry At Penn State Along With Day Job

By day, Kenneth Frazier runs Merck & Co. But just in case steering a $46-billion drug maker isn't enough, the chief executive also is leading Pennsylvania State University's inquiry into the school's response to sex-abuse allegations, a scandal that has rocked his alma mater.

Mr. Frazier, already a Penn State trustee, was named to head the probe in November. A big credential: his experience handling the Vioxx litigation that engulfed Merck in the mid-2000s after the painkiller was linked to heart attacks. His strategy of fighting off a tsunami of legal claims over the medication by trying each individual case saved Merck billions of dollars.

Critics ask whether that experience can—or should—be applied to Penn State's debacle, which involves allegations that a former assistant football coach sexually abused a child in the team's locker room.

The inquiry's mission is to "determine what failures occurred, who is responsible, and what measures are necessary to insure that this never happens again," board minutes say.

But, with Penn State itself named in civil lawsuits over the allegations, some worry the panel might prioritize protecting the school. Mr. Frazier and his committee hired Louis Freeh, a former director of the Federal Bureau of Investigation and federal judge, to lead the inquiry.

At a December breakfast hosted by The Wall Street Journal, Mr. Frazier said his Vioxx background applies to his task. "Inside the company, it was a defense of the institution," he said. With Penn State, he added, "I took on that responsibility because I believe in the institution."

He has another reason for accepting the assignment. His own four-year career at Penn State changed his life, he said, helping propel him from inner-city Philadelphia to the peak of corporate America.

Christopher Weaver

Whether Mr. Frazier can win over those who say R&D is wasteful depends on the fortunes of drugs like Bridion, a treatment designed to reverse the effects of surgical anesthesia that Merck expects to submit for U.S. regulatory approval in 2012.

The Penn State alumnus also will head the special committee investigating the university's response to child sex abuse allegations against a former football coach.

—Jonathan D. Rockoff

Tom Horton | AMR

Thomas Horton is tasked with saving American Airlines.

Named chairman and chief executive of the carrier's parent company, AMR Corp., on Nov. 29—the day AMR filed for Chapter 11—the 50-year-old Texan is now trying to figure out how to make a company that lost $10 billion over the past decade profitable again.

In 2012, his 23rd year with AMR, he will aim to cut costs on aircraft leases and labor contracts, while convincing 88,000 employees his decisions are in their best interest. He may also lead a merger with another airline, or see a competitor mount a hostile takeover.

—Jack Nicas

Cyrus Mistry | Tata Group

Does he have the business chops or is he just there because of his father? That's the question hanging over Cyrus Mistry, the 43-year-old heir apparent at India's flagship conglomerate, Tata Group, which counts among its holdings Jaguar cars and New York's Pierre Hotel.

Mr. Mistry's curriculum vitae touts his achievements as managing director of his family's construction firm, Shapoorji Pallonji & Co. But his father, reclusive billionaire Pallonji Mistry, also is the biggest shareholder in Tata Sons, Tata's holding company, with a stake of about 18%.

Mr. Mistry will have time to learn on the job before the answer becomes clear: He will spend almost a year's apprenticeship with the outgoing chairman, Ratan Tata, who retires in December 2012.

—Paul Beckett

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Reuters

Ron Johnson is expected to bring some Apple magic to J.C. Penney.

Ron Johnson | J.C. Penney

The former head of Apple's retail stores took the helm of J.C. Penney Co. in November, and already is shaking up the sleepy department store chain.

Ron Johnson, who is largely credited with the "cool factor" in Apple's stores, brought in a management team of former Apple and Target Corp. colleagues, and struck an exclusive deal with homemaking maven Martha Stewart Living OmnimediaInc.

During the company's third-quarter conference call in November, Mr. Johnson said, "I am here to transform."

Now all eyes are on what Mr. Johnson and his new team will tackle first, and how they will adapt to a store with much broader product inventory and a dusty image. Some expect Mr. Johnson to bring on other high-profile exclusive brands.

—Dana Mattioli

Tom Staggs and Jay Rasulo | Disney

For Walt Disney Co.'s top executives, 2012 marks the first full year of competition for the CEO crown, and no two candidates are said to be more primed to face off for the job than Tom Staggs and Jay Rasulo.

Serving current Disney Chief Executive Robert Iger, who announced in 2011 his intention to step down from that position in 2015, the two longtime Disney employees two years ago swapped jobs at Mr. Iger's behest. In the coming year, each is expected to oversee ambitious plans that will telegraph their potential to lead one of the world's biggest media companies.

Mr. Staggs, chairman of the theme parks and resorts business, will shepherd development of Shanghai Disneyland, part of a $4.4 billion Disney resort that broke ground in April.

Mr. Rasulo, Disney's chief financial officer, must position the company to measure up to the results of its most recent fiscal year, for which it posted record profit and revenue, as the company pushes into not just China but also media markets in India and Russia.

—Erica Orden

Fu Chengyu | Sinopec

The top executives of China's major state-owned companies often seem faceless and interchangeable, in part because authorities frequently shuffle them among different firms.

Nevertheless, Sinopec Chairman Fu Chengyu stands out for his aggressive attitude toward deals and his global ambitions.

Mr. Fu, 60 years old, is best known for running Cnooc Ltd. when it made its audacious, and unsuccessful, 2005 bid to acquire California-based Unocal. Now in a similar position at China Petroleum & Chemical Corp., or Sinopec, Mr. Fu has led a series of acquisition attempts around the globe this year.

Whether he can significantly broaden the company beyond China—and whether he can pull off an unusual unsolicited bid for China Gas Holdings Ltd.—remains to be seen.

—Carlos Tejada

Ginni Rometty | IBM

On Jan. 1, International Business Machines Corp. will embark on a new era with its first woman at the helm. Virginia M. Rometty, now in her 30th year at IBM, got the nod after shepherding the company's expansion into high-level consulting and emerging markets.

Chief on her priority list is to continue to drive IBM's growth initiatives around enterprise software and cloud computing and to achieve greater focus on emerging markets.

At the same time, Ms. Rometty, 54, will have to navigate a turbulent global economy and major shifts in the way companies use technology.

She doesn't plan any near-term changes to IBM's strategy, business model or financial road map, she said in an October interview when she was named CEO.

Still, Ms. Rometty knows it is critical that IBM never stop reinventing itself, some advice given to her by outgoing CEO Samuel J. Palmisano, who will remain chairman.

—Spencer E. Ante

Abilio Diniz | Pão de Açúcar

Abilio Diniz spent a lifetime building up Brazil's largest supermarket chain, Pão de Açúcar, battling his competitors, his family and his friends every step of the way.

At a moment of financial weakness in the last decade, he agreed to sell his empire to France's Casino SA, but that complex transaction culminates in 2012, when Mr. Diniz, 74, must hand over a single crucial share to give Casino control.

In 2011, the audacious executive sought to keep his company, going behind Casino's back to cut a deal with the French firm's fiercest rival, Carrefour SA. The bid failed, but no one believes that has dissuaded Mr. Diniz, and plenty more fireworks are expected before the deadline next June.

—Rogerio Jelmayer

Meg Whitman | H-P

Former eBay Inc. CEO and California gubernatorial candidate Meg Whitman faces her toughest task yet in 2012: turning around Hewlett-Packard Co.

Ms. Whitman was named CEO of the struggling computer and printer giant in September and so far has aimed to undo the damage created by her predecessor, Leo Apotheker, including putting the kibosh on a proposed split-off of the company's PC business.

Ms. Whitman has made it clear she plans to generate steady profits as opposed to making big strategic bets that take H-P into far-flung areas. To that end, she's already lowered the bar, setting conservative profit targets and declining to provide full-year revenue guidance.

—Ben Worthen

Jack Ma | Alibaba Group

Jack Ma, chairman of China's largest e-commerce empire, Alibaba Group Holding Ltd., has become a key figure in the uncertain fate of Yahoo Inc., which owns a roughly 40% stake in his company.

Mr. Ma holds the right of first offer to take over Yahoo's shares in Alibaba, and the executive has made no secret of his intention to get at least some of that stake back. That gives him significant say over the U.S. company's single most valuable asset.

At home in China, Mr. Ma is trying to stay ahead of the game as competition rises for the first time against his massive online shopping sites, Taobao Marketplace and Taobao Mall, which rival eBay.com in terms of transaction value.

This year, he circumvented his board, including his two biggest investors, Yahoo and Japan's Softbank, in a decision to transfer ownership of a key subsidiary to a separate company he controlled. Mr. Ma said he made the move to comply with regulations on online payment services but the decision brought him into the debate over Chinese corporate governance issues and heightened concerns that the government may try to further limit foreign investment in the nation's high-flying Internet sector.

—Loretta Chao

BOEING STRUGGLE TO KEEP ORDER

MASSIVE ORDER

BY DAVID KESMODEL

SEATTLE—Boeing Co.'s production struggles with its 787 Dreamliner taught it to regularly stress-test suppliers, a skill that is coming to the forefront as it tackles a mountain of orders for its best-selling 737 jets.

The company's comprehensive reviews are critical to its effort to mount one of its biggest production increases in years. Chicago-based Boeing aims to boost output by about 60% in the next three years—or nearly 300 more jets a year. After winning a series of big contracts, it is sitting on a staggering backlog of 3,500 commercial jets, valued at more than $270 billion.

MAS STAFF UNION UNHAPPY

No to MAS downsizing
 Posted on 29 December 2011 - 05:41am

KANG SIEW LI

PETALING JAYA: Malaysia Airlines’ (MAS) unionised staff are unhappy over a potential plan by its management to downsize the workforce as part of the struggling national carrier’s turnaround plans.

MAS Employees’ Union (Maseu) president Alias Aziz told SunBiz that MAS management had indicated its intention to reduce its workforce during a Dec 16 meeting chaired by MAS group CEO Ahmad Jauhari Yahya and his deputy Mohammed Rashdan Mohd Yusof, which was attended by representatives of Maseu, Malaysia Airlines Pilots’ Association, Airline Workers Union of Sarawak, Air Transport Workers Union of Sabah and MAS Executive Staff Association.

“However, the management did not say how many employees will be affected, although it was told that only 3,000 staff were needed for the airline’s short haul operations which include Firefly and the new yet-to-be-named regional premium carrier (that will be launched by mid-2012),” said Alias on Wednesday.

MAS also wants its employees to first resign from the airline if they opt to join the new regional airline.

Right now, MAS has about 20,000 workers.

theSun had reported on Dec 16, quoting sources, that about half of MAS’s total workforce will be affected by the airline’s business plan, which involves cutting money-losing routes, deploying new aircraft, managing costs and spinning off ancillary businesses.

“We (union members) are not happy with the latest business plan for MAS. We are concern about the impact of cuts on MAS’s unprofitable routes, closing of some stations overseas and spinning off its subsidiaries which may inevitably lead to staff cuts.

“This is not the way to turnaround MAS,” said Alias.

“This (possible job cuts) also goes against Prime Minister Datuk Seri Najib Razak, who had in a meeting with me (as Maseu president) in September gave an assurance that there would be no job cuts nor voluntary separation schemes (VSS) to follow the latest reshuffle at the airline,” he added.

Alias said the union members also disagree with the MAS-AirAsia share swap as they see AirAsia benefiting more from the deal, not MAS.

When contacted on Wednesday, a MAS spokesman said any move to redeploy or cut its workforce is “still a work in progress and we will make announcements when details are finalised”.

“These are still in planning stages. We are now engaging staff through a series of meetings for them to understand our plans and hear their feedback and questions.

“We will engage all stakeholders including the media at the right time when we have the detailed information,” he said.

AIR TRAVEL OUTLOOK 2012

OSK maintains ‘overweight’ call on aviation, logistics sectors
 Posted on 29 December 2011 - 05:41am

PETALING JAYA: Global air travel growth for 2012 is likely to moderate amid economic uncertainties over Europe’s sovereign debt crisis and the US’s anaemic economy, says OSK Research.

Its transport analyst Ahmad Maghfur Usman expects passenger growth for 2011 to come in at 10-12%.

“However, we see Malaysia as being insulated from a cyclical downturn in passenger travel given our expectations of a stronger GDP growth of 5.2% on the roll-out of more Economic Transformation Plan projects. The surprise Q3 GDP numbers were driven by strong private consumption growth.

“This, and the fact that Malaysia has a high penetration of low-cost carrier (LCC) travel, reinforces our view that air travel will remain resilient and benefit both AirAsia Bhd and Malaysia Airports Holdings Bhd (MAHB),” said Ahmad in a report on Wednesday.

“With AirAsia reaping more profit from lower jet fuel prices and MAHB seeing an upside from a recent tariff hike, we also see both companies gaining from down-trading when cheaper fares stimulate spending on ancillaries and at airports.

“However, we are sceptical of Malaysia Airlines (MAS) as we feel that AirAsia stands to gain more from the (MAS-AirAsia) tie-up in the immediate term,” he added, reiterating an “overweight” call on the aviation sector.

Ahmad is maintaining his “neutral” stance on the shipping sector, as the global vessel supply glut could worsen with the upcoming economic woes.

“We hold to our view that the worst is not over and a first step towards solving a long-term problem is desperately needed. Our head of regional research for transport opines that there must be a resolution to the industry’s long-term problems arising from overcapacity, over-ordering and over-production of ships despite the short-term recovery in the Baltic Dry Index.

“Ironically, we still think that any rebound now could be negative for the main shipping sub-sectors (bulk, tanker or container) as this can create a false sense of security for owners and operators, who could be tempted to postpone any decisive action needed to improve profitability. On this space we are more positive on MISC Bhd, which will see losses to be confined to the petroleum tanker segment after exiting from the liner business,” said Ahmad.

Meanwhile, Ahmad has an “overweight” call on the logistics sector as he believes that local freight forwarders will continue to perform well going into 2012, bolstered by new MNC contracts and healthy economic developments on the home front.

“Recently secured contracts from well-established consumer companies such as F&N, Coca-Cola Inc, British American Tobacco, Nestle and Pepsi.Co ensure that the freight forwarders’ sales volume would not be significantly affected by poor economic conditions as well as secure their earnings going forward.

SENAI AIRPORT FEEDER SERVICE

Strong demand for Senai airport feeder serviceBy S C Chan , Senai, Johor 

Senai Airport Terminal Services (SATS), the operator of Senai International Airport (SIA) in the Malaysian peninsula's southernmost state of Johor, has launched a Singapore-Malaysia road feeder service aimed at helping to transform the airport into a leading cargo and logistics hub in the region.

Called SATS Express, the service operates to and from Singapore's PSA port and Changi airport to Johor. Northbound, the service operates to and from Johor Bharu to Pasir Gudang, Port of Tanjung Pelepas, Kuala Lumpur International Airport (KLIA), Subang Airport and Port Klang. The trucks carry 20 and 40-ft containers and 20-ft reefers. 

There are also northbound services to and from Malacca to KLIA, Subang Airport, Port Klang and Kuala Lumpur and southbound services to and from Malacca to Johor.

The northbound service to and from Johor Bahru covers 16 designated drop-off/pick-up points falling under zones one and two and including Gelang Patah, Larkin, Pandan, Skudai, Tampoi, Tebrau, Pontian, Kota Tinggi, Kulai, Masai, Pasir Gudang, Senai, Ulu Tiram, Taman Johor Jaya and Taman Desa Jaya. Similarly, the southbound Kuala Lumpur service covers designated points under zones 1 and 2 that include Batu Tiga, Petaling Jaya, Shah Alam, Subang, Sungai Way, Ampang, Bangi, Banting, Batu Caves and Cheras.

SATS land logistics manager David Govind told Cargonews Asia the Singapore-Johor Bharu service onward to PTP and Pasir Gudang launched on April 18 had received "overwhelming response'' from both sides of the Johor Causeway.

"We are committed to providing the most efficient, reliable and economical choice [to companies] for cargo transportation [by land],'' he said, adding that the SATS road feeder service offers a combination of facilities and services for organisations to remain competitive in the ever evolving and demanding industry.

Govind described SATS Express' rates as "the most competitive'' in the market.

Among its existing clientele are leading logistics companies such as Maersk Logistics, Kuehne + Nagel, Schenker, ABX Logistics, TNT Express, Yamato Transport, SM Freight, Pro Logistics and Eastern Cargo.

On the refrigerated truck service, Govind said SATS Express is negotiating with Penang-based Dimerco Express and Alfro Cargo Express to bring reefers down to Johor Bharu, Pasir Gudang, Senai and PTP.

"We expect this service to commence at the end of the year,'' he said.

Govind said the northbound dry truck service to and from Johor Bahru was the busiest, and the service to and from Singapore was "picking up steadily''.

Meanwhile, Govind said construction work on the cargo complex at Senai airport is nearing completion and is expected to be ready for use by the end of the year. Twenty units of 2,200 sq ft each will be available and another 20 units will be ready possibly by early next year. 

"We will open the units for booking only a few months before the targeted completion date,'' he added.

Behind the cargo complex there will be a two-tier building for general sales agents (GSAs) and airlines and each unit will offer office space of 400 sq ft.

Under Senai International Airport's phase one cargo facility development, a US$3.42 million 3,000 sq m cargo complex became operational in July last year with annual handling capacity of 80,000 tonnes of cargo and capacity to handle B747-F aircraft. The airport aims to handle 50,000 tonnes of cargo this year. In its efforts to boost throughput, SATS recently clinched rights to prvide cargo handling services to no-frills airline AirAsia. 

Govind said the aim in launching the road feeder service was to improve Senai International Airport's connectivity to other airports and seaports as part of SATS' long-term plan to transform Senai airport into a cargo and logistics hub.

LOGISTICS - DIVERSIFICATION

Freight handlers go for specialisation 


Logistics companies around the world are rushing to invest in specialty cargo facilities in search of wider margins and stable growth in an increasingly uncertain outlook for global trade, reported Reuters.

Freight companies can charge higher prices for handling delicate electronic components, vaccines that have to remain chilled or Arabian race horses than for standard cargo.

"Specialty freight always has a higher margin," said Andreas Baader, managing partner at consultancy Barkawi Management Consultants, which focuses on supply chain and after sales services.

Lufthansa Cargo, the freight arm of German carrier Lufthansa , has invested a double-digit million dollar sum in a new "Cargo Cool Centre" in Frankfurt that handles pharmaceuticals and other medical products.

"In the crisis year 2009, cool products declined only marginally," Joerg Bodenroeder, the director of the Cool Centre, said ahead of its inauguration this month.

The global pharmaceutical drug logistics market is estimated at a little more than US$61 billion and is expected to grow at an average rate of 7.6 percent a year through 2015, according to Transport Intelligence.

The market for biotech drugs, which are typically tolerant to a tighter range of temperatures than traditional chemical drugs, is estimated to grow at an annual rate of about 10 percent through 2015.

That is more than twice the expected rate of growth for traditional drugs, creating opportunities for cargo companies that offer temperature-controlled logistics.

According to Barkawi's Baader, trucking companies that invested in specialised equipment to cater to new industries before and during the crisis also weathered the downturn better.

"If you can transport wind turbines, you are doing pretty well. There are only about 10 to 15 companies that are specialised in wind turbines," Baader said.

Overall, the mood in logistic has become more muted lately, with industry bodies and analysts lowering their expectations for growth in 2012 as economic growth looks set to remain slow.

"There have been periods of hope that this was just a soft patch and that run rates would re-accelerate, but as we approach the end of the year and GDP growth forecasts continue to fall, it is clear that 2012 is going to be another difficult year," Nomura analyst Mark McVicar said in a recent note.

Global trade is expected to grow at a pace of only 5.8 percent this year, compared with 14.1 percent in 2010, as the European sovereign debt crisis buffets developed economies, according to the World Trade Organisation (WTO).

That is still better than the 12.1 percent drop in global trade in 2009, during the financial crisis that followed the collapse of investment bank Lehman Brothers, though the WTO said the outlook was increasingly uncertain.

Deutsche Post DHL runs a high-security warehouse for Philips, distributes drugs made by Bristol-Myers Squibb in the United States and delivers cars to dealerships in Scotland for BMW.

Its supply chain business broke ground in September on a new $18 million euro distribution centre at eastern Germany's Leipzig/Halle airport, where medical supplies can be stored at controlled temperatures, and computers arriving by plane for servicing can be repaired on site before being put back on a plane to be returned to their owners.

"If you look at who sailed through the crisis, it was the big integrators like DHL and Kuehne + Nagel. They are very close to their customers' business," Barkawi's Baader said.

These big companies can handle their customers' entire supply chain if necessary, delivering raw materials and parts to factories, warehousing finished products and distributing them to retail outlets, a bigger job than many companies can do cost-effectively on their own.

Lufthansa Cargo CEO Karl Ulrich Garnadt told Reuters that the whole industry expects 2012 to be a "very strenuous" year, in which it will help to have more than standard shipping containers on offer.

But he said broadening one's product base, for instance into temperature-controlled cargo or animal handling, helps find pockets of growth in a tough economy.

Malaysia Airlines Cut Losses

Malaysian Airline cuts unprofitable routes to stem losses 

Malaysian Airline System will cut several unprofitable routes in a move that could help the national flag carrier save between US$68 million and $94 million in 2012, reported Dow Jones Newswires.

The airline said it would withdraw from routes to and from Surabaya, Johannesburg and Rome, among others, which account for almost 12 percent of passenger capacity, in stages beginning from January 6.

The move is expected to have "minimal impact" on its cargo operations, it said, but didn't elaborate.

"We also hope to return to these markets after we have stabilised our business," said Malaysian Airline chief executive Ahmad Jauhari Yahya.

The move follows last week's cost-cutting measures unveiled by the airline aimed at turning around the company and improving profit by between $350 million and $472 million in 2012.