EW January 2011

Transat lant ic Cable

On another positive note for the US economy, gross domestic ❈ ❈ product (GDP) expanded 2% in the third quarter, topping the 1.7% growth of the April-June period. Economists surveyed by Bloomberg News predicted a 2.4% expansion for the fourth quarter.

Energy

Innovative technology is not enough to save a US maker of solar panels from the vicissitudes of the market

Improved job numbers enable California to celebrate its first month of economic recovery

“The cost-cuttingmove, which will reduce the company’s previously announced production capacity, is a sign of the notable shift in the prospects for cutting-edge American solar companies, which now face intense price competition fromChinese manufacturers that use more established photovoltaic technologies.” Todd Woody, who writes the “Green” blog in the New York Times , was referring to Solyndra, a Silicon Valley solar panel maker that was aided by Washington to build a state-of-the-art robotic factory. On 3 rd November the company announced an alteration in its plans for that facility and another one. Just seven weeks previously, Solyndra had opened Fab 2, its $733million factory in Fremont, California. The plant was intended as the first phase of a rapid expansion. Instead, Solyndra will shutter the old plant and postpone the expansion of Fab 2, which was built with a $535 million federal loan guarantee. In an interview in San Francisco, Solyndra’s chief executive Brian Harrison sounded very much like someone who had spent time between a rock and a hard place. “Fab 2 is much more efficient and cost-effective than our existing facility. We’re adjusting our plans to be more in line with where the market is and where our business is at the moment.” The necessity for that adjustment became apparent over a mere six months from December 2009, when Solyndra filed for an initial public stock offering. At the time it projected a total production capacity of 610 megawatts by 2013 if its two plants were fully built out. Plans for the stock offering were abandoned in June 2010. The company nowexpects tohave capacity of 285 to300mWby 2013. After Solyndra filed for the stock offering, the market underwent a significant shift. Prices of solar modules plummeted as low- cost Chinese manufacturers like Suntech and Yingli Green Energy ramped up production. Mr Woody wrote that this has put pressure on companies like Solyndra, which makes advanced thin-film solar modules. These had been cheaper to install until prices began to fall sharply last year. Solyndra could reopen the old factory, Fab 1, or expand its ❈ ❈ successor. The closing of Fab 1 will save more than $60 million in capital expenditures. And according to Mr Harrison, despite the cutbacks Solyndra’s production of solar panels for commercial rooftops will double in 2011 from 2010. Suntech is China’s biggest solar panel maker, with head- ❈ ❈ quarters in Wuxi. Suntech America, based in San Francisco, opened a facility in Goodyear, Arizona, in 2010. Production there enables the Chinese company to avoid tariffs on imported solar panels imposed by the US. The Chinese solar module maker Yingli Green Energy (Baoding), which has offices in New York and San Francisco, is also believed to have a Phoenix operation under consideration. Dorothy Fabian USA Editor

California is badly in need of good economic news – and in November its residents at last received some. It was reported that the state added 39,000 jobs in October, across many sectors. While the unemployment rate was unchanged at 12.4%, the gain was sufficient to persuade economists that the recovery in the Golden State may be building up steam. As reported by Alana Semuels in the Los Angeles Times , the October data represented a major improvement over September, when payrolls declined by 53,600 jobs. The state’s struggling labour market had seen the biggest monthly employment increase in some three and a half years. (“California Posts Biggest Job Gain Since May 2006,” 19 th November) Among the gainers substantiated by the California Employment Development Department were manufacturing (7,100 jobs) and even the weak construction sector (2,500 jobs). Another positive sign for the labour market was the rise in the average hours worked per week from 39.9 in September to 40.4 in October. Even so, as noted by Ms Semuels, California’s “employment hole” remains huge. The state still has 1.3 million fewer jobs than it did at its peak in July 2007. Key sectors including housing continue to struggle. But Californians were inclined to put the best possible construction on the recent job numbers. Esmael Adibi, an economist with Chapman University in Orange, told the Times : “This is, relatively speaking, the best news we’ve gotten this year. We have bottomed out and we are creating jobs.” Jerry Nickelsburg, senior economist at the Anderson School of Management of the University of California, Los Angeles, concurred. “Our losses are starting to become smaller,” he told the Times ; then added, “We’ve got some climbing to do.” While California demonstrated the most dramatic ❈ ❈ improvement of the four biggest states, the next three in line – Texas, New York and Florida – all added jobs in October as the US economic recovery stoked demand for labour. Texas gained 47,900 jobs; New York, 40,500; Florida, 6,900. Goldman Sachs Group Inc, the investment banking and securities firm, said on 20 th November that the gains could help the states to shrink budget deficits as new jobholders boost income- and sales-tax collections. States’ tax revenue grew about 6% in the three months ended 30 th September, the third consecutive increase. At the national level, employment in the US rose in October ❈ ❈ for the first time in five months, the Labor Department said 5 th November payrolls climbed 151,000, exceeding all estimates in a Bloomberg News survey of economists.

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EuroWire – January 2011