New York’s loss could be Toronto’s gain
Amazon’s planpullout from Queens puts T.O.’s offer back on table
Toronto is back in the running for a second headquarter of Amazon.com Inc., the world’s biggest online retailer. And once again, Toronto won’t offer a dime in corporate welfare in seeking the prize.
Toronto made the shortlist of 20 North American centres in Amazon’s drawn-out examination of rival bids without offering subsidies, tax breaks and other goodies. Toronto and Canada are among the world’s best places to do business, with high quality of life and an extensive high-tech infrastructure, including world leadership in artificial intelligence, key to some of Amazon’s many non-retailing ambitions.
Amazon last week abandoned plans to build a $2.5-billion campus in Queens, saying — disingenuously — that New York “made it clear that they oppose our presence.” That’s nonsense. The Big Apple would be thrilled at the Amazon investment. But not at any cost.
A powerful grassroots movement of New Yorkers, objecting to the up-to $2.8 billion (U.S.) in municipal hand- outs to Amazon for its Queens facility, forced Amazon to turn tail. Toronto urbanologist Richard Florida predicts that emboldened grassroots protesters will next target Amazon’s planned taxpayer-subsidized Washington-area campus. And so, we might have reached a turning point in Corporate North America’s practice of pitting communities against each other and debauching their meagre treasuries in the process.
Toronto Mayor John Tory has wasted no time contacting Amazon officials to say the GTA still welcomes
Amazon, but on the same condition that Toronto can’t justify taxpayer subsidization of the expansion plans of an $800-billion company (Amazon’s current shareholder value). Indeed, Amazon’s high regard for the GTA is evident in its December announcement that it will boost its existing GTA workforce by an additional 600 employees. Getting tough with Trump on NAFTA II
In retrospect, it’s doubtful that Justin Trudeau, the Canadian prime minister, should have signed a replacement to the North American Free Trade Agreement (NAFTA) in November without a guarantee that Donald Trump, the U.S. president, would promptly remove the tariffs on Canadian steel and aluminum he imposed in March 2018. Those punishing tariffs, against NAFTA partners Canada and Mexico, have inexplicably remained in place. Trump, again inexplicably, last month lifted U.S. sanctions on Russian aluminum giant Rusal, once again favouring a U.S. adversary over America’s allies.
Canada and Mexico have the option of postponing legislative ratification of the proposed NAFTA replacement, the U.S.-Mexico-Canada Agreement (USMCA). But what’s more likely to happen is that American lawmakers will get the job done of removing the steel and aluminum sanctions. Republican Sen. Chuck Grassley charged with the heavy lifting in gaining USMCA passage in the U.S. Senate, declared last Wednesday that the steel and aluminum tariffs on Canada and Mexico have to be removed or the USMCA will die on Capitol Hill.
“People have to understand (meaning Trump and his protectionist advisers) that tariffs are a tax on American consumers. They’re not paid for by China or Mexico or Canada.” Actually, Canadians are on the hook for up to $2 billion in federal assistance to help Canada’s steel and aluminum industries cope with Trump’s tariffs. U.S. business leaders have lobbied the Trump White House for months to remove the tariffs, which have driven up their costs, and Capitol Hill is holding up passage of Trump’s flagship trade achievement over the tariffs.
Political logic argues for their removal sooner than later. But, alas, the twisted Trump logic does not. Don’t be tempted by GE’s stock surge
Equity in General Electric Co. is toxic. It is a stock assured of taking a decade to recover to GE’s precrisis levels. The subject arises here because late last month, GE stock jumped by an eye-catching 12 per cent on investor confidence that new turnaround CEO Lawrence Culp can quickly restore GE to health. And the stock has continued higher, up 29 per cent in value year-to-date.
Mostly, investors are impressed with Culp’s candour, after years of false promises and downright falsehoods from GE management about the firm’s turnaround prospects. By contrast, Culp has acknowledged that a return to sustainable profitability for GE is three years off.
But candour isn’t enough to bet retirement funds on. Even Culp, who took over just five months ago, doesn’t know the actual shape GE is in. GE has two black boxes. One is its $92-billion (U.S.) order backlog in its power-plant turbine division. That backlog is packed with secret agreements on discounted pricing for equipment and service contracts, the legacy of a disastrous market-share war with Siemens AG. Culp allows that many of those deals will be loss-makers for GE, but he doesn’t yet know the severity of those losses.
The second black box is suspected deceptive GE booking of revenue in the power division, now the subject of probes by the U.S. Justice Department and the U.S. Securities and Exchange Commission. At its current price of $10.37, just one-third of its level about two years ago, GE stock might look like a bargain. But GE is, in fact, what investors call a “bag of snakes.” Culp says he expects most future surprises to be ugly ones.