How big oil is trying to win back investors

THE ANNUAL shareholder meetings of ExxonMobil, Chevron and BP, all held on May 27th, each resembled a yearly check-up in a burning clinic. Covid-19 has caused the deepest collapse of demand for the oil giants’ products in history. In April Royal Dutch Shell, an Anglo-Dutch firm, cut its dividend for the first time since the second world war. On May 1st ExxonMobil reported its first loss since the mega-merger that formed the group in 1999.

Even before the pandemic investors were searching elsewhere for lower risk and higher returns. Energy was the worst-performing sector in the S&P 500 index in four of the past six years. Yet the supermajors argue that, for all that, their prospects aren’t bad.

They have half a point. Many of them have become more resilient since the last downturn, in 2014, pursuing more profitable projects and cutting costs. The oil price required to cover capital spending and dividends for the seven biggest—ExxonMobil, Shell, Chevron,...



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Business lessons from the Pentagon

A SMALL REVOLUTION has just occurred in America’s armed forces. They have, for the first time, deployed artificial intelligence (AI) to determine when a thorough check-up of a Black Hawk helicopter is in order. The algorithm, trained on maintenance records and sensor data, calculates how long the aircraft can fly safely in, say, a desert, before its engines should be cleaned to prevent sand melting into glass that could cause them to fail.

Such predictive maintenance is the most tangible product so far of the Joint AI Centre (JAIC). With 176 employees and an expected budget of $240m next fiscal year, up from $90m in this one, it lies at the heart of an ambitious effort to use machine learning and other AI to help the Pentagon run more efficiently and keep its technological edge, especially over China.

Yet when its first director, Lieutenant-General Jack Shanahan, steps down on June 1st, JAIC’s main output will not be whizz-bang software or even weapons, but infrastructure to develop them. “I did not want to create a classic insurgency organisation, but one that survives me,” says Lieut-General Shanahan. The way he has gone about it offers a case study in how large organisations struggle to adopt advanced technology.

Like many company bosses, top brass at the Department of Defence (DoD) in recent years began...



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The Renault-Nissan alliance hunkers down

THE PANDEMIC may create a kinder, more united society. That is certainly the effect on the Renault-Nissan-Mitsubishi alliance. It has been vying for the title of the world’s biggest carmaker while teetering on the brink of dissolution. The fear that covid-19 will damage some car firms beyond repair led the union to announce on May 27th that, like a couple about to divorce rekindling lost romance under lockdown, they would give it another go.

The alliance, started in 1999, was an attempt to avoid the pitfalls of a full merger. In carmaking these had often ended in tears. But the cross-shareholdings that held Renault and Nissan together in particular bred discontent. Renault, which is French, owns a controlling 43.4% of Nissan, a Japanese firm; Nissan has a non-voting 15% stake in Renault. Nissan, recently the main source of the group’s profits, resented the French government’s sway through a 15% stake in Renault. The three firms’ engineers rarely saw eye to eye, making joint projects hard to manage. When the man who ran the tie-up, Carlos Ghosn, was arrested in 2018 in Japan, accused of financial misconduct, the end seemed nigh.

The new plan both speeds up and slams the brakes on Mr Ghosn’s ambitions. The ex-boss’s merger plans are dead, says Jean-Dominique Senard, chairman of both the alliance and Renault. So is his...



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The global grooming industry gets cut down to size

Editor’s note: Some of our covid-19 coverage is free for readers of The Economist Today, our daily newsletter. For more stories and our pandemic tracker, see our coronavirus hub

SOME THOUGHT a mirror and a pair of clippers from Amazon would do it. Some gave up after the first flesh wound. Some braved a trim by spouses or children. Now, as hair salons reopen the world over after a covid-19 hiatus, the bearded and bedraggled are flocking back to the pros. They find an industry—with annual sales of $20bn in America alone—transformed.

Social-distancing rules force hairdressers and barbers to serve fewer clients. “If we could seat ten people before, now we can only seat three,” says Cristina Solymosi, whose beauty salon in Madrid has gone from 40-50 customers a day before the pandemic to 15-20. Protective gear and disinfectant are a must. Salons, which often double as social clubs mixing gossip with endless arguments about sports and politics, may soon resemble labs.

If they survive at all, that is. Kline, a consultancy, sees a decrease of over 30% in salon revenues in a dozen big markets this year. That could kill many firms in a trade with razor-...



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The e-commerce boom makes warehouses hot property

IN THE LATE 1990s Hamid Moghadam, an Iranian-born property developer, made a $5m bet on Webvan, an American online grocer. It was a bust. Webvan was one of the most spectacular casualties of the dotcom crash. More galling still, Mr Moghadam turned down the opportunity to invest in another e-commerce upstart called Amazon, thinking its focus on books was too narrow compared with groceries. Yet some people can win even by losing. Sensing a potential bounty in the online craze, the firm he co-founded, AMB, sold its portfolio of shopping centres and bought millions of square feet of warehouse space on the tarmac of American airports instead. “We got the company wrong, but we got the big trend right,” he says. Two decades later the company he heads, Prologis, is Amazon’s biggest landlord. Mr Moghadam, now 63, stands tall over the world’s warehouse business.

A Stanford graduate who got his start in property because no one else in America would hire him during the Iranian revolution, Mr Moghadam has made a career of bold bets. In 2011, with property still reeling from the financial crisis of 2007-09, he led a bumper deal to unite AMB and Prologis, a bigger rival, with a combined $46bn of owned and managed assets. Since then the property-investment firm has expanded globally. It has assets of $125bn and floor space of 1bn square feet (90...



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Why Asian business dynasties struggle with succession

MACAU WILL become the “Las Vegas of the Far East”, predicted Sheldon Adelson, an American casino magnate. In 2019 the Chinese territory’s $30bn in annual casino revenue was five times Vegas’s. Despite a slump in turnover this year as covid-19 emptied parlours, Macau’s rise looks poised to resume. It owes much to Stanley Ho, the charming scion of an illustrious Hong Kong clan. Thanks to the monopoly gambling licence he secured from Macau’s former Portuguese administrators in 1961 and held until 2002, STDM, his family’s main holding company, grew into Asia’s largest gambling empire.

Mr Ho died on May 26th, aged 98, leaving behind 14 children and a $6bn-plus fortune. A decade ago his last wife fought a bitter public battle against his second and third wives for control of SJM Holdings, the group’s publicly traded arm. His elder children joined the acrimonious spat, which ended in a truce.

Many Asian firms face similarly complex successions. Family concerns make up over half of all big businesses in Asia. Other recently departed patriarchs include Eka Tjipta Widjaja of Indonesia’s Sinar Mas Group, Henry Sy of SM Group in the Philippines and Shin Kyuk-ho of South Korea’s Lotte Group. Many other businesses have ageing leaders. Experts foresee a wave of turbulence.

Many patriarchs fear that anointing an heir apparent...



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South-East Asian tycoons’ high-wire act

IN 1919 CHIA EK CHOR moved to Bangkok and set up a small shop importing seeds from his home Chinese province of Guangdong. Two generations later the business, Charoen Pokphand (CP) Group, is Thailand’s pre-eminent conglomerate, peddling everything from chickens and pigs to cars and phones. The founding patriarch, who died in 1983, adopted a Thai version of the family name, Chearavanont. But he maintained a deep affection for his ancestral home. When recited in Mandarin, the first characters of his four sons’ names—Zhengmin, Daimin, Zhongmin, Guomin—spell out “fair, great China”.

The family’s bonds with China are not just emotional. Two-fifths of CP’s $68bn in annual revenues come via hundreds of Chinese subsidiaries running animal-feed factories, supermarkets and much else besides. CP holds a big stake in a Chinese technology-and-insurance giant, Ping An. And it is a favourite partner of Chinese investors in Thailand, including SAIC, a carmaker with which CP makes fancy MG sports cars and pickups.

The Chearavanonts’ past and present mirror those of other wealthy ethnic-Chinese clans in South-East Asia. Although they make up less than 10% of the region’s 650m or so people, they dominate swathes of its $3trn economy. Many have prospered thanks to familial ties with China—and vice versa. “China cultivates them and they...



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