COURSE CONNECTOR

 ARTICLE SUMMARIES AND QUESTIONS

"Buffett Takes Charge," pp. 44-50: Being described as a combination of Thomas Edison and former GE chief Jack Welch is a compliment no matter who's making the call, but when it's Berkshire Hathaway's Charlie Munger doling out such praise, it can prove to be downright lucrative. Just ask Wang Chuan-Fu, CEO of a Chinese battery, mobile phone, and electric car company known as BYD. He's the guy with the technical know-how of Edison, the management prowess of Welch, and now, the backing of uber-investor Warren Buffett. Last fall Berkshire Hathaway bought 10% of BYD for $230 million because Munger and Buffett think the company has a shot at becoming the world’s largest automaker, primarily by selling electric cars. Founded in 1995 as a battery manufacturer, BYD has come very far, very fast. It entered the auto business in 2003 by buying a Chinese state-owned car company that was all but defunct. Within five years, a BYD car model was the bestselling sedan in China, and the company had developed a plug-in electric car that put it ahead of auto giants GM, Nissan, and Toyota. Whether BYD will enter the U.S. market remains undetermined, but either way, it is poised to become the top battery supplier to global automakers as economics and energy concerns push electric cars back to the forefront.

Students take a closer look at BYD, an obscure Chinese electric car company that none other than Warren Buffett is banking on.

Discussion Questions:

1. Which of his famous rules of investing did Warren Buffett eschew by investing in BYD? What action by BYD CEO Wang Chuan-Fu assured Buffett that he had made the right decision?

2. What modest goal did Wang have in mind when he founded BYD? What does he consider the most important part of the company’s strategy? How has BYD been able to make money consistently even as it has expanded into new businesses?

3. Theoretically speaking, how can electric cars help ease the global energy crisis? What obstacles do electric carmakers face realistically? Do you think companies like BYD will be able to produce an inexpensive, reliable electric car? When?

"Who Is Rick Scott Trying to Heal?" pp. 68-73: You might not know Rick Scott's name, but you may have seen him on television. He stars in a self-produced, $5 million ad campaign designed to defeat government-driven health-care reform. But Scott isn't just a guy with conservative political convictions and a lot of money — though he has both of those — and this isn't his first foray into the world of health care. At one time, Scott was the CEO of Columbia/HCA, then the largest hospital company in the U.S. While Wall Street adored the for-profit chain of hospitals and surgery centers, Scott made numerous enemies, particularly among nonprofit hospitals that feared his competition and recoiled at his accusations that they were staid and inefficient. Scott's in-your-face media appearances didn't help matters, and drew the attention of regulators. The Columbia/HCA board ousted him from the company in July 1997, just months after dramatic raids of Columbia sites by federal agents. Scott was never even contacted by investigators and was gone for two years before the company settled for $1.7 billion, but nevertheless, his name and reputation were tied to two damaging words: Medicare fraud. Now back in the limelight, Scott faces adversity again as he works to defeat President Obama's agenda — polls indicate that more than 70% of Americans favor expanding the federal government's role in health care.

In this article, students read about former Columbia/HCA CEO Rick Scott, whose latest health-care ventures include a campaign to thwart Obama-style health care.

Discussion Questions:

1. How has the political climate changed since Hillary Clinton's health-reform efforts were stymied in 1994? On what issues do Rick Scott and President Obama share common ground? What outcomes does Scott fear government-run insurance plans or exchanges will produce?

2. How does Scott believe his Solantic urgent-care clinic chain can transform the emergency-room business? Why are the clinics popular with insurance companies? How are they a reflection of Scott's retail-oriented management style?

3. Identify three reasons given in the article why Scott's reputation has been tarnished, despite the fact that he has never been charged with any wrongdoing. How would you answer the question posed in the title of this article? Explain.

"Hard Times on Campus,"pp. 74-79: Middlebury College has followed a course very similar to the overall economy in recent years. Once primarily a rural, regional school, the liberal arts college located in Vermont experienced a period of tremendous growth — in its facilities and its enrollment — throughout the 1990s and into the 21st century. But as Middlebury's endowment shrunk by nearly 25% in the last six months of 2008, the costs of its long growth spurt hit home. Faced with $270 million in debt, the college announced in January that top officers were taking pay reductions. The school has also frozen faculty salaries, launched a voluntary early retirement program, and scaled back some student services, including the freshman orientation program, in an effort to remain solvent. Middlebury is not alone. Across the country, as public institutions are grappling with state funding cuts, private schools are scrambling to plug budget gaps left by decimated endowments. And while sticker prices at private schools have climbed 7.4% a year for the past 30 years — double the inflation rate — demand has remained high. Until now, that is. Sticker shock is finally hitting families who can no longer easily tap home equity or other credit lines to finance their children’s education. That leaves schools like Middlebury struggling to develop a whole new business model for higher education.

Students examine the impact of the economic slump on institutions of higher learning, and what steps schools are taking to work around their financial troubles.

Discussion Questions:

1. Why are cost issues especially critical at schools like Middlebury College? Why is Middlebury vulnerable to a "trade-down effect"?

2. What is one of the defining characteristics of elite schools like Middlebury in terms of admissions policy? Why might this policy be in jeopardy at some schools in the near future? What can schools do to avoid such a change?

3. What unusual step did Middlebury take in 2005? What offerings has the school since deliberated or made available to expand on that move? How is this alternative financial strategy similar to one Middlebury pursued in the 1880s?

"Banking the Buffalo Way," pp. 86-90: Considering that most Americans’ opinion of banks these days lies somewhere between "not good" and "not fit to print," the fact that M&T Bank Corp. merits a feature article that isn't about shady dealings, devastating losses, misused taxpayer funds, or death threats is a pretty remarkable feat in and of itself. Even more remarkable is the way M&T is run, and other financial institutions would do well to take notice of this thriving regional player. Based in unassuming Buffalo and led by soft-spoken CEO Robert Wilmers, M&T has been one of the bright spots in its industry over the past year, posting actual earnings, increasing its loan portfolio by $2.4 billion, and announcing a major acquisition that will boost market share in its core region. How has it done it? Quite simply, it has stayed focused on good, old-fashioned banking basics. While other banks expanded into financial supermarkets, lending to anyone with a pulse, M&T quietly pursued its mission to cater to the specific banking needs of the Mid-Atlantic communities it serves. In the process, it has become a magnet for banking talent, paying Manhattan salaries and promising fast-track careers for those who meet Wilmers' standards.

This article profiles regional banking powerhouse M&T Bank Corp. and its long-time CEO and chairman, Robert Wilmers.

Discussion Questions:

1. Define "community banking," according to M&T Bank Corp. CEO Robert Wilmers. How has M&T applied community banking theory in Buffalo?

2. Despite its success, what mistakes has M&T made? How has it learned from them? What is it doing to guide other lenders involved in similar crises?

3. Why doesn't Wilmers think the federal TARP program is doing much good? Whom does he blame for the damage in the banking industry? On what does he believe regulators must focus to avoid a future economic meltdown?