21st Century Water Cooler

THE VOWS

2009-06-03T21:32:00.000-07:00

General Motors, please repeat after me:

We, General Motors take you The United States of America to be our number one producer of wealth, to have and to hold from this day forward, for better, for worse, for richer, for poorer, in sickness and in health, to love and to cherish till death do us part.

The United States of America, please repeat after me:

We, The United States of America, take you General Motors to be our number one source of wealth, to have and to hold from this day forward, for better, for worse, for richer, for poorer, in sickness and in health, to love and to cherish till death do us part.

The moral of the story...

It's a lot easier to make a commitment, than it is to keep one.

What is preventing GM from closing their non-profitable North America manufacturing sector, and transforming themselves into a well know import?

2009-05-15T17:11:00.001-07:00

May 13, 11:59 PM EDT

Chinese imports could bring GM political troubles

DETROIT (AP) -- As thousands of General Motors workers await word on more U.S. plant closures, reports that the company plans to import Chinese-made vehicles to the U.S. have created a political problem for the automaker and the White House.

The reports, which GM will neither confirm nor deny, could mean trouble because GM is supported by $15.4 billion in U.S. government loans, largely due to the Obama administration's desire to preserve the company's 90,000 U.S. jobs.

The United Auto Workers charged last week that the Detroit automaker intends to almost double over the next five years the number of vehicles it imports to the U.S. from Mexico, South Korea, China and Japan.

"GM should not be taking taxpayers' money simply to finance the outsourcing of jobs to other countries," Alan Reuther, the union's Washington lobbyist, wrote in a letter to U.S. lawmakers.

The carmaker, which was in danger of running out of cash early this year, faces a June 1 government deadline to cut costs and complete other restructuring measures or go into Chapter 11 bankruptcy protection. It also has requested another $11.6 billion in government loans to make it through this year, and faces the prospect that the government will soon be its largest shareholder.

On Wednesday, Shanghai Securities News and other Chinese media reported that GM plans to begin exporting vehicles from China to the U.S. within two years, ramping up sales to more than 50,000 by 2014.

GM spokesman Tom Wilkinson in Detroit would not comment on the reports. The White House and Treasury Department did not immediately respond to requests for comment.

"GM is reviewing various options," GM's China office said in a written statement received Thursday. "We are not discussing details of our future portfolio, beyond what we have disclosed in auto shows and our viability plans."

But the report reiterated the company's emphasis on first meeting demand in the Chinese domestic market.

"GM's philosophy has always been to build where we sell, and we continue to believe that is the best strategy for long-term success, both from a product development and business planning standpoint," it said.

Harley Shaiken, a professor at the University of California at Berkley who specializes in labor issues, said increased overseas production and imports could prove politically tricky for GM.

"The reason is simple - production location is a corporate decision, but when it's on the taxpayer dime, there are different sensitivities, so the notion of billions for a rescue package and offshore production, I think, could be politically combustible," he said.

Shaiken said GM needs to lower costs, which is accomplished with cheaper overseas labor. But it must also address concerns of the U.S. government, which wants to preserve American jobs.

"GM is getting funding from U.S. taxpayers to help save the company," Sen. Sherrod Brown, D-Ohio, said. "Taxpayers deserve more than Chinese imports in return. Taxpayer funds should be used to build the next generation of fuel-efficient vehicles in the U.S., not abroad. This is about creating jobs and rebuilding our economy."

GM, though, says the percentage of cars made and sold in the U.S. will remain stable.

Company documents show that American-made cars will comprise 67 percent of all vehicles sold in the country this year. The number drops slightly to 66 percent in GM's 2014 projections. Imports will amount to 33 percent this year, rising to 34 percent by 2014.

The company says the import mix could change by 2014, with fewer vehicles produced in Canada and more produced in Mexico and other countries.

"The percentage sold in the U.S. will stay constant within a percent or two," Wilkinson said. "The number of vehicles built in the U.S. will increase as the market recovers."

He reiterated that the company's goal is to build vehicles in the regions where they are sold, in part to avoid getting stung by currency fluctuations. GM, he said, builds 90 percent of vehicles sold in the U.S. in North America, and that is not expected to change.

Of the 3 million vehicles GM sold in the U.S. last year, it imported the Chevrolet Aveo and Pontiac G3 subcompacts from South Korea, the Pontiac G8 muscle car from Australia and the Saturn Astra compact from Belgium. The Saturn Vue, Chevrolet HHR small sport utility vehicles and several pickup truck models were imported from Mexico. Full-size pickup trucks, several sedans and small SUVs and the Chevrolet Camaro were brought in from Canada.

Still, the UAW generally opposes importing vehicles into the U.S. According to its figures, the percentage of GM's U.S. sales from Mexico, South Korea, Japan and China will increase from 15.5 percent now to 23.5 percent in 2014.

Reuther wrote that GM's increased imports would be equal to the output of four U.S. assembly plants, "the same number that GM plans to close."

The union currently is negotiating with GM for government-demanded labor cost cuts, including 16 plant closures. At a leadership meeting in Cleveland Wednesday, leaders were told to expect a vote on concessions before the June 1 deadline.

GM millwright Ron Bear of Belleville, Mich., who attended the meeting, said the rank-and-file would be unhappy with any more imports.

"As far as importing cars, what is that going to do for our jobs? I guess that's the question," he said.

GM would be the first company to import cars from China although automakers have brought in components in the past to save on labor costs. Most Chinese automakers have been daunted by meeting U.S. safety standards. They also face the uphill battle of winning consumer confidence for unfamiliar brands.

According to Chinese media reports, the primary exports to the U.S. would be small cars similar to the Chevrolet Spark subcompact.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, says it makes good business sense for GM to import subcompacts from China because the U.S. market for them is uncertain, but there is strong demand in China.

With gas prices around $2 per gallon most Americans will keep driving bigger cars. U.S. sales would be too small to justify the expense of building and equipping an assembly plant, he said. At the same time, exports to the U.S. would allow GM to keep its Chinese plants running at maximum capacity, which is the formula to make money, he said.

"In the short term, you're going to locate your plants where the core of the market is for that product," he said.

Cole suggested that for Obama, returning the company to viability would outweigh the drawbacks of importing some cars.

"What's more important, some jobs in a particular factory somewhere or the overall success of the company?" Cole asked. "That is really far more important."

---

Associated Press writers Ken Thomas and Jim Kuhnhenn in Washington, Thomas J. Sheeran in Cleveland, Dan Strumpf in New York and Elaine Kurtenbach in Shanghai contributed to this report.

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2009-01-14T11:58:00.000-08:00

Global CIO: Satyam Scandal Isn't The End Of Indian Outsourcing

The company's misdeeds should be a wake-up call to CIOs, but not an indictment of the Indian outsourcing industry as a whole.

By M.S. Krishnan, InformationWeek
Jan. 13, 2009
URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=212900112

The recent confession about inflated revenue, profits, and accounting fraud exceeding $1.5 billion by Satyam Computer Services chairman and CEO Mr. Ramalinga Raju has put everyone linked to the Indian software industry in total disbelief and frustration. Only a few weeks back, Satyam was considered as one of the four pillars of the success story of the Indian software industry in the global economy. Along with Infosys, Tata Consultancy Services, and Wipro, Satyam was known for its coveted Fortune 500 clients, innovative software projects, capacity to train thousands of software engineers, and best-in-class certification of software engineering practices.

The irony is that last year Satyam won the "Golden Peacock" corporate governance award from the London-based World Council for Corporate Governance (although that award was revoked late last week). It is understandable that this major accounting fraud in the background of such accolades and credence has formed a cloud of uncertainty and doubts about credibility in the entire Indian software industry. There is no doubt that the fraud committed by the management at Satyam under the certification of internationally reputed audit firms is unforgivable and has created a black mark on corporate governance in India.

In that context, the disclosure of the misdeeds at Satyam is certainly an alert call for any CIOs who have exposure to Indian software firms as partners in their global resource network. However, I believe it would be shortsighted -- and probably harmful -- to taint the entire Indian software industry based on the Satyam fiasco.

Not Every Mole Is A Cancer
We do not conclude that every big mole that bleeds is a skin cancer; obviously, we collect data and investigate further before drawing our conclusion. In a similar way, I believe for several reasons that this major failure of corporate governance at Satyam is not a structural problem with the capabilities of the Indian software industry as a whole, or with that of software talent in India. And I would thereby urge global customers engaged with outsourcers in India or elsewhere to not act too hastily based solely on the malfeasance of Satyam's founder.

First, despite the corporate governance problems at Satyam, none of their global customers had raised any concerns related to the quality of operational delivery and performance in their projects. In fact, there has been an increase in the size and scope of projects delivered to global customers by the major Indian software firms over the last few years. Hence if it had been a problem related to inability to execute large projects, we would have heard this from the market loud and clear.

Second, it may be interesting to note that of all the major software groups in India, only at Satyam had the top management shifted its attention away from its core software business in the last few years. The real-estate business controlled by Satyam owners had expanded substantially with projects worth nearly $10 billion last year. As in other developing economies, the real estate sector in India is known for structural problems related to transparency, accountability, and ownership rights. While the answers to the questions on how Mr. Raju managed this fraud and why he did it will be known only when the regulators and government complete their investigations, it is not a surprise that some media reports are claiming that the accounting fraud at Satyam may be linked to the real-estate business of its owners/promoters.

Finally, the operational implementation team at Satyam has recently won several accolades from global IT vendors such as the Pinnacle award from SAP in June 2008 for excellence in customer experience and accelerating innovation. Similarly, Satyam received two prestigious shared-services excellence awards last year from the International Quality and Productivity Council. Unlike the corporate-governance awards cited above that are based on subjective judgment, these operational delivery awards are based on actual customer experience. In addition, anyone who has visited the EMRI (Emergency Management and Research Institute) facilities in Hyderabad set up by Mr. Raju can vouch for the excellence in operational process discipline and delivery metrics followed.

These collective reasons indicate that Satyam's failure in corporate governance is not a structural issue about any significant delivery risk from Indian software houses. In saying that, I do not mean to diminish in any way the fraud committed at Satyam, or to try to portray it as any smaller sin. It is one of the biggest corporate governance scandals for India and it leaves lessons to be learned for all. It certainly calls for, at a minimum, a new layer of due diligence and checks by CIOs within their IT strategy for dealing with governance of their global resource partners. Moving Ahead
The swiftness with which the regulators have approached the Satyam case in the last few days underscores the significance attached to this far-reaching situation. It is very well known that the success of the software industry and exports in particular have been a catalyst in creating new jobs and the growth of the entire Indian economy in the last two decades. Hence, it is mandatory for the government and the regulators to maintain the transparency and swift action in the investigation of this case right through to conclusion. This is one way to instill confidence among global organizations currently outsourcing to Indian firms and among foreign investors, two groups who will be certainly be tracking the case very closely. It also is anticipated that PWC, the main auditors of Satyam, will be made answerable and possibly accountable either for negligence or collusion. We may recall that Arthur Andersen went down with Enron. Accordingly, it is expected that regulators and government will move on structural changes and in the Satyam reorganization with all appropriate haste.

In its strategy for pulling Satyam from this hole, the company's newly constituted board needs to balance carefully the interests of employees, customers, and investors. And while each of those groups' interests must be given all due consideration, the board must be sure not to short-change the Satyam employee base, a group of more than 50,000 who had absolutely no connection whatsoever to the financial scandal. The board must recognize clearly that the most important source of competence and knowledge in the software business is the people, and that for Satyam it is particularly critical to sustain current project teams so that they can avoid any major disruptions for the company's global customers.

In a historical context, Satyam follows other major cases of accounting fraud such as WorldCom, Parmalat, and Enron, indicating that this not about a specific industry or country. In the earlier cases, we did not adopt a global philosophy of questioning the performance of all telecom firms, food industry, or energy companies. While CIOs and their teams will need as noted above to re-evaluate governance policies toward outsourcing partners, we also should be very hesitant to question the validity of the entire industry because there is no evidence now telling us to do so. Indeed, what all these examples of accounting fraud have in common is that they came about for two reasons, one of which is personal -- greed -- while the other is institutional -- our capitalistic system's relentless focus on short-term quarterly financial performance.

Satyam serves in that regard as another reminder that while one can fool the system for some time, the problem will only intensify in the long term and the truth will be out eventually. This calls for more transparency in the system and processes, particularly as it relates to corporate boards. These examples expose how little boards of directors know about the actual details of their companies' operations. While no system can help guarantee integrity and values, perhaps corporate boards need to get closer to the reality of their businesses by looking at real-time system dashboards of company performance and cash balances, rather than being limited to static PowerPoint presentations decorated by management. While such steps might not eliminate such frauds, they will certainly leave an audit trail in systems and make investigations easier. It is clear that in infusing greater rigor into the systems, CIOs and IT have an important role to play in facilitating this much-needed increase in transparency and corporate governance. Should that come to pass, then perhaps Satyam's shameful experience will eventually lead to something good.

M. S. Krishnan is professor of business information technology at the Ross School of Business, University of Michigan. He also is co-director of the Center for Global Resource Leverage: India at the Ross School of Business. He is the co-author with C.K. Prahalad of The New Age Of Innovation (McGraw-Hill, 2008). He blogs about transforming business models on the New Age Of Innovation blog.

2009-01-14T11:48:00.001-08:00

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Send workers home...

Tejaswi Shekhawat And Virat Markandeya

January 8, 2009

Mornings are particularly busy for Simone Premji, 34, Manager, HR, Tata Consultancy Services (TCS), Mumbai. It's a race against time to complete household chores, but Premji is in no hurry to leave for office—simply because she works from home. Premji joined TCS in 2002 and worked from office for three years until she had her daughter, Aliya. She initially took a year off and then wanted to get back to work. As a working mother, she was better off with a flexible working option. She got more than that; TCS gave her the option to work fulltime from home. Now her daughter goes to school, but she continues to work from home. "Something that started on a need basis has become a policy and way of working now," she says. TCS does not have a work-from-home (WFH) policy, but extends the same to employees who need it.

Mumbai-based Sameer Deshmukh's daughter Richa thinks her father has probably lost his job. What else could explain his presence at home when he should be in the middle of meetings in his office? The answer to Richa's confusion lies in the 'Work from Home Pilot Programme' at IT and BPO company MphasiS where Deshmukh, 42, works as Delivery Leader of the banking vertical. Deshmukh says he can't wait for this pilot programme to become a fulltime policy. "With e-mails and phone, there are no issues of connectivity. We are in a world where face-time is not required. Everything, including appraisals, can be done on e-mails," he says.

Simone Premji Manager, HR, TCS

Why telecommute:"Needed to balance out work and family"

Challenges: "Sometimes connectivity and a sense of dis-engagement"

Premji and Deshmukh are part of a growing number of employees opting for virtual workplaces or telecommuting, with organisations increasingly putting in place fulltime work-from-home programmes. The objective is two-pronged—to retain the talent pool and cut costs. But, that's not all. Says Shanthi Naresh, Principal Consultant, Human Capital, Mercer Consulting (India): "WFH policies have a great impact on employee engagement… while many organisations explicitly position WFH practices as part of the company's total reward strategy and use it as a great attraction and retention tool, the impact of WFH practices on employee engagement is often underestimated."

The trend of telecommuting may strengthen with organisations looking at reining in costs. "Today, when most organisations are trying to enforce cost-cutting measures, telecommuting is one of the most effective. From an employee's perspective, though, people may think twice. They will not want to move out of office. The employees may worry along the lines of— out of sight, out of mind," says Elango R., Chief Human Resource Officer, MphasiS.

Lower cost, higher productivity
While the jury is still out on the benefits of work-from-home, costcutting is clearly one of the drivers. "This policy seems to be working well for both the company and the employees. The productivity of our employees has gone up by 20 per cent," says Elango. Elango does some numbercrunching to drive home the point. "On an average, a company spends Rs 22,000 per person only on the seat cost. When he is working from home, all his needs like AC, food, transport etc., are taken care of." Elango would know because he works from home as well. "We as an organisation have to look at this as a policy and not a privilege because it probably benefits us more than the employee," he says.

IT major Cognizant, too, is actively adopting WFH. It is providing the option of telecommuting to people engaged in production support activities to avoid commute at odd hours. Says T. Sridhar, Chief People Officer, Cognizant: "Our belief is that if a fifth of our employees becomes part of this new arrangement, over a period of time, we would have effected a 20 per cent saving in investments in real estate, a 20 per cent increase in productivity of our employees and a 20 per cent improvement in customer satisfaction levels when these employees remain available to them on demand."

Vandana Arora Assistant Manager, Quality, Genpact

Why telecommute: "I have a small kid so I opted to work from home"

Challenges: "No major challenges":

Genpact sees telecommuting benefits in terms of employee satisfaction and thus, retention. Says Rajeev Sharma, Vice President HR, Finance and Accounting, Genpact: "We are rapidly moving towards the world of virtual organisations. The work-from-home policy helps us in talent pool retention. Re-training cost and loss of knowledge gets taken care of."

At Genpact, there is only three per cent attrition among employees working from home. Currently, the company has 500 employees working from home and it plans to increase the number to 5,000 by 2010.

No weak links
According to a white paper on Changing World of Work by Manpower Inc., by 2016, 63 per cent workers globally want to work flexibly and 84 per cent employers recognise this as a significant benefit in terms of retention. Vandana Arora, 30, Assistant Manager, Quality, Genpact, Gurgaon, is a recent convert to work-from-home. She has been working from home (which started on a need basis) for the past eight months. "It started because of my two-and-a-half-year-old son, but now I love it," she says. Arora is part of a five-member team and two more members of the team work from home. "It's a perfect team at work with deadlines and deliverables," she says.

Are the work-from-home members of the team weak links? "I don't think so. I have even got a promotion in the past six months," she says.

Companies want results. Whether you come to office every day or work from home, at the end of the day, it's the output that matters, say HR heads. "An employee's performance should be calculated on what he delivers, rather than how many hours he spends in office," says Elango.

TCS sets goals for its workfrom-home employees and tracks their performance and achievements based on which their performance assessment and appraisal takes place at the end of the year. "Meeting the deliverables of the job assigned is the key measure of performance," says Ajoy Mukherjee, Vice President and Head, Global HR, TCS.

Sameer Deshmukh Delivery Leader, MphasiS

Why telecommute: "My company wants me to. I am liking it"

Challenges: "The family needs to cooperate and be serious about the whole affair

The limitations
Telecommuting is not free from its share of challenges. For starters, it can only be offered to employee profiles that have no security and privacy issues involved. "If you are working on a client basis, then it is critical that your client is comfortable with your employees working form home," says Elango. Work-from-home may not work well where working together in a team and using a common pool of physical resources to deliver results is essential. Examples of this are in product engineering type functions where physical collaboration is vital for innovation. Mercer's Naresh points out: "This is, however, changing with a number of collaboration and knowledge management tools proliferating in the market."

On the flip side, WFH is sometimes a challenge because of unreliable power supply, lack of private working space at home, and a constantly ringing door bell. If employees make provision to tackle these issues, then WFH is very convenient.

Apart from this, there are execution challenges, too. According to Subash A.K. Rao, Director, Human Resources, Cisco India, work evaluation and absence of external motivation are two of the main challenges. Those working in teams might feel isolated and miss the interaction with co-workers. Many employees find they can get more work done without the distractions of a corporate environment, but some others find themselves unfocussed without other people around to motivate them. Cisco is implementing a work-fromhome policy on an ad-hoc basis, which is a carry-over of its worldwide policies.

HR heads say that it helps to have clear rules of engagement. "Telecommuting is a good option once certain pre-requisites, like a structured performance management approach, are in place and the employee's bonus is mapped onto productivity," says Rao.

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2008-12-31T15:41:00.001-08:00

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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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2008-12-31T15:36:00.001-08:00

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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)

2008-12-31T15:30:00.001-08:00

欢迎访问新华网 - WWW.XINHUANET.COM

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.

2008-12-31T15:27:00.001-08:00

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.

2008-12-31T13:06:00.001-08:00

Printed from

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

2008-12-31T12:57:00.001-08:00

December 28, 2008

Tainted-Milk Victims in China to Be Paid

By ANDREW JACOBS

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.

2008-12-31T12:51:00.001-08:00

BIOTERRORISM >> VIRAL HEMORRHAGIC FEVER >> NEWS >>

Ebola strikes Congo again

Lisa Schnirring Staff Writer

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.

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

2008-12-31T12:35:00.001-08:00

GMAC Says ResCap Will Continue to Originate Mortgages (Update2)

Email | Print | A A A

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

2008-12-31T12:32:00.001-08:00

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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)

2008-12-31T12:30:00.001-08:00

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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)

2008-12-31T12:22:00.000-08:00

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
Ford Motor Company
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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.

2008-12-31T12:17:00.001-08:00

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

2008-12-31T12:13:00.001-08:00

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."

2008-12-31T12:10:00.001-08:00

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

2008-12-29T16:29:00.001-08:00

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

2008-12-29T16:25:00.001-08:00

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.

2008-12-29T16:22:00.001-08:00

December 24, 2008

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

By NICK BUNKLEY and BILL VLASIC

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."

2008-12-29T16:16:00.001-08:00

freep.com

December 26, 2008

William Clay Ford Sr. is simply the worst

Virtually alone at bottom of team owners' list

BY DREW SHARP
FREE PRESS COLUMNIST

One more loss and William Clay Ford Sr. gets the scarlet letter he so
rightfully deserves.

That's what 0-16 means to Detroit.

Ford will forever wear that blemish. It becomes the first sentence of
his NFL biography. There's justice in The Imperfect Season becoming
the 83-year-old owner's legacy, offering some measure of payback to
the frustrated and forlorn. They want the perpetrator of this
poisonous climate bearing a permanent scar.

People were always upset with Ford's 44-year stewardship of this
franchise, but it's vindictive now.

One more loss and Ford unequivocally becomes the worst owner in NFL
history -- quite possibly the worst in all professional sports.

Al Davis might be the craziest NFL owner ever. There is neither rhyme
nor reason for some of the Oakland Raiders' owner's actions -- firing
head coaches with the ink on their first contracts still wet. But
there was once a "commitment to excellence" with the Raiders.

Ford's Lions have been "committed to exasperation."

The Arizona Cardinals' Bill Bidwill might be the cheapest NFL owner,
perhaps explaining why the Cardinals have only one playoff victory in
the last 61 years. That's worse than the Lions' one playoff win in 51
years. But the Cardinals are only 10 years removed from that one
playoff triumph, whereas Ford is 17 years removed from his last
playoff success.

And let's not forget that the Cardinals' return to the playoffs for
the first time since 1998, winning their first divisional championship
since they hailed from St. Louis.

Ford fosters an organizational culture choked by its own rampant
paranoia, chronically preoccupied with the steady stream of criticism
written and said about it. He once tossed around quarters like manhole
covers. But he pays his minions well now and they stay fiercely loyal,
adamantly defending what those on the outside see as Ford's
aristocratic aloofness.

But it's indefensible now. I'm tired of the
nice-old-man-deserves-a-break argument. Ford doesn't deserve a
championship simply because he's been around much longer than most of
his NFL ownership fraternal brothers. He's directly responsible for
one of the worst eight-year stretches in professional sports history.

If you assessed the public mood eight months ago on the greater
impossibility -- the country shedding its shackles of racial
intolerance and electing America's first black president, or an NFL
team going winless through a 16-game parity-driven schedule, the
concept of perfect football imperfection would've comfortably won the
argument.

The Lions have one-upped Barack Obama.

That distinction doesn't earn them a place on the inauguration stage
next month, but rather a unique spot in sports infamy.

They're going 0-16.

They've finally sold me on their destiny. I was once a stubborn
advocate of the blind squirrel theory, especially in a league that
blatantly legislates competitive balance. But the Lions finally
convinced me that even dumb luck when seeking that elusive acorn
doesn't fully absolve dumb decision making.

But when searching for the next great impossibility, it's that the
Lions will never win a championship as long as Ford's fingerprints
remain on this franchise.

Just when everyone thought the Lions were immune from further
management malfunctioning, Ford announced there would be no radical
front-office housecleaning.

It was a vintage Ford moment -- making a decision without really
making a decision. He said that the two-headed interim executive
monster he created following Matt Millen's long overdue dismissal --
chief operating officer Tom Lewand and general manager Martin Mayhew
-- would remain with the organization, although he didn't specify
their responsibilities in a new power structure.

Ford said he would seek another football executive but wasn't sure who
would answer to whom.

And you're still wondering why they've won only one playoff game in 51 years?

Contact DREW SHARP at 313-223-4055 or dsharp@freepress.com.

2008-12-29T16:09:00.001-08:00

freep.com

December 28, 2008

UAW stages GM sit-down strike

The UAW has become synonymous with companies such as General Motors
Corp., Chrysler LLC and Ford Motor Co., but that wasn't always the
case.

It wasn't until this week in 1936 that the union made a name for
itself by staging a sit-down strike at a GM plant.

After hearing that GM planned to close a plant in Flint, UAW members
had a lunchtime meeting and decided to take over the plant on Dec. 30,
1936, in an effort to get the company to acknowledge their demands.

After 44 days, the sit-down strike ended when the UAW was recognized
as the sole bargaining unit for GM employees.

By Melanie D. Scott

2008-12-29T16:05:00.001-08:00

Wheels - The Nuts and Bolts of Whatever Moves You
December 26, 2008, 12:27 pm
Tough Times for the Tata Nano
By Nick Kurczewski

The Tata Nano, with a projected price of about $2,500, was hailed as
the world's cheapest car when it was introduced in January, but nearly
a year later there is still no factory to build it.
Tata Nano, at the New Delhi Auto Expo in January. (Tomas Munita for
The New York Times)

Farmers have filed a case against the Indian government and Tata
Motors, demanding better compensation for land sold to support the
latest Nano factory in Gujarat, India. Sales of the Nano in India –
originally scheduled for October of this year – will not begin until
next spring.

This is the second time that Tata has faced off against angry farmers
and politicians. A similar series of protests erupted this summer, at
a factory purpose-built for the Nano in the town of Singur, in the
state of West Bengal. Protesters (led by a handful of local political
leaders) alleged that Tata forced farmers from their land or paid a
fraction of the land's true value.

By October, the Singur protests had grown in size and intensity.
Highways surrounding the factory were at a standstill, and workers
were being threatened. Tata finally abandoned the Singur factory, in
which it had invested $350 million, according to the BBC at the time.

"There is no way this plant could operate efficiently unless the
environment became congenial and supportive of the project," a Tata
spokesman said.

Plans to build a new factory in Gujarat seemed to put the Nano back on
track. But another land dispute has sparked a sense of déjà vu for
Tata.

"The land dispute is real," said Paul Blokland, managing director of
Segment Y, an automotive consulting firm based in Goa, India. "The
locals say that the lease on the land has run out, and that it
therefore reverts to them, while the government says it bought off the
original landowners in the 1920s."

Once again, Tata has been forced to find a quick solution. Automotive
News reported recently that Nano production will now begin at Tata's
existing factory in Pantnagar in the northern state of Uttarakhand.
And according the Economic Times on Friday, Tata has received an
allotment of land from the Uttarakhand government to expand the
Pantnagar factory for Nano production.

Even with a rapid expansion of the Pantnagar factory, sales of the
Nano will (at least initially) fall well short of Tata's original
expectations, Mr. Blokland said.

"The plant in Gujarat will not start serious manufacture until late
next year," he said, adding that the Nano will be produced in small
numbers, between 3,000 and 4,000, in Pantnagar, calling it a "soft
launch."

This is far from the 100,000 annual sales Tata envisioned when the
Nano made its debut at the New Delhi Auto Expo in January.

2008-12-29T15:56:00.001-08:00

The New York Times

December 9, 2008
Op-Ed Contributor
Where Are the New Jobs for Women?
By LINDA HIRSHMAN

Washington

BARACK OBAMA has announced a plan to stimulate the economy by creating
2.5 million jobs over the next two years. He intends to use the
opportunity to make good on two campaign promises — to invest in road
and bridge maintenance and school repair and to create jobs that
reduce energy use and emissions that lead to global warming.

Mr. Obama compared his infrastructure plan to the Eisenhower-era
construction of the Interstate System of highways. It brings back the
Eisenhower era in a less appealing way as well: there are almost no
women on this road to recovery.

Back before the feminist revolution brought women into the workplace
in unprecedented numbers, this would have been more understandable.
But today, women constitute about 46 percent of the labor force. And
as the current downturn has worsened, their traditionally lower
unemployment rate has actually risen just as fast as men's. A just
economic stimulus plan must include jobs in fields like social work
and teaching, where large numbers of women work.

The bulk of the stimulus program will provide jobs for men, because
building projects generate jobs in construction, where women make up
only 9 percent of the work force.

It turns out that green jobs are almost entirely male as well,
especially in the alternative energy area. A broad study by the United
States Conference of Mayors found that half the projected new jobs in
any green area are in engineering, a field that is only 12 percent
female, or in the heavily male professions of law and consulting; the
rest are in such traditional male areas as manufacturing, agriculture
and forestry. And like companies that build roads, alternative energy
firms also employ construction workers and engineers.

Fortunately, jobs for women can be created by concentrating on
professions that build the most important infrastructure — human
capital. In 2007, women were 83 percent of social workers, 94 percent
of child care workers, 74 percent of education, training and library
workers (including 98 percent of preschool and kindergarten teachers
and 92 percent of teachers' assistants).

Libraries are closing or cutting back everywhere, while demand for
their services, including their Internet connections, has risen.
Philadelphia's proposal last month to close 11 branches brought people
into the street to protest.

Many of the jobs women do are already included in Mr. Obama's campaign
promises. Women are teachers, and the campaign promised to provide
support for families with children up to the age of 5, increase Head
Start financing and quadruple the money spent on Early Head Start to
include a quarter-million infants and toddlers. Special education,
including arts education, is heavily female as well. Mr. Obama
promised to increase financing for arts education and for the National
Endowment for the Arts, which supports many school programs.

During the campaign, Mr. Obama also promised that the first part of
his plan to combat urban poverty would be to replicate a nonprofit
organization in New York called the Harlem Children's Zone in 20
cities across the country. The group, which works to improve the
quality of life for children and families in the Harlem neighborhood,
employs several hundred people in full- and part-time jobs. By making
good on this promise, Mr. Obama could create thousands of jobs for
women in social work, teaching and child care.

Unlike the proposal to rebuild roads and bridges, the Harlem
Children's Zone program is urban, and thus really green. If cities
become more inviting, more people will live in them — and that means
they will drive less, using less fuel. The average New Yorker's
greenhouse gas footprint is only about 29 percent as large as that of
the average American; the city is one of the greenest places in
America.

Maybe it would be a better world if more women became engineers and
construction workers, but programs encouraging women to pursue
engineering have existed for decades without having much success. At
the moment, teachers and child care workers still need to support
themselves. Many are their families' sole support.

A public works program can provide needed economic stimulus and revive
America's concern for public property. The current proposal is simply
too narrow. Women represent almost half the work force — not exactly a
marginal special interest group. By adding a program for jobs in
libraries, schools and children's programs, the new administration can
create jobs for them, too.

Linda R. Hirshman is the author of "Get to Work: A Manifesto for Women
of the World."

2008-12-29T15:48:00.001-08:00

Ethanol Industry Provides Green Jobs Input

Posted by Cindy Zimmerman

At the request of the Obama administration transition team, the
Renewable Fuels Association last week submitted discussion ideas for
an economic stimulus package partially designed to create green jobs
and spur the green economy.

RFAAccording to a statement from RFA, "Some have misconstrued this
communication as a request for federal assistance or a bailout. To the
contrary, the RFA recognizes that by stimulating increased production,
innovation, and investment in new technologies and cellulosic
feedstocks, a revitalized renewable fuels industry can help bail out
the flagging US economy and lessen America's dependence on foreign
oil."

RFA says the ethanol industry has helped support the creation of more
than 238,000 "green" jobs last year alone as well as helping to revive
struggling rural economies.

Organization representatives say they will continue to have
discussions with the Obama team on how ethanol fits into a green
stimulus package. "America's ethanol producers share the vision of
President-elect Obama of a domestic industry that is innovating to
include ethanol production from a wide array of materials including
switchgrass, wood chips, and municipal solid waste. That vision can
only become a reality if today's ethanol technologies and producers
are successful."

2008-12-29T15:45:00.001-08:00

U.S.News & World Report
Monday, December 29, 2008

President-elect Barack Obama has been talking up green jobs, green
energy, and green infrastructure for a while, but in the past few
weeks, as pressure has mounted for a new economic stimulus package,
his push for green spending has acquired a sense of immediacy: If
Congress is going to spend hundreds of billions of dollars to boost
the economy, as it appears likely to do, how much should be spent on
green projects? And do some green projects hold more promise for the
economy than others?
More News

There have certainly been many suggestions. Washington, over the past
month or so, has turned into something of a holiday showcase for
backlogged projects and wishful plans. The National Governors
Association and the U.S. Conference of Mayors have each published
lists featuring green projects they say are "ready to go"—ready for
construction—in 2009. Activists, utilities, and trade groups have
offered up their own lists, sending them along to the Senate Energy
and Natural Resources Committee, which in turn has turned them over to
Democratic congressional leaders.

From what Obama has said thus far about the stimulus package, which is
rumored to be in the $700 billion-to-$800 billion-plus range, he is
hoping to accomplish two things at once: stabilize and restore the
flagging economy while advancing his energy agenda. Observers say that
to do so, he will have to strike an appropriate balance between
short-term and long-term projects, a balance that delivers quick,
tangible aid to the economy but also lays a foundation for
transforming the country's energy portfolio.

The "green" proposals being bandied about are a motley bunch. They
include calls for fixing old things, such as retrofitting homes and
schools and offices with energy-efficient technologies, and for
building new ones, such as new power plants, new solar farms, and new
fueling stations for flex-fuel vehicles. They cover pitches for large,
multiyear projects—new municipal sewer systems and high-voltage
transmission lines—and pitches for smaller ones, such as installing
windows. And they encompass a range of ideas for distributing the
money (grants, tax credits, and loan guarantees, to name a few) as
well as a range of recipients, including homeowners, utilities,
manufacturers, developers, and city and state governments.

In addition to the calls for investment, there are calls for reform.
Many observers say the stimulus package gives lawmakers a rare
opportunity to overhaul regulatory policies that have hampered the
growth and success of the renewable energy industry (particularly wind
power) and set too-lenient efficiency standards for new office
buildings. One far-reaching move, they say, would be to give greater
control to federal regulators over the construction of new electricity
transmission lines across state jurisdictions, thereby overriding
fights among states and reassuring wind investors that their energy
will find buyers in distant markets.

Of the package's yet-to-be-determined price tag, as much as one third
of it may end up being tied to energy; some lawmakers have said they
would like to see a minimum of $100 billion in energy-related
investment. The big question, of course, is how that money will be
divided up.

At the moment, a consensus seems to be building around the notion that
energy-efficiency projects will have the quickest impact on the
economy, since they are among the easiest to deploy—and they lower
utility bills. As Joe Loper, Alliance to Save Energy's vice president,
said at a recent hearing, "Transformations have long lead times and
many pitfalls. We should not crowd out opportunities for incremental
gains."

The group, along with several other organizations, including Edison
Electric Institute, the main trade group for the electricity industry,
has called for retrofitting 2 million buildings over the next two
years and for at least $13 billion for energy-efficiency programs.

Retrofits, of course, tend to be cheaper than infrastructure projects
or new plants. Converting a coal plant to biomass, for example, might
cost about $100 million; replacing the windows at city hall, about $2
million. But they also only begin to address questions about supply
problems. "It's important to recognize that energy makes a huge
contribution to our economic recovery, not just through immediate jobs
but through providing affordable energy for the future," says Karen
Harbert, managing director of the U.S. Chamber of Commerce's Institute
for 21st Century Energy. "I don't think we should shy away from
something that could create jobs two, three, four years from now. New
plants have very long supply chains. Orders need to be placed now for
parts. Pieces of equipment take time to manufacture."

Both Obama and Vice President-elect Joe Biden have said that they do
not want the stimulus package to turn into a typical federal
appropriations bill, stuffed with earmarks and goodies for a
congressman's home district. How, then, will Congress designate what
it wants to fund?

Part of the answer appears to be that Democratic leaders are looking
to help state and city programs that already exist but are badly in
need of funding. Likewise, Congress has approved two giant energy
bills in the past three years with hundreds of new programs. But in
many cases, the programs have been left unfunded. In 2007, for
example, Congress authorized a new smart-grid program with a price tag
of $200 million a year for three years. But that program has gone
largely unfunded, according to records.

Environmental advocates, meanwhile, hope that long-neglected areas,
such as water treatment and land preservation, will finally get
attention and that the stimulus package will promote conservation
after years of resource depletion. Much of the nation's
infrastructure—roads, sewer systems, transport pipelines—dates to the
World War II era, if not well before then; some sewer systems in the
Northeast are more than 100 years old and vulnerable to flooding after
heavy rain.

Betsy Otto, vice president of American Rivers, says lawmakers should
focus on alleviating problems in existing systems and on restoring
wetlands and other natural protections. "Partly, this is a question of
follow the money," Otto says. "In the past, money has been in funding
pots for the Army Corps of Engineers and highway development.
Communities have followed where funding sources are—new development,
creating taller and taller levees. Part of a sound national strategy
would be investing in efficiency and natural solutions."

Inevitably, there will be clashes. Some groups say the stimulus
package should include funding for carbon capture and sequestration
technology for coal plants; others say the money should be spent only
on renewable technology. Some want massive funding for roads, in part
to alleviate wasteful idling in big-city traffic; others say funding
for roads should be redirected to companies working on electric cars
or advanced biofuels.

A point of general agreement, however, is that the stimulus package
should go beyond piecemeal funding and look at setting broad policies
that will encourage private investment amid poor conditions. "I don't
know if we have the luxury of picking which industries we want to
support in this economic crisis," Harbert says. "We need all types of
jobs and all types of energy."

2008-12-29T15:37:00.001-08:00

Legal outsourcing set to boom
OUTLOOK 2009
Priyanka Joshi / Mumbai December 28, 2008, 0:19 IST

An Indian legal professional who takes home Rs 25,000 a month earns a
tiny fraction of the Rs 10,000 an hour that his counterpart in the US
earns.

But with Indian legal process outsourcing (LPO) industry poised to
increase it's hiring, amidst a whirlpool of cost cutting measures
being embraced aggressively by the US and the European firms, things
could change. Mathematically, this translates into 20 per cent rise in
salary packages of LPO employees and bonuses of up to 25 per cent to
experienced lawyers employed by various outsourcing outfits.

Bhaskar Bagchi, country head, CPA, leading provider of outsourced
legal support services and intellectual property management
specialist, claims that CPA would double its headcount from the
existing 500 employees, in the next 6 months. "We are targeting a
headcount of 2,000 employees by 2010," he said. Industry sources
assert that the average salary benchmark would follow the increase in
outsourced legal project revenues, which is rising at an average 30-45
per cent.

Numerous foreclosure-related assignments from US banks and law firms
have been keeping Indian LPOs occupied, besides the usual assignments
like indexing and coding to database maintenance, patent support,
contract review and management, litigation support and legal
compliance.

Most LPOs employ an eclectic mix of lawyers, paralegal professionals
and engineers for various outsourced functions.

Soumitro Chatterjee, CEO of Legal Circle, a recent startup and
subsidiary of the leading law firm Fox Mandal Little feels that salary
packages of experienced lawyers would get better by up to 30 per cent
in 2009. According to him, "As complexity and volumes of outsourced
legal work increases, lawyers from LPO firms would be the most prized
professionals leading to a compensation scramble among the growing
Indian LPOs."

Legal Circle is looking to hire 15 lawyers in legal and compliance
verticals, and expects the headcount to cross 100-mark by 2009 end.

Attrition rates are on an upward curve for Indian LPOs and most
players agree that employee benefits like bonuses and increments would
be the key retention tools in 2009. Average attrition rates in the
industry vary between 25-35 per cent. Bagchi says, "At CPA, we handed
out bonuses and increments, starting at 15 per cent and upwards. For
2009, we have a healthy orderbook and the benefits will only get
better for employees."

2008-12-29T15:34:00.001-08:00

Printed from

Global meltdown catches IT firms off-guard
28 Dec 2008, 1226 hrs IST, IANS

BANGALORE: After nearly a decade of uninterrupted boom, the Indian information technology industry finds the road ahead bumpy as 2008 draws to a

close, with the global meltdown and financial turmoil in the US and other rich countries catching the otherwise resilient sector off-guard.

With no signs of early revival, even the top firms - TCS, Infosys and Wipro - are bracing for hard times in the year ahead.

A reality check of the industry by leading IT industry-specific publication Dataquest of Cyber Media shows that the Indian software services sector is set for a lower growth this fiscal due to declining IT spends by enterprises worldwide and a volatile currency market.

"The global economic slowdown is impacting the Indian software services sector as never before. With the US, Europe and Japan slipping into recession, demand for outsourcing and offshoring IT services will slacken over the next three-four quarters," Dataquest warned.

Though the software industry body Nasscom projected 21-24 percent revenue growth rate for this fiscal as against 28 percent in 2007-08, analysts fear the annual growth could decline to 15 percent by the end of the fiscal - the lowest in a decade.

Nasscom president Som Mittal said the growth rate target would now be reviewed in January, as the member-companies were in the process of furnishing fresh data to the representative body.

"We wanted to review the forecast in mid-December but could not do so as export and domestic firms are still assessing the situation. We will re-visit the numbers and give a revised forecast next month," Mittal told IANS.

A performance review of the top 20 Indian IT firms shows the projected growth rate of 28 percent may not be met.

"The slowdown is likely to last 12-15 months. New application development is expected to be affected the most. Smaller companies looking for funding are equally affected by the tight credit market, while the large outsourcing firms/IT bellwethers are sitting pretty on cash on their balance sheets," Dataquest said.

According to global technology and market research firm Forrester, slowdown in the technology sector will continue till the third quarter of 2009, while outsourcing growth will remain moderate till 2010.

"Slowdown will force companies to turn to vendors to help cut costs. Growth in IT outsourcing revenues will remain moderate due to the use of lower-cost offshore resources and smaller-scale outsourcing deals," Forrester said in its report "Outlook for the global IT industry".

"Unlike in the first two quarters (April-September), clients have put discretionary projects on hold in the third quarter. Decisions on new projects have been postponed to next year, as clients are busy grappling with the ongoing crisis," the report said.

Bearish sentiment in the US and British markets, which account for about 80 percent of the Indian IT export revenues, are compelling vendors to tap emerging markets.

According to Dataquest, the meltdown also impacted projects in the banking, financial services and insurance sectors, which contribute about 40 percent of software sector revenues.

"Coupled with recession, the prevailing negative sentiment is also affecting new projects in manufacturing and retail verticals, which account for 15 percent and eight percent of the total revenues," it added.

To sustain the growth momentum, albeit more slowly, Indian IT vendors are shifting to fixed price model from time-and-material billing model. Infosys, Wipro and HCL are moving away from billing customers by the hour to entire projects or in parts to maintain their profitability, as fixed price contracts give flexibility to drive productivity and protect margins.

In the second quarter (July-September), fixed price contracts accounted for 34 percent of the combined business of Infosys, Wipro and HCL, as against 29 percent in the same quarter the previous fiscal. TCS has been sustaining on fixed price contracts, which accounted for 44 percent in the last quarter.

The currency volatility has also compounded the woes of the Indian IT sector.

If a rising rupee in the last fiscal had dented export earnings, the steady rise of the US dollar against the rupee, British pound and Euro during the second quarter (July-September), impacted revenue realisation in dollar terms since 30 percent of the billing is done in these currencies.

"The sharp and sudden appreciation of the US dollar against the rupee by 5.5 percent, euro (13 percent) and pound (13.8 percent) in the second quarter had adversely impacted the revenue of Indian IT firms in dollar terms," Dataquest noted.

As a result of over-hedging in forward contracts, benefits of a weak rupee were limited. For instance, Infosys posted a market-to-market loss of $28 million (Rs.1.35 billion) on hedging $932 million for the entire fiscal.

Similarly, Wipro suffered a forex loss of Rs.280 mn in the second quarter on hedging $2.1 billion, while HCL took a hit of Rs.970 mn. On the other hand, multinational companies proved to be resilient.

"Having consolidated their presence in the hardware segment, thanks to a liberalised import regime and lowered tariffs, global brands such as Dell and Lenovo have outperformed their Indian counterparts even in these times of slowdown," the Dataquest report said.

Similarly, in the software segment, global majors like Microsoft and SAP registered revenue growth of 29 percent and 104 percent respectively last fiscal, and continue to grow despite the slowdown.

2008-12-29T15:25:00.001-08:00

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Tata group may need to invest $1 bln in Jaguar - report

Tue Dec 23, 2008 4:02am GMT

MUMBAI, Dec 23 (Reuters) - India's Tata group may have to pump in at least $1 billion to revive premium brands Jaguar Land Rover that was bought by Tata Motors (TAMO.BO: Quote, Profile, Research) earlier this year, the Economic Times reported on Tuesday.

Tata Sons, the holding company that holds large stakes in group firms, and unlisted financial services unit Tata Capital are among the options being considered to raise the cash, the newspaper said, quoting unnamed company sources.

"We will do everything in our ability to resource all our operations," the paper quoted a Tata Motors' spokesman as saying, Tata Motors paid $2.3 billion to buy Jaguar Land Rover from Ford Motor Co (F.N: Quote, Profile, Research) earlier this year, just as global auto sales began collapsing. adding he declined comment on the size of funds required.

A spokesman for Tata Motors could not be immediately reached by Reuters for comment.

On Monday UK's Financial Times had reported that Tata Motors had agreed to inject "tens of millions of pounds" into Jaguar Land Rover to prevent an immediate cash flow crisis. [ID:nLM408046].

Tata Motors, which has a market value of about $1.5 billion, has dropped 74 percent so far this year while the main BSE index .BSESN is down more than half. (Reporting by Janaki Krishnan; Editing by Ranjit Gangadharan and Lincoln Feast)

2008-12-29T15:21:00.001-08:00

India November Iron-Ore Sales Rise as China Increases Purchases

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By Debarati Roy

Dec. 26 (Bloomberg) -- India's iron-ore exports in November rose from the previous month as China, the world's biggest buyer of the steelmaking raw material, increased purchases.

Shipments were 8.74 million tons compared with 4.14 million tons in October, the Federation of Indian Mineral Industries, a group of iron-ore miners, said in a statement today.

Chinese mills are buying more from India because they want suppliers such as BHP Billiton Ltd. and Rio Tinto Group to cut prices, said R.K. Sharma, secretary general of the association.

"This is a way of putting pressure on Rio and BHP," he said by telephone from New Delhi.

China may ask Rio Tinto and rivals to accept an 82 percent price cut after steel prices fell to 1994 levels, Shan Shanghua, secretary in general of the China Iron and Steel Association, said earlier this month.

Still, total exports in November were lower than last year's 10.16 million tons, the association said.

India produced 160 million tons of iron ore in the year ended March 31. Two-thirds of the output was sold to China, according to the group.

To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net.

Last Updated: December 26, 2008 01:13 EST

2008-12-29T15:00:00.001-08:00

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Kerkorian sells off remaining Ford shares

Mon Dec 29, 2008 5:09pm EST

DETROIT (Reuters) - Billionaire investor Kirk Kerkorian has sold off all of his remaining shares of Ford Motor Co, a spokeswoman for his investment firm, Tracinda Corp, said on Monday.

Tracinda, which briefly ranked as Ford's largest outside investor earlier this year, said in a regulatory filing in October that it had begun working with bankers to sell the 133.5 million shares of the No. 2 U.S. automaker it still held at that time.

It was not immediately clear when Tracinda had completed those remaining sales of Ford stock.

Kerkorian's final pullout from Ford completed a costly retreat for the activist investor, who has a mixed track record with investments at all three Detroit-based automakers.

A spokesman for Ford could not immediately be reached for comment.

Kerkorian, 91, previously held a nearly 10-percent stake in General Motors Corp and made a failed bid for Chrysler LLC last year.

He surprised analysts and investors in April when he began buying Ford shares and spent over $1 billion to take a stake in Ford at an average price per share of $7.10.

At its peak, Kerkorian held a 6.5 percent stake in Ford and had offered in June to support the automaker's turnaround efforts with an infusion of additional capital.

Ford has been widely considered to be the best-positioned of the three Detroit automakers at a time when all three have been hit hard by declining sales and tight credit.

When GM and Chrysler negotiated $17.4 billion of emergency loans from the U.S. government earlier this month, Ford held back, saying it expected to be able to weather the downturn on its own.

But conditions across the auto industry have taken a dramatic turn for the worse since September when credit suddenly tightened for both car shoppers and dealers.

In late October, Tracinda began selling Ford shares at $2.43, representing a loss of almost 66 percent from what the fund paid on average.

Since then, Ford's shares have traded between a low of $1.02 in November to a high of $3.54 earlier this month.

Ford shares fell almost 5 percent in trading on Monday to $2.18.

The Ford family holds just under 3 percent of the automaker's shares but controls 40 percent of the voting power through a separate class of shares.

Kerkorian's offer of additional capital for Ford had been seen as an endorsement of the company's strategy and management under Chief Executive Alan Mulally.

But Kerkorian's record as an activist investor had also raised questions earlier this year about whether his investment could be a threat to the Ford family's continued control of the automaker.

(Reporting by Kevin Krolicki; Editing by Phil Berlowitz)

2008-12-22T19:22:00.001-08:00

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In this Nov. 18, 2008, file photo, women enjoy their ice cream at a mall in Bangalore, India. From Adidas to General Motors, companies that have plunged into India and China are finding that these markets are, by and large, still too small to make up for the slowdown in the U.S. and other rich countries. Moreover, India and China are not immune to the global crunch. Declining exports, particularly in China, and tight credit have cooled spending growth, despite the favorable long-term trends. (AP Photo/Aijaz Rahi, file)

India, China can't compensate for lost US spending

By ERIKA KINETZ – 1 day ago

MUMBAI, India (AP) — They were supposed to keep the good times going: Prakash Shetty, caught recently thumbing through "Singh is King" DVDs at a mall in India, and Zhu Xiaolin, who enjoys cute Adidas sportswear and Body Shop cosmetics in China.

But how far can Shetty and Zhu, both 26, and other Asian consumers go to save the groaning global economy? Just how many Buicks, Barbie dolls, Wrangler jeans, waffle fries, kiwi lip balms and plastic thingamajigs are they willing or able to buy?

Not enough, it turns out.

Much has been made of the power and promise of Indian and Chinese consumers. Each country has a rapidly growing economy, rising incomes and more than a billion people — many of whom have yet to burn through a single credit card or experience the joys a washing machine can bring.

China will be the world's third-largest consumer market by 2025 and India will be No. 5, ahead of Germany, McKinsey & Co has predicted. As U.S. sales swooned this year, emerging markets were the sole bright spot on many balance sheets.

But such heraldry obscures a painful bit of math: U.S. consumers still buy more than five times as much as Indian and Chinese shoppers combined. And despite rambunctious growth, revenues from India and China have barely softened the blow of declining sales in the developed world — even for companies that have chased after rupees and yuan most aggressively.

From Adidas to General Motors Corp., companies that have plunged into India and China are finding that these markets are, by and large, still too small to make up for the slowdown in the U.S. and other rich countries. Moreover, India and China are not immune to the global crunch. Declining exports, particularly in China, and tight credit have cooled spending growth, despite the favorable long-term trends.

Chinese consumer spending is projected to reach $1.3 trillion this year, according to Euromonitor International, a market research firm. That would approach France's $1.4 trillion but pales in comparison to America's $9.9 trillion. Indian consumers will spend $660 billion, or about half of China's.

In October, Americans spent $102.8 billion less than they did in September. That one month drop is nearly two and a half times more than Indian consumer spending is expected to grow this entire year.

"In dollar terms they can't offset," said Arvind K. Singhal, chairman of Technopak Advisors Pvt. Ltd., a retail consulting firm based in New Delhi.

It's not that Indian and Chinese shoppers aren't eager. Take Shetty. Trim and gregarious, he just got promoted to assistant manager at the Leela Kempinski, a luxury hotel in Mumbai where rooms were going recently for $280 a night. After he got the news, he handed his mom a fistful of cash, bought a television set, two cell phones (one for his dad), a stack of DVDs, a $700 gold necklace for his fiance and a couple of new outfits for himself.

"You feel great when you buy new clothes," he said, fending off a small crowd at the DVD rack of Big Bazaar, a popular discount shop.

His appetite for shopping helps explain why growing markets such as India and China "may make up for some of the stagnation you have in more mature markets," said Jan Runau, a spokesman for Adidas Group AG. By the end of this year, China is expected to surpass Japan as the second largest market for Adidas worldwide, after the U.S.

But, Runau cautioned that once other countries entered the recession, India and China would be affected: "They can't make up for everything."

Dell Inc., the world's second largest PC maker, saw revenues grow 48 percent in India and 18 percent in China in the third quarter, but global sales still fell 3 percent to $15.2 billion.

The two markets contribute about 5 percent of the company's revenues, while the U.S. accounts for half.

"It's starting to have a meaningful impact on Dell's results, but it's not enough to offset what's going on in the United States," said Steve Felice, president of Dell Asia Pacific and Japan.

GM's North American revenues fell $4.1 billion in the third quarter to $22.5 billion; the drop alone was almost as much as its total Asian sales of $4.8 billion. Add in the $1.3 billion slide in European sales, which totaled $7.5 billion, and it is clear that Asia can't save the company, teetering as it awaits federal assistance.

"We need to turn around our North American business. There is no choice," GM President Fritz Henderson said in September, at the opening of a new factory in Pune, a growing Indian manufacturing hub outside Mumbai.

For Vodafone Group Plc, the world's biggest mobile phone service provider by sales, India and China are "absolutely vital," said company spokesman Simon Gordon. "That's where the growth is."

But over 70 percent of Vodafone's sales still come from Europe. In the first half of this fiscal year, India accounted for just 6 percent of the group's 19.9 billion pound in revenues and less than 1 percent of adjusted operating profits. Vodafone does not operate in China, though it owns a 3.21 percent stake in China Mobile.

During that period, the company posted a 35 percent fall in net profit, despite adding 10.5 million new customers in India and growing India revenues by 41 percent.

Now, the economies of India and China are themselves slowing. Their stock markets have plunged, businesses and households are finding it harder to access credit, and fears of job losses have shaken consumer confidence.

Lower export growth in China is spilling over into consumer spending, as workers fret about pay and job security.

Zhu, who works at an export company in Shanghai, has been trolling the Internet for shopping deals, because she is not getting a bonus this year.

"Companies that can't manage to sell their export items are selling online at very low prices," she said. "It doesn't mean I don't like shopping in stores, but I can't afford that right now."

Despite government efforts to spur domestic spending, many Chinese remain frugal, concerned about saving for health care and retirement.

"Consumer demand is not going to be the answer to disappearing exports," said Robert Lawrence Kuhn, chairman of Kuhn Global Capital LLC and a longtime adviser to the Chinese government. "China's domestic consumption is necessary but not sufficient to stabilize China, much less the world."

India relies less on exports. They account for about 20 percent of the Indian economy, versus 35 percent in China.

Still, the global financial crisis has hit the Indian stock market and sparked a nasty credit crunch. Many consumers are unable to get loan approvals or afford the high interest rates. That, plus lingering inflation, has hurt consumer confidence and crimped growth.

Gibson Vedamani, chief executive of the Retailers Association of India, says overall retail sales in India will likely grow 8 to 10 percent this year, down from about 30 percent last year.

Sales of basic items such as food and clothes, which account for most Indian spending, have held up far better than credit-driven purchases, such as homes and cars.

"We are not seeing a slowdown on basic products," said Kishore Biyani, chief executive of the Future Group, India's largest retailer, whose holdings include discounter Big Bazaar. He's still hiring and plans to expand total floor space from 11 million to 16 million square feet by June next year.

Most Indians won't set foot in Biyani's sweeping 16 million square feet for years, however. The masses still struggle, parceling out their rupees at the hot, hectic mom-and-pop shops that dominate the landscape.

"We won't buy from the mall," said Suraj Buralkar, 21, who dropped out of school and started driving a taxi to help support his parents and three siblings. "The mall is too expensive for us."

Still, Buralkar, like many in this hopeful country, is on his way. Earning just 3,200 rupees ($67) a month and working overtime to satisfy his gnawing desire for stuff, he saved enough to pluck a pair of jeans, at 1,300-rupees ($27), or one-third of his monthly income, from one of India's teeming roadside bazaars.

AP Business Writer Elaine Kurtenbach contributed to this report from Shanghai and AP Researcher Monika Mathur from New York.

2008-12-22T19:14:00.001-08:00

Ford Debt Rating Is Cut Further Into Junk by Moody's (Update1)

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By Bill Koenig

Dec. 22 (Bloomberg) -- Ford Motor Co.'s credit was cut further below investment grade by Moody's Investors Service, which said the automaker will need to restructure debt to win union concessions similar to those at U.S. competitors.

The rating was lowered to Caa3, nine grades below investment status, Moody's said today in a statement. The change affects about $26 billion in debt at Dearborn, Michigan-based Ford.

The downgrade "reflects the increased risk that Ford will have to undertake some form of balance sheet restructuring" to get revisions like those General Motors Corp. and Chrysler LLC may receive from the United Auto Workers union under the federal rescue plan, Moody's said.

Ford isn't part of the $13.4 billion automaker emergency-aid package that President George W. Bush announced on Dec. 19. The assistance has conditions for GM and Chrysler, including getting their labor costs competitive with those of U.S. plants owned by Asian and European automakers.

Mark Truby, a Ford spokesman, didn't immediately comment on the Moody's rating change.

The second-largest U.S. automaker "must have UAW parity with GM and Chrysler," Moody's Senior Vice President Bruce Clark said in a statement. "But the UAW is unlikely to make concessions to Ford unless Ford's creditors also bear some pain in the form of a debt restructuring."

To contact the reporter on this story: Bill Koenig in Southfield, Michigan at wkoenig@bloomberg.net

Last Updated: December 22, 2008 16:53 EST

2008-12-19T17:07:00.001-08:00

China cull amid bird flu outbreak

More than 370,000 chickens have been culled in China's eastern province of Jiangsu after an outbreak of the H5N1 strain of bird flu, say officials.

The outbreak is thought to be the first in mainland China since June.

Meanwhile, a man has reportedly contracted the virus in Cambodia, while Taiwan is investigating suspected infection among birds.

The death of a teenage girl from H5N1 was announced in Egypt on Tuesday, and a bird cull is also under way in India.

More than 200 people in a dozen countries have died of the virus since it resurfaced in Asia in 2003, say global health authorities.

Experts fear that the virus could mutate into one that is easily transmissible from human to human.

Migrating birds blamed

China's Ministry of Agriculture said it received notification that the H5N1 virus had been found in two areas of Jiangsu on Monday.

The usual precautions have been imposed: birds have been slaughtered in the surrounding area, farms quarantined and disinfected, and the transport of fowl banned.

But no information has been released about the scale of the outbreak - how many birds were found to be carrying the H5N1 strain of the virus and how many of them died.

Officials say they think migrating birds might have been the source of the disease.

They are currently testing samples of the virus to check it has not mutated into a form that would pose a risk to human health, reports the BBC's Chris Hogg in Shanghai.

Virus returns

China is among a number of countries experiencing a return of the virus this season:

• Authorities in the Indian state of West Bengal are implementing a cull after tests on poultry from two villages yielded positive results

• In Cambodia, another cull is under way after the World Health Organisation (WHO) and government confirmed a young man had the virus, according to Reuters news agency

• Authorities in Taiwan say they are investigating the cause of the sudden death of poulty in Luzhu, Kaohsiung county, Reuters says

• Earlier in the week, Egyptian authorities announced the death of a 16-year-old girl from the virus

• The discovery of infected birds in Hong Kong last week sparked a cull of more than 80,000 birds

WHO warning

The WHO recently warned governments in Asia not to let down their guard against bird flu.

Some experts fear that because the virus has not yet mutated into a form that could spread easily among humans, the fight against bird flu is seen as less of a priority than before.

Countries like China - with huge densely populated cities and in many places only basic healthcare and veterinary services - are thought to be particularly vulnerable should the virus become more deadly, says our correspondent Chris Hogg.

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2008-12-19T16:50:00.001-08:00

Chrysler, Ford idle factories, GM delays new plant

By TOM KRISHER – 1 day ago

DETROIT (AP) — Chrysler announced Wednesday it is closing all its North American manufacturing plants for at least a month, the starkest move taken by U.S. automakers as they anxiously await word about government loans.

All three companies have been taking dramatic steps as they struggle to survive the recession and U.S. sales have dipped to their slowest rate in 26 years. Chrysler and General Motors fear they might not have enough money to pay their bills in a matter of weeks.

Attempting to cut costs, GM was halting construction of a plant tied to one of its most important projects, the Volt. Ford also said it will shut down 10 plants for an extra week in January because of sluggish sales.

Chrysler said it would extend the normal two-week holiday shutdown that begins Friday to at least Jan. 19 at all 30 of its factories due to slumping sales.

The lack of consumer credit is hampering sales and forcing the production cuts, Chrysler LLC said in a statement. Chrysler, Jeep and Dodge dealers say they have willing buyers for vehicles, but they can't close the deals, Chrysler said.

"The dealers have stated that they have lost an estimated 20 to 25 percent of their volume because of this credit situation," the statement said.

The Bush administration is mulling ways to help the automakers after Congress failed to reach a deal on $14 billion in loans for GM and Chrysler. Ford has applied for a $9 billion line of credit but says it has enough cash to make it through 2009.

Funding for the loans is expected to come from the $700 billion Wall Street rescue fund, but many Republicans have objected.

"It's clear that the automakers are in a very fragile financial condition and they're taking steps to deal with it," White house press secretary Dana Perino said in a statement. "We're aware of their financial situation and are considering possible policy options to provide assistance in an appropriate way."

House Democrats have encouraged Treasury Secretary Henry Paulson to adopt accountability provisions included in a House-passed auto bailout bill — the product of a deal with the White House — as a condition to get the loans.

The measure would have given a Bush-appointed "car czar" oversight over any major business decisions by the automakers.

The Bush administration has signaled that concessions would likely be required of stakeholders in the deal — auto companies, the United Auto Workers union, bondholders and others.

Chrysler spokesman Dave Elshoff said four plants will be temporarily closed beyond Jan. 19: two plants in Toledo, Ohio, and one each in Ontario and Detroit.

Toledo North, which makes the Dodge Nitro and Jeep Liberty, and Toledo Supplier Park, which makes the Jeep Wrangler, will be closed until Jan. 26. The Windsor, Ontario, plant, which makes minivans, and Detroit's Conner Avenue plant, which makes the Dodge Viper roadster, will be closed until Feb. 2, Elshoff said.

Chrysler sales were off 47 percent last month and are down 28 percent through the first 11 months of the year.

At Ford, a company spokeswoman said Wednesday it will shut down 10 of its North American assembly plants for an extra week in January, also due to lower U.S. sales.

Spokeswoman Angie Kozleski says the normal two-week holiday shutdown will be extended to Jan. 12 at all operating assembly plants except those in Claycomo, Mo., near Kansas City, and the Dearborn, Mich., truck plant.

Ford will also extend the shutdown at some engine, transmission and parts stamping plants, or temporarily shut portions of them to match cuts at the assembly plants, she said.

The extra week of down time has been planned for several months as part of the company's first-quarter production schedule, Kozleski said.

Ford Motor Co.'s U.S. sales were down 31 percent in November and are off 20 percent through the first 11 months of the year.

Laid-off workers at Ford and Chrysler get vacation pay for the normal holiday shutdown, then will receive unemployment benefits and supplemental pay from the company that total about 85 percent of their normal pay. (My heart bleeds for these poor bastards that are only getting 85% of their pay while be "layed off".)

General Motors Corp. said last week it will temporarily close 20 factories across North America and make sweeping cuts to its vehicle production. Many of those plants will be shut down for the entire month of January.

GM said Wednesday it was delaying construction of a new engine factory in Flint, Mich., in an effort to conserve cash. The plant is to make 1.4-liter engines for the Chevrolet Cruze and the Chevy Volt plug-in electric car, two key products in the century-old automaker's plan to turn itself around after relying on highly profitable truck and SUV sales.

The plant's engines will extend the range of the rechargeable Volt, GM's high-profile next-generation vehicle that will be able to travel 40 miles on electricity alone. They will also power the Cruze, GM's new small car that is supposed to get around 40 miles per gallon.

GM announced plans in September for the new engine plant, but the company is delaying the purchase of big-ticket items needed to build the factory, such as structural steel, GM spokeswoman Sharon Basel said.

Basel said Volt and Cruze development will continue as scheduled and the company still plans to bring them to showrooms in 2010.

Also Wednesday, Chrysler Financial, the company's dealer and consumer finance arm, warned dealers that it may temporarily stop financing vehicle inventories if dealers keep pulling large amounts of their money out of an account that helps fund those loans.

Chrysler Financial said in a letter to dealers dated Dec. 12 that recent withdrawals from the company's cash management account have been "unusual and unprecedented."

Amber Gowen, a spokeswoman for Chrysler Financial, said the company continues to provide financing for 75 percent of all Chrysler LLC vehicles shipped to U.S. dealers.

Sluggish auto sales worldwide are taking a toll on foreign automakers as well. Honda Motor Corp. said Wednesday that it would halt expansion in Japan, Turkey and India and cut 450 temporary workers in Japan through February.

Nissan Motor Co. said it would reduce Japanese production by 78,000 vehicles and also cut 500 temporary workers there.

AP Auto Writer Kimberly S. Johnson in Detroit and Associated Press Writer Ken Thomas in Washington contributed to this report.

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2008-12-19T16:36:00.001-08:00

December 17, 2008

Economy clouding progress, Ford says

Rivals' uncertainty also weighs on turnaround

BY BRENT SNAVELY
FREE PRESS BUSINESS WRITER

Ford Motor Co.'s executive chairman, Bill Ford Jr., said Tuesday that the company continues to make impressive progress with its turnaround plan -- but the uncertainty hanging over its crosstown rivals, the automotive industry and the U.S. economy are making the company's fight for survival tougher every day.

Ford, who is also the great-grandson of the company's founder, spoke Tuesday at an event in Dearborn to preview 2009 models and said there were several positive signs at the company these days.

He said the automaker has been successfully distinguishing itself from other ailing Detroit automakers in the marketplace, and that Ford's early December sales in the United States don't actually look too bad, despite the dismal economy.

"December for us is starting off relatively well," Ford said.

General Motors Corp. and Chrysler LLC have said they might run out of cash soon; Ford is the only Detroit automaker not seeking financial support. Bill Ford said that point of differentiation has been good news for the company.

"People are seeing we are trying to make it on our own, and I think we are hearing comments in the showroom to that effect," Ford said.

Ford Motor, which recently launched the redesigned F-150 pickup, saw its market share in the United States grow by 1.5 percentage points in November, to 16.4% of all sales. In Europe, where Ford recently launched its redesigned Fiesta subcompact car, Ford increased its market share to 8.8% of all sales. Ford plans to bring the Fiesta to the United States in 2010.

Despite that, Bill Ford said the uncertainty in the automotive industry is making it difficult for the company to plan for the future, even though the family-controlled automaker believes it has enough cash and credit, under current economic conditions, to make it to 2010.

A $14-billion financial rescue bill for GM and Chrysler failed in the U.S. Senate last week. Now, Detroit's automakers have turned their hopes to the Bush administration, but it remains unclear how much money the administration is willing to provide or when.

"I was disappointed that it did not pass because I think it would have been the right thing for our industry, and particularly, for GM and Chrysler, but ultimately for our suppliers," Ford said. "Here we are in limbo still for GM and Chrysler, and every day that passes puts more and more strain on them and the supply base."

Despite the importance of the effort, Ford said he tries not to obsess about what is happening in Washington, D.C.

"Every day this is changing, and every day there is a new set of conditions, a new set of strings, different amounts of money, and who knows how this is going to shake out," Ford said.

"One of the things we have learned is to try not to react to absolutely every change hour-by-hour because we have a company to run, and we feel that we are on the right path. We feel like our plan is working, and that's got to be the basic focus."

Some industry analysts said that fewer than 12 million vehicles will be sold in the United States in 2009. If true, that would mean 2009 would be an even tougher year than this year.

Bill Ford acknowledged that the selling environment could erode further.

"At a certain point, if customers are just stressed out and tapped out, all the messaging in the world is not going to get them in" to visit dealerships, Ford said.

But Ford President and CEO Alan Mulally said Ford's goal is to make a profit no matter how low industry sales go, and he said the company has been making progress toward greater flexibility in recent years.

Ford has announced the closure of 17 plants and eliminated 45,000 hourly employees and 12,000 salaried jobs in North America and since 2005.

"Whatever the market is, we are going to size ourselves to make money," Mulally said.

Contact BRENT SNAVELY at 313-222-6512 or bsnavely@freepress.com.

2008-12-19T16:10:00.001-08:00

China Car Parts Tariff Violates Trade Rules, Confirms WTO

Canada, U.S., EU call for fair practices amidst auto industry crisis

By Cindy Chan
Epoch Times Staff Dec 17, 2008

A worker from the Hangzhou Zhongce rubber company pieces together the different sections of a tyre at their factory in Hangzhou, 25 July 2007. (Mark Ralston/AFP/Getty Images)

The World Trade Organization's appeal court on Monday upheld a ruling that China's extra taxing on imported car parts violates WTO rules.

Amidst an escalating auto industry crisis at home, Canada, the United States, and the 27-nation European Union, who brought the high-profile dispute against China in 2006, welcomed the ruling and urged China to end its unfair practices.

As part of its agreement to lower auto-sector trade barriers when it joined the WTO in 2001, China reduced its import duty to 10 per cent on auto parts and 25 per cent on whole vehicles.

However, in 2004 it adopted regulations that considered imported parts the same as a whole vehicle if they comprise 60 per cent or more of the vehicle. In those cases the new policy required manufacturers in China to pay an extra 15 per cent tax on the imported parts.

Minister of International Trade Stockwell Day called the ruling "a win for the Canadian auto parts industry, because it ensures fair market access for our exports and will help maintain Canadian jobs in this important sector."

"I expect China to comply promptly with its WTO obligations by removing an unlawful and unfair trade barrier that is harming U.S. workers and manufacturers," said U.S. Trade Representative Susan Schwab in a statement.

E.U. Trade Commissioner Catherine Ashton said in a statement, "We welcome this Appellate Body ruling. China should now put an end to the discrimination and ensure a level playing field in its automotive sector."

The U.S. and E.U. first requested formal WTO consultations with China on this issue in March 2006, joined by Canada the following month. Consultations in May that year failed to resolve the dispute.

The Chinese regime said the new regulations were adopted to prevent tax evasion by companies importing whole cars as large auto parts to avoid the higher tariff rate.

The complainants argued that the additional tax put foreign auto parts producers at an unfair disadvantage by discouraging carmakers in China from using their products. It also put pressure on car parts companies to relocate manufacturing plants to China, leading to loss of jobs in their own countries.

In September 2006 the three complainants requested creation of a WTO panel to settle the matter. The panel issued a ruling against China in July 2008, which China appealed. This week's decision upheld the original ruling.

This was the first time a WTO established a panel to review a complainant against China, and the first WTO dispute that China has lost since joining the world trade body in December 2001. Japan, Australia, Mexico, Argentina, Brazil, Thailand, and Chinese-Taipei registered as interested third parties in the dispute.

The WTO Dispute Settlement Body is expected to adopt the appeals report within 30 days. China has another 30 days to state its intentions on complying with the report's recommendations. China will then have a "reasonable period of time," negotiated or arbitrated, to bring its measures into compliance with WTO rules. If it fails to change its regulations, the complainants may seek WTO permission to impose trade sanctions.

Amidst the global economic downturn and mounting loss of market share to Asia-based carmakers, the "Big Three" auto giants — General Motors, Ford, and Chrysler — are on the brink of bankruptcy and seeking major government bailout packages in both Canada and the U.S.

European carmakers are not faring any better. Car sales in Europe fell by a quarter last month compared to November 2007, declining for the seventh month straight.

The French government has said it is prepared to provide aid to the country's ailing auto industry on condition that carmakers and suppliers keep production jobs in France.

Meanwhile, last Friday Industry Minister Tony Clement said Canada will offer its domestic auto industry an aid package based on 20 per cent of any U.S. bailout, reflecting Canada's share of the North American car industry.

This would have amounted to about U.S.$2.8 billion if Washington had approved its U.S.$14-billion bailout last week, intended as an emergency measure until president-elect Barack Obama takes office on January 20 next year. However, the package was rejected on a vote in the U.S. Senate last Friday, putting government aid in limbo while Washington examines other options.

Even with the assistance package, the North American automakers will still be faced with long-term major restructuring if they are to return to profitability.

2008-12-19T15:47:00.001-08:00

China Slashes Fuel Prices as Economy Enters Slowdown (Update3)

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By Winnie Zhu

Dec. 18 (Bloomberg) -- China cut fuel prices for the first time in almost two years after crude oil slumped, seeking to reduce costs for companies and factories as the economy enters its deepest slowdown in almost two decades.

The ex-factory price of gasoline was lowered by 14 percent to 5,580 yuan ($816) a metric ton, diesel by 18 percent to 4,970 yuan and jet fuel by 32 percent to 5,050 yuan, the National Development and Reform Commission said on its Web site today. The cuts will take effect tomorrow, the economic planner said.

Crude oil's 73 percent decline from its July peak has given China room to ease costs for manufacturers hurt by a collapse in exports and slowing demand at home. Half of China's toymakers shut in the first seven months, while China Southern Airlines Co. and China Eastern Airlines Corp. are seeking government help after recording losses from fuel hedging.

"The price cuts are earlier than we expected and show the government's determination to spur the economy," Qiu Xiaofeng, an oil analyst with China Merchants Securities Co., said by telephone in Shanghai. The magnitude of the cuts is in line with market expectations, he said.

A plan to increase fuel consumption taxes was also approved, the commission said. The gasoline consumption tax will rise to 1 yuan a liter from 0.2 yuan and the levy on diesel will climb to 0.8 yuan from 0.1 yuan. Taxes on other fuel products will increase too, the commission said without giving details.

The government is raising fuel consumption taxes to replace road maintenance fees to encourage energy conservation. The tax changes will be effective as of Jan. 1, the commission said.

'Appropriate Profit'

Gasoline and diesel prices will be set based on global crude-oil prices, domestic refining costs, taxes and "appropriate profit" for refiners, the commission said.

China last cut fuel prices in January 2007, when oil was mostly between $50 and $60 a barrel. The benchmark crude contract in New York has plunged since reaching a record $147.27 a barrel in July on concerns the global recession will diminish energy demand. Crude for January delivery was at $40.07 a barrel at 9:30 p.m. Singapore time.

China also set a price cap for refineries to charge private wholesalers and certain users, such as railway builders for gasoline and diesel, to protect them from higher costs. The gasoline price is capped at 5,980 yuan a ton, and diesel at 5,370 yuan a ton. For qualified wholesalers, the charges can be further lowered by 400 yuan each, the commission said in a separate statement.

Economic Slowdown

China's economy may grow as little as 5.5 percent next year, the weakest pace since 1990, according to CLSA Asia Pacific Markets. That's less than the 8 percent needed to create jobs and maintain social stability, according to China Banking Regulatory Commission Chairman Liu Mingkang. Gross domestic product expanded by 9 percent in the third quarter, the least since 2003.

To shore up the economy, the government last month cut interest rates by the most in 11 years and announced a 4 trillion yuan ($584 billion) stimulus package running through 2010.

The lower fuel prices will probably cut earnings at China Petroleum & Chemical Corp. and PetroChina Co., the nation's largest refiners. Sinopec, as China Petroleum is known, has reported five straight quarters of profit declines as the government capped retail fuel prices below the cost of crude.

Regional Cuts

Most Asian countries have lowered or are planning to cut fuel prices as their economies slow. Tokyo Electric Power Co., Japan's biggest power company, may scale back a planned retail fuel price increase for the first quarter of next year by 50 percent, company officials said in October. The company is acceding to a request by the government to ease the cost burden on households.

Vietnam reduced gasoline prices four times in October to curb inflation. Malaysia has cut fuel costs five times since June. Indonesia may lower gasoline prices next month.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net.

Last Updated: December 18, 2008 08:34 EST

2008-12-19T15:18:00.001-08:00

GM and Chrysler Will Get $13.4 Billion in U.S. Loans (Update10)
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By Roger Runningen and John Hughes

Dec. 19 (Bloomberg) -- General Motors Corp. and Chrysler LLC will get
$13.4 billion in emergency government loans in exchange for
substantially restructuring their businesses, President George W. Bush
announced.

Another $4 billion will be available to GM in February provided
Congress releases the second half of the $700 billion Troubled Asset
Relief Program fund originally set up to bail out financial
institutions. The automakers have until March 31 to meet the
conditions of the loans, including demonstrating they have a plan to
become profitable, or be forced to repay.

Winning the assistance is a reprieve for GM, the biggest U.S.
automaker, and No. 3 Chrysler after they said they would run out of
operating funds as soon as this month. Bush is stepping in after
Senate Republicans' refusal last week to take up a House- approved
rescue raised the prospect that the companies would fail, costing
millions of jobs.

"These are not ordinary circumstances," Bush said at the White House
today. "In the midst of a financial crisis and a recession, allowing
the U.S. auto industry to collapse is not a responsible course of
action."

The cost of letting automakers fail would lead to a 1 percent
reduction in the growth of the U.S. economy and mean about 1.1 million
workers would lose their jobs, including those in the auto supply
business and among dealers, the White House said in a fact sheet.

'Necessary Step'

President-elect Barack Obama endorsed the plan, calling it in a
statement a "necessary step" to avoid a major blow to the economy.

"I do want to emphasize to the Big Three automakers and their
executives that the American people's patience is running out," Obama
said later at a news conference. "They're going to have to make some
hard choices."

The United Auto Workers are "disappointed" that Bush added "unfair
conditions singling out workers," the union's president, Ronald
Gettelfinger, said in a statement.

"We will work with the Obama administration and the new Congress to
ensure that these unfair conditions are removed," Gettelfinger said.

GM is reeling from almost $73 billion in losses since 2004 and a 22
percent slump in U.S. sales this year, while the drop at Auburn Hills,
Michigan-based Chrysler is 28 percent, the steepest among the major
automakers.

The package is intended for GM and Chrysler initially. Ford Motor Co.,
the second-biggest U.S. automaker, has said it can continue operating
without aid for now.

Loan Term

The loan term is three years. GM would get $4 billion by Dec. 29 and
$5.4 billion by Jan. 16. Chrysler would get $4 billion by Dec. 29. GM
would get another $4 billion by Feb. 17, provided Congress releases
the TARP funds.

Under the terms of the plan, the government's debt would have priority
over any other creditors. The automakers also must provide warrants
for non-voting stock, accept limits on executive pay, and give the
government access to financial records.

No dividends may be issued until the loans are repaid. In addition,
the automakers must cut their debt by two-thirds in an equity
exchange.

For workers, GM and Chrysler would be required to make half of the
payments to a union retirement fund in equity and eliminate a program
that pays union workers when they don't have work. Unions and
management would have to negotiate a plan to have compensation and
work rules in place by Dec. 31, 2009, that will make the U.S.
companies competitive with foreign automakers. The requirements could
be modified by negotiations with the union and debt holders.

5 Percent

GM and Chrysler will pay at least 5 percent on the loans, and would
pay 3 percentage points over the London interbank offered rate should
Libor exceed 2 percent.

The average cost of loans to high-risk, high-yield companies in
dollars is a premium of 10.5 percentage points more than Libor,
according to Standard & Poor's Leveraged Commentary and Data unit.

GM shares rose 83 cents, or 22.7 percent, to close at $4.49 in New
York Stock Exchange composite trading. Ford rose 11 cents, or 3.9
percent, to $2.95. Before today, the companies' shares had tumbled 85
percent and 58 percent this year.

Cerberus Capital Management LP, the New York-based buyout firm that
owns Chrysler, said today it will hand over equity in the company's
automotive operations to labor and creditors as part of the loan
agreement. "Concessions by all relevant constituencies" are needed to
restructure Chrysler, Cerberus said in an e-mailed statement.

Plan Criticisms

The plan "unfortunately singles out workers and clearly puts them at a
disadvantage before negotiations have even begun," House Speaker Nancy
Pelosi, a California Democrat, said in a statement.

Republican Senator John McCain of Arizona, his party's presidential
nominee this year, said he regretted that the president decided to
"give away" $17 billion to the automakers "while failing to receive
any serious concessions from the industry."

Senator Bob Corker, a Tennessee Republican, said the agreement is
"open to interpretation" and that he hopes the Obama administration
"has the will to enforce tough concessions." He added in a statement,
"The best solution would have been definite terms."

The conditions are largely those set out in the legislation passed by
the House and blocked in the Senate.

Foreign Companies

Representative Barney Frank, a Massachusetts Democrat who helped craft
the House plan, said in an interview that "it's outrageous to be
giving foreign companies the right to set wages for American workers."

The plan otherwise was mostly what was negotiated in the House, Frank said.

Democratic Senator Carl Levin of Michigan said the plan "gives the
industry breathing room." In a conference call with reporters, he said
Bush was wise to set the automakers' restructuring targets "as
non-binding goals which are subject to negotiations."

"We've got a huge amount of work to do over the next 90 days and
beyond," GM Chief Executive Officer Rick Wagoner said at a Detroit
news conference.

"Chrysler is committed to meeting these requirements," the company's
chief executive officer, Bob Nardelli, said in a statement.

The government rejected letting the companies go bankrupt, as had been
urged by some lawmakers opposed to a bailout.

'Weak Job Market'

Bankruptcy would "worsen a weak job market and exacerbate the
financial crisis," Bush said. "It could send our suffering economy
into a deeper and longer recession."

The terms of the loans represent a major challenge for the automakers,
Maryann Keller, an independent auto analyst and consultant in
Greenwich, Connecticut, said in a Bloomberg Television interview.

"The restructuring they're going to have to go through will be huge,"
Keller said. "I can't see a way for GM to operate properly with the
capital structure they have."

Joel Kaplan, Bush's deputy chief of staff, said representatives of
Obama, who takes office Jan. 20, have been kept informed of the
administration's actions.

The Treasury secretary would in effect be a "car czar," making sure
the automakers meet deadlines and having the authority to revoke the
loans, Kaplan said. The Bush administration didn't want to designate
an independent overseer with a month left in office.

Kaplan, asked whether Chrysler should merge with GM, sidestepped the question.

"We are not going to tell the manufacturers what the right structure
is for them to be viable; we're just going to tell them that if you
want taxpayers' assistance, you're going to have to make those
decisions, and you're going to have to prove it," he said.

Treasury will need to go to Congress to get the remaining $350 billion
in TARP funds released, including the $4 billion in additional loans
to the automakers, Kaplan said. That may be left for Obama's
administration, he said.

To contact the reporters on this story: Roger Runningen in Washington
at rrunningen@bloomberg.net; John Hughes in Washington at
Jhughes5@bloomberg.net

Last Updated: December 19, 2008 17:21 EST

2008-12-19T14:50:00.001-08:00

Bush Has Yet to Decide on Auto Bailout as Companies Idle Plants
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By Roger Runningen and Greg Bensinger

Dec. 18 (Bloomberg) -- President George W. Bush said he has yet to
decide on an auto bailout, prolonging a decision on a rescue as
companies idle plants to avoid running out of cash.

"I haven't made up my mind" on a plan, Bush said today during a forum
at the American Enterprise Institute, a research policy organization
in Washington. He said he is "worried about putting good money after
bad."

General Motors Corp., Chrysler LLC and Ford Motor Co. are shutting
about 59 factories over the next month as they struggle to adapt to
the worst sales in 26 years. GM and Chrysler have said they need $14
billion to keep operating through March.

"I'm worried about a disorderly bankruptcy and what it would do to the
psychology of the markets," Bush said. He also said he didn't want to
"dump a major catastrophe" on his successor, President-elect Barack
Obama.

Asked whether a Chapter 11 bankruptcy court restructuring is an
option, the president replied: "I think under normal circumstances, no
question, the bankruptcy court is the best way to sort through credit
and debt and restructuring.

"These aren't normal circumstances; that's the problem," he said.

The closings show how far automakers are going to conserve cash and
prune output under the pressures of a shrinking U.S. market, dwindling
access to credit for dealers and demands for advance payments by some
GM and Chrysler parts suppliers.

"No one is immune," said Ed Kim, director of industry analysis at
consulting firm AutoPacific Inc. in Tustin, California. The industry
is "imploding to a degree I've never imagined could happen, and at a
speed I'd never expected."

Plant Closings

GM, Ford and Chrysler began another round of pullbacks yesterday,
burdened by U.S. sales declines this year of 22 percent, 19 percent
and 28 percent, respectively, compared with the 16 percent average for
all automakers.

Chrysler will shut all 30 of its plants for at least a month starting
Dec. 19, and Ford plans to idle 9 of 15 North American assembly plants
in the first week of January.

Ford said its move was part of a previously announced plan to reduce
first-quarter North American production by 38 percent. GM said
yesterday that a new $370 million factory making engines for the
Chevrolet Volt electric car is being delayed to conserve cash.

The Bush administration agreed Dec. 12 to consider rescue options,
including use of the $700 billion Troubled Asset Relief Program, known
as TARP.

'Very Close'

Without a cash infusion the largest U.S. automaker and No. 3 Chrysler
may be only weeks from bankruptcy, threatening millions of jobs. Ford
isn't seeking emergency aid.

White House spokeswoman Dana Perino said today that the administration
is "very close" to deciding on a bailout plan.

"The president is not going to allow a disorderly collapse of the
companies. That is not an option," Perino told reporters at a
briefing.

Asked if managed bankruptcy is an option, Perino said "it's in the spectrum."

"There's an orderly way to do bankruptcies that provides more of a
soft landing," Perino said. "That would be one of the options. I'm not
saying that's necessarily what would be announced."

"We're very close" to a decision, although there will be no
announcement today, she said. The administration is "taking a few days
to get information from the companies," she said.

In Chicago, Obama sidestepped a question about whether the Treasury
Department should seek approval from Congress before tapping the
second half of the $700 billion TARP as part of a bailout for
automakers.

"The Treasury has not come forward with a formal request for the
second part of the TARP," he said at a news conference today, adding
that his economic team has been consulting with Treasury officials.

Obama declined to comment on negotiations with automakers and Congress
over GM and Chrysler's request for $14 billion in loans.

To contact the reporter on this story: Roger Runningen in Washington
at rrunningen@bloomberg.net
Last Updated: December 18, 2008 16:39 EST

2008-12-16T18:51:00.001-08:00

December 15, 2008
WILLIAM ARMBRUSTER

Business coalition says VATs should be top priority for US trade negotiators

AMTAC says other countries' VAT policies cost U.S. companies $474 billion

Value-added taxes are little known in the United States, but the VAT
policies of foreign governments should be the top priority for U.S.
trade negotiators, according to a business coalition.

VATs put U.S. companies at a competitive disadvantage in both domestic
and foreign markets, according to the American Manufacturing Trade
Action Coalition. It estimates that VATs had a negative impact of $474
billion on U.S. companies last year, including $368 billion on goods
producers. That equates to 46 percent of the $794 billion U.S.
merchandise trade deficit last year. The estimated impact was $428
billion in 2006, including $327 billion on goods.

VATs are assessed on the increase in the value of goods as they pass
through each stage from raw materials through the production and
distribution processes to final consumption. The tax on processors or
merchants is levied on the amount by which they increase the value of
goods they purchase.

AMTAC said 149 countries, including nearly every major U.S. trading
partner, have value-added taxes. Most of them rebate part or all of
the VATs paid by their companies on some or all exports, according to
Lloyd Wood, director of membership and media outreach for the
coalition.

Because those countries rebate the value-added paid by their producers
on exports and impose a VAT on imports, they simultaneously heavily
subsidize exports and erect massive trade barriers to imports,
according to Washington-based AMTAC. Wood said it represents companies
that employ about 50,000 manufacturing workers. Most of them are in
the textile sector.

The U.S. does not have a value-added tax, although some tax experts
have called for it over the years.

The U.S. charges lower taxes on most imports than on goods produced
domestically, according to Wood. He was referring to the large number
of products that enter the U.S. duty-free or that are subject to very
low tariffs. In contrast, the statuary U.S. corporate tax rate is 35
percent.

Wood said AMTAC came up with its estimates by taking each country's
VAT rate and checking its exports to the U.S. and American exports to
those countries.

VAT rebates were the coalition's top priority in 2008 and will be again in 2009.

Frank Reynolds, a trade consultant, agrees with the AMTAC critique of
VAT rebates.

"U.S. exporters are at a huge disadvantage when competing with
countries that have a value-added tax regime for the simple fact that
these taxes are forgiven for exports. This makes their export pricing
as much as 21 percent lower than comparable domestic selling prices
with the same net return to the seller," said Reynolds, who is also
president of International Projects, a Toledo, Ohio-based trading
company.

"Since the U.S. taxes profits rather than sales, the most our
exporters can get is a waiver of state sales tax — let's say from 4 to
8 percent at most — and then only for states that tax sales," Reynolds
added.

China has a value-added tax, but it does not draw much attention. Yet
it's "much more of a driver of China's (trade) surplus than exchange
rates," said John Frisbie, president of the U.S.-China Business
Council. (Story, Page 8.)

(China's refusal to let its currency, the yuan, appreciate to its
fair-market value, has been a hot-button issue for critics of its
trade policy. The yuan has risen about 17.5 percent since Beijing
loosened the controls in July 2005, but critics say it should
appreciate at least another 15 percent to reflect the strength of its
economy.)

VAT rebates are legal under a loophole built into the rules of the
WTO's predecessor organization, the General Agreement on Tariffs and
Trade, when it was created in 1947.

"The U.S. negotiating team was outnegotiated," said Cathy Schultz,
vice president of taxes for the National Foreign Trade Council. "The
VAT puts us at a competitive disadvantage. We have fights all the time
over that and other issues."

Congress tried in the 1990s to level the playing field by passing
legislation that allowed U.S. companies to create offshore
subsidiaries known as Foreign Sales Corporations. Companies that
established FSCs could then receive a reduction in US federal income
taxes for profits derived from exports. The World Trade Organization,
however, ruled in favor of a challenge by the European Union that the
tax benefits from the FSCs, constituted a prohibited export subsidy.
The GATT had rejected an earlier form of FSCs, known as Domestic
International Sales Corporations.

After the WTO blocked FSCs in early 2000, Congress tried again,
through legislation known as the Extraterritorial Income Exclusion
Act, but that was ruled illegal, too.

Besides attempting to create programs with benefits similar to VATs
for U.S. exporters, Congress has repeatedly mandated that the U.S.
Trade Representative seek to eliminate the VAT rule, but those efforts
have all failed, too. The most recent attempt came in 2003, during the
early stages of the Doha Round of global trade talks. U.S. negotiators
found very little support, a USTR spokesman said. "In large measure
it's because most countries have a VAT system. We're one of the few
that doesn't. It's a very difficult issue."

Bill Reinsch, president of the NFTC, appears resigned to the
continuing disadvantage created by the VAT system. "I don't think
anyone has any illusion that any other countries are going to agree
with us," he said.

Marty Regalia, vice president for tax and economic policy at the U.S.
Chamber of Commerce, said the inequity could be addressed by
eliminating taxes on foreign sales by U.S. companies. That would help
U.S. exporters, but it would not do anything to offset the advantage
that VAT rebates give foreign companies in the U.S.

The latest attempt to tackle the VAT issue came when a bipartisan
group of four congressmen introduced a bill called the Border Tax
Equity Act on June 6, 2007. It was referred to the House Ways and
Means Committee's trade subcommittee 10 days later, but no hearings
were ever held. The sponsors were Representatives Bill Pascrell,
D-N.J., Duncan Hunter, R-Calif., Mike Michaud, D-Maine, and Walter
Jones R-N.C.

As with some of the previous legislation, the bill would direct the
U.S. Trade Representative to negotiate a remedy for the VAT inequity
through the WTO. If it failed to do by an unspecified date in 2007,
the U.S. then would begin charging an offsetting tax on goods and
services at the U.S. border equal to the VAT rebated by the exporting
country. In addition, the U.S. would give tax rebates to U.S.
companies exporting goods to foreign countries at the same rate as the
VAT imposed by those countries at their borders.

The U.S. Chamber of Commerce, the NFTC and the National Association of
Manufacturers all oppose the bill, saying it's a blatant violation of
WTO rules. Pat Mears, a spokeswoman for NAM, said the U.S. would file
a complaint with the WTO immediately if any other country enacted such
legislation.

2008-12-16T18:46:00.001-08:00

Honda Widens North American Output Cuts by 119,000 (Update4)

By Alan Ohnsman

Dec. 12 (Bloomberg) -- Honda Motor Co. is cutting 119,000 vehicles
from its North American production plan, tripling its reduction for
this fiscal year as plunging sales push U.S.-based competitors to the
brink of collapse.

The automaker expects to build 1.29 million cars and light trucks in
the U.S., Canada and Mexico, in its year ending March 31, down from an
initial goal of 1.47 million, spokesman Ed Miller said today in an
e-mail. The latest reductions bring the total to 175,000 vehicles from
the Tokyo-based company's earlier cuts of 56,000. No layoffs are
planned, Miller said.

"Everyone is hurting," said Dennis Virag, president of Automotive
Consulting Group Inc. in Ann Arbor, Michigan. "Sales are down across
the industry 30 percent to 35 percent since September. That pain is
being shared equally by all companies."

Honda and Japan-based Toyota Motor Corp. and Nissan Motor Co. have
slashed production plans this year as the U.S. recession dragged the
annual auto sales rate last month to a 26-year low. Through November,
those companies built about 300,000 fewer autos in North America than
a year earlier, led by Toyota's three-month shutdown of a San Antonio
pickup-truck plant.

"Showroom traffic is down for everyone," Miller said.

Honda will trim production through slower line speed and eliminating
some scheduled assembly days, Miller said. Plants will extend a
scheduled holiday shutdown this month by two days, and in January
between four and seven days of output will be cut at factories in
Ohio, Alabama, Indiana and Ontario, he said.

Declining Sales

U.S. sales for Honda, which last had an annual drop in its biggest
market 15 years ago, fell 5.4 percent through November from a year
earlier. Honda, Japan's second-largest carmaker, last month posted a
32 percent decline, its steepest since 1981.

Across the industry sales this year are down 16 percent, led by
declines of 28 percent for Chrysler LLC, 22 percent for General Motors
Corp. and 19 percent for Ford Motor Co.

GM and Chrysler have said they need U.S. aid this month to avoid
running short of cash for operations. President George W. Bush's
administration said it may tap the $700 billion bank- bailout fund to
prevent an industry collapse, after the Senate yesterday failed to
approve $14 billion in emergency loans.

Ford has said it doesn't need emergency federal aid, though Chief
Executive Officer Alan Mulally said last week that his company could
be dragged into bankruptcy by a GM failure.

While Honda and Toyota are in better shape financially than the U.S.
companies, they would suffer should GM fail, Virag said.

"If GM collapsed, it would take out parts suppliers that Honda also
uses," he said. "It could knock sales for the industry down another 20
percent to 25 percent."

Honda's U.S. operations are based in Torrance, California. The
company's American depositary receipts fell $1.07, or 4.7 percent, to
$21.93 at 4:15 p.m. in New York Stock Exchange composite trading.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at
aohnsman@bloomberg.net

How to artificially inflate the value of commodities?

2008-12-16T18:33:00.000-08:00

China May Buy Up Steel Stockpiles, Aid Mills, Li Says (Update1)

By Helen Yuan and Lee Spears

Dec. 12 (Bloomberg) -- China's government may buy up steel stockpiles, offer subsidies for plant upgrades and give higher export rebates to help the nation's steel industry, the largest in the world, weather a "severe" slowdown, a minister said.

"Steelmakers are facing plunging prices with expensive raw-material stockpiles, the situation is severe," Minister of Industry and Information Li Yizhong said today at a conference in Beijing. The industry "needs government support," he said.

Mills in the world's fourth-largest economy including the biggest, Baosteel Group Corp., are grappling with a collapse in demand and prices as the global recession saps exports and domestic growth slows. The China Iron & Steel Association urged the government on Dec. 6 to buy up steel stockpiles.

"The government wants to help the steel industry bottom out," said Helen Lau, an analyst at Daiwa Securities Group Inc. "It's one of the key industries that supports GDP growth, so they're very interested in supporting it."

Clearing China's backlog of iron ore stockpiles will take until the end of March, the minister said. There's a total of 220 million metric tons, with 90 million tons held at ports, 30 million tons with steelmakers and 100 million tons held by traders, he said.

Steelmakers worldwide are reducing output as economies contract and demand plunges. ArcelorMittal South Africa Ltd., Africa's largest steelmaker and a unit of the world's biggest mill, ArcelorMittal, said yesterday it was cutting 1,000 contractor jobs and slashing capital expenditure next year.

Stimulus Package

China last month unveiled a 4 trillion yuan ($586 billion) stimulus package in housing, railways, roads and airports to bolster economic growth, raising expectations that steel and metal consumption may rebound.

The government will encourage domestic steel takeovers, Minister Li said today, reiterating existing government policy to support the emergence of larger, more-profitable mills and the closure of obsolete, polluting capacity.

The country's steel output this year may be 490 million metric tons, the minister said. That's 110 million tons less than capacity, and compares with forecast output of 540 million tons earlier this year from the Iron & Steel Association. Output in 2007 was 489 million tons.

Li's comments on iron ore echo remarks on Dec. 8 by Shan Shanghua, general secretary of China Iron & Steel Association, who said bigger Chinese mills don't need imports until the end of March, and some don't need supplies until the end of May.

China's 71 largest mills posted a combined loss of 5.8 billion yuan ($847 million) in October, the first time the entire industry has been money-losing, according to the industry association. Baosteel Group General Manager He Wenbo said last month that the company is facing its "most difficult" period since it was founded 30 years ago.

The price of hot-rolled coil, an industry benchmark, has plunged 39 percent to 3,653 yuan a ton from a record on June 5, according to the Beijing Antaike Information Development Co.

To contact the reporters for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net; Lee Spears in Beijing at lspears2@bloomberg.net
Last Updated: December 12, 2008 03:08 EST

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2008-12-16T17:56:00.001-08:00

December 6, 2008 > Please Pay Your Bill Before You Leave, Mr Tata!

Mainstream Vol XLVI, No 51

Please Pay Your Bill Before You Leave, Mr Tata!

by D. Bandyopadhyay, 12 December 2008

On October 3, 2008, at a press conference at Kolkata, Ratan Tata formally announced his decision to move out the Nano Project from West Bengal squarely blaming the agitation led by the Trinamul Congress for his decision to relocate the plant. This statement clearly reflected some of the discussions that he had with the Chief Minister of West Bengal with whom he was closeted for two hours before the press conference. He spoke persuasively with unwarranted venom.

One cannot blame Tata for his lack of knowledge of the character, trait and heritage of the popular upsurges in West Bengal. Singur was one of the epicentres of the Tebhaga movement in the late forties of the last century led by the old and unsullied Communist Party of India. There is a famous story by Manik Bandyopadhyay called "Chhoto Bakul Purer Yatri" on that episode. Its locale was Bara-Kamalapur in Singur. A blue-blooded bourgeois totally alienated from the common people cannot have any perception about any popular movement against gross violation of their basic right to life and livelihood. He cannot be faulted for it.

After all, the Tatas made their primary accumulation of capital through opium trade in China in the nineteenth century. Use of opium was prohibited under law in China. The East India Company and its minor trading partners, among which the Tatas were one, started illegal importation of opium into China from India. The Chinese Government strongly objected to this. The British waged the first Opium War (1839-42) in which China lost resulting in the Treaty of Nanjing, 1842. It imposed insulting and highly unfavourable conditions against China and in favour of the British. Then there was a second Opium War in 1856-60 wherein the British triumphed again and forcibly legalised contraband trade in opium in China. The Tatas and a few other Indian traders made enormous profit from this trade in a contraband commodity in China. Wealth creates hauteur. Hence we may excuse Tata for his slightly less than civilised behaviour in slandering Ms Mamata Banerjee at the press conference. He did not show any concern for or kindness to the land losers of Singur but it is reported that he donated US$ 50 million to Cornell University only recently.

But what about the Communist Party of India-Marxist? Did it not take a Royal Charter of monopoly for representing the "oppressed" who stood in constant opposition to the "oppressor" and who are in a constant fight, "a fight that each time ended, either in a revolutionary reconstitution of society at large, or in the common ruin of the contending classes"? The Chief Minister of West Bengal, Buddhadeb Bhattacharjee, while opening a SEZ project at the New Town Rajarhat on October 5, 2008, declared that he had "lost a battle, but not the war". A question naturally arises: for whom is he waging this war? While commenting on the adverse economic effects of SEZs, Professor Amit Bhaduri observed: "The devil in angel's guise would soon appear when large populations in rural areas would be rendered landless, jobless, homeless, incomeless, rootless and displaced making way for SEZs, the so-called epitomes of economic development." Bravo Mr Chief Minister, for so transparently exposing the class affiliation of yourself and your party! You have openly promised to wage a war in favour of the oppressors and against the oppressed. It is only to be hoped that it ends in the reconstitution of the society in favour of monopoly capital. In ensuring this objective, the CPI-M would fulfil its historic mission of total subjugation and annihilation of workers and peasants making the world safe for the bourgeoisie. It perhaps validates the saying "Money Speaks"!

The Government of West Bengal (GOWB) published 13 notifications under Section 4 of the Land Acquisition Act 1894 in July 2006 declaring its intentions to acquire roughly 1000 acres of land in five mauzas of Singur abutting the Durgapur Express Highway. All the 13 notifications had the same common clause. It stated

that land mentioned in the Schedule blow is likely to be needed to be taken by Government/Government Undertaking/Development Autho-rities, at the public expense for a public purpose (emphasis ours), viz., employment generation and socio-economic development of the area by setting up of Tata Small Car Project, etc., etc.

Since the government cannot acquire any land for a private company except through the procedure laid down in the Chapter-VII of the Land Acquisition Act, the GOWB openly committed a fraud on the law and on the public by acquiring the land in the name of the West Bengal Industries Development Corporation (WBIDC—a government company) for leasing out the land to Tata Motors Ltd (TML). This chicanery on the part of the GOWB enabled the Tatas to get hold of 643 acres of land on lease without paying a paisa. But under this procedure land could be acquired only for a "public purpose". Section 3(f) of the LA Act defines "public purpose". There are eight items under it. But the caveat to this definition is very significant. It says "but does not include acquisition of land for companies". Thus the acquisition of land for the TML was totally illegal. The issue is now pending before the Apex Court. For the exercise of the doctrine of eminent domain a "public purpose" is essential. Hence the GOWB deceitfully tried to make out a case by stating that the small car factory would generate employment and result in socio-economic development in the area. There is no basis for this assertion. Firstly, it did not disclose how many direct jobs would be created in the factory. Secondly, it did not specify how many land losers would get direct employment. Thirdly, the promise of the process of economic development and the resultant prosperity was a rehash of the discredited and discarded "trickle-down theory". Hence it was an exercise in falsehood. Though not conceding the point, let us accept these contentions for the sake of argument. The whole thesis is predicated by the fact that the TML would set up a small car factory. Now that they have decided to move out and are relocating the factory outside West Bengal, the whole thesis vanishes into thin air. There is no small car factory. There would be no employment generation. There would be no socio-economic development of the area. Therefore, there would be no "public purpose". Thus the expenditure of public funds for this non-existing project was a total waste and, therefore, fully unjustified. It calls for criminal action.

This has very grave and serious consequences. The whole exercise of acquisition of 1000 acres of land through the use of force, building up of infrastructure for the project which does not exist, supply of free electricity and water, round the clock police protection for two years, construction of an 18.75 km of eight feet high boundary wall with watch tower at regular intervals, were done for nothing. Who would bear this cost? Even with a contrived and convoluted argument of "public purpose", there could have been a fig-leaf of justification of such enormous public expenditure. With the withdrawal of the Tatas all these expenses lose all validity. Some heads should roll.

The Tatas withdrew from Singur on their own volition. Therefore, they would have to pay for the cost. That is the logic. That is also the ethics. In fact, the Comptroller and Auditor-General (CAG) of India should conduct a due diligence audit of the WBIDC, Commerce and Industries Department, West Bengal Housing Infrastructure Development Corporation (HIDCO), Bhangore-Rajarhat Area Development Authority (BRADA) and the Police Directorate to compute exactly the loss to the public exchequer due to this abrupt decision of the Tatas to move out from Singur. The CAG should also fix responsibility for this wanton waste of public funds. It would be a slightly time-consuming process but it has to be done for the sake of public accountability, transparency and good governance.

Meanwhile to present a provisional bill to the Tatas an attempt is being made here to compute a figure based on the facts and figures as published in the print media about this issue. The Tatas caused enormous loss of public funds for their misadventure in Singur. This provisional figure would be altered once the CAG's report is made available. But it is fair that the Tatas should have an indication of how much they would have to pay back.

In the first place, but for the fraud perpetuated by the GOWB the Tatas would have to pay upfront the estimated cost of land acquisition under Chapter VII of the LA Act 1894. Now that there is not even a fig-leaf of public purpose, they would have to reimburse to the State Government a sum of Rs 200 crores, the paid out cost of compensation for the acquisition with some visible overheads.

Secondly, the WBIDC or some other State agency constructed an 18.75 km long boundary wall along the outer periphery of the acquired property. We do not know its specifications. It is locally said that the wall is eight feet high with a two-feet foundation underground. Estimates made by a couple of A-class CPWD contractors indicated that it would cost Rs 275 per running metre for a wall of this type with supporting pillars at regular intervals. Thus the estimated cost of construction of this wall would not be less than Rs 51,56,250, that is, roughly Rs 51.56 lakhs. With this one has to add the cost of five big gates. At a conservative estimate that would cost not less than Rs 25 lakhs. Thus the wall with gates would cost not less than 76.56 lakhs.

Thirdly, the government provided round-the-clock police protection both during the process of acquisition and after the land was leased out to Tatas. Newspaper reports indicate that approximately 2000 policemen were deployed day and night for the last two years and several months for the protection of the property of the TML. The government did not come out with any fact about it. But the Police Directorate of West Bengal has a standard formula of cost for deployment of 1000 policemen (one battalion strength) including ASI and SI but excluding the salaries of officers of the ranks of Inspector and above. The salary cost per month comes to Rs 80,70,000 which is 83.01 per cent of the actual cost. To this one has to add the cost of uniform, boots and some other basic equipments which would come to Rs 16,51,100 constituting 16.99 per cent of the total monthly cost. Thus the total comes to Rs 97,21,800 per month. This figure does not include the expenses of vehicles, POL, and other heavy equipments without which a police force cannot function. Excluding these items the annual cost of deployment of a battalion of police men comes to Rs 11.67 crores. For two battalions deployed to protect the Tata property the cost would be Rs 23.33 crores. For two years it would be Rs 46.66 crores. This is basically the salary component. The actual cost is much higher.

Fourthly, the GOWB committed another act of deception to give financial benefit to the Tatas. The Principal Secretary, Commerce and Industry Department of the GOWB wrote a letter on 12.10.2006 to the Managing Director of the WB Housing Infrastructure Development Corporation (HIDCO) in which, inter alia, he mentioned:

In order to bring investment (obviously NANO Unit) in West Bengal, we had to face competition from other States, in particular, Uttaranchal which enjoys zero excise duty benefit in a car proposed to be priced at Rs 1 lakh, the exemption of 16 per cent excise duty makes a major difference. Therefore, in order to make the investment attractive to the TML, the State Government has to offer significant support in the form of upfront infrastructured assistance.

So the Tata Housing Development (THDC) would enter into an agreement with the WBIDC to form a joint venture company. Five hundred acres of land belonging to Bhangore Rajarhat Development Authority (BRADA) would be given at a concessional rate to the THDC+WBIDC combine. And 50 acres of high-value land of New Town Rajarhat should also be given to that combine. The letter clearly mentioned 20 acres should be given for commercial purpose and 30 acres for residential purpose at rates which were half the prevailing rates. The letter went on to state that the profit generated by the WBIDC would be used by it "to meet its commitment of infrastructure assistance to the TML project without having resort to budgetary support". The term "infrastructural support" was deliberately used to hide the real intention of giving subsidy to the TML. This directive of the C and I Department violated several laws apart from being ethically unsupportable. But we are not going into it here.

In one stroke, HIDCO suffered a loss of Rs 60 crores for 20 acres of commercial land and a loss of Rs 75 crores for the residential land making a total loss of Rs 135 crores.

On the 500 acres of BRADA land, one could make some conjecture in the absence of hard facts. Assuming that price of land per cottah was Rs 1 lakh and that BRADA had to sell it at Rs 50,000 to ensure the profitability of the TML, BRADA lost Rs 150 crores straightway. (1 standard acre = 60 Cottah)

Two separate companies/authorities had been ordered to suffer loss to ensure profitability of the TML. The whole idea is preposterous apart from being totally illegal and unethical. A future Commission of Inquiry on "La Affaire Nano" would have to untangle the knots within knots of these totally unwholesome and messy transactions to assess the damage and fix responsibility. It was as well that the Tatas have left, otherwise most of these worthy gentlemen would have got themselves further entangled in illegality verging on corruption that they might have resulted in spending their residual tenure of life in some State Correctional Homes. Incidentally, with due diligence audit followed by a Commission of Inquiry, the possibility of their short-term stay in these Homes is not beyond the realm of possibility. It would be good if they improved the living conditions of these Homes when they were still in service. Now let us get back to the point.

The provisional exit bill of Tatas would be: (i) Rs 200 crores (LA cost) + (ii) Rs 76.56 lakhs (cost of wall) + (iii) Rs 46.66 crores (police protection) + (iv) Rs 135 + Rs 150 = Rs 285 crores (subsidised land transferred from HIDCO + BRADA) = Rs 532.18 crores (excluding all indirect and invisible costs) = Rs 532.18 crores (excluding all indirect and invisible costs). The final bill would be computed only after the CAG's audit.

II

This episode cannot be ended unless some tit-bits of the parleys that took place on September 5-6, 2008 at the Council Chamber of Raj Bhavan, Kolkata, are recorded and made public. Since the GOWB unilaterally and unethically repudiated the agreement it entered into with the Opposition, the writer has no moral compunction now to mention some of the inner stories.

In the beginning the Facilitator set the ground rules. There should be no personal attacks. The attempt should be to find an amicable solution of the Singur impasse for the benefit of the "unwilling farmers", agriculture, industry and the general well-being of the people of West Bengal. It must be admitted that both sides adhered to the ground rules and carried on the discussions in a civilised and polite manner.

The discussion centred on the amount of land that could be made available within the project area for resettlement of the "unwilling land losers" on a land-for-land basis. Incidentally the "land-for-land" principle of R&R has been recognised in the National Rehabilitation and Resettlement Policy, October 2007. The Leader of the Opposition made it clear initially that, though debatable, his side would not discuss the merit or otherwise of letting out of 643 acres (approx.) for the mother plant of the TML. It was a major concession and it created immediately an amicable ambience for negotiations. Thus discussions centred on the residual 350 acres (approx.).

The government side pointed out that this area 294 acres has been set apart for ancillary units. After an hour of discussions it was found that the matter was not progressing. It was going round and round.

At this stage the Commerce and Industries Minister suddenly offered 40 acres of land in the project area for non-agricultural avocations on the basis of five per cent of the land cost per land losers. He also introduced the concept of R&R "in and around" the project area. With 40 acres already declared in favour of the land losers, there was an attempt to find out how much more land could be made available from the vacant but not yet utilised land in the project area, particularly, from the land earmarked for the ancillary units. Whatever proposal came from anywhere the stock reply of the Commerce and Industries Minister was: "The Tatas will not agree." It was like the repetitive refrain of a song in a cracked voice of a scratched HMV 78 RPM paraffin record. I counted this phrase 11 times before I gave up in disgust.

The Facilitator, a suave, charming and elegant gentleman, did not show any sign of displeasure, but very sweetly he asked the Commerce and Industries Minister "who had acquired the land". The reply was: it was the government. Then there was a further query that if the GOWB had acquired land under the LA Act forcibly, should not it have some view as to how the land should be utilised by the ancillary units? Did anyone ascertain the real requirement of each unit? To that the scratched record croaked: "The Tatas will not agree."

Then the Facilitator sought the permission of the Commerce and Industries Minister to ask a few questions to the MD of the WBIDC. The Minister promptly agreed. The Facilitator then asked the MD who had selected the ancillary units. The reply was—the Tatas. Then he enquired as to who had decided how much land one unit would require. The reply was—the Tatas. Thereafter, he wanted to know who decided where would that parcel of land be located. The answer was—the Tatas. Getting, perhaps, a bit perplexed, though not showing any sign of it, he politely asked to whom did the land belong. The reply was—the WBIDC. To this he further queried: "In that case should not the WBIDC have some say regarding areas to be allotted and their location?" This time the Minister replied: "The Tatas will not agree." The MD supplemented the answer by adding that the WBIDC did not have the technical competence to assess the requirement and, therefore, it depended entirely on the Tatas.

Never in my service career of more than three-and-a-half decades both in the State and at the Centre had I seen such shameful subservience of a government to a business house. One felt ashamed to be in the same company.

It is time to relate an anecdote about Dr B.C. Roy. In 1951 he received a proposal from Morris Motor Co. of England for technical collaboration with an Indian entrepreneur for the manufacture of Morris cars in India. After studying the proposal, one day he told his personal staff: "Call him (Oke dako)." Totally confused his personal staff left his chamber not knowing whom to call. Then it occurred to someone that it could be G.D.Birla who had sought an appointment earlier. So they rang up Birla and fixed the appointment at 3 pm on the same day. Birla arrived at the appointed hour. Dr Roy was informed. He told his staff "Request him wait for a while (Oke boshte balo)." After a while Birla went in and stayed with Dr Roy for almost an hour. That was the beginning of the Hindustan Motors at Konnagar, the first motor car factory in Asia after the WW-II. The Chief Minister of Bengal did not kow-tow to any business tycoon to locate an industrial unit in the State.

III

Now what happens after the exit of Ratan Tata from West Bengal. Firstly, to the best of our knowledge on October 4, 2008, the earth went round its own axis at its usual speed of 24 hours per round. Further, the sun rose on that day in East and went down in the west as usual. There was no media report of heaven having fallen or the earth cracking up. The general populace went on their business in the usual manner, so much so that the "bandh" called by the CPI-M collapsed much before time. Life continues in West Bengal in its normal pace and stride since October 03, 2008.

Second, since an area of more or less 643 acres was let out to the TML for setting up a car factory, now that they have decided to go, a notice has to be given for the cancellation of the lease. Similar notices have to be given to all the ancillary units because they were captive to the TML

Third, it appeared from the media reports that about 200 to 250 acres of land where heavy construction had already taken place, agriculture would not be possible without enormous capital cost to restore its original fertility. Hence that area could be kept reserved for a future motor car factory. In fact advice of a reputed consultant should be obtained to ascertain how much land would be required to set up a manufacturing facility of 500,000 small and medium cars per year. On the basis of his assessment an area of, say, 350 or 400 or 450 acres of land could be set apart for the future factory. This should include the built up area of the TML.

Fourth, instead of any sweet-heart agreement with any crony capitalist there should be world-wide advertisement for Global Expression of Interest for setting up of small/medium car factory in Singur. The government should openly advertise what benefits and/or facilities it would offer. Respondents should be requested to indicate what terms and conditions they would offer for the well being of the land losers and for the State in general. After appropriate technical and financial assessement the party whose offer would be best should be selected to set up the manufacturing unit. The agreement should be open and transparent and there should be no secret annexures as in the case with the TML.

Fifth, the rest of land should be returned to the land losers. The Commerce and Industries Minister had been repeating like an untrained parrot that land once acquired cannot be returned. This is not correct. There are various processes of restoring the land. There is Section 21 of the General Clauses Act 1897. Its heading reads as follows: "Power to issue includes power to add, to amend, vary, or rescind notification, order, rules or bye-laws." Under this section lands to be returned could be denotified.

If one wanted to stay within the four corners of the Supreme Court judgement in the Bhaskaran Pillai case (1997- 5 SCC.432), the surplus land should be handed over to the Singur Panchayat Samity for "planned development or improvement of existing village sites". Five mauzas have been devastated by reckless land acquisition proceedings. These villages should be developed in a planned manner as provided for under section 3(f)(I) and (v) of the LA Act, 1894. Land losers should be initially given a 999-year lease.

In due course, a local amendment should be made in the LA Act, on the lines of the Tamil Nadu Amendment to return land to the original owners. It may have to wait for the change of government.

The CPI-M requires to be cautioned that it would be totally illegal to go on a fishing expedition to find out a project which could fit into the definition of "public purpose" to utilise this land. The acquired land has to be used primarily for the purpose for which it was initially acquired.

It is said that "there comes a time in the history of any State when its hypocrisy must be exposed and its crimes against God and man must be proclaimed and denounced". It was time we did it in West Bengal.

IV

It is a polite submission to Mr Tata. Please do not misunderstand us. We are not begging you to foot the bill. We are not putting pressure on you to pay the bill either. We would only like to remind you of a common saying: "A gentleman always settles his bill before he leaves."

The author was the Secretary to the Government of India, Ministries of Finance (Revenue) and Rural Development, and the Executive Director, Asian Development Bank, Manila.

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In the same section

Mumbai 11/26 and Our Response
Tribute to V.P. Singh
Open Letter to Our Dear Brothers in Pakistan
Mumbai Terror Attack: Thus Far and No More
Voice of a Responsible Citizen
Strange Storm Brews in South Asia
Challenges before the Human Rights Movement
Denial of Right to Life
In the Name of Ram
Please Pay Your Bill Before You Leave, Mr Tata!

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Will it be 10 years before North American gets the product that they demand?

2008-12-16T17:50:00.001-08:00

Big Three's European Divisions Could Show Ailing U.S. Industry the Way Back

Friday , December 12, 2008

By Greg Palkot

American carmakers could take a page out of their European divisions' playbook if they want to revive the ailing U.S. auto industry.

While their parent companies in the United States are losing tens of billions of dollars, GM and Ford's European divisions are making money. And although 2008 has not been a good year for European carmakers, Ford nonetheless made $1.6 billion in profit in Europe through November. GM of Europe was in the black through the first half of the year.

Some believe the European market would be insulated from the fall of the American auto giants, but tens of thousands of workers are employed at Ford and GM's European divisions. (Chrysler assembles only a relatively small number of American cars in Europe.)

American carmakers in Europe give two reasons for their success — better cars and streamlined operations.

Ten years ago, the European automakers were perennial money-losers. But they streamlined management, cut deals with unions and closed plants. At the same time, they started building cars with the attributes Europeans demanded: fuel-efficient, space-saving, well-designed and high-quality vehicles. (What a novel idea... products the customer wanted to purchase?)

"The quality of the product now is second to none," said Nigel Gray, managing director of GM's Vauxhall's GMBodyworks dealership. "It's absolutely terrific."

U.S. companies are trying to capitalize on the success of their divisions abroad. They're taking their share of the profits, and they're bringing cars that are successful in Europe to the American market.

"The guys running the companies in North America should really take a look at the European product and learn a few lessons," said Car Magazine editor Phil McNamara.

GM's much-touted Chevrolet Malibu is simply a dressed-up Vauxhall Vectra from a few years ago, and Ford's Focus has been a money-spinner on both sides of the Atlantic for many years now.

"What we're looking for is a stylish car with the right package which will appeal all over the world," said Roelant de Waard, chairman of Ford U.K.

Maybe the hardest lesson for Detroit to learn will be Europe's brand of belt-tightening. American car chiefs have claimed in the past that it's hard to compare the two regions. The unions are said to be generally weaker in Europe, and the governments are more generous with benefits.

Some in Europe might see gains from the failure of U.S. carmakers. Car giants like Volkswagen and Daimler Benz are well-positioned to pick up the business slack if the American companies fail.

But with the growing interdependency of the industry, there's also a lot of solidarity being expressed in Europe. And there's hope that possible moves by the U.S. Treasury could bridge the carmakers' funding gaps and breathe more life into the ailing industry.

"Hopefully America will pick up," said Jeff Ball, a worker at GM's Vauxhall truck plant in Luton, England. "Without America picking up, everybody is in trouble, aren't they?"

Why do we need a mass transit system?

2008-12-16T17:38:00.001-08:00

December 14, 2008

Inside Detroit autos: Plan to aid older drivers to expand

Plan to aid older drivers to expand

Ford Motor Co. will expand a pilot program with a nonprofit group to help older drivers evaluate their ability to safely drive a motor vehicle.

Ford worked with the Traffic Improvement Association to present 38 workshops at hospitals and senior centers around Michigan in 2008. Even more workshops will be offered in 2009. The three-day workshops are confidential, voluntary and designed to allow seniors to evaluate their own skills. The program is being offered at a critical time, as the elderly population grows faster than any other.

The aging baby boomer generation is expected to increase the number of U.S. licensed drivers 65 and older by 25% in the next decade, as its oldest members turn 65 in 2011. By 2020, their number will reach 40 million. Other than teenage drivers, drivers age 65 and older have the highest accident and traffic fatality rates among all age groups, according to the National Highway Traffic Safety Administration.

Would that be considered a Hostile Takeover?

2008-12-16T17:29:00.001-08:00

Sunday Funnies: Feds could buy GM & Ford

Posted Dec 14th 2008 4:40PM by Sheldon Liber
Filed under: Management, Rants and raves, Ford Motor (F), General Motors (GM), Politics, Sunday Funnies, Recession

In a high stakes game of chicken this past week, the Senate GOP and UAW leadership could not agree on setting a date certain for cutting members wages and the hard-line senators would not accept anything less. (See Auto 'support fund': Senate & UAW clash.)

One of the ironies of the proposed, and not passed, Federal bailout, or support fund, as I have begun to call it, depending on your point of view, is that the proposed $14 billion is more than the value Wall Street currently places on the two companies.

General Motors (NYSE: GM) closed Friday at $3.94, down $0.18 or 4.37%, with a capitalization of $2.4 billion. Ford (NYSE: F) closed at $3.04, up $0.14 or4.83%, with a capitalization of $7.04 billion. The combined value therefore is $9.44 billion; yes folks, another Washington bargain!

While world markets sank on the news of the failed talks, U.S. investors yawned and were unimpressed with activity in foreign markets -- all three of the major indices ended up for the day. Perhaps that's because temporarily propping up the two companies by spending more than they're worth made no sense to anyone outside Washington D.C. or Detroit.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of GM or Ford.

2008-12-16T17:12:00.001-08:00

If GM Files Bankruptcy, What Happens to Worker's Pension Funds?

By Jenny Rizzo

As the White House mulls over whether or not to throw a life preserver to the Big Three, local auto workers are worried about what bankruptcy could mean for their pensions and their futures.

The GM Powertrain plant in Tonawanda will shut down for a month in January so the company can save money and hopefully hang on until federal aid arrives. That means 1,300 employees will be temporarily laid off and 300 of those workers won't be coming back at all. But GM and Chrysler have warned the White House that they are running out of cash and are facing bankruptcy if they don't get help. And a lot of people in Western New York are wondering what might happen.

There's four engine lines at the Tonawanda plant. Its provided work for thousands of people over the years. There's over a thousand current employees and triple that number of retirees. "The retirees are just as concerned about their pensions and health care as the actives workers are. In fact, we have almost 4,000 retirees in this local alone," said Salvatore Morana, President of UAW Local 774.

Both the retirees and the current workers are worried about what will happen to their pension plans if GM files for bankruptcy. But Jim Wooten, a law professor who specializes in pension and employee benefit law at the University at Buffalo Law School, said there's a federal agency that will insure the pensions if GM can't continue to pay out. "The pension benefits that they've already earned will be subject to protection, both the retirees and the active employees."

The federal insurance will provide up to a maximum payout of $54,000 a year to pension holders. ( multiplied by approximately 1,000,000 is $54,000,000,000 a year.) It doesn't cover health benefits ( Sorry, we can't afford to have them live for too long), which could disappear if the automaker does. That's another reason why the White House and Congress have to decide whether or not to bail out the automakers.

"Right now, if you look at the legacy costs of the auto industry, those are going to be very difficult costs to bear," said Professor Wooten.

Meanwhile, local businesses are worried about the impact of losing GM's Tonawanda facility. "They're one of major customers. I get a lot of takeout business from GM. I do catering. So it definitely will affect us if they do close," said Susan Baker, owner of Suzy Q's BBQ Shack. She says the ripple effect would hurt more than just GM workers. It could cause layoffs in other industries that are dependent on the Big Three and those are also her customers.

If the car companies go belly up, the union contracts they've signed may not be honored. "If they go into bankruptcy, GM can petition to have that contract undone. Section 1113 of the Bankruptcy Code," said Professor Wooten.

The GM plant in Tonawanda is not slated to be shut down permanently. Meanwhile the Ford stamping plant in Hamburg, which normally goes into a two week holiday slowdown this time of year, will begin a temporary one-month work stoppage on Monday. Ford is in somewhat better shape financially than GM and Chrysler, and so its seeking access to a line of credit from the government.

2008-12-16T16:50:00.001-08:00

Go to Google News

China battery company launches plug-in hybrid car

By ELAINE KURTENBACH – 1 day ago

SHANGHAI, China (AP) — Battery maker turned car company BYD Co. has launched China's first homegrown hybrid vehicle for the retail market, seeking an edge over its crisis-stricken international rivals.

BYD presented the vehicle, known as the F3DM, in a ceremony in the southern city of Shenzhen, where local officials have pledged to buy some of the cars in support of the project.

The vehicle can run up to 100 kilometers (62 miles) on its electric engine, and when it runs low on power shifts to a back up gasoline engine. Its battery can fully charge in nine hours from a regular electrical outlet, or much faster at BYD's own charging stations, the company said in a statement.

The car will sell for 149,800 yuan ($22,000), about the same as many Chinese-made mid-sized cars, it said.

Although the car is just now hitting the market, BYD claims to have leapfrogged larger automakers to be the first company to commercialize plug-in hybrid technology, which allows the batteries of the F3DM — DM stands for duel mode — to be recharged without any special infrastructure.

General Motors Corp.'s own plug-in electric car, the Chevrolet Volt, is due to roll out in late 2010. Toyota Motor Corp. also is pushing to get a plug-in electric vehicle to market in 2010, while Ford Motor Co., says it is five years away from producing them in significant numbers.

Still, developing a safe plug-in has been a major challenge for automakers, and it was unclear what sort of standards the BYD vehicle had met.

BYD, a private company based in Shenzhen, started out as a maker of rechargeable batteries. Its foray into electric car manufacturing drew broader attention recently when MidAmerican Energy Holdings Co., a unit of Warren Buffett's Berkshire Hathaway Inc., invested in a 9.9 percent stake in the company.

Encouraged by government support for alternative fuel technologies, BYD — whose name stands for "build your dreams" — has pressed ahead with developing electric vehicles, despite weakening sales in China and elsewhere.

The company has said it plans to export the cars to the United States, but its vehicles must first meet stringent U.S. safety standards — a requirement that so far has deterred other, better-known local automakers.

Eager to limit its fast-growing dependence on the crude oil imports needed to fuel its growing legions of autos, and to limit choking emissions, China is pursuing a medley of programs aimed at putting new energy buses and other vehicles on the roads.

Last week, China's Ministry of Science and Technology and the U.S. Department of Energy agreed to collaborate on alternative fuel vehicles, focusing on battery performance, testing and evaluation — areas bound to dovetail well with BYD's own approach.

On the Net:

BYD Co.: http://www.byd.com

We are coming to your city.

2008-12-16T16:46:00.000-08:00

2008-12-16T16:43:00.000-08:00

By Steve Rothwell and Bill Koenig

Dec. 15 (Bloomberg) -- Ford Motor Co., the second-biggest U.S. automaker, boosted its share of European sales in November after introducing a new version of the Fiesta small car.

The increase by 0.5 percentage point to 8.8 percent came as deliveries in the company's top 19 European countries tumbled 21 percent to 95,700 vehicles. The new Fiesta was the company's second-biggest seller last month, with 18,100 deliveries, Ford said today in a statement. The Focus was first, with 22,300.

"We are proud that in such a difficult economic environment we could further increase our market share," Ingvar Sviggum, vice president of Cologne, Germany-based Ford of Europe, said in the statement.

The new Fiesta is the first in a line of vehicles that Chief Executive Officer Alan Mulally plans to sell worldwide. The Fiesta will be introduced in China in 2009 and the U.S. in 2010. Mulally is boosting small-car output as he tries to reduce Dearborn, Michigan-based Ford's reliance on large pickup trucks and sport-utility vehicles.

Ford is hailing the Fiesta after saying last month that it would cut European production by about 10 percent as the credit crunch and the global recession sap demand for new cars.

The company began making the model this year in Cologne for European markets. Those cars are now also on sale in South Africa and are slated for introduction in Australia and New Zealand.

Ford adds Fiesta output in early 2009 in Valencia, Spain, and Nanjing, China. The company is retooling a truck plant in Cuautitlan, Mexico, to build the small cars for the U.S. and other North American markets.

Ford rose 14 cents, or 4.6 percent, to $3.18 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have fallen 53 percent this year.

2008-12-16T16:07:00.001-08:00

GM, GMAC agree on dealer payment deferral for cars

Mon Dec 15, 2008 5:37pm EST

DETROIT, Dec 15 (Reuters) - U.S. automaker General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) said on Monday it has reached an agreement with GMAC LLC (GKM.N: Quote, Profile, Research, Stock Buzz) on the deferral of payments by GMAC-financed dealers of up to $1.5 billion for GM vehicles until Dec. 30.

The announcement came in a filing to the U.S. Securities and Exchange Commission and GM said it would help finance purchases of its inventory levels before the end of the year. Usually, GMAC pays invoices to GM on the first business day after a vehicle is shipped to a dealer.

GMAC is 49 percent owned by GM and the other 51 percent is held by private equity firm Cerberus Capital Management LP [CBS.UL]. Cerberus also controls U.S. automaker Chrysler LLC. (Reporting by Nick Carey)

2008-12-16T16:05:00.001-08:00

GM to temporarily idle three Mexico assembly plants

Mon Dec 15, 2008 11:18pm EST

MEXICO CITY, Dec 15 (Reuters) - General Motors Mexico will temporarily shut down assembly lines at three of its Mexican car factories as part of an overall strategy to cut production due to falling demand, the company said on Monday.

GM (GM.N: Quote, Profile, Research, Stock Buzz), one of the car companies asking the U.S. Congress for immediate injections of cash to avoid near-term collapse, announced on Friday it would slash first quarter production in North America by 60 percent.

As part of its plan to idle some 30 percent of its assembly plant volume in the region, the San Luis Potosi and Ramos Arizpe factories in Mexico, which make Chevrolets, Saturns and Pontiacs will both go offline from Dec. 22 to Jan. 5.

The Silao factory, which makes Chevrolets, GMC trucks and Cadillacs will shut down from Dec. 22 to Jan. 8 and two assembly lines will be closed until February.

The three plants have more than 10,000 employees -- the bulk of the 13,000 GM jobs in Mexico -- and workers will have to use some of their vacation days for the lost work time, General Motors Mexico said in a statement.

"These stoppages will allow for preventive maintenance on the equipment and an adequate production balance," the statement said.

Mexico, the world's 10th-biggest car producer last year, is heavily dependent on the U.S. economy. It builds cars for most of the world's top companies, but exports are slackening as the United States goes through its worst economic downturn since the Great Depression.

U.S. automotive giants GM, Ford (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler -- known as the Detroit Three -- have all been badly battered by the crisis and turned to the government for a bailout package that could be announced this week. (Reporting by Mica Rosenberg; Editing by Anshuman Daga)

2008-12-16T16:03:00.001-08:00

GM and Ford face global problems

By Nelson D. Schwartz

Tuesday, December 16, 2008

MUNICH: For years, the overseas operations of Ford and General Motors helped buoy Detroit when times were tough in the United States.

But now, with the administration of President George W. Bush announcing Friday that it would step in to keep General Motors from falling into bankruptcy, and with Ford in serious trouble as well, fears are growing that the U.S. problems of the automakers will drag down their more successful units in Europe, Asia and Latin America.

And no matter what happens in Washington, the potential of an ultimate collapse by GM and even Chrysler, which sells almost exclusively in the United States, has stirred deep fears that the industry's problems are likely to do even greater damage to the already-battered European and global economy.

"There would be no winners, only losers," said Ferdinand Dudenhöffer, director of the Center for Automotive Research in Gelsenkirchen, Germany.

Dudenhöffer warned that the knock-on effect of a GM collapse for U.S. parts makers would be so severe that German manufacturers in the United States like Mercedes and BMW would have to rethink not just their American supply chains but their global ones as well.

"There's a big risk here," he said. "This would create a huge mess around the world."

Both GM and Ford were profitable in Europe last year and in the first half of 2008. But neither of the European operations is large enough to survive on its own, said Graeme Maxton, an independent economist who has long tracked the car industry.

"They'd need a parent of some sort," Maxton said. But it is not clear that another automaker would want to assume that role, given the slack sales hitting European giants like Renault, Fiat and Daimler. The tight credit markets would also inhibit any megadeals.

"Two drowning men clinging together don't make a good swimmer," he said.

Already, Dudenhöffer said, the image of Opel, GM's German subsidiary, is suffering among German consumers because of the bankruptcy speculation.

While an actual filing no longer looks imminent, any future move in that direction would cripple Opel's ability to obtain components from nervous suppliers, Dudenhöffer predicted, and hammer the entire car-parts industry, especially in Germany.

That is only one of the reasons many analysts are skeptical that Opel could survive as an independent company were GM to seek bankruptcy protection. A more workable solution might be to combine GM's entire overseas business, which would produce roughly three million to four million cars annually.

The parallel downward moves in both the U.S. and international automotive markets mark a turnabout from the usual pattern in which strength in one market offsets weakness in another. And markets outside the United States have generally been much more stable, in part because governments keep gasoline prices steadier by imposing hefty fuel taxes.

"Normally, North America and Europe don't move in tandem," said Louis Lataif, a former president of Ford in Europe who is now dean of the Boston University School of Management.

In fact, he said, one reason that Chrysler is in even worse shape is because its overseas business is so minimal. Chrysler had a German base when it was owned by Daimler from 1998 to 2007, but its operations are now largely confined to North America.

Despite record sales in 2007, GM earned only a razor-thin $55 million profit last year. It did better in the first half of this year, earning $297 million, but the second half is expected to be hit hard with losses.

Ford has performed far better overseas: It earned $1.4 billion in Europe in the first half of 2008, and nearly $1 billion in 2007. But it, too, is expected to be hurt by the severe downturn of recent months.

Over the years, Ford has tended to be stronger in Europe while GM has been more successful in China, said Peter Morici, a professor at the University of Maryland School of Business. And in recent years both companies have enjoyed fat margins and outsized profits in Latin America, especially Brazil.

In the first nine months of 2008, GM earned nearly $2 billion in Latin America, Asia, the Middle East and Africa even as its North American operations recorded a $5.7 billion loss. Similarly, Ford earned more than $1 billion in Latin America while it lost $4 billion in North America.

"Up until now, overseas operations have not been drains on cash," said Rod Lache, a Deutsche Bank analyst in New York. "But with sales now down 35 percent-plus in Brazil and off 30 to 35 percent in Western Europe, every market in the world looks like it will burn cash."

While it has been largely obscured in the current debate in Washington over aid to the ailing industry, Detroit and Europe are closely intertwined. Ford and GM employ a total of 120,000 workers across Europe and together sold roughly four million cars there last year. In fact, nearly a quarter of the 9.37 million cars GM sold worldwide in 2007 were purchased by European customers. In a statement Friday, GM Europe said, "We are working with our labor representatives and the European governments where we have big operations to provide liquidity for sustaining operations, while the U.S. team pursues its options." European executives at General Motors have appealed to Chancellor Angela Merkel of Germany for more than $1 billion in loan guarantees, while the Swedish government said Thursday that it would provide $3.5 billion in aid for Volvo and Saab, as well as suppliers. Volvo is owned by Ford, while GM controls Saab. The state of Aragón in Spain, which is home to GM's largest European plant, in Zaragoza, has also agreed to provide up to $200 million in credit guarantees.

In late November, the head of GM in Europe, Carl-Peter Forster, who has long compared his efforts to revitalize the carmaker's European business to those of a long-distance runner, told engineers at an internal meeting at Opel's headquarters in Rüsselsheim, Germany that they were now more like running a marathon up the side of a mountain. On Friday, with the financial situation of the company even worse than it was last month, Forster said in an interview that he would not speculate on the future of GM's operations in Europe or overseas in the event of a bankruptcy filing in the United States. But he acknowledged that parts suppliers were nervous. "They ask, 'Can you guys survive?"' he said. "We can. We do have cash in hand, and that's also why we've asked governments for help. We need the credit guarantees to sustain the relationship with suppliers."

Besides profits in the good years, GM's European operation "drives a sophistication in small to medium-sized cars," Forster said. "The know-how created in Europe has benefits in the U.S. and around the world, especially because the small-car market is so competitive here." John Fleming, the chief executive of Ford in Europe, said he was concerned about the "ripple effect" on suppliers if GM were to fail. "In the current financial situation," he said, "you'd have to worry about the implications on the supplier base."

Both companies have deep roots on this side of the Atlantic: Ford's British business dates to the era of Henry Ford, and GM acquired Opel in the 1920s.

While Volvo, Saab and other luxury brands have been financial sinkholes for their U.S. owners in Europe, it's a different story in the small-car market. More than 60 percent of their sales come from the Focus and Fiesta at Ford, and the Corsa and Astra at GM.

That is in striking contrast with the United States, where Detroit has long depended on light trucks and sport-utility vehicles to generate most of its profits and has ceded small-car dominance to the Japanese.

Ford, in fact, plans to reintroduce the Fiesta in the United States in 2010 to tap into resurgent demand for smaller, more fuel-efficient cars. But actually making money on those small cars has proved more difficult than moving them off the lot, especially for GM.

With 55,000 workers spread across 20 plants, GM's European work force is now down 40 percent from a decade ago. But with market share shrinking from roughly 12 percent to about 9.5 percent currently, GM remains under pressure to cut overhead.

Though Ford lost billions trying to crack the luxury market with brands like Jaguar and Volvo, industry experts say it has done a better job of reducing capacity, slimming payrolls and coming up with global winners like the Fiesta over the past five years. Still, when Ford reports sales for November on Monday, it is expected to show drastic declines from last year.

Fleming suggested that overseas units benefited the North American parent in profit as well as better products, like the fuel-efficient Fiesta, which Ford could adapt to North America quickly because it already existed in Europe.

He also pointed to his success in turning around Ford Europe as a template for what both automakers could do in the United States if they get through the current crisis.

"We didn't have the right products, we didn't have the right capacity," he said of the early years in the decade, when Ford lost billions in Europe. "We had the same issues as the U.S. industry does now. But we were able to accelerate development of the right products and get capacity in line with demand."

Correction:

Notes:

2008-12-16T15:53:00.001-08:00

High wages put Detroit union under pressure

By Bernard Simon in Detroit

Published: December 15 2008 02:00 | Last updated: December 15 2008 02:00

Blue-collar workers have found themselves as much in the line of fire as their jet-setting bosses in the debate over a bail-out for Detroit's three troubled carmakers.

The chief executives of General Motors, Ford Motor and Chrysler have assuaged their critics - at least for the time being - by agreeing to draw nominal salaries, sell their corporate jets and forgo golden parachutes.

However, the wages and benefits of United Auto Workers union's members remain a target for Detroit's critics.

A stand-off between the UAW and a group of Republican senators over the timing of fresh concessions scuppered a deal in Congress late last week to extend a $14bn (€10.5bn, £9.4bn) lifeline to GM and Chrysler.

The Bush administration on Friday indicated it might provide the funds from the troubled asset relief programme.

Management and the union are under pressure to bring labour costs into line with those at non-union plants, mostly in the southern states, operated by Toyota, Honda and other foreign carmakers.

UAW members have a long reputation as the aristocrats of US labour. Their generous pay and benefits are credited with bringing blue-collar workers into the middle class.

GM estimates its labour costs at $69 per worker per hour, compared with $53 at Toyota. But these bald numbers, the ones most cited by Detroit's critics, do not tell the full story. While a gap remains, it is closing. Ron Gettelfinger, the UAW's president, used a baseball analogy to make his case that the union had made more than its fair share of sacrifices to keep the carmakers afloat. "We're on third base and the other stakeholders are not even in the ballpark," he said.

GM and Toyota workers earn similar wages of about $29 an hour.

The big difference is in fringe benefits, such as healthcare insurance and pensions.

The overall labour-cost figures also include retiree benefits. Thousands of GM, Ford and Chrysler workers were on pensions with generous healthcare benefits - foreign carmakers have a fraction of the number of retirees.

The UAW made significant sacrifices in contracts signed last year, but many of the savings have yet to be realised by the company.

The union agreed to a two-tier wage structure under which new assembly-line workers would be paid about $14.20 an hour, compared with $29 for existing workers.

GM has so far hired about 3,000 people at the lower wage, but all are likely to lose their jobs as it closes plants and cuts shifts in line with the fall in vehicle sales.

Under last year's contract, the companies will shift responsibility for blue-collar workers' healthcare to a union-managed trust, due to be set up in 2010.

The UAW has made a symbolic concession by offering to suspend the much criticised "jobs bank", which allows idle workers to collect full pay and benefits just for showing up at their plant each day.

GM has 1,000 workers in its jobs bank, down from 7,600 in May 2006. The numbers are likely to rise in coming months as assembly lines lay idle.

The three carmakers - led by Ford - have negotiated more flexible work practices at many plants. For instance, the UAW has agreed to the outsourcing of some non-production tasks, such as housekeeping.

Hal Stack, director of the Labour Studies Centre at Wayne State University, says Mr Gettelfinger and his colleagues are realists who understand the problems facing the industry.

"They know that it's better to live to fight another day than to go down nobly with the sinking ship," Mr Stack says.

2008-12-16T15:43:00.001-08:00

UPDATE 1-China Commerce Ministry regrets WTO car parts ruling
Tue Dec 16, 2008 5:59am EST

BEIJING, Dec 16 (Reuters) - China's Ministry of Commerce said on Tuesday that it regrets a decision by the World Trade Organisation that duties it levies on imported car parts broke the terms of its WTO accession.

The decision, announced on Monday, upheld original rulings in July that marked China's first defeat in a WTO dispute since it joined the global trade body in 2001.

China took comfort that the Appellate Body upheld one part of its argument.

"China has noted the Appellate Body's support for China's treatment of import tariffs on completely knocked down (CKD) and semi-knocked down (SKD) kits, correcting the wrong decision made by the previous panel report," Commerce Ministry spokesman Yao Jian said in a statement on its website (www.mofcom.gov.cn).

"China welcomes that, while at the same time regretting that the Appellate Court upheld the other decisions by the panel."

When China joined the WTO in 2001, it had a maximum tariff of 25 percent on vehicles and 10 percent on auto parts.

But in 2004 and 2005 it started to charge car manufacturers importing parts the 25 percent rate if they did not use a sufficient quantity of components made in China, in a move designed to discourage foreign carmakers from importing vehicles in large parts to circumvent the higher tariff. ( How about 12.5% tarriff on everything?)

The appeal court called on the WTO to recommend China to bring its measures into line with WTO rules. Under WTO procedures the 123-page appeal report will be adopted within 30 days after which China will have to implement its findings.

The dispute seems more political than economic in nature, an analyst said, as most foreign auto makers in the country, from General Motors (GM.N: Quote, Profile, Research, Stock Buzz) to Volkswagen AG (VOWG.DE: Quote, Profile, Research, Stock Buzz), have been stepping up local production to cut costs.

"It seems that this car parts row has been highly politicised," said Yi Junfeng, an analyst with Changjiang Securities.

"Few of the foreign auto makers I talked to complained about high tariffs in the first place because locally-made parts in most cases make up more than 80 percent of their models built in China." (Reporting by Lucy Hornby, additionally reporting Fang Yan in Shanghai, Editing by Jacqueline Wong)

2008-12-16T15:38:00.001-08:00

Print | Close this window

Ford has no short-term liquidity problem: executive

Tue Dec 16, 2008 10:23am EST

DETROIT (Reuters) - Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) has no short-term liquidity problems but is hopeful that the Bush administration will take action on requests for emergency funds from the U.S. automakers.

Speaking at a Ford event in Dearborn, Michigan, Mark Fields, who heads the company's operations in the Americas, said that the automaker's sales for the first half of December were at "about the same level" as in October and November.

Fields also said that Ford is looking at strategic options for its Volvo unit, but declined to comment on whether the company is talking to other automakers about a possible sale.

"(This process) will play out of the next couple of months," Fields said.

(Reporting by Poornima Gupta, writing by Nick Carey, editing by Gerald E. McCormick)

2008-12-08T16:50:00.001-08:00

UPDATED ON:
Wednesday, November 19, 2008
12:03 Mecca time, 09:03 GMT

News Asia-Pacific

US watchdog opens China office

The recent scare over melamine in milk was the latest in a series of alerts on Chinese product safety [AFP]

The US Food and Drug Administration has opened its first office in China as part of a global strategy to ensure the safety of imports from China.

The office is the FDA's first permanent delegation outside of the US and will be followed by two more in the Chinese cities of Shanghai and Guangzhou.

"In the past we have always been at our borders to try and catch things that were not safe or did not meet our standards," US Health and Human Services Secretary Mike Leavitt said at ceremony to mark the opening of the Beijing office on Wednesday.

"In the future our new strategy is to build safety into products at every step of the way."

The opening of the new office follows a series of safety scares over Chinese-made products.

The most recent alert has centred on the Chinese dairy products tainted with the industrial chemical melamine.

Inspections

After meetings with Chinese officials on Tuesday, Leavitt said China and the US would work on a joint initiative to use better technology for detecting contamination, demand greater corporate responsibility and increase sharing of data and information.

In the past year, China has stepped up inspections and tightened restrictions on food production and other industries, after a series of scandals.

However, analysts say it remains an uphill climb for Chinese authorities to regulate countless small and illegally run manufacturing operations.

Shao Mingli, head of China's country's food and drug administration, said the opening of the FDA office was a "very clear signal to the whole world."

"As food and drug regulatory agencies, our first priority is to protect public health and life," Shao said at Wednesday's ceremony. "This is our top responsibility."

The FDA says it plans to open further offices in India, Latin America and Europe in coming months as it tries to step up safety monitoring of more than $2 trillion worth of goods imported into the US every year.

Source:

Agencies

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Number of comments : 1

Bigmel1981 Malaysia		19/11/2008

US watchdog opens China office

This is the war that is to be fought

2008-12-08T16:48:00.001-08:00

China says 1,041 infants still hospitalized with tainted milk problems

www.chinaview.cn 2008-11-20 20:09:44

BEIJING, Nov. 20 (Xinhua) -- The Ministry of Health said on Thursday that 1,041 infants around China were still receiving hospital treatment for kidney damage caused by tainted powdered milk.

One was in serious condition, the ministry said.

The number of hospitalized infants dropped by more than half from three weeks ago, when the figure stood at 2,300.

Another 50,741 infants have recovered and been discharged since mid-September, when a scandal erupted over milk containing a chemical, melamine.

More than 4,500 medical institutions nationwide offered free exams and treatment to affected children.

2008-12-08T16:43:00.001-08:00

BEIJING -- Two key gauges of manufacturing in China fell to record lows in November, signaling the country's economic growth will likely slow further in coming months before getting a boost from the government's pro-growth policies.

The China Federation of Logistics and Purchasing said Monday its Purchasing Managers Index for China fell to the lowest level since the index started in 2005. The November PMI was 38.8, down from 44.6 in October.

CLSA Asia-Pacific Markets said its PMI plunged to the lowest level since the index started in 2004, registering 40.9 in November compared with 45.2 in October.

A PMI reading above 50 indicates the manufacturing economy is expanding. A reading below 50 indicates contraction.

The global slowdown, as well as the slump in the local property market, is hurting China's economy.

The export-order component of both PMIs plunged in November from October, falling 12.4 percentage points to 29.0 in the CFLP survey, and 16.1 percentage points to 28.2 in the CLSA survey.

"Export orders will weaken further and we expect further cuts in production and employment," said Eric Fishwick, head of economic research at CLSA.

Citing the global downturn, the slowdown in Chinese manufacturing and weakening domestic demand, J.P. Morgan economists Monday cut their forecasts for China's economic growth to 7.7% in the fourth quarter from 8.2%, and to 9.2% for all of 2008 from 9.4%.

They predict growth will rebound in the second half next year because of policy measures, bringing 2009 growth to 8%, just off their previous forecast of 8.1%.

Reflecting Beijing's shift in focus to growth and away from inflation, the country's economic planning agency said Monday it has removed price controls on certain foods, such as processed grain products, edible vegetable oil and meat.

In January, when inflationary pressures were on the rise, the government required large producers of such foodstuffs to seek government approval before raising prices.

The PMI for Hong Kong, released Monday by NTC Economics Ltd., fell for a fifth consecutive month to 38.8 in November from 43.1 in October, partly because new orders from China fell at the steepest rate since 1998.

—Jackie Cheung in Hong Kong contributed to this article.


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