Wednesday, December 31, 2008

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GM sues bankrupt supplier Cadence over parts

Fri Dec 26, 2008 5:42pm GMT

NEW YORK, Dec 26 (Reuters) - General Motors Corp (GM.N: Quote, Profile, Research) has filed a lawsuit against a bankrupt auto-parts supplier, saying it is holding necessary equipment "hostage" which could potentially interrupt the launch of its new Chevrolet Camaro car.

In a lawsuit filed on Wednesday in U.S. Bankruptcy Court in Delaware, General Motors asked the court to allow it access to facilities of the supplier, Cadence Innovation, so it could obtain necessary tooling and parts for its plants.

Cadence, which makes door trim, instrument panels and air bag covers, filed for bankruptcy protection in August, but this month abandoned plans to sell itself and is now liquidating, according to court papers.

GM said it needed immediate access to the tooling, because it does not have enough parts on hand, and its vehicle assembly operations could be interrupted.

"Even one day's disruption in supply of certain Component Parts could cause a shutdown of GM assembly operations, disrupting not only GM's business, but the operations of countless suppliers, dealers, customers, and other stakeholders," GM said in the complaint.

GM said that such a shut down could cost millions of dollars per plant per day and it would need to have a successor supplier in place by Jan. 12 for the launch of the new Chevrolet Camaro.

GM said it had an accommodation agreement with Cadence that requires the auto-parts supplier to continue to manufacture the parts and provide tooling and equipment.

A Cadence lawyer and spokesman were not immediately available. (Reporting by Emily Chasan and Santosh Nadgir in Bangalore; Editing by Tim Dobbyn)

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GM shares up, GMAC may be eyeing $6 billion loans

Sat Dec 27, 2008 2:23am GMT

By Soyoung Kim and Karen Brettell

DETROIT/NEW YORK (Reuters) - Shares of General Motors Corp jumped on Friday after its auto finance affiliate GMAC won access to government lending programs, while analysts estimated GMAC might be seeking loans of more than $6 billion.

The Federal Reserve approved GMAC's status as a bank on Wednesday, giving the troubled finance company access to the Treasury-run financial bailout package, which may help GMAC avoid bankruptcy and continue financing of dealer and consumer loans for GM vehicles.

The news came less than a week after the U.S. government agreed to bail out GM and Chrysler LLC with $17.4 billion of emergency loans to provide liquidity and stave off collapse and massive job losses.

Analysts said the approval of GMAC as a bank further reduced the risk of bankruptcy for the No.1 U.S. automaker.

Underscoring the financial strains facing the U.S. auto industry, GM filed a lawsuit on Wednesday against a bankrupt auto-parts supplier, saying it is holding necessary equipment "hostage" and that could potentially interrupt the launch of its new Chevrolet Camaro car.

"It's significant in terms of GM's ability to move cars," said Erich Merkle, an analyst at Crowe Horwath.

"Things are still pretty ugly out there (in terms of sales) but in terms of GM possibly filing for bankruptcy, in my mind that's not going to happen. The reason I'm saying this is what they (the government) are doing with GMAC right now."

Shares of GM were up 13.54 percent, or 44 cents, at $3.69 on the New York Stock Exchange.

Bonds of GMAC LLC also rose, while the cost to insure GMAC's debt with credit default swaps plunged.

CreditSights said GMAC may have applied for up to $6 billion in funds from the government's $700 billion financial bailout program, and could potentially sell $17.5 billion in government-backed debt to shore up its capital position.

"While GMAC has not quantified its capital injection request from Troubled Assets Relief Program (TARP), we estimate the company could have applied for up to about $6.3 billion," CreditSights analysts Richard Hofmann and Adam Steer said in a report late on Thursday.

The analysts based their projections based on capital injections being limited to 3 percent of risk-weighed assets.

The bank status came before a debt swap deadline of 11:59 p.m. Friday. GMAC, owned by private equity firm Cerberus and GM, is looking to swap $38 billion of outstanding debt for a smaller amount of new debt, as well as preferred shares and cash, to reduce its debt load and raise capital.

"This opens the door to invest in the senior and subordinated debt," which are trading "at very attractive yields," said Andrew Brenner, an analyst at MF Global Inc in New York.

GMAC's 5.625 percent notes due in 2009 climbed to 94 cents, yielding 23 percent, versus about 73 cents on Monday, its last significant trade, when the note yielded almost 104 percent, according to MarketAxess data.

The cost to insure GMAC's debt with credit default swaps also plunged to around 24 percent the sum insured, or $2.4 million to insure $10 million for five years, plus annual payments of 5 percent. The swaps had traded at around 47 percent before the news.

GMAC TROUBLES

GMAC has struggled as the credit crunch raised its borrowing costs and the value of many of its assets plummeted.

It has lost $7.9 billion over the last five quarters and has said without bank holding company status, it would likely have to sell assets and take other extraordinary measures to make good on its obligations.

The lender's difficulties forced it to severely curtail financing for dealerships and for consumer purchases of new GM cars and trucks in recent months. The cutback in financing compounded the sales slump at GM, the No. 1 U.S. automaker, whose sales fell an eye-popping 41 percent in November.

GM Chief Executive Rick Wagoner said last week that GMAC's difficulties were "hammering" the carmaker's ability to sell vehicles.

GM dealers have depended on GMAC, North America's largest auto finance company, for financing their inventory and consumer purchases even after GM sold a 51 percent stake in GMAC to Cerberus in 2006 for $7.4 billion. GM retains the remaining 49 percent.

GM and Cerberus will have to trim their stakes to no more than 10 percent and 14.9 percent, respectively, to comply with Fed rules that are meant to prevent companies from using banks to fund their businesses.

Meanwhile, in the lawsuit filed in U.S. Bankruptcy Court in Delaware, GM sought access to facilities of parts supplier Cadence Innovation so it could obtain necessary tooling and parts for its plants.

Cadence, which makes door trim, instrument panels and air bag covers, filed for bankruptcy protection in August, but abandoned plans to sell itself and is now liquidating, according to court papers.

(Additional reporting by Walden Siew and Emily Chasan in New York, editing by Leslie Gevirtz)

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China revises patent law to encourage innovation

    BEIJING, Dec. 27 (Xinhua) -- China's top legislature on Saturday approved the revision of the Patent Law to allow inventors to apply for foreign patents before domestic ones for their inventions.

    The revised law, which takes effect on Oct. 1, 2009, was adopted with 154 votes and four abstentions at the closing meeting of the sixth session of the 11th National People's Congress (NPC) Standing Committee.

    The change is aimed at encouraging innovation and improving China's "international competitiveness", Chen Guangjun, a senior official with the NPC's Education, Science, Culture and Health Committee, said at a press conference after the legislative session.

    Previously, the Patent Law stipulated that people, whose inventions were completed in China, must apply for domestic patents first before applying for a foreign one.

    The new amendment also says Chinese inventors must first go through government scrutiny before applying for foreign patents to find out if such innovations should be made national secrets.

    Inventions which have not undergone security checks will not begranted Chinese patents, according to the law.

    The amendment applies to all inventions completed in China.

    The Patent Law, which was enacted 1985, has had two major revisions in the past.


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InformationWeek

Global CIO: The Top 10 CIO Issues For 2009

What should be on your agenda next year: A CIO-centric blend of business and tech issues that will help you increase business and customer value.

By Bob Evans,  InformationWeek
Dec. 30, 2008
URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=212700241

Given what's going on in the economy these days, maybe the No. 1 item on this list should be "Stay employed." But we figure you've all got that one nailed, so we've focused on a CIO-oriented blend of business and technology issues that in the end represent opportunities for you and your team to drive greater business value and customer value. And, to be sure, many other issues could have made this list -- we're assuming as givens things like increase revenue, make a profit, turn out great products, etc.

Along with each of the Top 10 CIO-centric issues, we've included at least one thematic piece published in 2008 by InformationWeek that offers valuable perspectives on these top-priority subjects. Please let us know what you think at bevans@techweb.com:

1. Customer-Facing Innovation. While it's essential for CIOs and your teams to be innovating across all parts of your operation, the greatest value in 2009 will come from efforts that directly connect your brands, products, services, and capabilities with your customers. In fact, in 2009, I think we'll see this term shift from "customer-facing" to "customer-embracing" to signify the move from the largely passive approach of merely facing your customers to the more-active and -engaged notion of embracing. Two articles that offer significant insights into this concept are this blog post introducing "The New Age of Innovation" microsite we created in April with authors C.K. Prahalad and M.S. Krishnan for their superb new book of that name; and a revealing look inside one of the top consumer brands in the world via Mary Hayes' "Coca-Cola's CIO Talks Innovation".

2. Attacking The 80/20 Ratio. Just as customer-facing innovation is the top outward-facing CIO priority for 2009, the inward-looking top priority is attacking the maintenance glutton that sucks up 75% or even 80% of your precious IT budget. Unless this beast is confronted and defeated, you're going to face an ugly 2009 with little or no money available for innovation, and that inability to push the company forward will, sadly, enhance the stereotype of you and your team as a cost center that impedes progress rather than accelerating it. In that context, we're happy to provide a richly detailed account for how to make it happen with Chris Murphy's superb "HP Goes All In With IT Transformation".

3. The Challenging Economy. Making your already-difficult job even a little more demanding, the current global economic mess is forcing CIOs to find ways to pursue the top two agenda items while also slashing away at costs. To see how some of your peers are tackling those challenges, check out another great piece by Chris Murphy called "How CIOs Are Setting IT Strategy Amid Economic Uncertainty".

4. The Strategic CIO. And somehow in 2009, even as you're dealing with those three issues above, you'll have to make some time to continue finding additional ways to enhance your role as a strategic business leader within your organization. While that certainly implies an open-ended set of possibilities, here are a couple of pieces that will offer some ideas of what you should be doing, "Tomorrow's CIO: The Qualifications," and what you should definitely not be doing, "Two Flavors of CIO, Each Leaving An Aftertaste".

5. Cloud Computing. Is it safe? Is it practical? Is it The End Of IT? Is it right for you and your company? InformationWeek's John Foley, who recently launched an excellent new site called Plug Into The Cloud, offers some CIO perspectives in his insightful overview, "CIOs On Cloud Computing".

6. The SaaS Effect. In 2008, like cloud computing, SaaS went from a slightly marginal prospect into a full-fledged player as large, midsize, and small companies alike began adopting the notion of having someone else host mission-critical applications. One of the challenges CIOs faced and will continue to face with the SaaS model is integration, and Mary Hayes offers an outstanding look at the challenges and solutions in "SaaS Integration: Real-World Problems, And How CIOs Are Solving Them".

7. Virtualization. While this became one of the most widely pursued approaches to attacking the 80/20 problem, some CIOs did not or could not make a strong case to the CEO and other executives about the business value virtualization can offer. So in some cases it was seen as a cool back-office techy thing, but not something to be confused with a game-changing business tool. Art Wittmann offers some analysis on this must-solve 2009 problem with "Does Management Get Virtualization?".

8. Outsourcing. Although it's widely used and most CIOs feel it can offer huge value, outsourcing is still regarded by some as anywhere from too risky to too mean-spirited. Chris Murphy shines some clear thinking on the whole matter as part of his two-week adventure in India with "Report From India: 5 Reasons To Outsource".

9. Green Computing. While a lot of attention around this issue was centered on the dubious claims of saving the planet, many companies devised excellent approaches to lowering energy consumption, reducing costs, and doing a better job with recycling -- all good business practices. In the midyear days of $4 gallons of gasoline, John Soat fingered the real culprit with "Energy Woes? Blame The CIO!".

10. Radical Desktops. Here's how Joe Hernick opens his analysis of how the trusty old desktop computer is about to undergo some massive change: "A slate of contentious issues -- social, economic, and technological -- will radically alter the business user's computing experience by the end of this decade." Virtualization, smartphones, new platforms, and more all play a role in "Radical Desktops Deliver Power To The People. But What About IT?".

So that's our list of things to keep you CIOs busy in 2009. If it's any solace, we here at Global CIO are honored to be able to follow your efforts and challenges and achievements, and to share the perspectives we hear from you and your peers as you attempt to change how the world thinks, works, plays, learns, communicates, and views itself. Thanks for the opportunity to serve you, thanks for your trust, and thanks for the great work you do. May 2009 be full of promise, fulfillment, and fun. Happy New Year!

To find out more about Bob Evans, please visit his page.

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IT cos eye Japanese outsourcing biz
30 Dec 2008, 0153 hrs IST, Aparna Ramalingam, TNN


CHENNAI: After neutralising their mother-tongue accent and mastering the American drawl, Indian geeks are busy learning Japan's Kanji, Katakana and Hiragana symbols. Reason: The recession is eating into the volume of outsourced IT work from the US; and after the US, Japan is an important market from the IT perspective, more so during the current period.

Take the case of Suman Reddy Ragidi, a business analyst of Cognizant. Japanese language training has enabled her to converse with clients both in formal as well as informal situations. "The training has also made it easier for me to understand all project documentation written in Japanese," says Reddy Ragidi.

On its part, Cognizant runs foreign language training in its offices and its mandatory for employees to enrol in such language courses. "Language is an important aspect of culture and such training is helpful in everyday communication. Importantly, employees are able to articulate their viewpoints to clients," says K Venkataraman, director of Cognizant.

The Japanese IT services market is valued at $108 billion, according to a recent survey by Nasscom and PricewaterhouseCoopers. India has bagged only 13% of this offshoring pie. Moreover, demand for software is primarily driven by the BFSI (banking, financial, services and insurance) and manufacturing companies which consume 42% of the total IT services.

Another Chennai-based IT player Infoview Technologies, whose business comes fully from Japanese majors, is making sure its employees know Japanese symbols by heart. Around three-fourth of the company's employees have learnt the language and the top management team which accounts for 10% of the workforce has reached the 'near native level' in terms of mastering the language.

The company also recently launched an online Japanese learning software for beginners in India. JWEIC is developed by WEIC Corporation, a Japanese company that is into production and sales of e-learning language and learning management systems. Infoview, which has the rights to sell the software in India and Singapore, is targeting executives and college students alike for the online course. It is targeting 10,000 learners during the first year.

Similarly, Noida-based Nucleus Software which generates half of its revenues from Japan is encouraging its employees to learn the language. "Right now, we are utilising the services of interpreters and translators," says chief executive and managing director, Vishnu Dusad.

For Indian IT entrepreneurs like Chandrasekaran of Infoview Technologies and Dusad of Nucleus the lure for doing business with 'The Land of the Rising Sun' is the importance that the Japanese place to long-term relationships. "It's tough to crack the market initially. On an average, while it takes three months to close a deal with an American firm, it's double for Japanese companies," says Cheran Chandrasekaran, CEO, Infoview Technologies. Adds Dusad, "The main challenge is the language. But once you meet up to their expectations, you can be assured of a fairly long-term relationship with the Japanese." These businessman are now ensuring that their employees learn the language and don't say 'sayanora' soon.

aparna.ramalingam@timesgroup.com
The New York Times


December 28, 2008

Tainted-Milk Victims in China to Be Paid

BEIJING — A group of Chinese dairy companies accused of selling tainted milk that sickened tens of thousands of babies has agreed to compensate the victims, the state media announced on Saturday.

China's Dairy Industry Association, a group of 22 milk producers, said it would provide one-time payments to the families of the children who were sickened or who died after consuming milk tainted with melamine, a chemical compound that is often used in the production of plastics and fertilizers.

"The enterprises offered to shoulder the compensation liability," the association said, according to Xinhua, China's official news agency. "By doing so, they hope to earn understanding and forgiveness of the families of the sickened children."

As part of its promised compensation package, the dairy association said, it would also pay for the long-term health care needs of affected children. "If the babies suffer from relative aftereffects, all medical fees will be covered by the fund," the association said, according to Xinhua. Six children died, and nearly 300,000 were sickened.

The report by Xinhua did not indicate the amount of compensation or when the payments would be made.

It is unclear how the promise of compensation may affect a series of lawsuits brought by the families of the victims. None of the lawsuits have been accepted by the courts.

On Friday, six melamine producers and dealers in Henan Province went on trial on charges that they manufactured or sold the compound to milk producers.

Until the scandal broke in September, melamine was frequently added to dairy products as a means of increasing the protein content of watered-down milk.

Earlier this month, the government said that more than 800 children remained hospitalized with kidney stones and other ailments.

This week the chairwoman of one of China's biggest dairies, Sanlu Group, will face trial in Shijiazhuang, the capital of Hebei Province, on charges that the company knowingly sold adulterated milk. Last week Sanlu was declared bankrupt. Sanlu, which is partly owned by a New Zealand dairy cooperative, stopped all milk production in September.

On Saturday the government took on another delicate issue, shoddy construction, by creating stricter codes to make schools and other public buildings more resistant to earthquakes. An earthquake in May in Sichuan Province killed at least 88,000 people, many of them children who died in the rubble of poorly built schools.

The regulations, passed by the National People's Congress, imposes new requirements on both new and existing schools. They also cover hospitals and shopping centers. The rules, reported by Xinhua, were short on details and, like many national laws, would be carried out largely by local governments.



BIOTERRORISM >>  VIRAL HEMORRHAGIC FEVER >>  NEWS >> 

Ebola strikes Congo again

Editor's note: This story was revised Dec 30 to make clear that as of Dec 29, only two cases in the outbreak had been confirmed as Ebola. During the DRC's 2007 outbreak the government confirmed 17 cases, down from 25 it reported earlier, and initial reports during that outbreak mentioned as many as 395 suspected Ebola cases.  Some of the suspected patients had other diseases, including shigellosis.

Dec 29, 2008 (CIDRAP News) – The World Health Organization (WHO) recently reported an outbreak of Ebola hemorrhagic fever in the Democratic Republic of the Congo (DRC) that involves 34 suspected cases, with at least 9 deaths.

Based on reports from the DRC's health ministry, the WHO said in a Dec 26 statement that the outbreak was detected in Mweka district in Kasai Occidental (West Kasai) province and that a laboratory in Franceville, Gabon, confirmed the Ebola virus in samples from two of the patients. WHO spokesman Gregory Hartl told CIDRAP News that the two patients with confirmed infections are still alive.

The WHO said a lab in Kinshasa also confirmed Shigella (bacterial) infections, but the agency did not say how many.

A spokesman from the medical aid group Medicins sans Frontieres (MSF, or Doctors Without Borders) said that two more people have died of suspected Ebola infections, raising the number of deaths possibly caused by Ebola to 11, according to a report today from Agence France-Presse.

The DRC's last Ebola outbreak, in September 2007, also hit West Kasai province and also featured Shigella infections in some patients, according to previous reports. Seventeen cases and six deaths were reported in that outbreak.

From the number of suspected cases and deaths in the ongoing outbreak, the WHO said the case-fatality rate is 26%. The agency said that additional samples have been sent to the lab in Kinshasa. The statement did not say which Ebola subtype had sickened people in the outbreak.

The Ebola virus is highly contagious and causes a high fatality rate, ranging from about 50% to 90%. Initial symptoms include fever, headache, joint and muscle aches, sore throat, and weakness, followed by diarrhea, vomiting, and stomach pain, according to the US Centers for Disease Control and Prevention (CDC). Hallmarks of Ebola infection include internal and external bleeding, and there is no vaccine or specific treatment for the disease.

In late 2007, researchers investigating an Ebola outbreak in Uganda, the DRC's neighbor to the east, identified a new Ebola subtype: Bundibugyo. Initial findings suggested that the case-fatality rate for Ebola Bundibugyo was about 36%, lower than that of the Zaire (80% to 90%) or Sudan (50% to 55%) subtypes, according to previous reports.

WHO experts are assisting the DRC's health ministry with the outbreak investigation and response at ministry headquarters and in the field, the WHO said. The agency said it has sent additional staff and supplies to the area, and a team of national and international experts has been sent to help control the outbreak.

The WHO said it hasn't received any reports that suggest international spread of the disease, and it advised countries not to impose travel or trade restrictions on the DRC.

Meanwhile, MSF said in a Dec 25 report that suspected cases have been reported since Nov 27. The group said nine of its Ebola specialists from Kinshasa and Brussels are working in Western Kasai province. MSF said an isolation ward is being built in the village of Kampungu and that the group's doctors are treating suspected patients and identifying those who may have been in contact with people who had or have the virus.

In other developments, government officials in the Philippines recently asked the United Nations Food and Agriculture Organization (FAO), the World Organization for Animal Health (OIE), and the WHO to send experts to help investigate the detection of the Ebola Reston virus in pigs, according to a Dec 23 statement from the FAO.

In early December the FAO announced that researchers had discovered the Ebola virus for the first time in pigs while investigating outbreaks of porcine reproductive respiratory syndrome (PRRS) at several Philippine swine producers. The Reston subtype can sicken monkeys, but it does not appear to clinically infect humans.

See also:

Dec 25 WHO statement
http://www.who.int/csr/don/2008_12_26a/en/index.html

Sep 11, 2007, CIDRAP News story "Ebola outbreak confirmed in Congo"

Nov 20, 2007, CIDRAP News story "Congo says Ebola outbreak is contained"

Dec 25 MSF statement
http://www.doctorswithoutborders.org/news/article.cfm?id=3275

CDC background information about Ebola

Nov 21 CIDRAP News story "Researchers report new species of deadly Ebola virus"

Dec 23 FAO statement



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GMAC Says ResCap Will Continue to Originate Mortgages (Update2)

By Bob Ivry

Dec. 30 (Bloomberg) -- GMAC LLC's mortgage-lending unit will continue to make home loans after the company receives a promised $6 billion federal bailout.

"We will continue to originate mortgage products that can move in the secondary market," GMAC spokeswoman Gina Proia said in an e-mail, referring to a lender's ability to sell loans to securities investors. "We are in a more stable position to conduct servicing operations."

Residential Capital LLC, GMAC's home loan unit, wrote $46.3 billion in mortgages in the first nine months of 2008, making it the seventh-largest U.S. mortgage lender, according to Guy Cecala, publisher of Bethesda, Maryland-based Inside Mortgage Finance. ResCap is also the sixth-largest among U.S. mortgage servicers, which collect monthly payments from borrowers.

GMAC, the Detroit-based lender owned by General Motors Corp. and Cerberus Capital Management LLC, ran short of cash after losing $7.9 billion over five quarters, mostly from defaults on subprime mortgages originated by ResCap. GMAC applied to become a bank holding company so it could gain access to the Treasury Department's Troubled Asset Relief Program.

Subprime mortgages were available to borrowers with bad or incomplete credit histories. ResCap isn't making new subprime mortgage loans, Proia said.

The $6 billion in federal funding for GMAC is in addition to the $13.4 billion that the Treasury Department agreed earlier this month to lend to GM and Chrysler LLC, also a unit of Cerberus, a New York-based buyout firm.

'All the Attention'

"The auto side of the business is getting all the attention," Cecala said. "Their mortgage lending has been flying under the radar and they are probably happier that way. The strategy got them a government rescue."

Cerberus spokesman Jim Olecki did not immediately return calls for comment.

More than 100 mortgage companies have closed, been bought or suspended operations since the beginning of 2007, including Countrywide Financial Corp., the biggest U.S. mortgage lender last year.

"My question is this: if Countrywide had stayed around till now, would we be bailing it out?" said Joseph Mason, a securities professor at Louisiana State University in Baton Rouge who previously worked at the Treasury's Office of the Comptroller of the Currency. "This is where we give back-door access to Treasury funds for private equity firms" such as Cerberus.

Bonds Rise

Reviving GM has become a priority for U.S. policy makers because of concern that a bankruptcy would deepen the year-old recession by putting millions of people out of work.

ResCap's $1.2 billion of 6.375 percent notes due in June 2010 rose 0.5 cents on the dollar to 20.5 cents at 4 p.m. New York time, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 164 percent.

U.S. Representative Scott Garrett, a New Jersey Republican, criticized the timing of the bailout, which was announced at 8:24 p.m. New York time yesterday.

"It's par for the course for this administration, doing this in the dead of night," Garrett said. "It's not good, nor is it acceptable that they aren't more forthcoming with the media or members of Congress about specifics on exactly what they're doing."

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net.

Last Updated: December 30, 2008 18:41 EST

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UPDATE 3-Steel merger puts second Chinese firm in top 5

Tue Dec 30, 2008 6:43am EST

(Recasts, adds comment, background)

By Alfred Cang and Fang Yan

SHANGHAI, Dec 30 (Reuters) - Three Chinese steel mills agreed on Tuesday to merge into the country's biggest listed steelmaker, creating a second Chinese industry champion in the world's top five steel producers.

The three-way merger could bulk up China's bargaining power in negotiations with mining giants Vale (VALE5.SA: Quote, Profile, Research, Stock Buzz), BHP Billiton (BHP.AX: Quote, Profile, Research, Stock Buzz) and Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), which normally set benchmark annual iron ore prices with Baosteel Group, the current leader of China's fragmented steel industry.

China's policymakers have long wanted to crunch the sprawling sector into a few big players, hoping to have 10 steelmakers account for half the country's production instead of 20.

The plan, which aims to improve efficiency and cut pollution as well as adding to China's bargaining power, has gained traction as the economic crisis forces once swaggering steelmakers to look for a way to survive the economic bloodbath.

The new firm will unify Tangshan Iron and Steel Co 000709.SZ, the listed unit of China's third-largest steel mill, with smaller rival Handan Iron and Steel Co (600001.SS: Quote, Profile, Research, Stock Buzz) and ferroalloy producer Chengde Xinxin Vanadium and Titanium Co (600357.SS: Quote, Profile, Research, Stock Buzz), with an aggregate market value of about $4 billion.

"The consolidation will definitely boost the efficiency of the merged entity," said CITIC Securities analyst Zhou Xizeng.

All three are based in the province of Hebei, which encircles Beijing and is home to one-fifth of China's steel production capacity, facts that prompted officials to crack down on the province's polluting heavy industry during the Olympic Games.

The three are all part of the state-owned Hebei Iron and Steel Group, and merging them would be a first step towards listing all of the group's major steel assets, Tangshan said.

BIGGER, QUICKER, BUT STRONGER?

The merger follows the creation of Shandong Iron and Steel Group in March from the state-owned parents of Laiwu Steel Corp (600102.SS: Quote, Profile, Research, Stock Buzz) and Jinan Iron and Steel Co (600022.SS: Quote, Profile, Research, Stock Buzz) and the formation of Anben Iron and Steel Group in northeastern Liaoning province three years ago.

Anben, half of which is owned by the central government, was only a partial merger, with no equity or cash changing hands and no pooling of steelmaking capacity. The Hebei case, as in Shandong, is likely to forge stronger bonds.

"Both cases in Hebei and Shandong were handled by the provincial governments, as all the mills involved in the cases are under local state asset management. Therefore, such consolidations move faster," said analyst Henry Liu at investment bank Macquarie in Shanghai.

The companies will merge via a share swap, which Zhou at CITIC Securities said would inhibit the parent firm from injecting assets into the mix, a common method for fostering a favoured company's growth and often a boon to its share price.

The group's steelmills produced about 31 million tonnes of crude steel in 2007, slightly exceeding the roughly 29 million tonnes produced by Baosteel Group, the parent company of Baoshan Iron and Steel Co Ltd (600019.SS: Quote, Profile, Research, Stock Buzz). This year the Hebei Group will hit 33 million tonnes, rising to 41 million tonnes in 2009, one group constituent, Wuyang Iron & Steel, said on its Web site.

"The merger will create a big steel player but not a strong one, and to some extent it is not good for Tangshan shareholders. Investors are also concerned about how smoothly the companies will integrate," said a steel analyst at Essence Securities.

The three firms' shares have been suspended for months and plunged as trading resumed on Tuesday, catching up with the big price falls in the interim. Tangshan and Chengde Xinxin both fell by their 10 percent daily limit, while Handan lost 9 percent.

Analysts expect the smaller firms to delist and deregister after the merger and said the Hebei Iron and Steel Group could inject its other assets, such as iron ore mines, once the merger, which required shareholder and government approval, is completed. (Editing by Tom Miles and Anthony Barker)

© Thomson Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.

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China faces new melamine scandal, 17 on trial

Tue Dec 30, 2008 4:04am GMT
BEIJING, Dec 30 (Reuters) - More than 1,500 boxes of Chinese biscuits exported to Hong Kong and Singapore have tested positive for melamine as suspects in the protracted tainted-food scandal go on trial in China, local media reported on Tuesday.

The scandal has battered faith in Chinese-made products after a series of food- and product-safety scares and led to recalls of Chinese-made dairy products around the world. At least six babies died after drinking contaminated formula in China and hundreds of thousands fell ill.

Melamine is an industrial compound used in making plastic chairs, among other things, and is added to food to cheat nutrition tests.

Quality inspectors in Dongguan in the southern province of Guangdong found the latest contaminated biscuits after examining 13 batches of 4,800 boxes for export after neighbouring Hong Kong, a "special administrative region" of China, and Singapore reported tainted samples, the China News Service said.

The tainted products had been destroyed while others were sent back to the manufacturer, it said. Investigations showed the melamine in the biscuits came from milk powder, it added.

Tian Wenhua, former chairwoman of Sanlu Group, goes on trial on Wednesday along with other three senior executives of the company that was at the heart of the scandal and since gone bankrupt, the Beijing News said.

By Monday, 17 suspects involved in producing, selling, buying and adding melamine into raw milk had gone on trial, the China News Service said.

(Reporting by Liu Zhen; Editing by Nick Macfie)



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Auto sector gains on GMAC funding news

GM's lending arm acts to facilitate obtaining car loans
By John Letzing & Michelle Donley, MarketWatch
Last update: 4:23 p.m. EST Dec. 30, 2008
NEW YORK (MarketWatch) - General Motors Corp. shares led a rally in
the auto sector on Tuesday, advancing as much as 11% after its
traumatized lending unit said it will receive a cash infusion from the
government that will help new-car shoppers obtain financing.
Chart of GM
GM (GM
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GM) shares pulled back from session highs but still finished up 5.6% at $3.80.
GMAC Financial Services will receive $5 billion in funds from the U.S.
government's $700 billion bailout program.
The Treasury Department will also lend up to $1 billion to GM so it
can take part in a transaction that will help GMAC raise additional
needed capital.
As a result of the funding, GMAC said it will lower its minimum
credit-score requirement for retail consumers to 621 compared to the
700 minimum level set two months ago.
"The actions of the federal government to support GMAC are having an
immediate and meaningful effect on our ability to provide credit to
automotive customers," GMAC President Bill Muir said. "We will
continue to employ responsible credit standards, but will be able to
relax the constraints we put in place a few months ago due to the
credit crisis. We will immediately put our renewed access to capital
to use to facilitate the purchase of cars and trucks in the U.S."
The loan to GM comes in addition to the $17.4 billion in federal
assistance for domestic car makers announced by the government earlier
this month. GM and Chrysler appealed to the government for aid in
restructuring earlier this year after suffering from plummeting sales
that pushed them to the brink of bankruptcy.
"While an eventual GM Chapter 11 cannot be entirely dismissed if
various stakeholders fail to meet required concessions (we think these
stakeholders are likely to meet the requirements), federal aid to GMAC
suggests the [government] is probably now so financially entangled in
the GM-complex that a Chapter 7 liquidation of GM-Auto seems highly
unlikely," analysts at J.P. Morgan wrote in a note to clients Tuesday
morning.
The Treasury Department's purchase of $5 billion in preferred stock
from GMAC comes after the lending unit last week received approval to
become a bank holding company, a necessary step to become eligible for
federal bailout money. See related story on GMAC winning bank status.
"The company intends to act quickly to resume automotive lending to a
broader spectrum of customers to support the availability of credit to
consumers and businesses for the purchase of automobiles," GMAC said
in a statement late Monday.
Separately, The Wall Street Journal reported that Ford (F
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F) plans to offer two Lincoln models in 2009 that can park themselves.
The automatic parallel-parking system is due to be unveiled next month
at the North American Auto Show in Detroit, offered as an option on
the Lincoln MKS sedan and MKT crossover-utility vehicle, according to
the report.
Ford will also show a hybrid version of the Ford Fusion sedan, which
gets 8 more miles a gallon in city driving than Toyota's Camry hybrid,
The Journal said.
In an interview on Monday, Mark Fields, Ford's president in charge of
the Americas, said the Dearborn, Mich.-based company is counting on
technological innovations and fuel-efficient cars to set it apart from
competitors and lure more people into its showrooms, the Journal said.
Ford shares tacked on 3.2% to close at $2.29. End of Story
John Letzing is a MarketWatch reporter based in San Francisco.
Michelle Donley is a MarketWatch news editor based in New York.

Deccan Herald » DH Avenues » Detailed Story
Indian outsourcing industry punctured
By Jermy Kahn New York Times
Bangalore, India after years of being blamed for job losses in America
and elsewhere, Indias high-tech companies and outsourcing firms are
going through a downturn of their own. The global slowdown is forcing
them to reduce hiring, freeze salaries, postpone new investments and
lay off thousands of software programmers and call center operators.

While some industry insiders insist the global crisis will actually
benefit companies here, as western businesses seek to cut costs by
moving jobs overseas, right now the sector is gripped by an unfamiliar
sense of uncertainty.
"It's certainly not irrational exuberance," said Nandan Nilekani,
co-chairman of Infosys, one of India's best-known technology
outsourcing firms. "There is a lot of introspection about what does
this mean and when does it end."
The downturn is exposing a deeper concern: India has become the
world's front office, handling customer service calls, and its back
office, helping to process payments and run accounting and other
computer systems. But it has not yet become the head office -- making
major new products, pioneering marketing techniques or helping to
shape corporate strategy.

Rather than drowning the American technology firms or work forces with
a vast supply of cheap engineering talent, as some had feared, India –
and Bangalore, its Silicon Valley – have continued to largely serve as
the information economy's version of manual labor.

"Historically, when it comes to innovation, Indian companies are
relatively weak compared to the IBMs and Accentures of the world,"
said Partha Iyengar, the head of research in India for the Gartner
Group, which analyses trends in the technology sector. "It has been
their chronic Achilles' heel."

The recent coordinated terrorist attacks brought Mumbai, India's
commercial capital, to a virtual halt. But long before that brutal
shock, the country had been suffering the effects of the global slump,
losing capital as Western investors fled to the security of American
Treasuries, undermining Indian banks and company balance sheets.
Infosys recently scaled back its earnings projections for the year,
telling investors that it now expects revenue to expand 13 to 15 per
cent, instead of the 19 to 21 percent it had forecast and far below
the 30 per cent annual expansion the company had been used to.

Like many of India's outsourcing companies, Infosys is heavily
dependent on the financial sector, deriving a third of its revenue
from banks like Citigroup and Bank of America and other financial
clients. Its fate is also closely tied to the American economy:
Two-thirds of its business comes from the US. Neither factor bodes
well for the company's prospects.

Technology Partners International, a consulting firm that publishes a
widely watched index of global outsourcing deals, says its index is at
a 10-year low. "People think that outsourcing is a recession-proof
industry. It is not," said Siddharth Pai, a partner at the firm.

That realisation has changed the atmosphere of this city. Young
workers still flock to a rooftop terrace on Residency Road every
Wednesday night to grind to house and hip-hop music. But lately, the
crowds at NYKS, an upscale nightclub, are a little thinner. They drink
a little bit less. They talk a little less loudly. "Now they are
thinking twice before spending money," said Supreeth Chandrasekhar, a
25-year-old disc jockey at NYKS.
Mr Chandrasekhar also said that he used to perform at numerous
corporate events but that this business had largely disappeared.

In a country where most marriages are arranged by parents, the
downturn has even taken a toll on the matrimonial prospects of those
in technology outsourcing. "Because there is no job guarantees for IT
people, for the last six months brides' families have not been
accepting grooms from this background," said Jagadeesh Angadi, a
matchmaker in Bangalore.

The Indian National Association of Software and Service Companies
estimates that the country's technology sector will have created
50,000 fewer jobs in 2008 than last year, although it predicts the
sector will still have added 200,000 workers by year's end. India's
technology outsourcing companies have laid off about 10,000 employees
since September, according to the Union for Information Technology
Enabled Services, a labor group that represents technology workers.
Among the major players that have announced significant cutbacks in
hiring is Satyam Computer Services, which slashed its recruitment
plans to fewer than 10,000 from 15,000. Infosys, by contrast, has
almost $2 billion in cash on its balance sheet, a significant amount
that can help it weather the downturn. It said it intended to follow
through on plans to hire 25,000 workers this year.
"We made offers to people, and we need to stand by them," Mr Nilekani said.

But some companies that have hired recruits are postponing their start
dates. The deferrals allow companies, which once hired in anticipation
of future business, to better manage overhead by adding staff only
when they have confirmed projects.

A few so-called captive outsourcing operations – those that serve only
their parent company in Europe or the US – have also cut back.
American Express laid off some 200 of its 6,000 workers in India, and
Goldman Sachs announced last month that it would dismiss a similar
number, or about 10 per cent of its Indian work force.
For the moment, the industry has escaped large-scale job losses.
Indian labor laws make it difficult for companies to drop workers, and
mass firings can draw a political outcry. Yet outsourcing companies
have begun pruning workers, citing poor job performance, a way to
quietly reduce labor costs without attracting much public scrutiny.
The large outsourcing company Wipro dismissed 2.5 per cent of its work
force in the second quarter. Outsourcing companies are also shelving
expansion plans. Wipro, for instance, announced it was postponing the
opening of a major new software development center in Atlanta.

But India's business leaders see opportunity in the downturn. "Once
things settle down, people will start looking at their business
operations and how to make them more efficient, and that is where we
play," Mr Nilekani said.
Even consolidation on Wall Street, which may eliminate some Indian
companies' clients, could help Indian workers, outsourcing executives
say. Mergers require technical skills to integrate disparate systems,
and there is a potential for profitable outsourcing work in areas like
regulatory compliance. Banks are likely to be under stricter
government scrutiny given the sense that lax oversight contributed to
the financial crisis.
Quatrro BPO Solutions Chairman Raman Roy, says he has 300 employees
reviewing legal documents as part of bank mergers.

Copal Partners, a company that uses employees in India to help
investment banks do the sort of deal-based research normally performed
by the bank's junior analysts, has continued to expand even during the
downturn.
Critics say that will not change the local industry's basic
competitive disadvantage: a creativity gap with western competitors.

Indian technology companies are too focused on increasing the
efficiency of their internal systems, not improving their clients' own
industry-specific processes, according to Navi Radjou, an analyst with
Forrester Research. "They are having trouble tailoring a technical
application to a particular business need," he said.
But India's biggest tech outsourcing companies want to do as much as
their European and American rivals, including expanding in Europe and
the US. And the downturn may allow them to acquire talent – and even
whole businesses – on the cheap.

In August, for example, Infosys acquired the British consulting firm
Axon for $753 million. Wipro is said to be shopping for a similar
acquisition.

The changes may come too late for workers like Vikram Hathwar.
In July, Hathwar, a 22-year-old engineer, graduated from a technical
college with a job offer from a software developer.

But instead of starting his job -- paying nearly $6,000 a year, a good
starting salary in this country -- he has been waiting in vain for a
letter from the company telling him when to report for work.

"I called them and they said they would be calling two or three months
later, but still they have not informed me anything about when I
should start," Mr Hathwar said.

In the meantime, he has begun looking for a temporary job. But he said
most tech businesses were no longer hiring recent graduates. The few
that are have begun asking applicants to intern for several months
without pay and with no guarantee of a permanent position. "The
recession has made for all these pressures on us," Mr Hathwar said.
"It is very confusing to know what to do."
comment on this article
Copyright: 2007 The Printers (Mysore) Private Ltd., 75, M.G. Road,
Post Box No 5331, Bangalore - 560001

PTI
India Inc began 2008 on a promising note but...
Monday, 29 December , 2008, 16:12

Bullish on huge profitability and deep pockets, Corporate India
started 2008 with an aim to conquer the world and pocket global firms,
but ended with blues caused by bitter controversies, be it Tata's
Nano, ICICI Bank share debacle, Satyam fiasco or Ambani vs Ambani
battle.

Misery of the corporate world was further compounded by the slowdown
in the economy that forced virtual who's who of the industry resorting
to retrenchment, plan closures and other cost-cutting steps including
axing of perks and luxuries enjoyed by the top management.

Six hot stocks

The year going by also saw Tatas' euphoria of clinching global
trophies like steel giant Corus and auto marquees Jaguar and Land
Rover turning into despair caused by fund starvation and political and
corporate controversies surrounding the world's cheapest car Nano,
which is yet to hit the roads.

India Inc raises Rs 45,000 cr less in 2008

Who would have heard of a Rs 10,000-crore (Rs 100 billion) defamation
suit in India if it were not for the no-holds-barred fight between the
country's two richest and estranged Ambani brothers, Mukesh and Anil,
whose companies collectively lost over Rs 5 lakh crore in market
capitalisation to the shock of investors.

India Inc's dream run turning sour in UK

As if frustrated by elder brother 'sabotaging' his plans to acquire
over $50-billion South African telecom giant MTN, Anil slapped a
defamation suit on Mukesh for the latter's purported comments in an
interview to New York Times that the network of lobbyists and spies
were overseen by Anil before they split and has since been expunged
from his tranche of companies.

More India business stories | Get the latest Sensex update

Through a dogged legal battle, the younger one has also put a spook on
gas from the elder brother's prized find at KG Basin, which has
delayed commercialisation of the asset.

The end of the year would be best remembered for a corporate bloomer
by India's fourth largest IT company Satyam Computers, which apart
from being hit by aborted $1.6 billion acquisition of the two
companies promoted by chairman Ramalinga Raju's family, is also
suffering an eight-year ban from the World Bank on charges of bribery
and business wrong-doings.

The highs of stock markets in January turned into desolate bourses
making India Inc lose more than half of its wealth in terms of market
capitalisation of listed firms.

While Anil Ambani faced the embarrassment of not being able to salvage
the Rs 12,000-crore (Rs 120 billion) IPO by the group company Reliance
Power -- biggest in the Indian capital market history, country's
largest private sector lender ICICI Bank was virtually brought onto
its knees.

The bank's share prices crashed by 20 per cent in a single day due to
rumours on the running of the bank and its financial health in the
wake of news of its exposure to bankrupt Lehman Brothers, which its
chairman K V Kamath said was the handiwork of 'vested interests'.

The stock market crash also forced realty major Emaar MGF Land,
Wockhardt Hospitals and SVEC Constructions to withdraw their public
offers this year, while a host of other firms that got approval from
SEBI for their IPOs are awaiting a better market situation.

As if losing the market capitalisation was not enough, firms in
manufacturing sector were forced to deal with piling inventories and
dropping demands.

Big steel makers, including state-run SAIL, Essar, JSW and RINL, were
forced to cut output and prices, which at one point had touched a
record $1,250 a tonne. Tata Steel was an exception as it saw
production rising.

In the automotive sector, Tata Motors, Ashok Leyland and Mahindra &
Mahindra resorted to temporary plans shutdowns, while others like
Maruti Suzuki, Hyundai and General Motors India cut down production.
As a result, temporary workers in some companies lost jobs while in
some employees had to face salary cuts.

The aviation sector also saw turbulence as jet fuel prices
sky-rocketed threatening to ground carriers, who made desperate calls
to the government to bail them out.

Jet Airways' sacking-and-reinstatement drama of 1,900 employees hit
the headlines and the carrier came under severe criticism from the
government for its handling of the issue.

The woes of corporate India could be unending, with even high growth
sectors like real estate and automobiles scrambling for cover and
working overtime for getting a bailout package from the government.

Nevertheless, the year had its share of positives as well. The credit
for good news of the year went to country's largest private sector
entity Reliance Industries with its subsidiary Reliance Petroleum
creating history when it commissioned an only-for-export refinery in
just 36 months at rock-bottom prices to create the world's largest
refining hub at Jamnagar in Gujarat.

RPL commissioned a 580,000-barrel a day (29 million tonnes a year)
refinery adjacent to its parent Reliance Industries' existing 33
million tonne per annum refinery.

Other's like India's fifth largest IT firm HCL Technologies also
brought cheers by successfully completing the 440 million pounds
(approx Rs 3,100 crore) acquisition of

UK-based SAP consulting company Axon, after piping rival Infosys Technologies.

As Tatas would like to see it, ending of the two-year-long
controversial stay at Singur meant a new beginning for the Nano
project after it shifted to Sanand in Gujarat, which is expected to
start production by 2010.

More India business stories | Get the latest Sensex update

In the pharmaceutical sector, Ranbaxy Laboratories saw a change in
ownership with Japan's Daiichi Sankyo buying out the promoters --
Singh family -- and acquiring 63.82 per cent stake in India's blue
chip drugmaker in a total deal valued around Rs 21,000 crore (Rs 210
billion), the largest-ever in the country's pharma industry so far.

On the whole, the year 2008 will go down in history of corporate India
as one which began on a promising note but ended in despair.


"(c) 2004 sify.com India Limited. All Rights Reserved. This material
may not be published, broadcast, rewritten, or redistributed."

Print


Indian Rupee, Stocks Complete Annual Decline on Growth Concerns
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By Anoop Agrawal

Dec. 31 (Bloomberg) -- India's rupee completed its biggest annual drop
since 1991 as a global financial crisis prompted overseas funds to
favor safer bets than emerging-market assets. Stocks dropped by a
record this year.

The currency reached an all-time low this month against the dollar as
the U.S., Japan and Europe entered their first simultaneous recession
since World War II, fanning concern India's growth will slow. The
rupee slid 19.2 percent, the second-worst performance among the 10
most-active Asian currencies outside Japan. The benchmark Bombay Stock
Exchange's Sensitive Index, or Sensex, fell 52.5 percent.

"It has been ecstasy to agony for the rupee this year," said K.V.
Mallik, treasurer at state-owned UCO Bank in Kolkata. "The outlook
isn't any better as it appears far from certain as to when the
financial markets will stabilize. I expect the rupee to be under
pressure in the next few months."

The rupee closed at 48.775 against the dollar at the 5 p.m. in Mumbai,
versus 39.415 at the end of 2007 and 48.485 yesterday, according to
data compiled by Bloomberg. It touched a record low of 50.615 on Dec.
2. Mallik forecast it may weaken to 49.5 next month.

The currency may end 2009 at 48, according to the median estimate of
analysts in a Bloomberg News survey.

Foreign funds dumped emerging-market assets, including Indian
equities, as $1 trillion of credit-market losses triggered the failure
of Lehman Brothers Holdings Inc. in September and led to a freeze in
global lending.

Offloading Equities

Overseas investors bought a record $17.2 billion of Indian shares in
2007, helping the rupee rally 12.3 percent, the biggest annual gain
since at least 1974. It touched 39.185 a dollar on Nov. 7, 2007, the
highest in almost a decade. Funds have since offloaded a record $13.4
billion in 2008, according to Securities and Exchange Board of India's
data.

The Sensex had its biggest annual drop since at least 1980, when data
on the gauge is available.

For the year, Hindustan Unilever Ltd., the nation's biggest maker of
household products, was the only stock on the Sensex to rise, gaining
17 percent. Jaiprakash Associates Ltd., India's biggest builder of
dams, fell the most on the measure, with an 81 percent slump.

India's exports dropped in October for the first time since 2001 and
industrial production posted its first decline in 15 years, official
figures show. The $1.2 trillion economy may expand as little as 7
percent in the year through March, the slowest pace since 2003, the
finance ministry said in its mid- year review on Dec. 23.

"Concerns over the fundamentals of the economy are mounting, which is
strong enough to keep investors at bay in the near term," UCO Bank's
Mallik said.

In an attempt to counter slowing growth, the Reserve Bank of India cut
its overnight lending rate, or repurchase rate, three times since Oct.
20.

Dollar Sales

The central bank's dollar sales in October exceeded purchases by a
record $18.7 billion to curb the decline in the local currency. It
sold a net $5.25 billion this year through October.

"It is only the central bank that can make a significant change to the
rupee's trend," said Paresh Nayar, chief of currency and fixed-income
trading at Development Credit Bank Ltd. in Mumbai. "In 2009, I think
the capital flows on their own won't impact the exchange rate beyond a
point."

India's foreign-exchange reserves have declined by $62.2 billion from
an all-time high of $316.2 billion reached in May, indicating it sold
dollars.

Central banks intervene in currency markets to influence exchange
rates by arranging sales or purchases of dollars. The Reserve Bank of
India has sold dollars for two straight months.

The rupee may trade between 46.5 per dollar and 50.1 in 2009, Nayar said.

Futures Contracts

Non-deliverable forward contracts showed traders increased bets for
further weakness in the rupee. Offshore contracts indicate traders are
betting the rupee will weaken more than 5 percent to 51.38 per dollar
in a year.

Forwards are agreements in which assets are bought and sold at current
prices for future delivery. Indian rupee forwards traded overseas are
non-deliverable, meaning they are settled in dollars rather than the
local currency.

India introduced exchange-traded currency futures this year to enable
investors to hedge their foreign-exchange risk, a move aimed to
complement currency forwards and options agreements. Trading in all
derivatives is restricted to the dollar-rupee pair.

The National Stock Exchange of India Ltd. was the first to offer the
derivatives on Aug. 29, followed by the Bombay Stock Exchange Ltd. and
the Multi Commodity Exchange of India Ltd. Futures contracts are
agreements to buy or sell a currency, commodity or other financial
product at a later specific price and date.

To contact the reporter on this story: Anoop Agrawal in Mumbai at
aagrawal8@bloomberg.net.
Last Updated: December 31, 2008 07:37 EST

Monday, December 29, 2008

Toyota May Cut U.S. Payroll as Unsold Autos Pile Up (Update3)
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By Alan Ohnsman

Dec. 23 (Bloomberg) -- The worst U.S. auto market since the early
1990s may force Toyota Motor Corp. to do something that was once
unthinkable: cut its North American payroll.

Asia's largest automaker, which hasn't shed workers in 24 years of
building cars in the U.S., is exhausting options to trim costs after
halting work on a Prius plant in Mississippi, idling a Texas truck
factory for 15 weeks and planning to pare U.S. and Canadian output
next month.

"If we don't see a rebound by the second half of next year, they'd
probably have to consider layoffs," said Haig Stoddard, an analyst at
forecaster IHS Global Insight Inc. in Troy, Michigan. "Toyota was
expanding to catch up with demand. Now it's got itself stuck with
overcapacity for the first time."

Adding to the pressure on North American operations amid a 13 percent
slump in U.S. sales will be Toyota's first operating loss in 71 years.
Toyota yesterday projected a deficit of 150 billion yen ($1.7 billion)
in the year ending March, erasing a forecast for a 600 billion yen
profit.

Job cuts can't be ruled out as sales continue to fall, said Jim
Wiseman, vice president of external affairs for Toyota's North
American production unit.

'Never Say Never'

"We wouldn't anticipate it getting to that point, but we never say
never," Wiseman said. Toyota has 30,000 North American employees
spread among 14 assembly, engine and parts plants, and vehicles built
in the region made up 56 percent of U.S. sales through November.

The Toyota City, Japan-based company hasn't cut full-time workers
since 1950 in Japan, when it last posted an annual loss, though
temporary jobs have been eliminated. Toyota adopted a lifetime
employment policy after years of labor turmoil, said Jim Womack,
chairman and founder of Lean Enterprise Institute in Brookline,
Massachusetts.

"At the end of the day, you can be as paternalistic as you like, but
if there's no cash in the till, it all comes to an end," said Womack,
co-author of "The Machine That Changed the World," a book about
Toyota.

Toyota's operating loss in North America for the six months ended in
September was 34.6 billion yen, excluding gains on interest-rate
swaps.

Regional production fell 13 percent to 1.45 million units through Dec.
20, according to trade publication Automotive News. Most of the drop
came from idling the San Antonio plant and an assembly line in
Princeton, Indiana, from Aug. 8 until Nov. 3 as inventory of Tundra
pickups swelled.

Training, Graffiti Removal

The 2,000 San Antonio workers stayed on the payroll to train, work on
efficiency improvements and even do community service such as graffiti
removal -- practices that may become less tenable as Toyota adapts to
the end of the growth that marked the years since U.S. assembly
operations began in 1984.

"In the past our flexibility was only upward," Ray Tanguay, Toyota's
executive vice president of North American production said Dec. 4 at
the opening of the company's plant in Woodstock, Ontario. "To manage
downward flexibility is obviously more challenging."

This year's U.S. sales decline will be Toyota's first since 1995.

While the 13 percent drop through November is smaller than the
industry's 16 percent average, Toyota trails its biggest Japan-based
competitors. Honda Motor Co. is down 5.4 percent in the U.S., the
least among major automakers, and Nissan Motor Co. is off 9.1 percent.
Depending on December sales, the U.S. market may fall to its lowest
annual total since 1992.

Longer Payback

Operating plants below capacity means companies will take longer to
recoup costs for construction, land and taxes, said Ron Harbour, a
partner at New York-based consultant Oliver Wyman, publisher of the
Harbour Report on auto-plant efficiency.

"You anticipate you'll spread those fixed costs over a certain number
of units," Harbour said. "If you're running a plant at half the pace
you originally planned, the cost per vehicle doubles."

Toyota's drive to match the big trucks of General Motors Corp. and
Ford Motor Co. spurred construction of a $1.3 billion San Antonio
plant to build Tundra pickups, a project overseen by President
Katsuaki Watanabe. He may step down next year and be succeeded by Akio
Toyoda, grandson of the company's founder, people familiar with the
matter said.

The Tundra factory opened in November 2006, before crude oil surged to
a record $147.27 a barrel in July and the recession damped demand.
Tundra sales are down 28 percent this year.

Workers in San Antonio earn an average of $25 an hour in wages and
benefits, Harbour estimates. That means Toyota may have had $30
million in labor expenses over the 15 weeks workers weren't making
trucks. Toyota's Wiseman declined to comment on these estimates.

Toyota's American depositary receipts fell 51 cents to $60.37 at 4:01
p.m. in New York Stock Exchange composite trading. The ADRs have lost
43 percent this year.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at
aohnsman@bloomberg.net
Last Updated: December 23, 2008 16:11 EST

Worker lawsuit over Ford Motor stock stays alive

By ED WHITE
MORE FROM BUSINESSWEEK

DETROIT

A judge has ordered Ford Motor Co. to start discussing settlement of a
lawsuit filed on behalf of employees who had company stock as a
retirement investment.

In a key ruling this week, U.S. District Judge Stephen Murphy allowed
the 2006 lawsuit to go forward over Ford's objections.

Current and former nonunion workers say it was a mistake for Ford to
offer company stock as an investment for retirement. From April 2000
to April 2006, the stock fell approximately 70 percent and now trades
under $2.20.

"A stock can be imprudently risky for an employee savings plan even in
the absence of fraud or imminent collapse," Murphy said.

The lawsuit was filed under ERISA, a broad federal law that sets rules
for pension and 401(k) plans and allows participants to sue over
mismanagement.

The lawsuit says Ford's stock was an investment option, and a company
match, during a volatile period for the automaker: the messy spinoff
of parts-maker Visteon, rising pension and health care costs and a
drop in market share.

"They had an obligation to protect the plan and its participants from
unreasonable and entirely predictable losses," the lawsuit says.

Ford "failed to apprise participants of the myriad of systemic,
internal and marketplace problems ... which threatened the viability
of the company," according to the lawsuit.

In a court filing, Ford said employees had opportunities to diversify
their investments in major mutual funds.

Murphy wants Ford and lawyers for employees to start holding
settlement talks under the eye of U.S. Magistrate Judge Steven Pepe.

An attorney for workers, Stephen Wasinger, declined to comment. A
message seeking comment was left Wednesday at Ford.

A similar lawsuit involving GM employees and company stock was settled
this year for $37.5 million. Lawyers got 30 percent.

The New York Times
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December 24, 2008

Nearly the End of the Line for S.U.V.'s

JANESVILLE, Wis. — Even a federal bailout could not save three of the last remaining plants in the United States still making sport utility vehicles.

Reeling from its financial problems and a collapsing S.U.V. market, General Motors on Tuesday closed its factories in this city and in Moraine, Ohio, marking the passing of an era when big S.U.V.'s ruled the road. The moves followed the shutdown last Friday of Chrysler's factory in Newark, Del., which produced full-size S.U.V.'s.

The last Chevrolet Tahoe rolled off the line here in Janesville shortly after 7 a.m. in the 90-year-old plant, which had built more than 3.7 million big S.U.V.'s since the early 1990s.

Most of the plant's 1,100 remaining workers were not scheduled to work the final day, but many showed up for an emotional closing ceremony. Dan Doubleday, who had 22 years on the job, broke down in the plant's snowy parking lot afterward.

"I was a fork lift driver," he said, glancing at his watch through welling tears. "Until about seven minutes ago."

At the Mocha Moment coffee shop around the corner, two co-workers, Michael Berberich and Lisa Gonzalez, exchanged Christmas presents just as they had most years since they were both hired in 1986.

"For a while we had it made," Ms. Gonzalez said. "I just wish it would have lasted."

The fate of the Janesville, Moraine, and Newark plants was sealed this spring, when rising gas prices suddenly made S.U.V.'s unpopular, and long before President Bush approved $17.4 billion in emergency loans last week to keep G.M. and Chrysler out of bankruptcy.

While the overall new vehicle market has dropped 16 percent so far this year, sales of big S.U.V.'s have plummeted 40 percent.

With consumers shifting rapidly to smaller, more fuel-efficient cars, G.M. no longer needed to produce big S.U.V.'s in Janesville as well as in a plant in Texas.

Still, some Janesville workers felt G.M. broke a pledge in its 2007 contract with the United Automobile Workers to keep the factory running.

"We didn't deserve this," said John Dohner Jr., shop chairman at U.A.W. Local 95. "We've all put a lot of hard work into trying to secure a future here."

Shrinking market shares have forced G.M., Chrysler and the Ford Motor Company to close more than a dozen assembly plants and shed tens of thousands of workers in recent years. The moves have devastated communities from Georgia to New Jersey and from Michigan to Oklahoma.

Even so, G.M. and Chrysler are likely to close more manufacturing facilities as they overhaul their operations to meet conditions of the federal loans.

"The companies are moving very fast now to close plants, but it may be too little, too late," said John Casesa, a principal in the Casesa Shapiro Group, a consulting firm. "They're doing now what they should have done 15 or 20 years ago."

G.M.'s Moraine plant was the last to build the midsize Chevrolet Blazers and GMC Envoys that were once among the best-selling vehicles in the country.

The Janesville factory built three of the biggest and most profitable vehicles in G.M.'s lineup, the Chevrolet Tahoe and Suburban and GMC Yukon. The Chrysler plant in Newark also made big S.U.V.'s — the Dodge Durango and Chrysler Aspen.

Their closings leave the Big Three with only one factory each still devoted to making traditional big S.U.V.'s — Ford in Kentucky, G.M. in Texas, and Chrysler in Detroit.

The Janesville plant once employed more than 5,000 workers and turned out 20,000 Tahoes, Yukons and Suburbans each month. With its closing, residents worried about the future of this city of 64,000 people, about 75 miles southwest of Milwaukee.

"Janesville will lose a lot," said Patti Homan, as she finished a strawberry-topped waffle at the nearby Eagle Inn restaurant. "I expect my electricity to go up, water rates to go up, property taxes to go up, and the value of my home to go down."

Ms. Homan worked in the plant for 23 years, and her father, brother and husband all retired from the factory. "It's generation after generation for so many families here," she said.

The empty feelings in Janesville were echoed in Moraine, a suburb of Dayton and last week at the Chrysler plant in Newark.

More than 1,000 workers were laid off at the Moraine plant. Under terms of the U.A.W. contract for all its members, they and the workers in Janesville and Newark will collect unemployment checks and payments from G.M. that together equal about 80 percent of their take-home pay.

But those payments will only last about a year. And with the U.A.W. prepared to suspend its "jobs bank" program as a condition of the federal loans, there will be no safety net after that.

Some workers will have an opportunity to transfer to other plants. But with the industry contracting so quickly, there is little job security in making a move.

"I can't risk transferring," said David Williams, one of the remaining 1,100 workers at the Newark plant when it closed. "I don't want to go 1,200 miles away to get laid off again."

Mr. Williams installed a sunroof on the last Dodge Durango to come down the assembly line in Newark. Now he plans to take massage-therapy classes and pursue a new career far from the factory floor.

"Enough with the concrete," he said. "It's time for some carpet and climate control."

On the last day for the Newark plant, 84-year-old Woody Bevans unlocked the weight room at the U.A.W. union hall and began brewing coffee for a handful of retirees who passed the time there.

A Texan who started work at the plant when it opened in 1952, Mr. Bevans recalled how the factory was first used to build tanks for the Korean War. He retired in 1983, but thought the plant would go on forever.

"We had hope right up until the last," Mr. Bevans said. "We're really going to feel it when it shuts down. There's a big chain reaction, believe me."

The University of Delaware is negotiating with Chrysler to buy the plant and redevelop the 270-acre site with academic buildings and a technology park.

After the plant closed, one of the workers, Merle Black, drove directly to a Delaware Department of Labor office and registered for job openings. He is hoping to become a heavy equipment operator, and possibly be involved in the demolition of the factory where he used to install airbag parts.

"If I can get in there to help take it apart, I don't mind," Mr. Black said. "That's where I spent the last 19 years. That's what I know."

The closing of an auto plant draws a crowd, with some people somber and nostalgic and others defiant and energized.

Outside the Janesville plant on Tuesday, a few workers posed for pictures in front of the building while others said their goodbyes as they loaded gear in their snow-covered S.U.V.'s

One man had two small children with him on the last day. Another man wearing an orange ski mask waved a large American flag as departing workers drove by.

Many of the workers trudged over to a one-story, cinder-block building on the grounds of the factory, a bar called the Zoxx 411 Club. A sign said "customers only" and forbade reporters and media from entering.

Outside, a cluster of reporters, including a documentary film crew from Japan, tried to interview workers about the last days of the S.U.V. plant.

"It's been a good ride, man," said Frank Hereford, a body shop worker, as he left the plant with a microwave oven that heated up countless lunches during many of his 38 years with G.M. "Good people worked down here."