Comrade Marcel
14th January 2003, 17:47
McDonald's Corp. First Ever Quarterly Loss
Retail food service monopoly McDonald's Corp. recently announced that it would register the first quarterly loss in its history. The company is cutting back its operations worldwide and expects to book pre-tax charges of about US$435 million in the fourth quarter to cover what it calls restructuring costs. McDonald's is projecting a loss of about six cents a share, but said the figure could be higher as it continues to review operations after recent management changes.
"This has been a difficult year and our financial performance has been below expectations," said McDonald's chief financial officer Matthew Paull in a statement.
In November, McDonald's said it would close 213 restaurants globally and lay off up to 600 corporate staff in a bid to boost its bottom line. Former chairman and chief executive Jack Greenberg reportedly oversaw the introduction of the one-dollar value meal, which the company said improved traffic into their stores but not profit margins. Under pressure from disgruntled owners and board members, Greenberg announced his resignation from December 5, just nine months after initially agreeing to run the company until 2005. His replacement Jim Cantalupo will oversee further cost-cutting plans to be completed by the end of the first-quarter 2003.
Company figures released in December show McDonald's battling with slipping sales in its key markets. In the first 11 months of the year, same-store sales were off 1.3 per cent in the United State and 1.6 per cent in Europe, with December expected to show even softer results according to analysts, who say the outlook for 2003 is equally bad.
"We are looking for flat U.S. same-store sales in 2003," said Andrew Barish, an analyst with Bank of America Securities. "Margins will be below modelled levels. Clearly, this turnaround will take some time."
Other analysts said McDonald's first quarterly loss was not a surprise as the burger monopoly "struggles to boost stagnating sales abroad and at home where its margins are under pressure amid aggressive discounting in the sector."
----------------------
What Is Happening at McDonald's?
- K.C. Adams -
The first ever quarterly loss at McDonald's Corp. has surprised many people. How could such a powerful worldwide monopoly lose money? The company itself explains the phenomenon as "pressure on profit margins." In other words, the market price of what they sell in their restaurants is only "marginally" more than the cost of production and distribution. The price of a meal at the window is only fractionally higher than all the costs of getting that meal to the consumer. How could that be true when McDonald's is infamous for paying low wages and low prices for the ingredients it uses?
McDonald's Corp. is part of the monopoly controlled retail sector of the economy that developed mostly in the late 1950s and early 1960s as part of the consumer society. At that time finance capital moved into almost every niche in the retail sector. Family businesses and even many larger companies like Simpson's and Eaton's have fallen victim to the avalanche of finance capital. The retail sector is a particularly uncertain world, as much of its profits depend not on surplus value produced by its own workers engaged in distribution but on the workers who produced the commodities in the first place. Even giants like Home Depot are struggling for profit and others like Wal-Mart are deeply involved in international political intrigue as most of what they sell comes from poor countries. Wal-Mart, Lowes and similar monopolies depend entirely on cheap domestic labour, control of currency prices, foreign money underwriting American imports and consumption, and the right to import and sell cheap commodities from China and other countries.
The retail sector, except food services, mostly sells already produced (finished) commodities. It adds no new value to commodities and must win its profits from already produced surplus value at the point of production. It must fight for a share of profits with the production capitalists. Part of the surplus product created during production must be used to pay for the distribution of commodities. Under capitalism no overall planning takes place determining the distribution of profits among producers and retailers; it is mostly a raw trial of strength. The bigger a retailer becomes; the more price concessions it can wring out of producers. To date, retail workers have borne the brunt of this anarchy, receiving mostly minimum wages and poor working conditions.
The retail food industry, like McDonald's and Wendy's, both distributes and partly produces its commodities. In the operation of a fast-food restaurant, workers add some value to the food through preparation and cooking. McDonald's has reduced the labour time involved in food preparation and cooking to a minimum to keep down its price of production. The reduction in labour time (productivity) reduces the market value of their products but also narrows their profit margin. Lower prices for their products means less revenue in relation to their fixed costs for rent, machines, electricity, management, advertising, bookkeeping, financing, etc.
A consumer society dominated by finance capital is predicated on the false illusion that consumption, individually and collectively, is infinite. From infinite consumption comes unlimited growth and limitless profits that somehow defy the laws of capitalism, commodity production and even biology.
The individual human body is an organism with a beginning and an end and finite in the amount it can consume. The number of individual consumers is determined by the total population on earth. Once the majority of those consumers have been drawn into the capitalist marketplace, the finite reality of limited individual consumption takes firmer hold.
Retail monopolies like McDonald's and Wal-Mart are also bound by the fact that they attract customers with limited incomes. Unlike the luxury and military sectors of the economy, the necessary economy catering to the working class is constrained by how much the capitalists are forced or are willing to pay for labour power. Capitalists are caught in the contradiction of not wanting to pay their own workers a good wage but wanting other workers to have lots of money as consumers. Spending is also greatly affected by the level of insecurity felt by the working class due to economic downturns and unemployment.
Collectively, our economic forms are in constant flux and respond to the way we produce and the social relations that develop around those forces of production. Social relations sooner or later must be in harmony with the way humans produce. Giant social enterprises like McDonald's and Wal-Mart are not in harmony with private ownership and control. Private ownership and control of monopolies must be replaced with social ownership and control. The working class must win the battle to control social production and distribution and the direction of the economy, if it is to open the door to progress and solve any of the problems facing individuals, collectives and the society and bring some harmony into the world.
Economic forms are controlled by natural laws that are greater than the dreams of finance capital for a limitless consumer society. If the disposable income of individual consumers on a world scale is increased, the increase in wages would mean a decrease in profits of the capitalists, a further squeezing of their profit margins and possible bankruptcy. McDonald's Corp., Wal-Mart and all the other retail monopolies are ruled by the same nasty laws of value and capitalism that bind all those who profit from buying human beings to work for them and selling in the marketplace what those workers produce.
Capitalism constantly needs to extend its exploitation and marketplace. It always requires new workers to exploit, new consumers to sell to and new capital to exchange with. U.S. capitalism expanded after the Second World War by extending its exploitation of workers mainly in three directions: the female population within the U.S., new immigrants to the U.S. and peasant masses abroad. U.S. capitalism emerged from the war with many advantages over competitors: it had made money from the war; none of its vast industrial base had been destroyed; land prices in the U.S. were still far lower than in old societies; huge numbers of refugees from war were desperate to emigrate and there was space in North America; a "progressive" "anti-fascist" image of U.S. capitalism had emerged after the war; and, competing centres of capitalism around the world were greatly weakened, allowing the U.S. monopolies to penetrate into new areas. Those new areas were in addition to its traditional control of South and Central America and the Philippines.
U.S. capitalism flush with money used cultural aggression to promote its monopolies, their products and the "American way of life" at home and abroad. Advertising is the most common form of cultural aggression bolstered by the "hard, serious" culture of movies, books, magazines, news, science and television. One of McDonald's biggest "costs of distribution" is advertising, especially aimed at children.
One of the countries that witnessed a significant expansion of U.S. capital and reduction of influence of British capital was Canada. The U.S.-Canada Auto Pact during the 1960s signalled the growing annexation of the Canadian economy by U.S. capital.
The expansion of the number of women into social production in the U.S. was a big factor in the growth of McDonald's. The exploitation of women in social production and distribution put pressure on the traditional family unit in many ways. The traditional patriarchal family social form with women doing most of the domestic chores has been weakened as capitalism sought out women to exploit socially not just domestically. No new social form for the family has been developed, only new niche areas that retail monopolies have used to expand. Fast-food outlets are a crude form of "socialised" eating that fill an obvious need for food preparation that takes the burden off the family unit especially working women. Issues of food quality, a cultured setting, and decent wages and working conditions for the workers of the retail food sector are all incidental to the underlying need of the monopolies for profit.
Land prices played a significant role in the growth of retail monopolies in the U.S. Low land prices and ground rent allowed companies like McDonald's and Wal-Mart to expand rapidly into the suburbs. Cheap farmland was used for malls. With malls at the centre, governments financed highway and road systems that bolstered the car culture, ruined existing communities and allowed land speculators and construction companies to make fortunes by subdividing land for individual homes. From their solid base in the United States, U.S. monopolies have fanned out over the world. However, it is one thing to sell enough burgers in suburban St. Louis to pay the rent but quite another in Japan or even France. Landlord capitalists in the old societies are far more powerful than in North America and demand a bigger slice of the surplus product.
The biggest challenge to the retail monopolies comes from the capitalist system itself and the law of the falling rate of profit. Finance capital does not allow any profitable niche to go unchallenged. As McDonald's expanded, so also arose their competitors using identical methods and even benefiting from not making some of the same mistakes. When the competition was mainly family restaurants, McDonald's profits were high as it could sell its meals at or even above the price of production and distribution. Today when the competition is other monopoly chains, McDonald's must sell at or mostly below the price of production and distribution cutting its profit margin to razor thin.
The market price and profit from the production and distribution of burgers at fast-food outlets has gradually fallen in response to productivity, wholesale price control, over-saturation, competition from other burger-joints and other types of fast food, and a growing public consciousness about food quality.
How many burger joints can one area sustain? The consumerism of the retail industry has come up against the finiteness of the individual, a set number of human beings on the planet and the laws of the capitalist system and commodity production.
The retail sector aimed at the working class is experiencing profit difficulties in spite of paying rock bottom wages and employing a highly productive system based on economy of scale and monopoly controlled wholesale prices. How can workers in this sector win liveable wages and working conditions if powerful monopolies like McDonald's, Home Depot and Wal-Mart have razor thin profit margins and threaten to close outlets whenever workers organize? It proves that the monopoly capitalist system is unworkable and cannot provide for the people no matter how hard they work. The retail sector has to be organised to serve the working class and people in conjunction with the productive sectors of the economy. Surplus product from the productive sectors must be distributed in a planned way to provide living wages and decent working conditions for workers in the retail sector. A first step to accomplish this would be to set up a government controlled wholesale network in all sectors to establish stable prices for producers and the retail sector. With stable government-controlled wholesale prices, the government could then mandate minimum liveable wages in the monopoly-controlled retail sector. The non-monopoly retail sector could be encouraged to pay their workers a living wage and accept a reasonable profit by allowing them to purchase commodities wholesale at lower prices than the monopolies.
The key to any change is the involvement of the working class in discussing, analyzing and taking action on its own program to solve problems facing the economy and people. New ways of food preparation and distribution to ease the burden on working families could be developed stressing quality, a high cultural level and low cost. The people taking on their social responsibility of managing the country's economy can overcome any difficulty.
http://www.cpcml.ca/tmld/D33003.htm#5
(Edited by Comrade Marcel at 5:48 pm on Jan. 14, 2003)
Retail food service monopoly McDonald's Corp. recently announced that it would register the first quarterly loss in its history. The company is cutting back its operations worldwide and expects to book pre-tax charges of about US$435 million in the fourth quarter to cover what it calls restructuring costs. McDonald's is projecting a loss of about six cents a share, but said the figure could be higher as it continues to review operations after recent management changes.
"This has been a difficult year and our financial performance has been below expectations," said McDonald's chief financial officer Matthew Paull in a statement.
In November, McDonald's said it would close 213 restaurants globally and lay off up to 600 corporate staff in a bid to boost its bottom line. Former chairman and chief executive Jack Greenberg reportedly oversaw the introduction of the one-dollar value meal, which the company said improved traffic into their stores but not profit margins. Under pressure from disgruntled owners and board members, Greenberg announced his resignation from December 5, just nine months after initially agreeing to run the company until 2005. His replacement Jim Cantalupo will oversee further cost-cutting plans to be completed by the end of the first-quarter 2003.
Company figures released in December show McDonald's battling with slipping sales in its key markets. In the first 11 months of the year, same-store sales were off 1.3 per cent in the United State and 1.6 per cent in Europe, with December expected to show even softer results according to analysts, who say the outlook for 2003 is equally bad.
"We are looking for flat U.S. same-store sales in 2003," said Andrew Barish, an analyst with Bank of America Securities. "Margins will be below modelled levels. Clearly, this turnaround will take some time."
Other analysts said McDonald's first quarterly loss was not a surprise as the burger monopoly "struggles to boost stagnating sales abroad and at home where its margins are under pressure amid aggressive discounting in the sector."
----------------------
What Is Happening at McDonald's?
- K.C. Adams -
The first ever quarterly loss at McDonald's Corp. has surprised many people. How could such a powerful worldwide monopoly lose money? The company itself explains the phenomenon as "pressure on profit margins." In other words, the market price of what they sell in their restaurants is only "marginally" more than the cost of production and distribution. The price of a meal at the window is only fractionally higher than all the costs of getting that meal to the consumer. How could that be true when McDonald's is infamous for paying low wages and low prices for the ingredients it uses?
McDonald's Corp. is part of the monopoly controlled retail sector of the economy that developed mostly in the late 1950s and early 1960s as part of the consumer society. At that time finance capital moved into almost every niche in the retail sector. Family businesses and even many larger companies like Simpson's and Eaton's have fallen victim to the avalanche of finance capital. The retail sector is a particularly uncertain world, as much of its profits depend not on surplus value produced by its own workers engaged in distribution but on the workers who produced the commodities in the first place. Even giants like Home Depot are struggling for profit and others like Wal-Mart are deeply involved in international political intrigue as most of what they sell comes from poor countries. Wal-Mart, Lowes and similar monopolies depend entirely on cheap domestic labour, control of currency prices, foreign money underwriting American imports and consumption, and the right to import and sell cheap commodities from China and other countries.
The retail sector, except food services, mostly sells already produced (finished) commodities. It adds no new value to commodities and must win its profits from already produced surplus value at the point of production. It must fight for a share of profits with the production capitalists. Part of the surplus product created during production must be used to pay for the distribution of commodities. Under capitalism no overall planning takes place determining the distribution of profits among producers and retailers; it is mostly a raw trial of strength. The bigger a retailer becomes; the more price concessions it can wring out of producers. To date, retail workers have borne the brunt of this anarchy, receiving mostly minimum wages and poor working conditions.
The retail food industry, like McDonald's and Wendy's, both distributes and partly produces its commodities. In the operation of a fast-food restaurant, workers add some value to the food through preparation and cooking. McDonald's has reduced the labour time involved in food preparation and cooking to a minimum to keep down its price of production. The reduction in labour time (productivity) reduces the market value of their products but also narrows their profit margin. Lower prices for their products means less revenue in relation to their fixed costs for rent, machines, electricity, management, advertising, bookkeeping, financing, etc.
A consumer society dominated by finance capital is predicated on the false illusion that consumption, individually and collectively, is infinite. From infinite consumption comes unlimited growth and limitless profits that somehow defy the laws of capitalism, commodity production and even biology.
The individual human body is an organism with a beginning and an end and finite in the amount it can consume. The number of individual consumers is determined by the total population on earth. Once the majority of those consumers have been drawn into the capitalist marketplace, the finite reality of limited individual consumption takes firmer hold.
Retail monopolies like McDonald's and Wal-Mart are also bound by the fact that they attract customers with limited incomes. Unlike the luxury and military sectors of the economy, the necessary economy catering to the working class is constrained by how much the capitalists are forced or are willing to pay for labour power. Capitalists are caught in the contradiction of not wanting to pay their own workers a good wage but wanting other workers to have lots of money as consumers. Spending is also greatly affected by the level of insecurity felt by the working class due to economic downturns and unemployment.
Collectively, our economic forms are in constant flux and respond to the way we produce and the social relations that develop around those forces of production. Social relations sooner or later must be in harmony with the way humans produce. Giant social enterprises like McDonald's and Wal-Mart are not in harmony with private ownership and control. Private ownership and control of monopolies must be replaced with social ownership and control. The working class must win the battle to control social production and distribution and the direction of the economy, if it is to open the door to progress and solve any of the problems facing individuals, collectives and the society and bring some harmony into the world.
Economic forms are controlled by natural laws that are greater than the dreams of finance capital for a limitless consumer society. If the disposable income of individual consumers on a world scale is increased, the increase in wages would mean a decrease in profits of the capitalists, a further squeezing of their profit margins and possible bankruptcy. McDonald's Corp., Wal-Mart and all the other retail monopolies are ruled by the same nasty laws of value and capitalism that bind all those who profit from buying human beings to work for them and selling in the marketplace what those workers produce.
Capitalism constantly needs to extend its exploitation and marketplace. It always requires new workers to exploit, new consumers to sell to and new capital to exchange with. U.S. capitalism expanded after the Second World War by extending its exploitation of workers mainly in three directions: the female population within the U.S., new immigrants to the U.S. and peasant masses abroad. U.S. capitalism emerged from the war with many advantages over competitors: it had made money from the war; none of its vast industrial base had been destroyed; land prices in the U.S. were still far lower than in old societies; huge numbers of refugees from war were desperate to emigrate and there was space in North America; a "progressive" "anti-fascist" image of U.S. capitalism had emerged after the war; and, competing centres of capitalism around the world were greatly weakened, allowing the U.S. monopolies to penetrate into new areas. Those new areas were in addition to its traditional control of South and Central America and the Philippines.
U.S. capitalism flush with money used cultural aggression to promote its monopolies, their products and the "American way of life" at home and abroad. Advertising is the most common form of cultural aggression bolstered by the "hard, serious" culture of movies, books, magazines, news, science and television. One of McDonald's biggest "costs of distribution" is advertising, especially aimed at children.
One of the countries that witnessed a significant expansion of U.S. capital and reduction of influence of British capital was Canada. The U.S.-Canada Auto Pact during the 1960s signalled the growing annexation of the Canadian economy by U.S. capital.
The expansion of the number of women into social production in the U.S. was a big factor in the growth of McDonald's. The exploitation of women in social production and distribution put pressure on the traditional family unit in many ways. The traditional patriarchal family social form with women doing most of the domestic chores has been weakened as capitalism sought out women to exploit socially not just domestically. No new social form for the family has been developed, only new niche areas that retail monopolies have used to expand. Fast-food outlets are a crude form of "socialised" eating that fill an obvious need for food preparation that takes the burden off the family unit especially working women. Issues of food quality, a cultured setting, and decent wages and working conditions for the workers of the retail food sector are all incidental to the underlying need of the monopolies for profit.
Land prices played a significant role in the growth of retail monopolies in the U.S. Low land prices and ground rent allowed companies like McDonald's and Wal-Mart to expand rapidly into the suburbs. Cheap farmland was used for malls. With malls at the centre, governments financed highway and road systems that bolstered the car culture, ruined existing communities and allowed land speculators and construction companies to make fortunes by subdividing land for individual homes. From their solid base in the United States, U.S. monopolies have fanned out over the world. However, it is one thing to sell enough burgers in suburban St. Louis to pay the rent but quite another in Japan or even France. Landlord capitalists in the old societies are far more powerful than in North America and demand a bigger slice of the surplus product.
The biggest challenge to the retail monopolies comes from the capitalist system itself and the law of the falling rate of profit. Finance capital does not allow any profitable niche to go unchallenged. As McDonald's expanded, so also arose their competitors using identical methods and even benefiting from not making some of the same mistakes. When the competition was mainly family restaurants, McDonald's profits were high as it could sell its meals at or even above the price of production and distribution. Today when the competition is other monopoly chains, McDonald's must sell at or mostly below the price of production and distribution cutting its profit margin to razor thin.
The market price and profit from the production and distribution of burgers at fast-food outlets has gradually fallen in response to productivity, wholesale price control, over-saturation, competition from other burger-joints and other types of fast food, and a growing public consciousness about food quality.
How many burger joints can one area sustain? The consumerism of the retail industry has come up against the finiteness of the individual, a set number of human beings on the planet and the laws of the capitalist system and commodity production.
The retail sector aimed at the working class is experiencing profit difficulties in spite of paying rock bottom wages and employing a highly productive system based on economy of scale and monopoly controlled wholesale prices. How can workers in this sector win liveable wages and working conditions if powerful monopolies like McDonald's, Home Depot and Wal-Mart have razor thin profit margins and threaten to close outlets whenever workers organize? It proves that the monopoly capitalist system is unworkable and cannot provide for the people no matter how hard they work. The retail sector has to be organised to serve the working class and people in conjunction with the productive sectors of the economy. Surplus product from the productive sectors must be distributed in a planned way to provide living wages and decent working conditions for workers in the retail sector. A first step to accomplish this would be to set up a government controlled wholesale network in all sectors to establish stable prices for producers and the retail sector. With stable government-controlled wholesale prices, the government could then mandate minimum liveable wages in the monopoly-controlled retail sector. The non-monopoly retail sector could be encouraged to pay their workers a living wage and accept a reasonable profit by allowing them to purchase commodities wholesale at lower prices than the monopolies.
The key to any change is the involvement of the working class in discussing, analyzing and taking action on its own program to solve problems facing the economy and people. New ways of food preparation and distribution to ease the burden on working families could be developed stressing quality, a high cultural level and low cost. The people taking on their social responsibility of managing the country's economy can overcome any difficulty.
http://www.cpcml.ca/tmld/D33003.htm#5
(Edited by Comrade Marcel at 5:48 pm on Jan. 14, 2003)