P2HW007000-0-B00200-1--------AL
THE WALL STREET JOURNAL.
B2 | Thursday, January 7, 2016
INDEX TO BUSINESSES
Foxconn Technology ... A1
G
B
Bausch & Lomb...........B4
C
Casio Computer .......... B3
Changjiang Securities.B8
Compose......................B4
GapJumpers................B4
Google ......................... B3
P
H
Pfizer...........................B8
Hon Hai Precision
Industry .................... A2
HSBC Bank..................B4
Rare Recruitment.......B4
J
Johnson & Johnson....B8
D
K
Dalian Wanda Group .. B1
Dow Chemical.............B1
DuPont ........................ B1
Dyax.............................B5
KLM Royal Dutch
Airlines ................... A12
KPMG .......................... B4
E-F
Levenson Group..........B4
Li Ning.........................B3
MannKind....................B3
Eli Lilly ........................ B8
Fitbit............................B8
Merck...........................B8
Monsanto....................B3
Morgan Stanley..........B5
L-M
R
S
Samsung Electronics..B3
Sanofi-Aventis............B3
Singha Group..............B2
Syngenta.....................B3
T
Tyco International ...... B1
V
Valeant Pharmaceuticals
International.............B1
Vanguard Group..........B8
INDEX TO PEOPLE
B
J
Bouchard, Andre.........B7
Breen, Edward ............ B1
Junaidi Wan Tuanku...B8
C
Kashio, Kazuhiro.........B3
Kellen, Ari...................B4
Kinsella, Peter ............B7
Chai-Onn, Robert........B4
Cotton, Alanna............B3
Pearson, Michael........B1
K
R
Rosiello, Robert..........B4
S
D
L
Sanallah, Mustafa......A5
Schiller, Howard B......B1
Szpakowski, Ivan........B8
Dimon, James.............B7
Dung, Phan Chi...........B2
Lerner, Aline ............... B4
Liveris, Andrew...........B1
G
N
Tuvey, Jason...............B7
Glasscock III, Sam......B5
Noble, John.................B5
T
Y
I
P
Ingram, Robert............B1
Pack, Jason.................A5
Yaakob, Adnan............B8
Z
Zezhu, Yang ................ B8
Vietnam Says It Plans
To Produce More Beer
HANOI—Vietnam, one of
Asia’s largest beer consumers,
is seeking to increase its beer
output to meet an expected
rise in demand at home and
abroad.
The country aims to raise
beer production in a range of
18% to 25%, from 3.4 billion liters in 2015 to between 4 billion and 4.25 billion liters by
2020, the Vietnam Beer Alcohol Beverage Association said
Tuesday.
The planned expansion isn’t
just aimed at meeting rising
domestic demand. Vietnam is
also eager to boost exports to
other Southeast Asian countries after the Asean Economic
Community, an economic bloc
of 10 countries, came into effect last week, said Phan Chi
Dung, head of the Ministry of
Industry and Trade’s light-industry department.
“The Asean Economic Community will boost trade and
allow freer flows of labor and
services, so it will be an opportunity for Vietnamese beer
to go to a wider market,” Mr.
Dung said.
With a population of more
than 90 million and a beerdrinking culture, Vietnam has
been attractive to foreign investors because of perceived
growth prospects in its beer
market. In May, Belgium-based
Anheuser-Busch InBev NV
opened its first brewery in
southern Vietnam to produce
Budweiser and Beck’s. Other
foreign brewers that have a
footprint in Vietnam include
Denmark’s Carlsberg Group
and the U.K.’s SABMiller PLC.
The targeted expansion in
Vietnam’s beer output will include both domestic and foreign brands, said Phan Dang
Tuat, head of the Ministry of
Industry and Trade’s enterprise-reform commissionand a
former deputy chairman of the
REUTERS
BY VU TRONG KHANH
Vietnam is eager to boost
exports in Southeast Asia.
beer association.
Mr. Tuat said his ministry
is planning an international
investment conference in Hanoi to encourage foreign investors and investment funds
to buy stakes in local companies, including in breweries.
Last month, Thailand’s
Singha Group made one of the
largest investments in Vietnam, buying stakes valued at
$1.1 billion in certain subsidiaries of Vietnam’s Masan
Group, including a 25% stake
in Masan Consumer Holdings
and a 33.3% stake in Masan
Brewery, the companies said
in a joint statement at the
time. Masan Brewery is a new
local competitor, opening its
first plant in southern Vietnam in late 2015, with a capacity of 100 million liters a year.
Mr. Tuat said the long-delayed plan to sell a stake in
the country’s largest brewer,
Sabeco, is still alive, however
it isn’t clear when the government will make a final decision.
Vietnamese officials said
several foreign brewers have
made approaches to buy a
stake in Sabeco, formally
known as Saigon Beer Alcohol
Beverage Corp. It is 89%-stateowned and controls about 45%
of Vietnam’s beer market, selling brands including 333 and
Saigon. Thai Beverage PCL,
Heineken NV and SABMiller
have shown interest in buying
Sabeco, the officials said.
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China Shakes Up Car Sales
Proposed rule change
would let dealers buy
new cars from others,
set their own pricing
SHANGHAI—China moved
to allow automobile dealers
more leeway to acquire new
cars, steps that would weaken
the power of car makers to decide who can sell their cars
and at what price in the
world’s largest vehicle market.
In drafted rules published
on Wednesday, the Ministry of
Commerce proposed to permit
dealers to sell domesticallymade branded cars without
permission from manufacturers and would prohibit auto
makers from imposing sales
targets on authorized dealers.
The proposal also would require dealer contracts with
manufacturers to run for at
least three years. Currently
auto makers usually sign
yearly contracts with their
dealers, which dealers say puts
them at a disadvantage. The
draft rules are open for public
comment through Feb. 6.
The
move
represents
China’s latest step toward
shaking up its auto industry at
a time when sales growth has
slipped and competition has
intensified. Analysts say the
rules could pose a greater
challenge for global auto makers’ profit in the country.
China’s rapid economic gains
have been a boom for international auto makers.
It is a “breakthrough” to
shatter auto makers’ monopoly
over car sales, said Li Yanwei,
an analyst at China Automobile Dealers Association, an industry group comprising more
than 22,000 dealers. The current legal framework, which
has been in place since 2005,
requires dealers to get permission from auto makers to legally sell their cars.
The framework has effec-
REUTERS
A
AbbVie.........................B8
Anheuser-Busch..........B2
Apple ................ A1,B3,B8
BUSINESS NEWS
Chinese new car dealers have pushed for rules changes on how they buy and price new vehicles.
tively allowed auto makers in
China to dictate the prices that
their dealers pay for new cars
and branded replacement
parts, say dealers. New car
sellers here earn scant margins on new vehicle sales, a
change from the past, and
some say they now are selling
vehicles at losses. New car
makers have provided subsidies to cover those losses.
“At present, wholesale car
prices are usually higher than
retail prices, and the losses are
mostly undertaken by dealers,”
said Mr. Li. “Once the new
rules take effect, dealers can
sell cars to each other, circumventing the manufacturers,” he
said.
In October, wholesale shipments to dealers were 11%
greater than new cars registered that month. In November, they were 8% more, according to research firm
Sanford C. Bernstein. More inventory means dealers will
likely have to discount cars.
China has more dealerships
than the U.S. after years of furious expansion. China had
over 26,000 dealers at the end
of 2014, 60% more than the
U.S. market, said Bernstein.
“We’re convinced that the
dealer networks in China are
too dense, too fragile, and will
act as a catalyst for declining
pricing and profitability in the
industry,” Robin Zhu, an analyst from Bernstein, said in a
recent note.
The move represents
China’s latest step
toward shaking up
its auto industry.
China
passenger-vehicle
sales registered a roughly 6%
gain in the first 11 months of
2015, compared with a 9.2%
year-to-year rise in the yearearlier period and booming
double-digit
percentage
growth in prior years. In October China slashed a purchase
tax on small-engine cars to lift
the car market, which had
fallen into a recession as a
worse-than-expected economic
downturn and plummeting
stock prices scared off buyers.
CAR
Continued from the prior page
making. Pulling out her iPhone,
she noted that once-upon-a-time
youngsters raced to buy cars because that was the ticket to independence and being with
friends. Today, texting apps and
social media satisfy that need.
In 2010, as the industry was
rebounding from one of the
worst years in the postwar era,
J.D. Power estimates those
born between 1977 and 1994
(the firm considers them Gen
Y) made up only 17% of sales,
or 1.6 million vehicles. Five
years later, that number has
grown to 28% of sales, or 3.3
million vehicles. The impact of
baby boomers and Gen Xers on
industry volume has flat lined
or fallen back during that
same period.
The average age of a new
car owner fell in 2015, J.D.
Power said, to 48 years old
from 49.
Still, auto makers—frustrated with stagnant stock
prices—are pursuing ways to
TYCO
Continued from the prior page
Some of the resulting stocks
became hits, particularly medical-equipment company Covidien PLC. Others have
fared less well, particularly
home-security service ADT
Corp.
Unlike DuPont or Dow, Tyco
was in perilous financial shape
when Mr. Breen arrived in
2002 after serving as president of Motorola Inc.
Following years of acquisitions by his predecessor, L.
Dennis
Kozlowski,
Tyco
was saddled with debt and
dozens of incompatible businesses that made it unwieldy
to manage.
Still, fellow directors were
surprised when Mr. Breen in late
2005 proposed spinning off
Tyco’s medical products and
electronics businesses, recalled a
former Tyco executive.
The medical business, which
would become Covidien, was
Tyco’s most profitable unit. Tyco
Electronics, a components manufacturer that became TE Connectivity Ltd., generated the most
revenue, though was more exposed to cyclical industries such
as auto making than other Tyco
businesses.
Mr. Breen argued at the
Chinese officials have accused foreign car makers of
earning exorbitant profits by
dominating the market and
controlling the sale of auto
parts. In 2014 China’s top economic planner, the National
Development and Reform
Commission, began an investigation into foreign car makers
parts pricing. The investigation led to a $46 million fine
on Audi and Chrysler, and
prompted car makers including Volkswagen AG and General Motors Co. to cut prices
on new cars and auto-parts.
Car prices in China are high
by international standards,
even as the country’s economy
is growing at its slowest pace
in 25 years. As of November,
the same midsize sedan and
big sport-utility vehicle in
China was pricier than in the
U.S., according to car makers’
websites.
The drafted rules, issued on
Wednesday, said auto manufacturers can’t forbid dealers
from selling car parts to each
other, and ban force selling of
insurance to consumers.
—Rose Yu
get into the business of offering alternative forms of mobility with the same vigor that
they went after fuel-cell technology 15 years ago and, more
recently, electric cars.
In the early 2000s, the last
time auto sales set a record,
then-Ford Motor Co. CEO
Jacques Nasser invested in a
slate of ventures, including ecommerce initiatives and a
Norwegian
electric-vehicle
maker—only to see that strat-
egy entirely unwound after he
was let go.
A few years later, at a news
conference, Mr. Nasser’s successor Bill Ford was asked why
Wall Street didn’t seem to
value the back-to-the-basics
approach he had introduced
when taking over. Mr. Ford
joked that some equity analysts “wouldn’t know a car if it
ran them over. Some live in
New York and don’t ever drive
a vehicle.”
Mark Fields, Ford’s CEO for
the past 18 months, is showing
flashes of being as much a disciple of Mr. Nasser as of Mr.
Ford or Alan Mulally, hired in
2006 to steer the auto maker
past bankruptcy by focusing on
the core business of selling
mass-market vehicles. Mr.
Fields says Ford needs to “have
one foot in today, one foot in
tomorrow” and has authorized
a series of experiments to compliment Ford’s core.
Investors expect Detroit to
find new revenue streams even
if the path to profitability of
these new ventures isn’t obvious. Uber and Tesla Motors
Inc., two companies with a
fraction of the revenue of what
the Motor City generates, have
far more attractive valuations
because, as Mr. Fields puts it,
they are seen as the real
growth companies, and the
numbers back him up. Valuations of Ford and GM have actually declined even as the industry sets a blazing pace,
reflecting an educated fear
among investors that every
boom is followed by a painful
crash.
time that separation would
help the businesses thrive. For
example, Covidien, which manufactured pharmaceuticals, sutures, surgical instruments,
and other items for operating
rooms, needed independence
to invest in research and development, and to attract specialized employees wary of
joining a manufacturing conglomerate.
The spinoffs began trading
in 2007. Covidien’s stock price
soared more than 170%
through early 2015, when it
was acquired by medical-device maker Medtronic Inc. for
$42.9 billion in cash and stock.
Thomas Lynch, TE Connectivity’s CEO since its split,
credits Mr. Breen with identifying executives and board
members for the new companies early on and involving
them in decisions.
Mr. Breen created trust
among the future CEOs, and
avoided surprises. “It was very
seamless when the split occurred,” Mr. Lynch said.
Connectivity’s stock languished
following
the
move, owing partly to the auto
industry’s collapse, but is up
71% since the start of 2013.
Four years after the initial
spinoff, Tyco said it planned to
split off ADT security and its
business selling valves and
pipes.
To groom executives to run
them, Mr. Breen devised a sixmonth training program, emphasizing compliance with regulatory requirements and
managing relations with investors and board members, recalled Laurie Siegel, Tyco’s
then senior vice president of
human resources. “We even
went into things like how to do
succession planning with a
board,” she said.
Mr. Breen says he tried to
be clear with employees about
their aspirations and prospects, and stepped back while
senior managers handled portions of earnings calls to explain plans for their proposed
new units.
“People were nervous,” Mr.
Breen said in the interview,
but “that process worked very
well for us.”
Tyco ended up merging the pipes-and-valves business with Pentair Ltd. in 2012,
giving Tyco shareholders
52.5% of the resulting company. Pentair’s stock rose in
the two years after the merger,
but fell in 2015 amid weaker
sales, particularly in energy,
leaving it up 15% since the
merger.
ADT has an industry-leading 25% share of the home security market in the U.S. and
Canada, but has faltered since
its 2012 spinoff, owing partly
to high costs to acquire customers and new competition
from cable TV and phone service providers. Its shares are
down 13% since their debut.
ADT recently entered the
commercial-building security
market, competing with Tyco,
its former parent. ADT declined to comment.
Tyco performed well immediately after the last breakup,
its stock beating the broader
market during its first two
years of trading. But its shares
fell 27% in 2015 amid slowing
revenue growth.
Its 2016 sales and profit
guidance lagged behind analysts’ expectations.
Despite more challenging
business conditions, corporate
breakups such as Tyco’s that
create focused companies remain popular with investors.
Jack Krol, a retired DuPont
CEO who was Tyco’s lead independent director during much
of the Breen era, expects Mr.
Breen to follow the same
breakup playbook at DowDuPont.
“He will send [the companies] out with strong balance
sheets and the right kind of
people to run them,’’ Mr. Krol
said. In that way, “they don’t
run into trouble.”
—Jacob Bunge
and Rachel Feintzeig
contributed to this article.
REUTERS
These indexes cite notable references to most parent companies and businesspeople
in today’s edition. Articles on regional page inserts aren’t cited in these indexes.
The average age of a new-car owner in the U.S. fell last year.