swedish

Sweden’s Nov industrial output down by 1.9%

by on January 11, 2012

menafn.com…

(MENAFN) The Swedish Central Statistics Bureau (SCB) said that in November, the country’s industrial output declined by 1.9 percent compared with the previous month, reported Xinhua News. The …

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Sweden’s Nov industrial output down by 1.9%

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MF Global Collapse Puts Spotlight On Clearing Houses

by Jillian Berman on December 23, 2011

Huffington Post…

LONDON (Reuters) – The collapse of U.S. futures brokerage MF Global has brought to light inconsistencies in the way clearing houses operate, prompting questions over regulatory plans to use more of these platforms to make markets safer. The confusion stems from the fact the largest European futures markets — Deutsche Boerse’s Eurex and NYSE Euronext’s Liffe — use different arrangements when a market party defaults. Six weeks after the U.S. firm’s demise, some clients are still angry about the different approaches to the MF Global unwind the clearers took, leaving them in the dark for weeks as to what had happened to their money. “There was confusion around the clearing houses, as some transferred positions and others closed them out,” said one senior futures trader at a large investment bank. “In the immediate aftermath of the default we simply didn’t know our exposure,” this person said. Clearing houses like LCH.Clearnet, which clears Liffe, and Eurex Clearing sit between trading partners and hold money to reimburse any firm left out of pocket if a counterparty defaults, making the markets less risky. Regulators in the United States and Europe are keen to increase the use of clearing houses after the collapse of Lehman Brothers in 2008, which they say has the additional benefit of making the market more transparent. At the moment, mainly exchange-traded assets such as equities, futures and options, use clearing. But regulators are keen to expand the use of clearing into OTC products such as swaps, bonds and foreign exchange. But the confusion after the demise of MF Global has triggered demands that top clearing firms adopt a more unified approach before they adopt these greater tasks. “There is no standardization across the different clearing houses in Europe and no standardization between Europe and the U.S., which is confusing for clients, particularly when dealing with a global player like MF Global,” said Grewal. Eurex Clearing began liquidating, or selling off, positions after MF Global defaulted, a process it had completed by the following day, November 2. By contrast LCH.Clearnet, gave members the option of keeping their positions open. It then switched those positions to other brokers, a more laborious process that took until the end of November to complete. Eurex likes the liquidation approach, because clients quickly have certainty. LCH argues that transfers are preferable because clients need these positions to hedge others, and liquidating the trades increases client risk exposure. “You’d think the clearing houses would have had a conversation about this but from what we are seeing now it looks like there was no coordination,” said Simmy Grewal, analyst at research and consulting firm Aite Group. “MF Global was trading vanilla listed futures and options, and it exposed serious flaws in the clearing model. How will the clearing houses perform if a large OTC broker goes under?” she said. The criticism comes with Deutsche Boerse and NYSE Euronext set to merge, pending European support for the $9 billion merger. The combination would likely lead to greater consistency in how Eurex and Liffe are cleared but it might also expedite the growth of rival platforms that could use different clearing practices. (Editing by Douwe Miedema and Jon Loades-Carter) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Saab Files For Bankruptcy

December 19, 2011

STOCKHOLM — Saab Automobile filed for bankruptcy Monday after attempts by Chinese investors to take over the loss-making brand were blocked by previous owner General Motors Co. Saab CEO Victor Muller personally handed in the bankruptcy application to a court in southwestern Sweden, ending his two-year struggle to revive the more than six-decades-old car maker, known for its rounded sedans and quirky design features. The Vanersborg District Court was expected to approve the application later Monday. While experts say the company is likely to be chopped up and sold in parts, local officials in the town of Trollhattan, where Saab employs more than 3,000 people, were holding out hope that a new buyer would emerge to salvage the brand. “Our absolute hope is that the bankruptcy administrator will aim for a solution where the company is sold in its entirety,” Trollhattan Mayor Paul Akerlund said in a statement. Muller, a Dutchman, used his luxury sports car maker Spyker Cars to buy Saab from GM in 2010, promising to restore its Swedish identity, but the company ran out of money just a year later. Even as production stopped and salary payments were delayed, Muller fended off bankruptcy by selling the company’s real estate and lining up financing deals with investors in Russia and China. He bought time by placing the company in a reorganization process under bankruptcy protection. But the deals fell through, blocked by regulators or by GM, which still owns some technology licenses for Saab. The U.S. automaker was concerned that its technology would end up in the hands of Chinese competitors. The final Chinese suitor, Zhejiang Youngman Lotus Automobile Co., pulled out after the last proposal for a solution was rejected by GM over the weekend, according to Saab owner Swedish Automobile, Muller’s company which was formerly known as Spyker Cars. Originally an aircraft maker, Saab entered into the auto market after World War II with the first production of the two-stroke-engine Saab 92. It soon became a household name in Sweden and in the 1970′s it released its first turbocharged model – the landmark Saab 99. To auto enthusiasts, Saab was known for its quirks such as placing the ignition lock between the front seats and becoming the first car to have heated seating in 1971.

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Duncan Quirk: Is Congress Taking Debt Ceiling Advice From Billionaire Who Routinely Made Huge Profits Shorting Currency?

June 10, 2011

As readers of my writings know, I am a deficit hawk, however, I am also a pragmatic defect hawk. I believe strongly in the recommendations of last year’s bipartisan debt commission , mainly decreasing our spending and increasing taxes and overhauling our tax code to cut deductions therefore raising tax revenues. Last week, I argued for no vacations, no pay, and no campaigning until the debt ceiling was resolved : in order to strengthen our economy and get out of debt, we must raise the debt ceiling. A week later, with the media focused on Weiner’s stupidity and the elections of 2012, we are still no closer to solving this problem. In fact, many more main stream Republicans are saying that a technical default will do more good than harm if it reins in spending. Whether this is political posturing for the 2012 elections or if they truly believe it is still to be seen. In either case, more Republicans have taken this stance after Stan Druckenmiller announced that he is behind it as well . While Stan Druckenmiller is one of the nation’s largest philanthropists, he has made billions off of shorting currencies. In 1992, he engineered a $1 billion profit for George Soros by shorting (basically betting against a stock or currency) the British Pound Sterling on Black Wednesday , which by the UK Treasury’s estimates cost the country £3.3 billion. A few months later, Druckenmiller made another $1 billion shorting the Swedish Krona. I can’t say for certain that Druckenmiller is planning on shorting the dollar in the event of a debt default, in fact he is saying that he is currently longing US treasury bonds, but he has shown a knack for betting against currencies and coming out on top. If he is using his position and influence to push a debt default and short the US dollar for his own profit, then we really should not be listening to him. We do not want to be the guy at the craps table being led on to roll the dice by the guy next to him who at the last second bets on him failing. One may ask, “how would a debt default lower the value of the dollar?” By not paying our obligations, Moody’s, Fitch, and Standard and Poor’s will reevaluate and in all likelihood downgrade the US credit rating . These agencies evaluate the quality of financial instruments and debt, including US bonds, and if they see the US default on these loans they will call into question the security of other existing bonds and debts. With the deficit where it stands, the US needs to take out loans to meet all of its obligations to our creditors and citizens. Similar to an individual’s credit score, a downgrade in the US credit rating will mean that creditors will be less likely to loan to the US and those that do loan will do so at a higher rate. A lack of international demand for the dollar, a drop in confidence in US debts and borrowing combined with overextension of stimulus packages and government spending will drive the down the value of the dollar. The higher interest rates that a lower credit rating will cause will in turn raise the prime rate that the US charges banks. Raising the prime rate is a standard tactic to combat inflation, but in a stagnant economy it can have drastic effects. An increase in the prime rate translates into higher interest rates on new loans and, if you have a flexible APR, old loans and credit cards from consumer banks. In times of rapid expansion and inflation, this is used to slow down the economy for its own good, in a recession it hinders economic growth in a two pronged approach. Businesses are less likely to borrow with higher interest rates and therefore less likely to expand and less likely to build or hire more people. Consumers are less willing to take out loans from banks on larger items and goods which in turn means less sales and less money for businesses further reducing their expansion and possibly leading to further layoffs. A farmer will hold off on buying a new tractor at a higher interest rate, therefore the tractor is not sold and the company that is making it will not make a profit off of the tractor and be less likely to continue to build more tractors. While it is true that rising interest rates benefit lenders and savers, with US Household debt outstanding totaling $13.3 trillion (it’s lowest in nearly four years), they will not be good for generating growth. Despite corporate profits and signs that companies are stabilizing, we still see a high and fairly stagnant unemployment rate. Companies are profiting and in some cases growing, but the are not hiring more people. It can be argued that this is due to companies having one employee do the amount of work that a few years ago would have been done by two or more employees, the initial phase of a massive corporate anorexia problem. Whatever the cause, the unemployment rate has not gone down significantly and with more people entering the work force and the Baby Boomers having to work longer due to massive losses in their retirement savings, it is not likely to do so if businesses and consumers do not spend. Add in ever rising gas prices, which in turn effect food and every other marketable good and we will have fewer dollars to spend on the things we need and have to make further sacrifices including the quality of food we eat (which would increase long-run healthcare costs), our homes and the education of our youth. Our tax dollars will go shorter distances and our economy will remain in a stagnant recession. By allowing the country to default by not raising the debt ceiling, we are tying the hands of the American people and American businesses behind their backs at a time where we need to encourage job growth and spending. This does not include the damage that default will do to international markets. Greece is a small player in the international level and look at the damage which that potential default is causing. A US default would ripple through Asian and emerging markets where the majority of economic growth currently is. The dollar’s status as the world’s reserve currency will surely be shattered, as would our economic parity and purchasing power. Cutting the deficit is an extremely important goal, and we will need to reform our entitlements and our taxes, but it should not be done at the expense of sending us into a further recession on the advice of a man who has made his name on betting against currencies and economies. We would not stop paying our mortgage because our utility bill was too high. We need our elected officials to not pay themselves for a job they are not doing with money they don’t have, and to not campaign for a future election when the real problems need to be dealt with now. They need to reach a compromise to raise the debt ceiling to encourage the economy and buy time to build a responsible budget for October’s new fiscal year and the future. And we need to tell them: not at the polls in 2012, but today. Do not contribute any money to a political campaign. Sign the No Labels petition to keep the legislature at work. Write, call, email, text, moon them with a very elaborate tattoo, just contact your congressman, your senator, and your news station. Stay tuned as my next post up is a tax compromise we can all agree on: forget about the top 1%, let’s close the loopholes and get the taxes that are owed by the top 400 people. PS: Stan Druckenmiller , if you’re reading this please explain to me how the beneficiaries of your donations at the Harlem Children’s Zone can take their educations and job training into a job market that is nonexistent.

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Chinese Tech Giants Fight Over 4G Phones

May 5, 2011

BEIJING — Two of China’s biggest technology companies have launched a court battle in Europe over mobile phone patents in a rare public clash between firms Beijing is promoting as national champions. The fight between Huawei Technologies Ltd. and ZTE Corp. highlights the challenge for communist leaders who need to manage Chinese corporate ambitions as they try to create global competitors in telecoms, energy and other fields. It is the first case of its kind between major Chinese companies, which usually settle disputes in private. “We’re going to see more of this in this industry and others,” said David Wolf, a technology marketing consultant in Beijing. “The government will find, wow, we’ve got these national champions, but now they’re trying to kill each other.” The dispute centers on fourth-generation mobile technology, which companies that are developing it say will deliver more stable connections, wireless broadband and other advances. It is in limited use in the United States and being tested elsewhere. Control of key patents could help decide which equipment suppliers are positioned to reap billions of dollars in sales once it is rolled out in other markets. Huawei and ZTE make network gear, the core of phone systems. They have multibillion-dollar annual sales in China, Africa and Latin America and see themselves as potential global 4G leaders. That fits with Communist Party hopes to transform China from a low-cost factory into a creator of profitable technology. Huawei announced last week it filed patent infringement lawsuits against ZTE in France, Germany and Hungary. ZTE rejected the claims and said it has asked a French court and Chinese regulators to invalidate a Huawei patent. Huawei and ZTE are among China’s first wave of fledgling multinational companies. They compete with Nokia-Siemens Networks, Ericsson and Alcatel-Lucent and have a small but growing U.S. and European presence. Their dispute comes amid mounting complaints by foreign business groups about Beijing’s industrial policy. They say China is improperly supporting favored companies by limiting market access and providing low-cost loans and other support. Huawei’s lawsuits accuse ZTE of infringing patents for data cards and improperly using a Huawei-registered trademark on some of its products. “We will do whatever is required to ensure that the use of Huawei’s intellectual property by any company is based on internationally accepted protocols and practices,” said Huawei’s chief legal officer, Song Liuping, in a statement. ZTE said its lawsuit accused Huawei of infringing its 4G patents. The company said it also has asked a French court and China’s State Intellectual Property Office to invalidate Huawei’s patents for a rotary USB connector used to exchange data between devices. “ZTE respects the intellectual property rights of other companies, but it will not stop protecting its own intellectual property rights,” said a company statement. Huawei, founded in 1987 by a former Chinese military engineer, has 110,000 employees and reported 2010 revenues of 182 billion yuan ($28 billion). ZTE, founded in 1985, has 70,000 workers and reported 2010 revenues of 70 billion yuan ($10.8 billion). Their status as industry leaders gives both high-level political influence. But Chinese leaders want both to succeed – a possible reason for a stalemate and the decision to go to court. An impartial ruling by a European court also might add to the winner’s appeal for potential customers by reinforcing its status as a technology creator, rather than a Chinese policy tool. “They are making an interesting statement by filing those lawsuits not in Chinese courts but overseas, because Chinese courts are perceived to be very political, and they want this matter obviously adjudicated on the legal merits,” said Wolf, CEO of Wolf Group Asia. Huawei and ZTE are unusual among major Chinese companies because they compete directly with each other, offering similar products in the same markets. Authorities who want China’s potential global companies to focus their competitive energies on foreign rivals have tried to head off clashes in other industries by assigning different markets or products to individual enterprises. In aerospace, a plan to create a homegrown jetliner to compete with Boeing Co. and Airbus Industrie was assigned to one state-owned company while a potential rival was told to develop a smaller regional jet instead. Huawei has suffered setbacks as it tries to expand in the United States. It was forced in February to unwind its acquisition of 3Leaf Systems, a maker of cloud computing technology, after it failed to win approval from a U.S. security panel. In a separate case, Huawei won a court order that temporarily blocked the sale of Motorola Solutions Inc.’s network business to rival Nokia-Siemens Networks. Huawei said the deal might reveal business secrets because Motorola sold Huawei equipment. Motorola settled with Huawei for an undisclosed fee. Also this month, Ericsson said it has filed lawsuits against ZTE in Britain, Germany and Italy accusing the company of infringing patents for handset and network technology. The Swedish company asked the courts to block ZTE from selling mobile phones that contain the disputed technology and some network products. ___ Array Array

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Rich Nadworny: Corporate People

February 16, 2011

A lot of people got very worked up last year over the Supreme Court’s Citizens United decision. In it, the Court decided that corporations were just like regular people and thus deserved the right of free speech. The more I read the news these days, the more I think those justices might be on to something. Take for instance the latest news that the Entergy’s Vermont Yankee nuclear power plant is still leaking . This has been an ongoing issue with the plant, one that the company initially denied. According to the court’s decision, we should all look at this as a simple case of corporate incontinence. And we all know that it’s not right to make fun of incontinence. Still, we do expect Vermont Yankee to do something about it. I mean, it’s one thing if they’re doing it in the privacy of their corporate home, but it’s another entirely if they’re making a mess while out visiting! Vermont Yankee, like many other older people, seems to have a hard time recognizing its problem. It should listen to the Supreme Court and go out and by some Corporate Depends before things get out of control! Otherwise the doctors at the Vermont Legislature in Montpelier will surely want to operate on it. That’s not the only way big corporation act like real people. In some sense, those huge profits companies make these days are like a version of Corporate Viagra. Yes, they sure appear big, robust and powerful. But it’s not that simple; those profits seem to be hiding a more serious affliction, namely employing fewer people, making fewer things, and rewarding people with obscene bonuses. Nowhere does corporate Viagra seem more rampant than in the financial sector. Even though they’ve deflated the world’s economy, they’re still rewarding their Big Swinging Dicks, to use a phrase from Michael Lewis’ book Liars Poker . If these obscene profits and bonuses last for more than four straight years, should we call a doctor? You know, now that I think of it, the Supreme Court was dead on in saying the corporations were just like people. They reminded me of a time I lived in Sweden. Back in the 80s and 90s lots of Swedish men couldn’t deal with the demands and equality of Swedish women. So they went looking for wives in Southeast Asia and Eastern Europe. I’m not saying they were trafficking or doing anything illegal; those men were just looking for the path of least resistance, where the women were trained in subservience. And when you think about it, that’s pretty much what a lot of corporations did when they moved its manufacturing overseas. They left the American workers just like all of those Swedish guys who couldn’t deal with those terrific, smart blonde women. It sure looks like some corporation act like people. Or more precisely, it seems that some corporations act a lot like weak men. So maybe being just like a person isn’t really all that great. Maybe it’s okay for corporations to act, well, like responsible businesses. I mean, if you push this all the way out it might mean that one day we could actually elect a corporation as president of the United States. And that would be a supreme mistake.

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Lobster In The Mountains, Riots On The Nile

January 29, 2011

(Reuters) – The global elite, dining on Norwegian lobster and reindeer at the end of the World Economic Forum on Saturday, felt pretty chipper despite growing concerns about the inequality of the economic recovery. While they believe the global financial and euro zone debt crises are abating, the real world intruded with a different and much more acute crisis in Egypt that made their debates about inequality and food security less theoretical than anticipated. This year’s four-day talkfest in the Swiss mountain resort of Davos was a fragmented affair. The issue expected to dominate discussion, the euro zone debt crisis, turned out to be a relatively damp squib, with a growing consensus among bankers and policymakers that a resolution of the issue may be near. If there was one common strand in Davos this year it was growing divisions — whether between fast-growing emerging markets and sluggish developed world economies, or between rich and poor within countries. As residents in Cairo and Alexandria counted the cost of a further night of clashes between protesters and police on Saturday, politicians and business leaders urged Egyptian President Hosni Mubarak to start a dialogue with his people. The corporate world is nervous. Egypt has, after all, been one of the darlings of African and Middle Eastern investors, and the world is stepping into unknown territory with the rapid spread of unrest from country to country, propelled by the Internet and mobile technology. LESSON OF EGYPT “The lesson from Egypt is clear: people will no longer accept oppression, particularly when oppression is married with rising food prices, a lack of employment and the destruction of hope for a young generation,” Sharan Burrow, general secretary of the International Trade Union Confederation, told Reuters. Yet the mood among 2,500 business leaders and policy-makers in Davos was still predominantly positive, albeit tempered with caution after the worst economic slump in 75 years. “Compared to last year and the year before, there is certainly much greater confidence about stability, more optimism about the global economic outlook,” said the International Monetary Fund’s first deputy managing director John Lipsky. For many CEOs and bankers, there is simply the reassurance of having put yet another year’s distance between themselves and the collapse of Lehman Brothers in 2008, which brought the world economy to the brink. As a result, the panicky mood evident at the last two annual meetings in Davos has evaporated and business bosses are starting to look again at spending the trillions of dollars of cash sitting on their balance sheets. “It is quite obvious that the mood has changed. Everybody is much calmer,” said Swedish Finance Minister Anders Borg. “You see it in the meetings, without people speaking on their telephones or leaving the room or having to stand in the corner, having very difficult conversations.” As ever, this year’s Davos was an eclectic mix, covering everything from macroeconomics to geopolitics to management theory to science. But there was no single, dominant theme — and Adair Turner, chairman of Britain’s Financial Services Authority, reckons that, perhaps, is the most encouraging sign of all. “It is a thoroughly good thing because when the world gets gripped by one big theme it usually either means there’s a big disaster or else people are getting in the grip of some new irrational exuberance,” he said. (Additional reporting by Emma Thomasson and Dmitry Zhdannikov; editing by Michael Stott and Mark Heinrich) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Video: Riksbank’s Wickman-Parak Warns Against Keeping Low Rates

January 21, 2011

Jan. 21 (Bloomberg) — Swedish central bank Deputy Governor Barbro Wickman-Parak talks about the risks of keeping interest rates low for too long. She spoke with Bloomberg’s Adam Ewing in Stockholm yesterday.

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Rebecca Solnit: Iceberg Economies and Shadow Selves: Further Adventures in the Territories of Hope

December 22, 2010

Crossposted with TomDispatch.com . After the Macondo well exploded in the Gulf of Mexico, it was easy enough (on your choice of screen) to see a flaming oil platform, the very sea itself set afire with huge plumes of black smoke rising, and the dark smear of what would become five million barrels of oil beginning to soak birds and beaches. Infinitely harder to see and less dramatic was the vast counterforce soon at work: the mobilizing of tens of thousands of volunteers, including passionate locals from fishermen in the Louisiana Oystermen’s Association to an outraged tattoo-artist-turned-organizer, from visiting scientists, activist groups, and Catholic Charities reaching out to Vietnamese fishing families to the journalist and oil-policy expert Antonia Juhasz, and Rosina Philippe of the Atakapa-Ishak tribe in Grand Bayou.

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AstraZeneca Seeks To Sell 2B Astra Tech

November 16, 2010

AngloSwedish pharmaceutical group AstraZeneca is looking to divest its Swedish unit that makes dental implants and medical devices for about 2 billion

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Don Tapscott: Macrowikinomics: Rebooting the Economy

November 5, 2010

This article is the first in a series of 12 over the next 3 weeks written by Don Tapscott and Anthony D. Williams, authors of the newly released book Macrowikinomics: Rebooting Business and the World. The book is receiving a lot of buzz. The Economist calls it “a Schumpeterian story of creative Descruction.” The book argues that many of the institutions of the industrial age have finally come to the end of their lifecycle, and now being reinvented around a new set of principles and a networked model. Today’s blog is about rebooting the economy. ***** The election is over, but the economic stagnation gripping the country is not. Many economists are warning us to buckle down for a period of prolonged sluggishness, reminiscent of Japan’s lost decade or the Swedish crisis of 1992. Arguably, we’ve been in this slump for a decade. We just didn’t know it. Booming house prices and the massive expansion of cheap credit made a lot of us feel rich as kings. Now that the jig is up it’s clear that the housing bubble was masking a dark economic picture. The economy is growing more slowly than at any time since the Great Depression. It was announced today by the Labor Department that the unemployment rate for October remained unchanged at 9.6 percent with close to nearly 15 million Americans out of work. The Total unemployed (called U6 including all persons marginally attached to the labor force) is 17 percent. There has been virtually no net job creation since 2000. And unless you happen to work in finance (where average salaries are four times higher than in the rest of the economy) your wages have probably stagnated. Factor in the collapse of the housing market and it turns out that the net worth of ordinary Americans is lower now than at the turn of the Century. A foreclosure crisis and stubbornly high unemployment suggest that the forward-looking picture is not getting rosier anytime soon. It’s far too convenient for critics to pin our economic problems on Obama. To do so makes the solution self-evident. Replace Obama, turf out the Democrats and you have your answer to America’s woes. If only it were so simple. Evidence is mounting that this not simply a crisis of political leadership. Rather than the normal ups and down of capitalism, the global slump is symptomatic of a deeper secular change. There is a case to be made that industrial economy and many of its institutions have finally run out of gas — from newspapers and old models of financial services to our energy grid, transportation systems, education and institutions for global cooperation and problem solving. Take media and entertainment. Newspapers throughout the United States and Canada are collapsing. Some say bad business decisions are to blame. What, you might ask, were the managers of the New York Times thinking when they borrowed hundreds of millions of dollars to buy lavish real estate and other dubious properties like the Boston Globe? Others say that crashing circulation and revenues are caused by the tough economic climate. But no amount of rationalization or denial can hide the looming truth that the collapse of the newspapers is not coincidental, conjunctural, or containable. It is systemic – rooted in the digital revolution. So the leaders of the old media should take a deep breath and get going on the kind of experimentation required to forge some new approaches that are optimized for a world of digital data. Newspapers are just the beginning. Across the board, a lot of old models and industries need rebooting. Greater openness in innovation and science, for example, is creating more economic opportunity for start-ups and small business owners businesses who can acquire global marketing and product development capabilities that used to be available only to the world’s largest and wealthiest enterprises. Or when it comes to fixing and restoring confidence in the financial services industry more is required government intervention and new rules; it’s becoming clearer that what’s needed is a new modus operandi based on new principles like transparency, integrity and collaboration. Bankers can get going now to rebuild the industry on a new model. For example they could remove the value and dispose of the $trillion of toxic assets on their balance sheets by placing them in a commons and letting the world’s leading financial modelers determine their value. Companies like the Open Models Corporation are working hard to make this happen – using the web and 21st century strategic thinking to create a human genome of risk management information. On the health care front, Republican lawmakers have pledged to gut Obama’s reforms. This would no doubt deliver a significant setback to the Democrats’ efforts to boost equity and contain costs. But convincing and empowering the American population as a whole to live healthier lives would arguably amount to a far greater accomplishment and no enabling legislation would be required. Possibly the greatest failure of the current healthcare system is that it clearly doesn’t engage a large part of the population. And when we don’t think about our health we get unhealthy. Close to two-thirds (63.1 percent) of adult Americans are becoming overweight or obese, exercising less, and eating unhealthy foods. Compared to healthy-weight people, overweight and obese people have particularly unhealthy lifestyles–lifestyles that contribute to the skyrocketing rates of preventable diseases like diabetes and heart conditions, which are among the most costly public health afflictions. A population truly engaged in the issue of wellness would not act so recklessly with respect to its own wellbeing. To change that, we need to shift from a model of health care where patients are passive recipients of care only after they become sick to one in which one where patients become much more active in managing their own health over their lifespan. A main benefit, as studies show, is that when patients are more engaged in managing their own health, they are more committed to being healthy. Collaborative healthcare could not just improve health it could reduce costs of a system that is close to 20 percent of the GDP and acting as an anchor on the economy. The same fresh thinking is required to job creation. A study done last year by the Kauffman Foundation of Entrepreneurship shows the extent to which job creation depends on new business creation. Using Census Bureau data, the Foundation examined net new job creation in terms of firm age rather than firm size. From 1980 to 2005, nearly all net job creation in the United States occurred in firms less than five years old. Without start-ups, net job creation for the American economy would be negative in all but a handful of years. Estimates from the Panel Study of Entrepreneurial Dynamics samples suggest there are about 12.6 million U.S. nascent entrepreneurs. “Add to this the swelling ranks of the unemployed and there is substantial latent entrepreneurial job creation potential in this country,” says Kevin Kimberlin, Chairman of Spencer Trask – the Venture Capital company that has supported some big job creators dating back to Thomas Edison. “We need to help these budding companies achieve liftoff. Failure to launch need not be the norm. With the proper incentives and platforms in place, we could quickly create hundreds of thousands of new jobs.” Because of the Internet, small companies can have the same capabilities as large companies, without the same liabilities, like bureaucracy and legacy cultures, processes, people and systems. The world’s most dynamic innovators are using the Internet and new business models to transform industries ranging from manufacturing and transportation to fashion and retail. So rather than simply debating the merits of fiscal stimulus, the task before us is to support more start-ups that lay the groundwork to get the country back to the high level of pre-recession job creation. A moratorium on capital gains for start-ups would be a good place to start. More on this is subsequent articles in this series. The list goes on. In Macrowikinomics we discuss the sparkling initiatives underway to rebuild our stalled institutions. But these initiatives need to be come mainstream and not just light house undertakings. So rather than simply tinkering, leaders in business need face up to the new realities and get going on rebooting their industries. Paul Krugman writes that “financial crises have consistently been followed by long periods of economic distress.” Among others, he’s calling for further stimulus. But the fact of the matter is that this just isn’t going to happen. With a congress in stalemate we need to seek other solutions. Instead, let’s use this opportunity to rethink and rebuild many of the organizations and institutions that have served us well for decades, but now have come to the end of their life cycle. If we do this there can be growth, jobs and a new time of prosperity.

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Robert Sutton: Bad Boss: 14 Horror Stories About The World’s Worst Bosses From The Author Of ‘Good Boss, Bad Boss’ (PHOTOS)

October 22, 2010

The best bosses are competent at the work they oversee and are in tune with what it feels like to work for them — that’s a central theme in my new book, “Good Boss, Bad Boss.” I show how the best bosses know when to push their people to work harder, when to praise versus criticize their people, and when the best management is no management at all. They are seen as in charge, but have the wisdom to listen to their people closely and to encourage them challenge the boss’s ideas in civilized and instructive ways. They treat their people with dignity and respect, and serve as “human shields,” who protecting their charges harm, distraction, and idiots and idiocy of every stripe. The good news is that, although no boss is perfect, a recent national survey found that 80% of employees feel respected by their bosses and believe their bosses value their work. But there is also strong evidence that the clueless and incompetent minority does massive damage to employee’s mental and physical health – a longitudinal study of Swedish workers found that those with crummy bosses had a 39% percent greater chance of having a heart attack than those with good bosses. And the evidence that bad bosses hamper productivity keeps growing: a recent survey by University Florida researchers found that people with abusive bosses more likely to arrive late, do less work, and to take days off when they aren’t sick. The hallmark of the worst bosses is that they suffer from power poisoning : They focus on satisfying their own needs and wants, devote little or no attention to the needs and wants of their followers, and they act like the rules don’t apply to them. This cluelessness manifests itself in many ways; for example, one study showed that people in power were more likely to grab more cookies and to eat like pigs. To give Huffington Post readers a sense of the horrific actions of the worst bosses and, to entertain you a bit too, I put out a call on my blog Work Matters for stories about “clueless and comical bosses.” Between comments on the blog and emails from readers, I received approximately about 200 examples; although many were funny, some were just plain sick and even downright cruel. Here are the 14 worst: I would love to hear more stories about clueless bosses from The Huffington Post readers — as well as tips and stories about how bosses can avoid living a fool’s paradise and, instead, stay in tune with what it feels like to work for them. Again, the following stories featured in the slide show were submitted by readers — some are ridiculous, some are scary and some might be downright offensive. But hopefully all are instructive.

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Vivian Norris de Montaigu: Choosing Sides in a 1930s-like Economy

July 19, 2010

Many years ago, when writing about World War II and Occupied France, I found a quote that basically said not making any kind of choice was still a choice. In that case it was a choice between collaboration and resistance. Beginning pre-war, in the 1930s, there were groups of industrialists, which we found out were collaborating in the shadows, the “cagoule” they were called…and they went on to build and lead (or already were) some of the biggest companies in France (L’Oreal, Renault, etc) just as Standard Oil and others had done in the U.S. They were fascists, using their so-called anti-Communism as an excuse for their violence (much like Pinochet who supported Economist Milton Friedman and the Neocon point of view in the US did as well), and went on in some cases to reap great profits before, during and after the war. In the summer of 2001, while attending an anti-globalization meeting during then President George W. Bush’s first trip to Europe, just prior to the EU Summit in Gothenburg, Sweden, I met an elderly Swedish woman protesting against the cuts to her health care. As we spoke, she told me of her memories of the 1930s and how 2001 reminded her of 1933. Later that same summer, a Swiss-Italian man told me exactly the same thing, as did a retired Dutch professor, who had served in the Resistance and been captured by (and escaped from) the Nazis. With the attacks of 9/11 at the end of that summer of growing protests and police and state violence against the protesters, we saw fear and so-called “anti-terrorist” controls almost bring that movement to a halt. What has been going on that reminds three people from three different countries in Europe, all who had been young adults during the war, to be reminded of those years leading up to the horrific events which killed millions? Why were they reminded of the 1930s and how can we see that what has been going on is replicating that frightening period in when fascism emerged and human beings made choices that lead to so much death, destruction and yet also profits? The gap between the rich and poor is greater than it was even during the last Depression in the 1930s. Job insecurity and unemployment, in the U.S. and increasingly in Europe and other parts of the world, is at an all-time high. Nationalistic tendencies, trade wars, a return to gold and many other factors are tell-tale signs of an increasingly unstable time, during which alliances formed lay bare choices made (or not made), which demonstrate which side people are on (or not). In other words, it is time to choose sides. But guess what? We are all human beings and we all have to live together on this planet. In order to survive and to create a better world, we all have to be on the same side! There is no place for disturbingly huge gaps between rich and poor, there is no reason for poverty, and as the Nobel Peace Prize winning economist and banker to the poor, Muhammad Yunus has stated time and again, if we wanted to get rid of poverty we could! What is the point of so few people having so much, even if they then decide to leave it to charity? No one elected Paul Allen or Bill Gates or Warren Buffett to any kind of office so why should we who treasure democracy allow those with so much cash and thus power, decide what affects ourselves, our country and so much of the world? It simply is not sustainable. So look around you at what is happening. Beware of racist, fascist and elitist tendencies in everything from seemingly off he cuff remarks to a Texas-like choice of rewriting history in schoolbooks (Stalin did the same thing). If you are truly for freedom and prosperity, it must be for all humans, not just a select spoiled few. Elect people like Elizabeth Warren to office, fight for people who truly represent the best interests of all versus those who protect profits before humans. And while you (we) are at it, let’s protect the earth and the future for generations to come. I am an optimist, even as I see my native Gulf Coast polluted, and people losing jobs, the inequality…I also see many many more people speaking out and saying this is enough! Make a choice Americans! Stand with humanity not hunkering down in fear! We are more than that! Support Obama’s attempts to make America a better place! He has already done so much especially considering the mess he was left with! And President Obama, please support people like Elizabeth Warren and do not let pressure from banks (not humans) force your hand! We are also asking you to make a choice to stand with us!

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Michael Tasner: Virtual Reality Worlds: The Hows and Whys of This Unique Marketing Universe

July 8, 2010

Marketing using virtual reality worlds and methods is one of the more advanced Web-3.0 tactics that you can use to generate leads, close business, even to communicate with your team. It also takes the biggest time commitment, requiring the most work and the largest initial expense to get the platform designed. The upside: when put into place, these 3-D worlds can prove to be your most effective lead generator, sale closer, and cost saver. Let me take a step back now that I have your eyes curious, your ears more attentive and your full attention. Virtual reality worlds are just that. They are 3-D, Web-based communities that allow interaction among users and devices by way of the Internet. In general, virtual reality has a variety of uses. The whole intent of virtual reality is to convince you and your mind that you’re actually there, alive in this make-believe world. It brings the experience and interaction to life, even though you are behind a computer or another device and not there live, in person. Picture this: •3-D people walking around, interacting and talking. They don’t really exist, but they represent people who do in some way. • Communication using webcams, headsets, microphones and text chat. • People from all walks of life and from around the world who might never have met otherwise. • Houses decked out with all the latest electronics. • The ability to walk around, drive cars, purchase goods and services and do pretty much anything you would do in your actual life. • A world that seems so real, you start thinking it is real. Sometimes your mind continues to believe this can’t be real, it isn’t real, and it’s fake. It will take some conditioning of your mind (after you start engaging in these virtual worlds) to understand the concept. Here are some of the common myths of virtual reality worlds: • Everyone is fake or acts fake. Eighty-four percent of people reported that when they join the various virtual worlds, they create people — avatars — that represent themselves. Yes, that does leave 16% of avatars who are not entirely representative of their true selves. Typically these people make minor adjustments, rather than entire modifications of their real persona. • It’s nowhere near real life. Many times this is more like real life than your own real life. People host parties and business events. Attend trainings. Interview for jobs. Shop. Practice foreign languages. Work in global teams. All virtually. • It’s only for kids. The average age across most virtual reality worlds is just over 30. The only thing to do in these communities is play games. Yes, you can play games, but this is only a small fraction of what’s done in these worlds. Why should you care? Here are the key driving factors to the rise in virtual reality usage: • Limited time. • Less discretionary income (across the map). • Further adoption of the Web by everyone, including consumers, businesses and even the government. • It’s user-generated content. People, businesses and agencies are continuing to move to using virtual reality worlds because they are tired of traveling, have less money to spend on travel, and are realizing the power associated in these worlds. My motto is, “Essentially everything that can be done in person can be done over the Web using various technologies.” This is the concept that people are finally starting to understand. Everything continues to move to the web. So instead of simply resisting, both consumers and businesses are starting to jump on the bandwagon. An additional factor that has helped the rise of virtual reality worlds is their ease of use. Two to three years ago you needed to have a very fast computer and connection just to view one of these worlds. Today things open up much quicker and are much more intuitive. Anything you would want to do in person (yes, everything) can be done over the Web in the comfort of your own home or office. Why do you think Amazon.com had one of its best holiday seasons ever in 2008, while Circuit City closed its doors? Granted, there were a variety of outside factors as to why Circuit City failed. But from the customer’s perspective, if I can buy the same products on Amazon.com and save time and money (including sales tax and shipping charges), there is absolutely no need for me to visit a real store, deal with a salesclerk who probably doesn’t know what he’s talking about, stand in line, and risk having my credit card information misappropriated. And so, virtual reality-world usage continues to climb. According to The Gartner Group, it’s anticipated for over 250 million people to be in virtual worlds by 2011. There are hundreds of popular virtual communities and worlds with thousands of users in existence that are much less popular. Let’s zero in on the most popular ones that you need to be concerned with. There are a variety of common threads among most virtual worlds: • Typically they are run by user-generated content rather then people at the particular company adding content. • Users can purchase and own virtual land. • Currency can be exchanged and typically needs to be converted. • There are various e-commerce applications and functionality so you’re able to buy products and services in real time. • They are regulated to comply with the various, real, international laws. Here are some of the virtual-world terms you should be aware of: • Avatars: The term is derived from Sanskrit and relates to a “mental traveler” in Indian fairy tales. In the virtual world, it is the character you use to represent yourself and communicate with others. • Community: The people or residents who inhabit the virtual space. • Currency: Most of the virtual worlds have their own form of currency which typically can be converted into USD or other forms of real money. • Emotes: Expressing emotions in a virtual world (laughing, crying, smiling, etc.). • Grid: The technology and platform behind the virtual world. • Latency: The lag of movements in motion. It’s measured in the delay of the actual change of position versus the response time. The faster your computer and Internet connection, the lower the latency you will experience. • Teleport: The ability to fly to another location in the virtual space. • Universe: The collection of all entities and the space they are embedded in for a virtual world. Each virtual reality site has it’s own “universe” so to speak. Here are some of the most popular and growing Virtual Reality Worlds: SecondLife.com Let’s start with the community that has received the most media attention. SecondLife.com does not have the largest amount of registered users, but it has received more media coverage than most of the other major players as they have poured money into PR and have also had some notable people use their site. Second Life was launched in June 2003 by Linden Labs. It allows its residents to interact with each other, socialize, conduct business, and so on, across its grid. You must be 18 or older to use Second Life, and between the ages of 13 and 18 to use Teen Second Life. This is an important distinction for marketing purposes to know that users are 18 and older. They have over 15 million registered users. Registration is free for personal use. If you want to purchase land, there are monthly fees ranging from $5 to $295 per month, depending on the amount of space you are looking to purchase. For $295, you can have your own private island. A big advantage to purchasing land is to start controlling the marketing space. Most of your competitors will not be on these virtual sites. Get your land before them. Much like the other virtual worlds that will be outlined below, currency can be exchanged. In Second Life the currency used is Linden dollars. The exchange rate from Linden dollars to USD and to other currencies varies based on market factors — buy and sell rates. There have been live concerts in Second Life, government embassies established and education and training going on pretty much 24/7, just to name a few of the applications. Keep a close watch on this virtual reality world, as it has the most potential for continued and massive growth. ActiveWorlds.com Active Worlds is a little bit different than the rest. It is a 3-D world platform with a browser that runs on Windows. (Yes, this helps Bill Gates’ wallet grow even larger!) Originally, Active Worlds’ programmers wanted to integrate a 3-D browser. Think of Firefox or Internet Explorer in 3-D. Instead, it has morphed into another Second Life. For consumers, they can play around with their avatar in one of the 1,000 different worlds across the platform, interacting with each other, playing games or purchasing goods and services. For businesses, this has been a solid platform to develop buzz, sell products, support customers and to provide demos and training. The advantage of ActiveWorlds.com over SecondLife.com is that the cost to develop a presence is easier and much less expensive. To develop a full-blown store on SecondLife.com you are looking at upwards of $5000-$10,000 or more. Your time to market will be much quicker than on SecondLife.com. They also are very business-centric. They understand virtual reality-world marketing is growing in popularity and have catered many of their offerings and support to businesses while making it effortless for consumers to buy They are trying to bring the Amazon.com experience to their virtual world! EntropiaUniverse.com Entropia Universe is in a different league than the rest as they have a real cash economy. Some consider this a good thing, others do not. Entropia Universe is an online, 3-D, virtual universe for entertainment, social interaction and trade, using a real-cash economy. The virtual world was developed by the Swedish software company MindArk, based in Gothenburg. What MindArk really understands is monetization. Instead of charging a subscription price, they use an alternate micropayment model, asking people to buy in-game currency (the PED) which then, in turn, can be exchanged back to USD. MindArk claims to offer the first virtual universe with a real-cash economy. They want people coming to the site to spend money, rather than just to be playing around. And this is stressed across their website and promotional materials. Entropia Universe has been quite busy attracting various businesses and even government entities. In May 2007, they were chosen by the Beijing Municipal People’s Government endorsed online-entertainment company, Cyber Recreation Development Corporation, to create a cash-based virtual economy for China. This is huge in terms of adoption and possible numbers. They have been working toward creating the largest virtual world ever. Their proposal was accepted over many others, most notably Second Life. This was a blow to Second Life as they assumed they were the front runner! Entropia Universe has a goal to attract 150 million users from around the globe. Even more impressive, they expect to generate over $1 billion annually in commerce. But this is not the go-to place for business meetings. Instead, it has been a good place for entrepreneurs to sell their E-Commerce products and services to consumers and businesses. But, to date, they have some new plans in the works to make the site less gaming-intensive and more centered on business. Check out the site for free and get a feel for it, but don’t make a major investment of your time or money just yet. The above is an adapted excerpt from the book “Marketing in the Moment: The Practical Guide to Using Web 3.0 Marketing to Reach Your Customers First” by Michael Tasner. The above excerpt is a digitally scanned reproduction of text from print. Although this excerpt has been proofread, occasional errors may appear due to the scanning process. Please refer to the finished book for accuracy. Copyright © 2010 Michael Tasner, author of “Marketing in the Moment: The Practical Guide to Using Web 3.0 Marketing to Reach Your Customers First”

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Ferrari Designer Jason Castriota Hired by Saab Auto to Speed Turnaround

June 18, 2010

By Ola Kinnander June 18 (Bloomberg) — Jason Castriota, the U.S. designer known for creating the Ferrari P4/5 and Maserati GranTurismo, will head Saab Automobile’s design team to help the Swedish carmaker take on Bayerische Motoren Werke AG and Audi AG. The first assignment for Castriota’s design firm is to create an upscale version of Saab’s current 9-3 model, scheduled for release in 2012, the 36-year-old said in an interview. Aerodynamics will be a focus of the new design, he said. “It’s absolutely vital we get this car right,” Castriota said from New York late yesterday. “This is Saab returning to its roots, not having to worry about being part of a much larger machine that they were before in the GM organization.” Saab, sold by General Motors Co. to Dutch supercar maker Spyker Cars NV in February, aims to become profitable by 2012. The turnaround strategy includes releasing premium models more distinct and sporty in their design than when Saab was under GM, according to Spyker Chief Executive officer Victor Muller . Castriota will play a major role in fashioning the new 9-3 and other models, said Eric Geers , a spokesman for the Trollhaettan, Sweden-based Saab. “The 9-3 design as made by him is basically done, and I can tell you it is spectacular,” Muller said by telephone, adding that the design will be completed within weeks. “It is truly aircraft-inspired and Swedish-clean.” Benchmark Cars The 9-3 was first released in 1998. The second generation, still produced today, hit the streets in 2002. The new version intends to challenge BMW’s 3-series and Volkswagen AG ’s Audi A4, Castriota said. “Those are the benchmark cars,” he said by telephone. “They’re true premium vehicles and the 9-3 also needs to be a true premium vehicle.” Castriota started his career in 2001 at luxury-car designer Pininfarina SpA in Turin, Italy, where he stayed until 2008. He then worked for Stile Bertone in Italy until September 2009. Last December, he started his own firm, Jason Castriota Designs. The design house has five designers and is based in New York City and Turin. “I literally started sketching Ferraris when I was about five years old,” he said. “For whatever reason, some kids might kick around a soccer ball, I picked up a pencil and started sketching cars.” BMW Talks Castriota will become part of the leadership at Saab and will help “define the strategy for the new models,” he said. Saab is also planning to introduce a smaller car with a tear-drop shape inspired by the 92 model that was in production between 1949 and 1956. Saab is in talks with BMW about using its Mini platform, as well as engines and gearboxes, for that model, two people familiar with the situation said last week. “A small premium car from Saab is a very important vehicle and is something that could truly help the overall production volume of Saab in a great way,” Castriota said. To contact the reporters on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net ; Andreas Cremer in Berlin at acremer@bloomberg.net

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Virgin, Qantas Say They’re Open to Bids as Airline Industry Consolidates

June 8, 2010

By Steven Rothwell and Cornelius Rahn June 8 (Bloomberg) — Qantas Airways Ltd. and Virgin Atlantic Airways Ltd. said they’re open to merger proposals as efforts to cut costs and boost traffic push carriers to combine. Qantas, Australia’s biggest airline, favors an inter- continental deal and would be “a great asset for anyone,” Chief Executive Officer Alan Joyce said in an interview. Virgin is exploring options as U.S. and European mergers squeeze its position in the North Atlantic market, CEO Steve Ridgway said. “Consolidation isn’t easy to do and cross-border inter- continental mergers have not occurred yet, but I think they will and Qantas will be at the forefront of that,” Joyce said in Berlin, adding that the process “will take some time.” Joyce didn’t say if he favored a combination with British Airways Plc , which held merger talks with Qantas in 2008 before agreeing to a deal with Iberia Lineas Aereas de Espana SA. Virgin, British Airways’s biggest competitor at London’s Heathrow airport, is reviewing its standalone stance after regulators said they’d approve an expanded alliance between its rival and AMR Corp.’s American Airlines and after United Airlines agreed to combine with Continental Airlines Inc. “We’re a small company still,” Ridgway said in an interview in Berlin where, like Joyce, he was attending the annual meeting of the International Air Transport Association. “We would be looking potentially just to grow ourselves, to become part of a bigger group. We just need to look at what happens in the industry over the next 18 months.” LOT, SAS Polish national carrier LOT said its forecasts of a return to profit this year are attracting interest from other carriers and private-equity firms, while SAS Group AB CEO Mats Jansson said a new wave of consolidation in Europe is likely to begin in earnest next year as prospects improve. Sydney-based Qantas’s previous negotiations with British Airways were called off after the pair failed to agree on how to split ownership, the U.K. carrier has said. A combination would have created a carrier with $24 billion in sales and 500 planes. Talks were complex because the London-based company had more revenue and Qantas a higher market value. That’s still the case. “I don’t think you can ever look back and have any regrets,” Joyce said. “I think you have to look forward, and we do look forward at what other opportunities do exist.” The airline rose as much as 2.4 percent to A$2.52 in Sydney and changed hands at A$2.50 at 11 a.m. The shares have fallen 16 percent this year. Singapore Stake Qantas is already partnered with British Airways in the Oneworld alliance, as are American Airlines and Spain’s Iberia, with which the U.K. company aims to complete a merger this year British billionaire Richard Branson ’s Virgin Atlantic isn’t in a global grouping and specializes in point-to-point travel to business destinations and high-end tourist resorts. Singapore Airlines Ltd. owns a 49 percent stake in the Crawley, England-based company, though CEO Ridgway said it’s possible that the holding could be offered for sale as the Asian carrier modifies its strategy to reflect the expansion of the Indian and Chinese markets in the past 10 years. “Singapore Airlines is a great shareholder, and I don’t think they’re in any hurry to do that,” he said. “At the end of the day it’s down to them, but it could be an opportunity.” Malaysian Airline System Bhd. , which like Virgin stands apart from the Oneworld, Star and SkyTeam alliances, also favors consolidation to boost earnings and cut costs, CEO Tengku Azmil Zahruddin said yesterday at the IATA event. “As an industry we are far too fragmented and that is one of the reasons that we don’t make reasonable returns for shareholders,” the CEO said during a roundtable discussion. ‘Too Early’ SAS, the unprofitable owner of Scandinavian Airlines rescued by share sales that saw the Swedish, Danish and Norwegian governments increase their stakes, has said it’s unlikely to remain independent once earnings are restored. CEO Jansson said yesterday that the level of losses suffered by European carriers during the recession means it’s “too early” to contemplate consolidation this year. “2011 is the time for new steps in the consolidation process,” Jansson said in an interview. “When companies feel they’ve done their homework, they’re in good shape and the market is stable, then boards will start to look at the acquisition list, but not now.” “Good Moment” Poland’s LOT, or Polskie Linie Lotnicze LOT SA, said right now is “a very good moment” to seek a buyer. The company, which aims to post a profit in 2010 after losing money for the past two years, has sent “teasers” that attracted interest from “a few” airlines and investment funds and a transaction could in theory be agreed “very quickly,” CEO Sebastian Mikosz said in an interview. At Qantas, Joyce said an investment-grade debt rating will be a major attraction for a merger partner. The Asia-Pacific market is also now “very healthy,” though demand on routes to Europe is weak and of most strategic concern, he said. Air France’s purchase of KLM Royal Dutch Airlines in 2004 is the airline industry’s biggest deal to date. It would be surpassed by merger of United Airlines parent UAL Corp. and Continental in a $3 billion stock swap announced on May 3. To contact the reporters on this story: Steven Rothwell in Berlin via srothwell@bloomberg.net ; Cornelius Rahn in Berlin via crahn2@bloomberg.net

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Qantas, Virgin Say They’re Open to Bids as Airline Industry Consolidates

June 7, 2010

By Steven Rothwell and Cornelius Rahn June 8 (Bloomberg) — Qantas Airways Ltd. and Virgin Atlantic Airways Ltd. said they’re open to merger proposals as efforts to cut costs and boost traffic push carriers to combine. Qantas, Australia’s biggest airline, favors an inter- continental deal and would be “a great asset for anyone,” Chief Executive Officer Alan Joyce said in an interview. Virgin is exploring options as U.S. and European mergers squeeze its position in the North Atlantic market, CEO Steve Ridgway said. “Consolidation isn’t easy to do and cross-border inter- continental mergers have not occurred yet, but I think they will and Qantas will be at the forefront of that,” Joyce said in Berlin, adding that the process “will take some time.” Joyce didn’t say if he favored a combination with British Airways Plc , which held merger talks with Qantas in 2008 before agreeing to a deal with Iberia Lineas Aereas de Espana SA. Virgin, British Airways’s biggest competitor at London’s Heathrow airport, is reviewing its standalone stance after regulators said they’d approve an expanded alliance between British Airways and AMR Corp.’s American Airlines and after United Airlines agreed to combine with Continental Airlines Inc. “We’re a small company still,” Ridgway said in an interview in Berlin where, like Joyce, he was attending the annual meeting of the International Air Transport Association. “We would be looking potentially just to grow ourselves, to become part of a bigger group. We just need to look at what happens in the industry over the next 18 months.” LOT, SAS Polish national carrier LOT said its forecasts of a return to profit this year are attracting interest from other carriers and private-equity firms, while SAS Group AB CEO Mats Jansson said a new wave of consolidation in Europe is likely to begin in earnest next year as prospects improve. Sydney-based Qantas’s previous negotiations with British Airways were called off after the pair failed to agree on how to split ownership, the U.K. carrier has said. A combination would have created a carrier with $24 billion in sales and 500 planes. Talks were complex because the London-based company had more revenue and Qantas a higher market value. That’s still the case. “I don’t think you can ever look back and have any regrets,” Joyce said. “I think you have to look forward, and we do look forward at what other opportunities do exist.” Qantas is already partnered with British Airways in the Oneworld alliance, as are American Airlines and Spain’s Iberia, with which the U.K. company aims to complete a merger this year British billionaire Richard Branson ’s Virgin Atlantic isn’t in a global grouping and specializes in point-to-point travel to business destinations and high-end tourist resorts. Singapore Stake Singapore Airlines Ltd. owns a 49 percent stake in the Crawley, England-based company, though CEO Ridgway said it’s possible that the holding could be offered for sale as the Asian carrier modifies its strategy to reflect the expansion of the Indian and Chinese markets in the past 10 years. “Singapore Airlines is a great shareholder, and I don’t think they’re in any hurry to do that,” he said. “At the end of the day it’s down to them, but it could be an opportunity.” Malaysian Airline System Bhd. , which like Virgin stands apart from the Oneworld, Star and SkyTeam alliances, also favors consolidation to boost earnings and cut costs, CEO Tengku Azmil Zahruddin said yesterday at the IATA event. “As an industry we are far too fragmented and that is one of the reasons that we don’t make reasonable returns for shareholders,” the CEO said during a roundtable discussion. ‘Too Early’ SAS, the unprofitable owner of Scandinavian Airlines rescued by share sales that saw the Swedish, Danish and Norwegian governments increase their stakes, has said it’s unlikely to remain independent once earnings are restored. CEO Jansson said yesterday that the level of losses suffered by European carriers during the recession means it’s “too early” to contemplate consolidation this year. “2011 is the time for new steps in the consolidation process,” Jansson said in an interview. “When companies feel they’ve done their homework, they’re in good shape and the market is stable, then boards will start to look at the acquisition list, but not now.” Poland’s LOT, or Polskie Linie Lotnicze LOT SA, said right now is “a very good moment” to seek a buyer. The company, which aims to post a profit in 2010 after losing money for the past two years, has sent “teasers” that attracted interest from “a few” airlines and investment funds and a transaction could in theory be agreed “very quickly,” CEO Sebastian Mikosz said in an interview. At Qantas, Joyce said an investment-grade debt rating will be a major attraction for a merger partner. The Asia-Pacific market is also now “very healthy,” though demand on routes to Europe is weak and of most strategic concern, he said. Air France’s purchase of KLM Royal Dutch Airlines in 2004 is the airline industry’s biggest deal to date. It would be surpassed by merger of United Airlines parent UAL Corp. and Continental in a $3 billion stock swap announced on May 3. To contact the reporters on this story: Steven Rothwell in Berlin via srothwell@bloomberg.net ; Cornelius Rahn in Berlin via crahn2@bloomberg.net

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Israeli Raid on Ship Adds to Pressure for Easing Gaza Controls

May 31, 2010

By Jonathan Ferziger and Calev Ben-David June 1 (Bloomberg) — Israel’s raid on a flotilla of ships bringing aid to the Gaza Strip, which left nine dead, has increased pressure for an end to the country’s control of the coastal enclave’s borders. British Foreign Secretary William Hague yesterday issued a statement calling on Israel to “allow unfettered access” to Gaza, while European Union foreign policy chief Catherine Ashton urged the “unconditional opening of crossings” into Gaza. Israel, which is facing international criticism over the boat deaths, says it needs to control Gaza’s borders or else Hamas will smuggle in material to make rockets and attack its territory. Palestinians, backed by the United Nations and human rights groups, say the restrictions on food imports and construction materials have created a humanitarian crisis. Blockading Gaza “is turning into a human rights and public relations disaster” for Israel, said Martin Indyk , director of foreign policy at the Brookings Institution in Washington and a former U.S. ambassador to Israel. “Israel needs to find a better way.” Israel said its soldiers were attacked with knives and clubs after boarding a vessel and seven soldiers were wounded, including by gunfire after activists aboard the ship managed to grab Israeli firearms. The clash was in international waters, said the Free Gaza Movement, which organized the flotilla. ‘Freedom Flotilla’ The six ships in the “Freedom Flotilla” came from Sweden, Greece and Turkey on a mission aimed at breaking Israel’s blockade of Gaza that organizers pledged would be nonviolent. Israel had warned it wouldn’t let the ships reach Gaza and called the mission a propaganda trick aimed at making it look bad. Several of the dead were from Turkey, which said relations with Israel may suffer irreparable harm. Israel committed “murder” and violated international law when it intercepted the ships, Turkish Foreign Minister Ahmet Davutoglu told an emergency meeting of the United Nations Security Council. French President Nicolas Sarkozy said Israel had used “disproportionate” force. German Chancellor Angela Merkel said she had spoken by phone with Israeli Prime Minister Benjamin Netanyahu and Turkish Prime Minister Recep Tayyip Erdogan and called for “a comprehensive investigation.” Netanyahu cut short a trip to Canada to return to Israel, canceling a meeting scheduled in Washington with President Barack Obama . ‘Hamas Terrorist Base’ “Gaza has become a Hamas terrorist base, backed by Iran, firing thousands of rockets at Israel, and has amassed tens of thousands more to fire at our cities, our towns, our children,” Netanyahu said yesterday during a visit to Ottawa. “Our policy is this: We try to let all humanitarian goods into Gaza after they have undergone our security checks.” Obama expressed “deep regret at the loss of life” and said it was important to learn “all the facts and circumstances around this morning’s tragic events as soon as possible,” according to a statement from the White House. Israeli stocks fell the most in four days. The benchmark TA-25 Index lost 1.6 percent, the biggest drop since May 25, to 1,082.74 at the close in Tel Aviv. The shekel fell as much as 1.5 percent to 3.8729 to the dollar and traded at 3.8652 at 5:14 p.m. yesterday. Aboard the ships were more than 500 people, including European members of parliament and Swedish author Henning Mankell , according to the Free Gaza Movement. Israeli Navy ships have intercepted three previous efforts by the Free Gaza Movement, formed in 2008 to deliver aid to the territory by sea. Attacked With Knives An Israeli military official, speaking on condition of anonymity, told reporters that soldiers boarded the ships after approaching on three military helicopters and several commando boats at about 4 a.m., according to a pool report provided by the Associated Press. One of the commandos, also speaking on condition of anonymity, said after descending from one of the helicopters on a rope, he was immediately attacked by a group of passengers with metal sticks and knives, the pool report said. The commando said activists grabbed soldiers, stripped them of their helmets and equipment, and threw them from the top deck to the lower deck, the report said. Saeb Erakat , the Palestinian Authority’s chief peace negotiator, called the incident a “war crime” and said the international community must take “swift and appropriate action.” Three-Week War Israel has restricted entry of people and goods into Gaza since the territory was taken over by Hamas in 2007, allowing in a limited range of supplies including food, clothing and medicine. Hamas is considered a terrorist organization by Israel, the U.S. and the European Union. Israel fought a three-week war in Gaza starting in December 2008 that it said was meant to stop Hamas and other militant groups from firing rockets into its territory. Some 330 rockets have been fired from Gaza into Israel since the end of the operation, killing one foreign worker last March, the army said. Israeli bombing and ground operations during the war destroyed thousands of houses across Gaza, and Israel’s restrictions on construction materials have prevented Palestinians from being able to rebuild. The army says Hamas has used materials such as cement and iron pipes to build rockets and bunkers. “The area is ruled by Hamas, a terror organization that is arming itself all the time with weaponry and rockets intended to hurt Israel,” Israeli Defense Minister Ehud Barak said at a news conference yesterday in Tel Aviv. Indyk said one way Israel could solve its “dilemma” was a “cease-fire deal in which Hamas commits to preventing violent attacks from Gaza and stopping all smuggling into Gaza in return for Israel opening the passages with international monitors.” To contact the reporter on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net ; Calev Ben-David in Jerusalem at cbendavid@bloomberg.net

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U.S. Stocks Fall, Euro Weakens on Concern China Reviewing Europe Holdings

May 26, 2010

By Nick Baker and Rita Nazareth May 26 (Bloomberg) — U.S. stocks fell, halting a global advance, and the euro weakened as reports that China may review its investments in European government bonds spurred concern the credit crisis will worsen. The Standard & Poor’s 500 Index retreated 0.6 percent to 1,067.95, compared with the 2.4 percent and 0.9 percent rallies by the Stoxx Europe 600 Index and the MSCI Asia Pacific Index, respectively. The euro dropped to $1.2169 at 5:23 p.m. in New York from $1.2346 yesterday, sinking toward the four-year low of $1.2144 reached last week. Treasuries pared losses, with yields on 10-year notes at 3.19 percent versus 3.26 percent earlier. China’s State Administration of Foreign Exchange has met with foreign bankers because of concern about exposure to Europe, the Financial Times reported without saying where it got the information. China Investment Corp., the nation’s sovereign wealth fund, may lower its allocation of assets to Europe, Reuters said, citing President Gao Xiqing . U.S. stocks gained and Treasuries fell earlier as new-home sales rose to the highest in two years and durable-goods orders beat forecasts. “People are scratching their heads,” said Mark Bronzo , an Irvington, New York-based fund manager at Security Global Investors, which oversees $23 billion. “We had good economic data points, but that did not help. We couldn’t sustain the gains. People are on the sidelines. There are too many uncertainties about Europe.” 10% Retreat The S&P 500 is down 10 percent in May, poised for its worst month since February 2009 as credit-ratings downgrades of Greece, Portugal and Spain added to concern some European nations will struggle to fund budget deficits. Microsoft Corp. tumbled 4.1 percent today in New York after Chief Executive Officer Steve Ballmer said the effects of the debt crisis won’t be isolated to Europe. Wells Fargo & Co. and Goldman Sachs Group Inc. slid at least 1.6 percent as financial shares in the S&P 500 reversed a 1.8 percent increase. The stock indexes erased gains as the euro dropped below $1.22. The “euro has been trading terribly,” Peter Boockvar , equity strategist at Miller Tabak & Co. in New York, said in an e-mail. “Once euro broke the 1.22 level, selling picked up in everything else.” The MSCI World Index of shares in 24 developed nations climbed 0.5 percent. It posted an advance of 2 percent an hour after U.S. stock exchanges opened before retreating. Rand, Yen The euro fell against 14 of 16 major counterparts, including losses exceeding 1.5 percent versus the South African rand, the Japanese yen and the Singapore dollar. The Dollar Index, which measures the U.S. currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, rallied 0.6 percent in its third straight advance. The Reuters/Jefferies CRB Index of commodities rose 1.6 percent. Oil advanced 4 percent, the most since September, to $71.51 a barrel in New York after a U.S. government report showed gains in fuel consumption. Demand climbed 0.6 percent to 19.7 million barrels a day in the week ended May 21, the Energy Department said in a report today. To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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Israel Says Gaza Aid Ships Are `Propaganda,’ Will Block Them From Docking

May 25, 2010

By Jonathan Ferziger May 25 (Bloomberg) — Israel won’t allow an international flotilla to reach the Gaza Strip with construction materials and humanitarian supplies, an official said, calling the shipment a provocative stunt. While the Free Gaza Movement, the group behind the shipments, has “wrapped themselves in a humanitarian cloak, they are engaging in political propaganda and not in pro-Palestinian aid,” Foreign Ministry spokesman Yigal Palmor said today in a telephone interview from Jerusalem. The eight vessels, carrying 10,000 tons of cargo and some 550 pro-Palestinian activists through the Mediterranean Sea, will probably reach the coastal waters of Gaza by May 28 or 29, Dror Feiler, one of the organizers, said by satellite phone from aboard the Swedish-Greek ship Sofia. Israel has restricted entry of people and goods into Gaza since it was taken over by the militant Hamas movement in 2007, allowing in only a limited range of supplies including food, clothing and medicine in truck convoys. Israeli Navy ships have stopped three previous efforts by the Free Gaza Movement, an international group formed in 2008 to deliver aid, to reach the territory by sea. The ships set sail from Ireland, Sweden, Turkey and Greece, Feiler said. Some are carrying television crews that plan to broadcast live any confrontation between Israeli forces and the activists. “This is not going to look good on television,” said 58-year-old Feiler, an Israeli-born resident of Sweden. “We’re on a peaceful mission to help end the misery of the people in Gaza and it’s going to be very ugly if Israeli soldiers try to take over our ships.” Gaza War Hamas is considered a terrorist organization by Israel, the U.S. and European Union. Israel fought a three-week war in Gaza starting in December 2008 that it said was meant to stop Hamas and other militant groups from firing rockets into its territory. It has been negotiating a prisoner swap with Hamas to exchange a captive Israeli soldier, Gilad Shalit , for about 1,000 jailed Palestinians. The Palestinian Authority condemned Israel’s decision to stop the ships. “This is part of the Israeli policy of suffocating Gaza’s population of 1.5 million people by tightening the blockade,” spokesman Ghassan Khatib said in a telephone interview from Ramallah in the West Bank. Along with medical and school supplies, the ships this time are carrying cement, iron rods and other construction material that Israel has banned from entering Gaza, and that are needed to rebuild homes and other buildings destroyed in the war, Feiler said. Making Bombs Such materials are used by Hamas “for developing its arsenal, building bunkers and launching sites, and making rockets and mortars,” according to a statement e-mailed by the Israeli army. The ships can unload their cargo at Ashdod port, north of Gaza, and Israel will determine which supplies can be trucked in, Shlomo Dror , a Defense Ministry spokesman said. To contact the reporter on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net

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U.S. Stocks Drop on Lending Rates as S&P 500 Hits Six-Month Low

May 25, 2010

By Rita Nazareth May 25 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index to its lowest level since November, as bank borrowing costs rose and a report said North Korean leader Kim Jong Il ordered his military to prepare for combat. Citigroup Inc. and JPMorgan Chase & Co. fell at least 2.3 percent as the rate known as Libor that banks say they pay for three-month loans in dollars increased to 0.536 percent, the highest since July 7 and the 11th straight gain. Exxon Mobil Corp. and Alcoa Inc. tumbled as crude oil fell below $68 a barrel and metals plunged. Office Depot Inc. and Abercrombie & Fitch Co. lost more than 2.5 percent after the International Council of Shopping Centers cut its forecast for May sales. The S&P 500 dropped 2.2 percent to 1,049.78 at 10:12 a.m. in New York. It fell to 1,040.78 earlier, the weakest intraday level since Nov. 3. The Dow Jones Industrial Average lost 211.23 points, or 2.1 percent, to 9,855.34. Both pared losses for 5 minutes before resuming their drop after the Conference Board’s consumer confidence measure beat the median economist estimate. “We’re back in uncharted territory,” said Art Hogan , chief market analyst at New York-based Jefferies Group Inc. “Korea is a major distraction at a time of global uncertainty. The market is selling for a bigger reason. There’s concern about the banking industry in Europe. The Libor rate has spiked, which certainly signifies that the credit is slowing in an interbank basis. The market is trying to price in the worst-case scenario right now, of not only lending freezing, but of a major bank becoming insolvent.” Budget Deficits The S&P 500 has lost 13 percent from a 19-month high on April 23 amid concern mounting budget deficits in European countries will derail global growth, erasing a quarter of the index’s 80 percent surge since March 9, 2009. Four Spanish banks said they will combine as regulators push lenders to merge with stronger partners and after the International Monetary Fund yesterday urged the nation to take more steps to overhaul its financial institutions. Six stocks in the S&P 500 rallied, led by AutoZone Inc.’s 4.3 percent surge to $192.14. The auto parts retailer with more than 4,300 stores reported fiscal third-quarter profit of $4.12 a share, topping the average analyst estimate in a Bloomberg survey by 15 percent. Goldman Sachs Group Inc. climbed 0.9 percent to $137.86. Equities fell worldwide, driving the MSCI Asia Pacific Index down 3.1 percent, after the North Korea Intellectuals Solidarity group said that the country’s military was put on alert. The U.S. announced plans yesterday to conduct anti- submarine exercises with South Korea following the March 26 torpedoing of a warship. ‘Spooking Markets’ “The troubles that we have are big enough to keep this downtrend going for quite some time,” said Philippe Gijsels , head of research at BNP Paribas Fortis Global Markets in Brussels. “Everybody realizes this is going to put severe stress on economic growth. Tension between South and North Korea is another additional negative that is spooking markets.” Corporate and sovereign credit risk indicators jumped to the highest level in 10 months on concerns that heightened military tension in the Korean peninsula and a slump in confidence in the euro will hurt the global economy. The gap between the cost to buy and sell corporate credit reached the widest in nine months in another sign investors are increasingly wary of all but the safest government bonds amid Europe’s sovereign debt crisis. Mohamed A. El-Erian , co-chief investment officer at Pacific Investment Management Co. , said strains evident in Spain’s banking system are intensifying concern that the Greek debt crisis may spread, PBS reported. “Banks have a way of amplifying shocks in the system,” El-Erian, whose company runs the world’s biggest bond fund, said in an interview with PBS’s Nightly Business Report posted on the U.S. public broadcaster’s website. Banks are “like the oil in your car. They link up so many different parts. The minute you introduce strains in the banking system, there’s always a fear that governments will be behind the curve and that you can get contagion. You can get widespread disruption.” Banks slumped. Citigroup tumbled 3.3 percent to $3.66. JPMorgan lost 2.4 percent to $37.71, while Bank of America Corp. declined 2.6 percent to $15. Energy and raw-materials producers sank on concern that demand will slow. Exxon slumped 2 percent to $58.99, while Alcoa slid 4.4 percent to $10.60. Crude oil declined before a report forecast to show U.S. supplies are growing, while concern Europe’s debt crisis will spread prompted investors to sell riskier assets. Crude oil for July delivery fell as much as 4.4 percent to $67.15 a barrel in New York. Copper, aluminum, nickel and zinc fell in London as investors shied away from risky assets on concern that Europe’s sovereign-debt crisis may spread and China might take more steps to cool its economy. The Dollar Index, which measures the U.S. currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, climbed for a second day, rising 1.1 percent. Retailers slumped after the International Council of Shopping Centers forecast that sales will rise 2 percent to 2.5 percent in May, compared with a previous projection of 3.5 percent growth, according to an e-mailed statement. Office Depot fell 2.6 percent to $5.68. Abercrombie & Fitch retreated 2.9 percent to $34.33. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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Stocks Gain as Europe Financial Crisis Eases; Treasuries Fall, Gold Rises

May 12, 2010

By Rita Nazareth and David Merritt May 12 (Bloomberg) — Stocks rallied, with the Standard & Poor’s 500 Index recovering losses from its May 6 plunge, as a successful Portuguese bond sale and planned budget cuts in Spain and the U.K. bolstered optimism the European debt crisis is subsiding. Treasuries fell and gold rose to a record. The S&P 500 surged 1.4 percent to 1,171.67 at 4 p.m. in New York, above its highest close since May 4. The Stoxx Europe 600 Index climbed 1.5 percent as all 19 of its industry groups gained. The 10-year Treasury yield increased six basis points to 3.58 percent after a $24 billion auction of the notes, while gold futures surged to a record $1,249.20 an ounce on speculation international financial support for indebted European nations will depress currencies. Portugal’s bond sale, Spain’s reduction in public wages and new U.K. Prime Minister David Cameron ’s plans to cut the deficit added to optimism that Europe’s debt crisis will ease after leaders pledged almost $1 trillion in emergency loans over the weekend. Better-than-estimated earnings at companies from A.P. Moeller-Maersk A/S to ING Groep NV and faster-than-forecast growth in the euro region’s economy also lifted sentiment, as did a potential $15 billion leveraged buyout in the U.S. “It’s not another Lewis Carroll ’s ‘Alice in Wonderland’ tale,” said Michael Holland , who oversees more than $4 billion as chairman of Holland & Co. in New York. “David Cameron’s budget-deficit plan reminds people that you have some adults in the world when it comes to addressing the problems. The European package was another adult response. The global economic recovery is continuing and will likely not be derailed by the European crisis.” U.S. Rally Gauges of technology and industrial companies rose at least 2 percent to lead gains among all 10 groups in the S&P 500, with International Business Machines Corp., Intel Corp., Cisco Systems Inc. and Caterpillar Inc. rising at least 3 percent to help lead the Dow Jones Industrial Average up 148.65 points, or 1.4 percent, to 10,896.91, also the highest since May 4. Cisco reported better-than-estimated results after the close of trading, while IBM forecast earnings-per-share may double by 2015. Morgan Stanley fell 2 percent after the Wall Street Journal reported that U.S. prosecutors are investigating some of the bank’s transactions in collateralized debt obligations, citing people familiar with the matter. Chief Executive Officer James Gorman , speaking at a press conference in Tokyo today, said there is “no substance” to any allegations. M&A Watch Blackstone Group LP slipped 0.2 percent as the world’s biggest private equity company, Thomas H. Lee Partners LP and TPG Capital are in talks to pay more than $15 billion including debt for Fidelity National Information Services Inc., according to a person with knowledge of the deal. Fidelity National rallied 2.9 percent. Sybase Inc. jumped 35 percent after Bloomberg News reported SAP AG is close to buying the company for $6 billion, according to two people with knowledge of the matter. The MSCI World Index of stocks in 23 developed nations advanced 1.1 percent, recouping yesterday’s drop. Maersk , the owner of the world’s largest container-shipping line, rallied 9 percent after saying it returned to profit as freight rates jumped and global trade picked up. ING , the largest Dutch financial services company, jumped 4.2 percent in Amsterdam after reporting a better-than-estimated profit as bad loans fell. European Austerity The U.K.’s FTSE 100 Index rose 0.9 percent as Conservative leader Cameron took over as prime minister. Cameron’s chancellor of the exchequer, George Osborne , will prepare an emergency budget within 50 days containing 6 billion pounds ($9 billion) of spending cuts to narrow the deficit. The measure is part of the Conservative Party’s deal with its coalition partners, the Liberal Democrats, announced yesterday. Spain’s IBEX 35 Index, which jumped a record 14 percent two days ago after the European loan package was announced, climbed 0.8 percent today and the cost of insuring against default on Spain’s largest banks fell to the lowest in three weeks after Prime Minister Jose Luis Rodriguez Zapatero announced measures to cut the country’s deficit. Credit-default swaps on Banco Santander SA, Spain’s biggest lender, declined 35 basis points to 130, the lowest since April 20, according to CMA DataVision prices. Contracts on Banco Bilbao Vizcaya Argentaria SA fell 31.5 basis points to 148, indicating an improvement in the perception of credit quality. Spain, France Spain will reduce public-sector wages 5 percent this year and freeze them in 2011 in response to calls from European finance ministers for deeper budget cuts as part of the aid package for the region’s most indebted nations. Zapatero’s deficit reduction plan triggered a 22 basis-point decline in the country’s sovereign default swaps to 139. The CAC-40 Index of French equities rallied 1.1 percent today, trimming its 2010 decline to 5.1 percent. Nicolas Lenoir , chief market strategist at ICAP Futures LLC in Jersey City, New Jersey, advised shorting the French equity market on speculation that any potential austerity measures will not be well-received in that nation. “Being French I can promise you first hand that if there is any form of austerity required as part of the $1 trillion package it will not fly one bit,” Lenoir said in a note to clients. “We had riots with a daily car-burn rate above 1,200 for over a week because a teenager electrocuted himself trying to escape from the cops, so just try and imagine if railway workers can no longer retire at 50 or 55 after being driven to exhaustion watching a computer do their job 35 hours a week.” Portugal Bond Sale In Portugal, Finance Minister Fernando Teixeira dos Santos said the nation’s sovereign debt is enjoying better market conditions as borrowing costs eased. Portugal sold 1 billion euros ($1.3 billion) of 10-year bonds today, getting more demand than at previous auctions. The country’s debt agency priced the 4.8 percent bonds due 2020 to yield 4.52 percent, 181 basis points below last week’s high, which was a record since the euro’s introduction. Gross domestic product in the 16 euro nations rose 0.2 percent from the fourth quarter, when it remained unchanged, the EU’s statistics office in Luxembourg said today. Germany’s economy unexpectedly grew in the first three months of the year as rising exports and company investment outweighed the effects of the cold winter. Gains for the Greek two-year note drove the yield down 4 basis points to 6.98 percent. The nation’s 10-year bond yield lost 20 basis points to 7.24 percent, with the yield premium demanded to own the debt instead of benchmark German bunds narrowing for a third day to 430 basis points from a record 965 basis points on May 7. Asset-Backed Downgrade Moody’s Investors Service lowered 22 billion euros ($28 billion) of Greek bonds backed by loans to consumers and companies as the country adopts austerity measures to qualify for European aid, leaving the notes under review for further downgrades. Spain’s 10-year bond yield slipped one basis point to 3.91 percent, the lowest since April 21, and Italy’s decreased two basis points to 3.92 percent. The MSCI Asia Pacific fell 0.1 percent. Mitsubishi UFJ Financial Group Inc., which holds about 20 percent of Morgan Stanley, sank 2.4 percent in Tokyo. China Resources Land Ltd., a property developer, lost 3.1 percent in Hong Kong. Posco, South Korea’s largest steelmaker, declined 2.5 percent. The yen weakened against 14 of its 16 most-traded counterparts, dropping more than 1 percent against the Brazilian real, Mexican peso, South African rand and Swedish krona and at least 0.2 percent against the dollar and euro amid demand for high-yielding currencies. The Dollar Index, a gauge of the currency against six major trading partners, rose 0.5 percent to 84.889. Emerging Markets The MSCI Emerging Markets Index of equities rallied 1 percent, with the Micex Index in Russia, the world’s largest energy exporter, jumping 4.3 percent for the biggest gain among global equity gauges. Brazil’s Bovespa increased 1.2 percent after retail sales rose at the fastest pace on record and BM&FBovespa SA, Latin America’s biggest securities exchange, reported better-than- estimated earnings. . Argentina gave institutional investors more time to turn over defaulted bonds in a $20 billion restructuring offer and said it may shelve plans to sell new debt as its borrowing costs surge. Argentina Restructuring Argentina extended the deadline for swapping securities to May 14 from today and said further extensions are possible, according to a government statement distributed by Barclays Capital, which is managing the offer. Economy Minister Amado Boudou said yesterday the country may scrap a $1 billion bond sale that formed part of the restructuring after yields rose to a two-month high on concern the Greek crisis was spreading. Gold futures for June delivery rose $22.80, or 1.9 percent, to $1,243.10 an ounce. In electronic trading after settlement, the price reached $1,249.20, the highest ever. Crude oil declined, losing 0.9 percent to $75.65 a barrel in New York, after a U.S. government report showed that inventories climbed for the 14th time in 15 weeks. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; David Merritt in London on dmerritt1@bloomberg.net .

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Stocks, Oil Drop on Bailout Skepticism; Pound, Gilts Gain

May 11, 2010

By Rita Nazareth and Michael P. Regan May 11 (Bloomberg) — Stocks fell, led by commodity producers and banks, and oil and copper slid on skepticism an almost $1 trillion European loan package will halt the region’s debt crisis. The pound gained as Conservative leader David Cameron was appointed prime minister. Gold rose to a record. The Standard & Poor’s 500 Index lost 0.3 percent at 4 p.m. in New York following a 4.4 percent jump yesterday after the European plan was announced. The MSCI World Index dropped 0.7 percent. Oil fell on a stronger dollar, while copper slid on concern growth will slow in Europe and China. The pound rose 0.8 percent to near $1.50 and added 1.5 percent versus the euro on speculation Cameron will form a coalition with Liberal Democrats and take aggressive steps to cut the deficit. Ten-year gilt yields fell 4 basis points to 3.9 percent. The European Union’s unprecedented bailout package is unlikely to be a “long-term solution” for the region, Marek Belka , the director of the International Monetary Fund’s European department, said in Brussels yesterday. Federal Reserve Chairman Ben S. Bernanke told U.S. senators in a closed-door session that the plan isn’t a cure-all, said Alabama Senator Richard Shelby , the senior Republican on the Banking Committee. “I think 24 hours after the realization that there’s a solution in Europe, people are more reflective right now on what does that solution mean longer term,” Gary Cohn , president and chief operating officer of Goldman Sachs Group Inc., said this morning at a UBS AG conference in New York. “Are we socializing the risk throughout Europe?” China Bear Market Chinese stocks entered a bear market as inflation in the nation accelerated to an 18-month high, increasing pressure on the government to raise interest rates in an economy that has been an engine of growth through the global financial crisis. U.S. stocks pared early declines, with the Dow Jones Industrial Average recovering most of a 100-point drop, on speculation Cameron’s government will cut the U.K. budget deficit and prevent the European debt crisis from worsening. The Stoxx Europe 600 Index closed down 0.5 percent after tumbling as much as 2.2 percent. Producers of raw materials and energy and financial firms fell the most among 10 groups in the S&P 500, dropping at least 0.5 percent each. Occidental Petroleum Corp., Alcoa Inc. and Goldman Sachs Group Inc. fell at least 1.3 percent each. Newmont Mining Corp., the largest U.S. gold producer, jumped 4.9 percent as the precious metal rose 2.9 percent to a record $1,235.20 an ounce on demand for a safe haven amid fluctuations in currency markets. Euro Retreats The euro slumped 0.9 percent to $1.2676, erasing yesterday’s advance. The currency has tumbled more than 11 percent versus the dollar this year. The dollar strengthened against 11 of 16 major counterparts, gaining more than 1 percent versus the Swedish krona and Brazilian real. Traders are betting the plan to rescue debt-laden governments from Greece to Portugal will fail to reverse the euro’s worst start to a year since 2000, forcing the European Central Bank to keep interest rates at a record low for longer. Economic growth in the nations that share the euro will lag behind the U.S. by almost 1.5 percentage points next year, Bloomberg surveys of economists show. “I understand the concerns around what’s going on in Europe, and it’s going to have a dampening effect on economic activity for sure,” Kevin Rendino , who manages $11 billion in Plainsboro, New Jersey, for BlackRock Inc., said in an interview on Bloomberg Television. “But we still see the glass half- filled.” Libor Rises The rate banks pay for three-month dollar loans held near the highest level in about nine months as Europe’s loan plan failed to encourage institutions to lend more to each other. The London interbank offered rate, or Libor, rose to 0.423 percent today from 0.421 percent yesterday, according to data from the British Bankers’ Association. Libor reached 0.428 percent on May 7, the highest since Aug. 17, on concern the sovereign-debt crisis triggered by Greece’s budget deficit is hurting the quality of loan collateral. Banks led the drop in the Stoxx 600, with the group sliding as much as 4.4 percent before paring losses and ending down 1.8 percent. Banco Santander SA , Spain’s largest lender, slipped 3.3 percent after surging 23 percent yesterday, its biggest rally in 20 years. Deutsche Boerse AG slipped 1.5 percent in Frankfurt after reporting earnings that missed analysts’ estimates. The MSCI Asia Pacific Index fell 1.1 percent, paring yesterday’s 1.5 percent advance. The MSCI Emerging Markets Index slipped 0.9 percent as the retreat in Chinese shares was offset by gains of more than 3.5 percent in Russian and Philippine equity markets, which were closed for trading yesterday. Philippine Peso The Philippine peso strengthened 0.8 percent against the dollar, the most among major emerging-market currencies, after Benigno Aquino headed for a landslide presidential election victory, ending concern that the result would be contested. The Shanghai Composite Index sank 1.9 percent, bringing its decline from a Nov. 23 high to 21 percent. Investors are concerned that accelerating inflation and surging property prices in China will spur the government to boost interest rates for the first time since 2007, slowing growth in the world’s fastest-expanding major economy and biggest metals user. Commodities pared an earlier drop, with the Reuters/Jefferies CRB Index slipping 0.1 percent. Crude oil fell 0.6 percent to $76.37 a barrel, while copper futures for June delivery fell 0.7 percent to $3.2065 a pound in New York. To contact the reporter for this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; Michael P. Regan in New York at mregan12@bloomberg.net .

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Stocks, Oil Drop on Skepticism About Europe’s Debt Plan; Pound, Gilts Gain

May 11, 2010

By Rita Nazareth and Michael P. Regan May 11 (Bloomberg) — Stocks fell, led by commodity producers and banks, and oil and copper slid on skepticism an almost $1 trillion European loan package will halt the region’s debt crisis. The pound gained as Conservative leader David Cameron was appointed prime minister. Gold rose to a record. The Standard & Poor’s 500 Index lost 0.3 percent at 4 p.m. in New York following a 4.4 percent jump yesterday after the European plan was announced. The MSCI World Index dropped 0.7 percent. Oil fell on a stronger dollar, while copper slid on concern growth will slow in Europe and China. The pound rose 0.8 percent to near $1.50 and added 1.5 percent versus the euro on speculation Cameron will form a coalition with Liberal Democrats and take aggressive steps to cut the deficit. Ten-year gilt yields fell 4 basis points to 3.9 percent. The European Union’s unprecedented bailout package is unlikely to be a “long-term solution” for the region, Marek Belka , the director of the International Monetary Fund’s European department, said in Brussels yesterday. Federal Reserve Chairman Ben S. Bernanke told U.S. senators in a closed-door session that the plan isn’t a cure-all, said Alabama Senator Richard Shelby , the senior Republican on the Banking Committee. “I think 24 hours after the realization that there’s a solution in Europe, people are more reflective right now on what does that solution mean longer term,” Gary Cohn , president and chief operating officer of Goldman Sachs Group Inc., said this morning at a UBS AG conference in New York. “Are we socializing the risk throughout Europe?” China Bear Market Chinese stocks entered a bear market as inflation in the nation accelerated to an 18-month high, increasing pressure on the government to raise interest rates in an economy that has been an engine of growth through the global financial crisis. U.S. stocks pared early declines, with the Dow Jones Industrial Average recovering most of a 100-point drop, on speculation Cameron’s government will cut the U.K. budget deficit and prevent the European debt crisis from worsening. The Stoxx Europe 600 Index closed down 0.5 percent after tumbling as much as 2.2 percent. Producers of raw materials and energy and financial firms fell the most among 10 groups in the S&P 500, dropping at least 0.5 percent each. Occidental Petroleum Corp., Alcoa Inc. and Goldman Sachs Group Inc. fell at least 1.3 percent each. Newmont Mining Corp., the largest U.S. gold producer, jumped 4.9 percent as the precious metal rose 2.9 percent to a record $1,235.20 an ounce on demand for a safe haven amid fluctuations in currency markets. Euro Retreats The euro slumped 0.9 percent to $1.2676, erasing yesterday’s advance. The currency has tumbled more than 11 percent versus the dollar this year. The dollar strengthened against 11 of 16 major counterparts, gaining more than 1 percent versus the Swedish krona and Brazilian real. Traders are betting the plan to rescue debt-laden governments from Greece to Portugal will fail to reverse the euro’s worst start to a year since 2000, forcing the European Central Bank to keep interest rates at a record low for longer. Economic growth in the nations that share the euro will lag behind the U.S. by almost 1.5 percentage points next year, Bloomberg surveys of economists show. “I understand the concerns around what’s going on in Europe, and it’s going to have a dampening effect on economic activity for sure,” Kevin Rendino , who manages $11 billion in Plainsboro, New Jersey, for BlackRock Inc., said in an interview on Bloomberg Television. “But we still see the glass half- filled.” Libor Rises The rate banks pay for three-month dollar loans held near the highest level in about nine months as Europe’s loan plan failed to encourage institutions to lend more to each other. The London interbank offered rate, or Libor, rose to 0.423 percent today from 0.421 percent yesterday, according to data from the British Bankers’ Association. Libor reached 0.428 percent on May 7, the highest since Aug. 17, on concern the sovereign-debt crisis triggered by Greece’s budget deficit is hurting the quality of loan collateral. Banks led the drop in the Stoxx 600, with the group sliding as much as 4.4 percent before paring losses and ending down 1.8 percent. Banco Santander SA , Spain’s largest lender, slipped 3.3 percent after surging 23 percent yesterday, its biggest rally in 20 years. Deutsche Boerse AG slipped 1.5 percent in Frankfurt after reporting earnings that missed analysts’ estimates. The MSCI Asia Pacific Index fell 1.1 percent, paring yesterday’s 1.5 percent advance. The MSCI Emerging Markets Index slipped 0.9 percent as the retreat in Chinese shares was offset by gains of more than 3.5 percent in Russian and Philippine equity markets, which were closed for trading yesterday. Philippine Peso The Philippine peso strengthened 0.8 percent against the dollar, the most among major emerging-market currencies, after Benigno Aquino headed for a landslide presidential election victory, ending concern that the result would be contested. The Shanghai Composite Index sank 1.9 percent, bringing its decline from a Nov. 23 high to 21 percent. Investors are concerned that accelerating inflation and surging property prices in China will spur the government to boost interest rates for the first time since 2007, slowing growth in the world’s fastest-expanding major economy and biggest metals user. Commodities pared an earlier drop, with the Reuters/Jefferies CRB Index slipping 0.1 percent. Crude oil fell 0.6 percent to $76.37 a barrel, while copper futures for June delivery fell 0.7 percent to $3.2065 a pound in New York. To contact the reporter for this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; Michael P. Regan in New York at mregan12@bloomberg.net .

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Europe Financial Defense Package: Agreement Reached On Massive Preemptive Bailout

May 9, 2010

BRUSSELS — European Union finance ministers agreed Monday on a euro750 billion EU and International Monetary Fund safety net for troubled eurozone countries, hoping it will keep markets from targeting the weaker members of the 16 countries that use the embattled euro. Under the three-year aid plan, the EU Commission will make euro60 billion ($75 billion) available while countries from the 16-nation eurozone would promise bilateral backing for euro440 billion ($570 billion). The IMF would contribute an additional sum of at least half of the EU’s total contribution, or euro250 billion, Spanish Finance Minister Elena Salgado said. “We are placing considerable sums in the interest of stability in Europe,” she said after marathon 11-hour talks in an emergency finance ministers’ meeting. The talks were called on Friday night after a eurozone summit in Brussels amid concerns that the financial crisis sparked by Greece’s runaway debt problems had begun to spread to other financially troubled eurozone countries such as Portugal and Spain. The EU’s monetary affairs commissioner, Olli Rehn, said the agreement “proves that we shall defend the euro whatever it takes.” “We are facing such exceptional circumstances today and the mechanism and the mechanism will stay in place as long as needed to safeguard financial stability,” the ministers said in a statement. Spain and Portugal, which have begun to see the same signs of trouble that Greece had three months, have committed to “take significant additional consolidation measures in 2010 and 2011,” the statement said, and the two countries will present them to the EU’s finance ministers at their meeting on May 18. The EU’s slow response to the crisis and its failure to keep Greece from reaching the brink of bankruptcy triggered slides in the euro and global stocks last week, and intensified fears the crisis would spread. Ministers had hoped to have something approved by the time stock markets opened Monday in Asia, but they missed their deadline by a couple of hours. “We need to make progress today because in the night, when the markets are opening, we cannot afford disappointments,” Swedish Finance Minister Anders Borg said as he headed into the meeting Sunday afternoon. “We now see herd behaviors in the markets that are really pack behaviors, wolf pack behaviors,” he said. If unchecked, “they will tear the weaker countries apart. So it is very important that we now make progress.” Some eurozone nations blamed the fragile governments and a lack of European cooperation for the crisis. “I’m against putting all the blame on speculation,” said Austrian Finance Minister Josef Proell. “Speculation is only successful against countries that have mismanaged their finances for years.” Compounding the Greek financial crisis, attention has centered on fragile finances of countries like Spain and Portugal, which in turn could drag the whole of the euro zone down. Fear of default led to investors demanding high interest rates that Greece could not pay, forcing it to seek a bailout; the risk is that market skepticism will make Portugal and Spain pay more and more to borrow, worsening their plight. Early on Saturday, the eurozone leaders gave final approval for an euro80 billion ($100 billion) rescue package of loans to Greece for the next three years to keep it from imploding. The International Monetary Fund also approved its part of the rescue package – euro30 billion ($40 billion) worth of loans – in Washington on Sunday. Financial markets have continued to sell off the euro and Greek bonds even as EU leaders have insisted for days that the Greek financial implosion is a unique combination of bad management, free spending and statistical cheating that doesn’t apply to other euro-zone nations. Many economists think Greece will eventually default anyway, which could deal a sharp blow to the euro and lead to sharply higher borrowing costs for other indebted countries in Europe. Default, or market contagion to other countries could lead to panic, intimidating consumers from spending and making banks fearful to lend money to businesses and consumers. ____ AP Business Writer Emma Vandore in Brussels, and Associated Press writers Elaine Ganley in Paris and Daniel Wagner in Washington contributed to this report.

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Renault May Wait on Volvo Sale, Eliminate $6.8 Billion in Debt

April 30, 2010

By Laurence Frost and Ola Kinnander April 30 (Bloomberg) — Renault SA may keep its Volvo AB stake until a rebounding heavy-truck market boosts the price 25 percent, allowing the carmaker to raise about 50 billion kronor ($6.8 billion) and wipe out most of its debt. France’s second-biggest automaker will probably wait for Volvo’s improving outlook to push the stock to 112.5 kronor before unloading its 21.8 percent holding , the average estimate of 10 analysts surveyed by Bloomberg shows. The stock has gained 47 percent this year, closing yesterday at 90.15 kronor. Chief Executive Officer Carlos Ghosn pledged last month to reduce the carmaker’s net debt of 5.9 billion euros ($7.8 billion) through non-strategic asset sales. Banks are preparing to bid for the stock sale and expect invitations soon, according to people at two financial institutions, who asked not to be identified because the discussions are confidential. “Renault’s under no real pressure to refinance right now, so Ghosn can wait for the U.S. recovery to be better reflected in Volvo’s share price,” said Max Warburton , a Sanford C. Bernstein analyst in London who correctly predicted Renault’s share-swap deal with Daimler AG three weeks before the April 7 announcement. With credit conditions improving and a 3 billion-euro French government loan repayable next year at the earliest, Renault “may wait until then and do a clean swap,” he said. Volvo, along with European rivals Daimler AG , MAN AG and Scania AB, this month reported first-quarter earnings that beat analysts’ estimates as demand for heavy trucks improved. Volvo on April 23 posted net income of 1.68 billion kronor, its first profit in more than a year. Analysts had forecast a loss of 8 million kronor. The shares gained 10 percent. ‘Encouraged’ by Gains Chief Financial Officer Thierry Moulonguet said April 27 that Renault, based in the Paris suburb of Boulogne-Billancourt, was “encouraged” by Volvo’s share-price gains. The carmaker has the flexibility to dispose of the stake “when we judge most appropriate,” he added. Renault and Volvo spokesmen declined to comment for this story. As Ghosn waits, Volvo’s outlook is improving. The company will post second-quarter net income of 2 billion kronor on sales of 64.5 billion kronor, according to the average estimate of eight analysts. First-quarter trucks orders more than doubled in Europe and rose 19 percent in North America, Volvo said. Volvo forecasts growth of 10 percent for Europe’s truck market in 2010 and up to 30 percent in North America, after deliveries slumped in both regions last year. The Swedish company is also benefiting from reduced labor costs after shedding 12 percent of its workforce in 2009. Trading Higher “Volvo will trade higher as soon as there’s conclusive proof of orders recovering in the U.S.,” said Mike Tyndall , London-based automotive specialist with Nomura Securities. “There’s still more to come from developed markets as they recover, and as payback for all the work they did last year.” Renault may sell the stock to more than one institutional or industrial investor, analysts said. Among potential buyers are current Volvo owners Industrivarden AB and Christer Gardell’s Violet Partners LP, they said. Both companies declined to comment. “They’re probably sitting now and crunching the numbers” said Michael Andersson , an analyst with Evli Bank in Stockholm who has a “reduce” rating on Volvo. “It’s really open.” Reaching 112.5 kronor, the average share price seen by analysts as the likely trigger, would take Volvo to a high last seen on Dec. 14, 2007 — the year truckmakers posted record profit and sales on surging demand. About one-third of Renault’s stake is made up of so-called A-shares, which have 10 times the voting rights of the more widely held B-shares and currently are trading slightly lower. Renault acquired its Volvo stake in 2001, when Volvo swapped its shares for the French company’s Renault and Mack truck units. Whatever Renault decides, “Ghosn has already proven he’s a better broker than all those investors who were pushing him to sell at 60 kronor last year,” said Gaetan Toulemonde , a Paris- based analyst at Deutsche Bank AG. To contact the reporters responsible for this story: Laurence Frost in Paris at lfrost4@bloomberg.net ; Ola Kinnander in Stockholm at okinnander@bloomberg.net .

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Greek Debt Talks, Trade Shows Suffer as Flight Disruptions Strike Business

April 19, 2010

By Chiara Remondini April 19 (Bloomberg) — European business events including trade fairs in London and Milan and talks on a loan package for Greece have been diminished, delayed or canceled because of flight disruptions caused by volcanic ash from Iceland. U.S. bank Morgan Stanley told clients “stuck in London” following an analyst day for Wal-Mart Stores Inc.’s Asda unit that it can arrange desk space, analyst and management meetings, and store tours to fill their time. The Salone del Mobile in Milan, the world’s biggest furniture and design fair, had fewer visitors than expected because of travel restrictions. “About half of the clients we were expecting didn’t show up” in Milan, said Maurizio Peregalli, a designer at Zeus, which makes furniture and lighting. “Our business has been hit hard by the groundings.” Traffic authorities across Europe imposed a flight ban after Iceland’s Eyjafjallajökull volcano erupted April 14, spewing dust across Europe. The ash, which can clog plane engines, has resulted in the cancellation of as many as 63,000 flights and prompted the closure of airports from Dublin to Moscow. Air France-KLM Group , Europe’s largest airline, is among carriers pushing European governments to ease restrictions. The World Retail Congress in Berlin, set to host Burberry Group Plc Chief Executive Officer Angela Ahrendts , Kingfisher Plc CEO Ian Cheshire and WPP Plc CEO Martin Sorrell , was postponed until October. “Many speakers and delegates faced huge difficulties reaching Berlin in time for the event,” the organizers said today in a statement. The conference had been scheduled for April 21 to April 23. London Book Fair The London Book Fair , the biggest gathering of international literary agents and publishers, predicts a difficult start today, said exhibition director Alistair Burtenshaw. “The show must — and will — go on and we will provide all the help we can to ensure it runs as smoothly as possible,” Burtenshaw said in a statement on the fair’s Web site. U.K. Prime Minister Gordon Brown and opposition Conservative Party leader David Cameron canceled campaign trips to Scotland today ahead of the May 6 elections. Italian Prime Minister Silvio Berlusconi scrapped talks with German Chancellor Angela Merkel , including a dinner in Berlin. The Greek government’s talks with the European Central Bank, the International Monetary Fund and the European Commission about an emergency loan package will be delayed until April 21, the Greek Finance Ministry said yesterday. The new date assumes improved travel conditions, the ministry said. No Roubini Inrev, the European Association for Investors in Non-listed Real Estate Vehicles, said today that it canceled its annual meeting in Venice, scheduled to begin April 22. Nouriel Roubini, the New York University economist who predicted the financial crisis, was among the speakers. Riksbank Governor Stefan Ingves won’t participate in an interest rate meeting today in Stockholm because he’s abroad and won’t make it back in time, the Swedish central bank said. Volcanic ash can cause jet engines to fail by melting and then congealing in the turbines. Test flights in Europe have been successful so far, according to airline executives. The ash cloud may reach the coast of Newfoundland later today, the U.K. Met office predicted. Lost airline revenue from the restrictions is rising to as much as $300 million a day, according to the International Air Transport Association. IATA predicted that it will take as long as six days for traffic to get back to normal once a ban ends, as carriers work through a backlog of stranded passengers and reposition planes. Puma, Stadiums Puma AG , the second-largest European sporting-goods maker, postponed its “World Cup 2010 Press Day” event scheduled for today in Herzogenaurach, Germany, due to the air traffic disruptions, according to an e-mailed note. In Dublin, an awards ceremony for the global stadium industry was postponed last night. More than 150 executives from sports teams and stadiums, including Red Bull New York and Manchester United Ltd., were to attend the conference this week. “With speakers stuck in Mexico, Istanbul, the U.S. and even the U.K., it was clear that we had to reschedule,” said Ian Nuttall, CEO of event organizer Xperiology. “We’re currently in the process of fixing new dates this June. Hopefully by then the dust has settled.” The Cobalt Conference 2010 in Cape Town set to start April 21 was delayed as several speakers and many delegates were coming from or travelling through Europe. ‘Sensible’ Decision “We have reluctantly, but we think sensibly, decided to postpone the conference to later this year,” David Weight, general manager of the Cobalt Development Institute, said on the group’s Web site. Bayerische Motoren Werke AG canceled a press trip ahead of the Beijing car show to visit a factory in Shenyang, China. BMW officials and journalists were due to depart today. The 16th International Conference & Exhibition on Liquefied Natural Gas in Oran, Algeria, due to be attended by the ministers of the Gas Exporting Countries Forum, was delayed until tomorrow because of the volcano. To contact the reporter on this story: Chiara Remondini in Milan at cremondini@bloomberg.net

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Euro Strengthens as Stocks, Commodities Rally on Greek Rescue; Bonds Fall

April 12, 2010

By Patrick Chu April 12 (Bloomberg) — The euro gained for a third day against the dollar, stocks climbed and commodities rose after European governments unveiled a plan to halt Greece’s fiscal crisis. Treasuries declined and Asia credit default swaps fell. Europe’s currency strengthened 1 percent against the dollar to $1.3649 at 4:12 p.m. in Tokyo and rose versus all 16 of its most-traded counterparts. The MSCI World Index added 0.4 percent, and Standard & Poor’s 500 Index futures advanced 0.2 percent. The Stoxx 600 increased 0.1 percent. Copper gained 0.6 percent and oil rose 0.3 percent. Shares in Thailand plummeted following anti-government riots in Bangkok that killed 21. Euro-region finance ministers pledged as much as 45 billion euros ($61 billion) in loans at below-market interest rates to help rescue debt-plagued Greece and restore confidence in the European currency, which weakened 4.8 percent against the dollar this year. The bailout, combined with expectations of faster economic growth in India and South Korea, improved investor sentiment in Asia, where the MSCI Asia Pacific Index rose 0.2 percent to 128.45. “The development in Greece is giving market sentiment a boost because it eases concerns of a default among European nations facing debt problems,” said Olan Caperina , a fund manager at Bank of the Philippine Islands, which manages $9.7 billion. “Investors have reasons to turn positive and put money into the markets.” Europe’s currency rose 1.2 percent to 127.37 yen and the Danish, Swedish, Swiss and Norwegian currencies led gains, all strengthening more than 0.7 percent versus the yen. Poland’s zloty declined against the euro as the nation’s president and central bank chief died in a weekend plane crash. Below-Market Loan European nations and the International Monetary Fund pledged to provide three-year loans with a rate of about 5 percent, compared with 6.98 percent on Greek three-year securities. Greek bonds may climb and the gains may cut the yield premium investors demand to hold Greek 10-year debt instead of benchmark German bunds. “This is very positive,” said David Keeble , head of fixed-income strategy at Credit Agricole Corporate and Investment Bank in London. “We have got some concrete numbers and that is just what the market wanted. I would be all over Greek bonds after this. The market will not get down to 5 percent, but it will trade close to that. Maybe about 50 basis points above.” The European agreement, aimed at stopping Greece’s financial distress from infecting the rest of the region, damped concerns about the viability of the euro, which was created in 1999. The pact also may remove an impediment to the global economic recovery now being led by Asian nations. Won Climbs South Korea’s won rose 0.5 percent to 1,113.05 per dollar, as the central bank raised its economic growth forecast and a rescue package for Greece boosted demand for higher-yielding assets. Copper in London traded near the $8,000-a-ton level as the dollar declined and after China’s imports surged in March on rising seasonal demand. The metal for delivery in three months gained to as much as $8,043.75 a metric ton before trading at $7,978.75. Aluminum advanced 0.7 percent to $2,422 a ton. Oil rose for the first time in four days, to $85.27 a barrel, as the dollar fell and China increased crude imports to meet surging demand. “China is playing a key role in underpinning global demand for commodities, including crude,” said Toby Hassall , a research analyst at CWA Global Markets Pty in Sydney. “The Greek rescue plan, which is going to be driving the markets today, resolves a lot of the uncertainty. A weaker dollar is a supportive element for oil prices.” Advancing stocks beat decliners by more than three to one on the MSCI Asia Pacific Index , where industrials and commodity producers rallied. Japan’s Nikkei 225 Stock Average increased 0.4 percent. BHP Billiton Ltd. , the world’s largest mining company, gained 1.2 percent to A$44.41, Mitsubishi Corp., Japan’s　largest commodities trader, climbed 1.6 percent to 2,480 yen. Nintendo Co., a game maker that gets 34 percent of its revenue in Europe, increased 4 percent to 31,550 yen in Osaka. Toyota Motor Corp., the Japanese carmaker that gets 31 percent of its revenue in North America, rose 0.5 percent to 3,725 yen after U.S. wholesale inventories climbed more than estimated. Futures on the Standard & Poor’s 500 Index climbed following the index’s 0.7 percent advance on April 9 to the highest close since September 2008. Inventories at U.S. wholesalers rose 0.6 percent in February, suggesting businesses are ramping up orders, a Commerce Department report showed. Economists had estimated a 0.4 percent increase. Thai Stocks The Stock Exchange of Thailand index plunged 5.1 percent, the biggest drop in six months, after a clash between soldiers and protesters left as many as 21 people dead. Overseas investors sold a net 3.2 billion baht ($99 million) of Thai equities in the past two trading days, the most since Feb. 8, ending 31 days of buying. “Some overseas investors will be so jittery that they may rush to reduce their investments,” said Vana Bulbon , chief executive officer of UOB Asset Management (Thailand) Co., which oversees $1.6 billion. “No one expected that many deaths and this situation further worsens the political crisis.” Treasury Yields Investors sought higher-yielding assets. The two-year Treasury note yield rose three basis points to 1.09 percent in Tokyo, according to data compiled by Bloomberg. The cost of protecting Asia-Pacific bonds from default declined as the European rescue package for Greece helped calm investors, according to traders of credit-default swaps. The Markit iTraxx Australia index dropped 7 basis points to 77.5 basis points in Sydney, according to Citigroup Inc. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan declined 7 basis points to 89 in Singapore, Citigroup prices show. Both risk benchmarks are at their lowest since Jan. 12, according to CMA DataVision in New York. The Markit iTraxx Japan index fell 5 basis points to 90 in Tokyo, its lowest since June 2008, Deutsche Bank AG and CMA prices show. The zloty fell 0.3 percent to 3.8806 per euro after the weekend plane crash that killed Poland’s president and central bank chief. It gained 0.7 percent to 2.8457 per dollar. President Lech Kaczynski, central bank Governor Slawomir Skrzypek and leaders of the opposition and military were among 96 people who died en route to commemorate the Soviet massacre of 22,000 Polish officials near Russia’s Katyn forest. To contact the reporters for this story: Patrick Chu in Tokyo at pachu@bloomberg.net

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Euro Strengthens as Stocks, Commodities Gain on Greek Rescue; Bonds Fall

April 11, 2010

By Patrick Chu April 12 (Bloomberg) — The euro gained for a third day against the dollar, stocks climbed and commodities jumped after European governments unveiled a plan to halt Greece’s fiscal crisis. Treasuries declined and Asia credit default swaps fell. Europe’s currency strengthened 1.1 percent against the dollar to $1.3646 at 12:40 p.m. in Tokyo and rose against all 16 of its most-traded counterparts. The MSCI World Index added 0.5 percent, and Standard & Poor’s 500 Index futures advanced 0.3 percent. Oil increased 0.6 percent and copper gained 0.9 percent. Euro-region finance ministers pledged as much as 45 billion euros ($61 billion) in loans at below-market interest rates to help rescue debt-plagued Greece and restore confidence in the European currency, which weakened 4.8 percent against the dollar this year. The bailout, combined with expectations of faster economic growth in India and South Korea, improved investor sentiment in Asia, where the MSCI Asia Pacific Index jumped 0.7 percent to 128.99, the highest since August 2008. “The development in Greece is giving market sentiment a boost because it eases concerns of a default among European nations facing debt problems,” said Olan Caperina , a fund manager at Bank of the Philippine Islands, which manages $9.7 billion. “Investors have reasons to turn positive and put in money into the markets.” Europe’s currency rose 1 percent to 127.11 yen and the Danish, Swedish, Swiss and Norwegian currencies led gains, all strengthening more than 0.8 percent versus the yen. European nations and the International Monetary Fund pledged to provide three-year loans with a rate of about 5 percent, compared with 6.98 percent on Greek three-year securities. Crisis Contained The agreement, aimed at stopping Greece’s financial distress from infecting the rest of the region, damped concerns about the viability of the euro, which was created in 1999. The pact also may remove an impediment to the global economic recovery now being led by Asian nations. South Korea’s won rose 0.4 percent to 1,114.05 per dollar, as the central bank raised its economic growth forecast and a rescue package for Greece boosted demand for higher-yielding assets. Australia’s dollar jumped to the strongest in more than two years versus the yen after the rescue revived demand for riskier assets. Australia’s dollar touched 86.98 yen, the most since September 2008, and reached 93.38 U.S. cents. Copper in London traded near the $8,000-a-ton level as the dollar declined and after China’s imports surged in March on rising seasonal demand. The metal for delivery in three months gained to as much as $8,043.75 a metric ton before trading at $7,990.25. Aluminum advanced 0.7 percent to $2,423 a ton. Oil Rises Oil rose for the first time in four days as the dollar fell after European governments offered debt-burdened Greece a rescue package and China increased crude imports to meet surging demand. Oil advanced to $85.27 a barrel as the weaker dollar bolstered the appeal of commodities as an alternative investment. “China is playing a key role in underpinning global demand for commodities, including crude,” said Toby Hassall , a research analyst at CWA Global Markets Pty in Sydney. “The Greek rescue plan, which is going to be driving the markets today, resolves a lot of the uncertainty. A weaker dollar is a supportive element for oil prices.” Advancing stocks beat decliners by more than three to one on the MSCI Asia Pacific Index , where industrials and commodity producers rallied.. Japan’s Nikkei 225 Stock Average increased 1.1 percent, the biggest gain among major benchmarks in Asia. BHP Billiton Ltd. , the world’s largest mining company, gained 1.2 percent to A$44.41, Mitsubishi Corp., Japan’s　largest commodities trader, climbed 2.1 percent to 2,493 yen. Exporter Shares Nintendo Co., a game maker that gets 34 percent of its revenue in Europe, increased 3.8 percent to 31,500 yen in Osaka. Toyota Motor Corp., the Japanese carmaker that gets 31 percent of its revenue in North America, rose 1.9 percent to 3,775 yen after U.S. wholesale inventories climbed more than estimated. Futures on the Standard & Poor’s 500 Index climbed following the index’s 0.7 percent advance on April 9 to the highest close since September 2008. Inventories at U.S. wholesalers rose 0.6 percent in February, suggesting businesses are ramping up orders, a Commerce Department report showed. Economists had estimated a 0.4 percent increase. Thai Stocks The Stock Exchange of Thailand index plunged 3.5, the biggest drop in nearly six months, after a clash between soldiers and protesters left as many as 21 people dead. Overseas investors sold a net 3.2 billion baht ($99 million) of Thai equities in the past two trading days, the most since Feb. 8, ending 31 days of buying. “Some overseas investors will be so jittery that they may rush to reduce their investments,” said Vana Bulbon , chief executive officer of UOB Asset Management (Thailand) Co., which oversees $1.6 billion. “No one expected that many deaths and this situation further worsens the political crisis.” Investors sought higher-yielding assets. The two-year Treasury note yield rose three basis points to 1.09 percent in Tokyo, according to data compiled by Bloomberg. Futures traders decreased bets the euro will fall against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The euro climbed, after last week dropping to within once cent of an 11-month low, as futures traders lowered from a record bets that Europe’s common currency would slide. Euro Shorts The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain — so-called net shorts — was 67,223 on April 6, compared with net shorts of 85,326 a week earlier. Last week, the euro traded at $1.3283, less than a quarter of a cent above $1.3268, the lowest since May 7. The cost of protecting Asia-Pacific bonds from default declined as the European rescue package for Greece helped calm investors, according to traders of credit-default swaps. The Markit iTraxx Australia index dropped 7 basis points to 77.5 basis points in Sydney, according to Citigroup Inc. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan declined 7 basis points to 89 in Singapore, Citigroup prices show. Both risk benchmarks are at their lowest since Jan. 12, according to CMA DataVision in New York. The Markit iTraxx Japan index fell 5 basis points to 90 in Tokyo, its lowest since June 2008, Deutsche Bank AG and CMA prices show. To contact the reporters for this story: Patrick Chu in Tokyo at pachu@bloomberg.net

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North Korea Sentences U.S. Citizen to Eight Years Labor on Illegal Entry

April 6, 2010

By Bomi Lim April 7 (Bloomberg) — North Korea sentenced a U.S. citizen to eight years of hard labor for illegally entering the country in January, risking tension as the Obama administration seeks to persuade the regime to resume nuclear disarmament talks. Aijalon Mahli Gomes, 30, confessed to all charges, the official Korean Central News Agency reported today. Officials from the Swedish embassy, which represents U.S. interests in North Korea, attended yesterday’s trial, it said. Former President Bill Clinton traveled to Pyongyang last August to win the release of two American journalists who were arrested in March 2009 close to the border with China. In February, North Korea released an American missionary, Robert Park, it detained in December on the same charge. “North Korea may be seeking to use the American’s conviction as a bargaining chip to engage in direct talks with the U.S.,” said Yang Moo Jin , a professor at the University of North Korean Studies in Seoul. North Korea has said Gomes, a Boston resident, was captured Jan. 25 for illegally crossing its border with China. He was born on June 19, 1979, KCNA said March 22. Kim Jong Il ’s regime is under growing pressure to return to stalled international disarmament talks on its nuclear weapons program after conducting a second nuclear test last year that resulted in tougher United Nations sanctions. The U.S. yesterday singled out North Korea and Iran for violating “non- proliferation obligations.” Fine Imposed Gomes previously taught English in South Korea, according to Agence France-Presse. Gomes, who had taken part in anti-North Korean rallies in South Korea, may have been inspired by the U.S. missionary’s actions, AFP said, citing a human rights activist in Seoul. KCNA said Gomes was also fined 70 million North Korean won. There have been various reports on the exchange rate since the country revalued the currency late last year. South Korea’s Unification Ministry said North Korea’s official exchange rate would put the dollar value of the fine at $700,000. The market rate was about 600 per dollar in Pyongyang between March 26 and April 1, according to Seoul-based Daily NK . Aaron Tarver, a spokesman at the U.S. embassy in Seoul, didn’t answer calls to his office or mobile phone today. The six-party talks on North Korea’s nuclear weapons ambitions also involve China, Japan, Russia, South Korea and the U.S. The forum last met in December 2008. To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net

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U.S. Stock Futures, Treasury Yields, Dollar Rise on Improving Jobs Market

April 2, 2010

By Nick Baker April 2 (Bloomberg) — U.S. stock-index futures, yields on 10-year Treasuries and the dollar advanced after employers added the most jobs in three years, boosting optimism that the economic recovery is accelerating. Standard & Poor’s 500 Index futures expiring in June rose 0.3 percent to 1,177.30 when trading stopped at 9:14 a.m. in New York. U.S. stock exchanges are closed today for the Good Friday holiday. Treasuries fell, driving the yield on 10-year notes up 0.06 percentage point to a 10-month high of 3.93 percent. The U.S. dollar reached 94.67 yen, the strongest in seven months. Payrolls rose by 162,000 last month, less than anticipated, after a revised 14,000 decrease in February that was smaller than initially estimated, figures from the U.S. Labor Department in Washington showed today. The March increase included 48,000 temporary workers hired by the government to help conduct the 2010 census. The unemployment rate held at 9.7 percent. “The data supports the idea of a sustainable recovery going forward,” said Michael Pond , an interest-rate strategist in New York at Barclays Plc, one of 18 primary dealers required to bid at Treasury auctions. Caterpillar Inc. is among companies adding staff, indicating the recovery that began in the second half of 2009 is starting to foster the job gains needed to lift consumer spending and sustain the economic expansion. Unemployment may be slow to recede as formerly discouraged employees enter the labor force looking for work, signaling the Federal Reserve will keep interest rates low in coming months. No Rush “There is underlying strength and there are other components here that are also underlying strength, but you still have a 9.7 percent unemployment rate,” Michael O’Rourke , chief market strategist at BTIG LLC, said in a Bloomberg Television interview. “There’s still enough weakness there for investors that the Fed’s not gonna rush in.” The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 1 basis point to a mid-price of 85.9 basis points as of 8:51 a.m. in New York, according to Markit Group Ltd. The Dollar Index, which measures the U.S. currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, rose 0.6 percent to 81.254, erasing about two-thirds of its losses from the past two days. To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net .

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Men Accused of Heathrow Warehouse Heist Found Guilty in Case Without Jury

March 31, 2010

By Lindsay Fortado and James Lumley March 31 (Bloomberg) — Four men were found guilty in the 2004 armed robbery of a Heathrow Airport warehouse in the first trial of a serious crime in England in modern times decided by a judge instead of a jury. Judge Colman Treacy gave his verdict on the men, Peter Blake, John Twomey, Glenn Cameron and Barry Hibberd, today at the Old Bailey criminal court in London. They denied the charges in the 1.75 million pound ($2.65 million) robbery. The U.K.’s Court of Appeal ruled in June that a judge should decide the case because of the “very significant danger” of jury tampering. The case led to the first nonjury trial of a serious crime in at least 350 years, according to the judicial press office for England and Wales. Prosecutors said the men, armed with guns, sneaked into the warehouse in the back of a van. They tied up 16 workers and seized bags of British, Swedish, Danish, Norwegian and Australian currencies that arrived from Austria, escaping in another van which they hijacked at gunpoint, prosecutors said. The four hoped to seize 10 million pounds in foreign money, the government said. They got less because of a mistake, prosecutors said. “These men rounded up, tied up and held at gunpoint the 16 terrified employees of the Menzies depot and subjected them to a frightening and violent attack,” Portia Ragnauth, chief crown prosecutor for Surrey, England, said today in a statement . “When one of the staff tried to escape the ordeal, Peter Blake shot at the defenseless man several times.” The case is a “benchmark prosecution,” Ragnauth said. A previous trial of the men was stopped because of jury tampering, and prosecutors “had no doubts that only a trial without a jury would protect the integrity of this prosecution,” she said. The men will be sentenced later today, said a judicial spokeswoman, Jane Holman. The case is The Queen v. Blake, Twomey, Cameron and Hibberd. To contact the reporter for this story: Lindsay Fortado in London at lfortado@bloomberg.net ; James Lumley in London at jlumley1@bloomberg.net .

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Geely Buys Volvo From Ford for $1.8 Billion in Record Chinese Auto Deal

March 28, 2010

By Ola Kinnander and Keith Naughton March 28 (Bloomberg) — Zhejiang Geely Holding Co. agreed to buy Volvo Cars from Ford Motor Co. for $1.8 billion in the biggest overseas acquisition by a Chinese automaker. The deal will close in the third quarter, after which Ford and Volvo will continue to cooperate, Ford Chief Financial Officer Lewis Booth told reporters today in Gothenburg, Sweden. The Chinese company will pay $1.6 billion in cash and the rest in a “note,” Ford said in a statement. Booming auto sales in China made the nation the largest car market last year, generating profit that’s allowing its manufacturers to reach out to Western markets and technologies. Selling Volvo will complete Ford Chief Executive Officer Alan Mulally ’s strategy of divesting European luxury lines to focus on its namesake brand. Ford has sold Jaguar, Land Rover and Aston Martin since 2007. “This could set the benchmark for more Chinese deals to come,” said Rebecca Lindland , an auto analyst at IHS Global Insight of Lexington, Massachusetts. “It potentially could allow Geely to come into the West with its own brand of vehicles.” The Swedish carmaker will tap China’s growing car market, Geely Chairman Li Shufu said at the press conference. Drop in Price Geely first approached Dearborn, Michigan-based Ford about buying Volvo in mid-2008, two people familiar with the talks have said. Ford named Geely its “preferred bidder” in October 2009 and said on Dec. 23 that they had agreed on the major terms of the transaction. Ford paid $6.5 billion for Volvo in 1999. “Compared to the business environment when we bought it, it’s a very different world,” Booth said in a March 24 interview. “We only have so much management resource, we only have so much capital to invest and we needed to make sure we were focusing on the Ford business.” Geely, China’s largest private automaker based on 2008 sales, will gain access to Volvo’s technology as well as an image boost because of the brand’s status as a premium vehicle line in China, said Vivien Chan , an analyst at SinoPac Securities Asia Ltd. in Hong Kong. Li, Geely’s founder, has said he is seeking to have half the company’s sales from overseas markets by 2015. He aims to sell 200,000 Volvos a year in China, up from 22,405 last year, and has been seeking locations for a new plant there. Biggest Car Market Sales-tax cuts for smaller vehicles combined with rural subsidies boosted nationwide auto sales in China 46 percent last year to 13.6 million, helping it supplant the U.S. as the world’s largest auto market. Volvo sold 334,808 cars worldwide last year, a decline of 11 percent from 2008 and 27 percent from a peak of about 460,000 in 2007, according to the company. Its sales in the U.S. have risen for nine consecutive months and increased 40 percent this year through February. Volvo CEO Stephen Odell said at the press conference today that the Swedish company plans to produce 390,000 cars this year, compared with 330,000 in 2009. Geely will restore profitability to Volvo, Booth said. The Swedish carmaker has about 20,000 employees worldwide, including almost 14,000 in Sweden. It has about 2,500 dealers in 100 countries. The unit’s pretax loss narrowed to $934 million last year from $1.7 billion in 2008, Ford said on Jan. 28. Volvo’s last annual pretax profit was $377 million in 2005. Saab Automobile, the Swedish auto brand that was under General Motors Co.’s control for the past two decades, was sold last month to Dutch luxury-car maker Spyker Cars NV for about $400 million. Sharing Technology Ford ended three years of losses with net income of $2.7 billion in 2009 and was the only major U.S. automaker to avoid bankruptcy. Ford has said it and Volvo will continue to share parts and technology. The Swedish carmaker’s S40 model is built on the mechanical foundation of the Ford Focus now sold in Europe. Volvo supplies diesel engines for Ford’s European lineup. Volvo’s managers endorse the sale to Geely, according to the Ford statement. To contact the reporters on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net Keith Naughton in Dearborn, Michigan, at Knaughton3@bloomberg.net

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Geely Buys Volvo From Ford in Biggest Chinese International Auto Purchase

March 28, 2010

By Ola Kinnander and Keith Naughton March 28 (Bloomberg) — Zhejiang Geely Holding Co. agreed to buy Volvo Cars from Ford Motor Co. for $1.8 billion in the biggest overseas acquisition by a Chinese automaker. The deal will close in the third quarter, after which Ford and Volvo will continue to cooperate, Ford Chief Financial Officer Lewis Booth said told reporters today in Gothenburg, Sweden. The Chinese company will pay $1.6 billion in cash and the rest in a “note,” Ford said in a statement. Booming auto sales in China made the nation the largest car market last year, generating profit that’s allowing its manufacturers to reach out to Western markets and technologies. Selling Volvo will complete Ford Chief Executive Officer Alan Mulally ’s strategy of divesting European luxury lines to focus on its namesake brand. Ford has sold Jaguar, Land Rover and Aston Martin since 2007. “This could set the benchmark for more Chinese deals to come,” said Rebecca Lindland , an auto analyst at IHS Global Insight of Lexington, Massachusetts. “It potentially could allow Geely to come into the West with its own brand of vehicles.” The Swedish carmaker will tap China’s growing car market, Geely Chairman Li Shufu said at the press conference. Drop in Price Geely first approached Dearborn, Michigan-based Ford about buying Volvo in mid-2008, two people familiar with the talks have said. Ford named Geely its “preferred bidder” in October 2009 and said on Dec. 23 that they had agreed on the major terms of the transaction. Ford paid $6.5 billion for Volvo in 1999. “Compared to the business environment when we bought it, it’s a very different world,” Booth said in a March 24 interview. “We only have so much management resource, we only have so much capital to invest and we needed to make sure we were focusing on the Ford business.” Geely, China’s largest private automaker based on 2008 sales, will gain access to Volvo’s technology as well as an image boost because of the brand’s status as a premium vehicle line in China, said Vivien Chan , an analyst at SinoPac Securities Asia Ltd. in Hong Kong. Li, Geely’s founder, has said he is seeking to have half the company’s sales from overseas markets by 2015. He aims to sell 200,000 Volvos a year in China, up from 22,405 last year, and has been seeking locations for a new plant there. Biggest Car Market Sales-tax cuts for smaller vehicles combined with rural subsidies boosted nationwide auto sales in China 46 percent last year to 13.6 million, helping it supplant the U.S. as the world’s largest auto market. Volvo sold 334,808 cars worldwide last year, a decline of 11 percent from 2008 and 27 percent from a peak of about 460,000 in 2007, according to the company. Its sales in the U.S. have risen for nine consecutive months and increased 40 percent this year through February. Volvo CEO Stephen Odell said at the press conference today that the Swedish company plans to produce 390,000 cars this year, compared with 330,000 in 2009. Geely will restore profitability to Volvo, Booth said. The Swedish carmaker has about 20,000 employees worldwide, including almost 14,000 in Sweden. It has about 2,500 dealers in 100 countries. The unit’s pretax loss narrowed to $934 million last year from $1.7 billion in 2008, Ford said on Jan. 28. Volvo’s last annual pretax profit was $377 million in 2005. Saab Automobile, the Swedish auto brand that was under General Motors Co.’s control for the past two decades, was sold last month to Dutch luxury-car maker Spyker Cars NV for about $400 million. Sharing Technology Ford ended three years of losses with net income of $2.7 billion in 2009 and was the only major U.S. automaker to avoid bankruptcy. Ford has said it and Volvo will continue to share parts and technology. The Swedish carmaker’s S40 model is built on the mechanical foundation of the Ford Focus now sold in Europe. Volvo supplies diesel engines for Ford’s European lineup. Volvo’s managers endorse the sale to Geely, according to the Ford statement. To contact the reporters on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net Keith Naughton in Dearborn, Michigan, at Knaughton3@bloomberg.net

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Ericsson’s China Boom Cools as Telephone Companies Trim Network Spending

March 23, 2010

By Diana ben-Aaron March 24 (Bloomberg) — Ericsson AB ’s Chinese boom may be running out of steam. The world’s largest maker of wireless phone networks boosted sales in the country last year by 22 percent — the biggest jump in at least seven years — to a record high, as China Unicom (Hong Kong) Ltd. and rivals invested in third- generation infrastructure. Now, those same companies are cutting back. Last week, China Mobile Ltd ., the country’s biggest phone company, said it will trim capital spending, while China Telecom Corp. Ltd. said on March 22 such expenditure will be flat. Chinese mobile- network investment, which rose to 371 billion yuan ($54 billion) in 2009, may drop below 300 billion yuan this year, according to Beijing-based consultants BDA China Ltd. “Since China was so strong last year with Unicom it’s fairly safe to assume this will be a slower year,” said Haakan Wranne , an analyst at Stockholm’s Swedbank, with a “reduce” rating on Ericsson. “That goes for the market and for Ericsson. And a bad year in China would have to be compensated with a good year elsewhere.” Ericsson will need new growth drivers even as Chinese government spending to stimulate the economy and competition between carriers keeps investment flowing for some years. Orders could come from India, which may award 3G licenses this year, or from the U.S., where Ericsson added 2.7 billion kronor ($347 million) in sales, or about 1 percent of the total revenue of 206 billion kronor in the last six weeks of 2009 from its acquisition of some Nortel Networks assets. Growth Drivers Ericsson supplies more than 1,000 networks in 175 countries, and has years when no one market accounts for more than 10 percent of sales. The company, which has been in China since 1894 — when it delivered 2,000 telephone-sets to Shanghai — built the country’s first commercial analog mobile-phone system in 1994. Mobile growth catapulted China to the company’s largest market in 1998. Last year, China was the Swedish company’s second-largest market after the U.S., with sales in the country helping offset a 6 percent drop in Western Europe, where Chinese rivals Huawei Technologies Co. and ZTE Corp. gained ground. Ericsson shares have risen 16 percent this year in Stockholm trading, giving the company a market value of about 251 billion Swedish kronor. Rival Alcatel-Lucent SA, based in Paris, has risen 0.9 percent in the period. Thirty out of 49 analysts who follow Ericsson rate its stock a “hold” or “sell,” according to Bloomberg data. Spending Cuts China Mobile said last week it will trim capital expenditure to 123 billion yuan from 129.4 billion in 2009, and to 80.4 billion yuan in 2012. The projected amounts are less than expected, BDA analyst Flora Wu said by e-mail. The third-largest carrier, China Telecom , said yesterday it targets capital spending for this year of 39 billion yuan, about the same as in 2009. China Unicom, the second-biggest carrier, will give an update on its plans today, spokeswoman Sophia Tso said by e-mail. “The cautious outlook for capex from China Mobile along with carriers in western Europe maintaining tight control over spending suggests the global wireless market would see only muted recovery in 2010,” Kulbinder Garcha , an analyst with Credit Suisse, wrote in a note March 19. Ericsson “could continue to see headwinds for its China business.” China Presence Ericsson says government investment will keep up a steady stream of orders and that revenue from upgrading networks will become increasingly important. “We don’t foresee that the government’s spending plan will end at a certain time,” said Erik Feng , Ericsson’s executive vice president of marketing for China. “New spending plans will be announced, both in 3G network expansions and in the new 4G area. There are also quite a few service opportunities.” Revenue from services such as network management gained 15 percent last year to 27 percent of overall sales on demand from operators in the U.S. and emerging markets. In China, Ericsson was able to book sales quickly from fast 3G rollouts and anticipates service revenue from the networks in the future, Feng said. 3G refers to a family of digital wireless standards that provide data-transfer speeds for fast Internet browsing and video streaming, as well as voice and text messaging as in older 2G standards. The company supplied about 24,000 WCDMA base stations to China Unicom, its main 3G customer in the country, in four months last year, Feng said. The carrier, which sells Apple Inc. ’s iPhone in China, installed more than 100,000 stations. Ahead of Demand “The rollout was above anyone’s expectations, a very quick launch of the 3G services,” said Feng. “I’m amazed when I go to a smaller city, like the place where we have a summer house, there’s 3G coverage. The capacity is not much utilized yet.” Huawei, Ericsson, ZTE, Nokia Siemens Networks , and Alcatel- Lucent all had a piece of the China Unicom project, in order of size, according to research by Redwood City, Calif.-based Dell’Oro Group . Ericsson’s total China sales last year were 18.5 billion kronor, or about 9 percent of revenue, and second only to the 10 percent from the U.S. “If you look in the U.S., AT&T Inc. is spending heavily because demand is almost outpacing the capacity they have,” Dell’Oro Group analyst Scott Siegler said in an interview. “In China it’s the opposite and they are just deploying massive amounts of capacity ahead of demand.” China Mobile and China Telecom built similar-sized mobile broadband networks to Unicom’s after they won 3G licenses in January 2009, according to researchers Frost & Sullivan. Market Share Ericsson’s main Nordic competitor, Finnish-German joint venture Nokia Siemens Networks, got 11 percent of its sales in “greater China” last year, including 3G contracts with China Unicom and China Mobile. “With all the new 3G contracts the Chinese players got the best share of them, and Ericsson’s existing market share is more the result of history in a country where it was initially on its own and then Huawei came in and gained market share,” said Pierre Ferragu , a London-based analyst with Sanford C. Bernstein who has an “outperform” rating on Ericsson. He sees Unicom’s spending with Ericsson to be flat this year. China had 757 million mobile subscribers as of January, according to figures released by the Ministry of Information Industry. China Mobile’s market share was about 70 percent in January, China Unicom had about 20 percent and China Telecom about 8 percent, according to the carriers’ figures. Building Networks Last year, the carriers rushed out their networks so quickly that they completed their plans for the year in the first half and spent little in the second half, Dell’Oro Group ’s Siegler said. This year’s spending will focus on adding capacity to the networks already in place, he said. Ericsson’s shares can be hurt by unforeseen declines in Chinese spending, said David Hallden , head of research at HQ Bank in Stockholm, who has a “neutral” rating on its stock. In early October 2008, shares fell after the Chinese government ordered carriers to share networks to save money on 2G equipment. “That was Ericsson’s cash cow in Asia,” Hallden said. To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

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Ford Chief Mulally Says Talks to Sell Volvo Cars Unit to Geely Continuing

March 18, 2010

By Bruce Einhorn and Keith Naughton March 18 (Bloomberg) — Ford Motor Co. Chief Executive Officer Alan Mulally said talks to sell the automaker’s Volvo unit to China’s Zhejiang Geely Holding Group Co. are proceeding, rebutting local media reports the deal could be delayed. “We are making progress on the negotiations,” Mulally said in an interview in Shanghai, without giving a time frame for when the agreement will be made. Ford aims to sign a $2 billion deal to sell Volvo Cars to Geely by the end of this month, three people familiar with the talks said last week. Dearborn, Michigan-based Ford put Volvo up for sale in late 2008, part of a strategy of dropping European luxury lines to focus on its namesake brand. The China Daily said yesterday financing and technology transfer problems could delay the acquisition, citing people familiar with the matter. “There is little chance for the deal to fall apart given that the two companies have both made a lot of efforts on the deal and have seen some progress,” said Vivien Chan , an analyst with SinoPac Securities Asia Ltd. in Hong Kong. Buying Volvo would give the Chinese automaker access to Volvo’s technology and “improve Geely’s image” because Volvo is considered a premium brand in China. Ford ended three years of losses in 2009 by posting $2.7 billion in net income, its first full-year profit since Mulally came from Boeing Co. in 2006. Mulally has focused on refreshing Ford’s lineup, including adding more fuel-efficient small cars, while cutting costs. He reduced the North American workforce by about 47 percent and sold the Jaguar, Land Rover and Aston Martin luxury brands. ‘Great Brand’ Whoever buys the Swedish unit “are gaining a great brand,” Mulally said. “We will continue to support Volvo just like we did with Aston Martin, Jaguar and Tata.” Geely, China’s largest private automaker based on 2008 sales, wants to gain insights into Western vehicle development and manufacturing through buying a mainstream European brand. Mulally, 64, said he sees about 40 percent of global auto sales coming from the Asia-Pacific region over the next 10 years, while 35 percent will be in the European region and 25 percent in the Americas. “We are going to invest whatever we need to support Asia- Pacific,” Mulally said. “It’s clearly the highest growth market going forward.” Top-Selling Automaker Ford gained U.S. market share last year for the first time since 1995 with new models such as the revamped Taurus sedan, while the predecessors of GM and Chrysler Group LLC reorganized in bankruptcy and received federal aid. Ford surpassed General Motors Co. last month to become the top-selling automaker in the U.S. for the first time since 1998. Mulally broke ground in September on a $490 million small- car factory in Chongqing, Ford’s third assembly plant in China. Ford ranks 12th in the nation with 2.8 percent of sales, according to auto researcher J.D. Power & Associates. GM, which emerged from bankruptcy July 10, outsells Ford 3-to-1 in the country, building twice as many vehicles. Ford gained 4.5 percent to $14.10 in New York trading yesterday. To contact the reporters on this story: Bruce Einhorn in Hong Kong at beinhorn1@bloomberg.net ; Keith Naughton in Dearborn, Michigan, at Knaughton3@bloomberg.net

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Ireland Arrests Seven in Overseas Murder Plot Probe Linked to Cartoonist

March 9, 2010

By Dara Doyle and Colm Heatley March 9 (Bloomberg) — Irish police arrested seven people in Cork and Waterford in connection with an investigation into a conspiracy to murder an individual in another country. Irish police have “been working closely with law enforcement agencies in the United States and in a number of European countries,” the police said in a statement today, without giving additional details. The arrests, which took place in counties Waterford and Cork, are in connection with an investigation into a conspiracy to murder Swedish cartoonist Lars Vilks, RTE reported today, without saying where it got the information. Vilks depicted the Prophet Muhammad with the body of a dog and Al-Qaeda offered $100,000 for the murder of Vilks in 2007, the broadcaster said. All those arrested are being detained under section 50 of the criminal justice act, which allows them to be detained for as long as seven days, a police spokesman who declined to be identified, said by phone. The arrested includes four men and three women, RTE said. To contact the reporter on this story: Dara Doyle at ddoyle1@bloomberg.net Colm Heatley in Belfast at cheatley@bloomberg.net

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Calculating Death Risk Makes Swedish Insurance Actuary a Gold-Medal Curler

February 9, 2010

By Doug Alexander and Niklas Magnusson Feb. 9 (Bloomberg) — Olympic curler Anette Norberg says weighing the risk of death and disease for Folksam Group gives her an advantage that may result in her second gold medal at the Winter Games this month. “Curling is a bit like chess on ice,” said Norberg, the captain of Sweden’s four-member women’s curling team and an actuary with Folksam, which insures half the people in her country. “It is about logical, strategic thinking, which you learn through this kind of work.” Norberg, 43, is one of at least three financial-services professionals competing for a podium spot at the Winter Games in Vancouver. She’ll be joined by Swiss freestyle skier Thomas Lambert, who works at Raiffeisen Switzerland, and blind Canadian skier Chris Williamson, a Royal Bank of Canada teller competing in the Paralympic Games. Financial services workers are a rarity among the 2,700 athletes scheduled to compete during the 17-day event in Vancouver and Whistler starting Feb. 12. Another 600 athletes will compete in the Paralympic Games in March. Norberg is the only member of her team who worked while training for the 21st Winter Olympics. The mother of two, who also assesses financial risk at her Stockholm-based firm, wouldn’t have it any other way. “I like my job and I have a hard time letting go of it,” she said. “I need the mix of curling and work.” Disease Risk Norberg normally works full-time as department head of Folksam’s Aktuarie Liv unit, though since October she’s been taking two afternoons off each week to train. Actuaries calculate the risk of disease and death among different age groups, using statistical data to determine how much clients should pay for life insurance. The Swede, who lives just east of Stockholm in Saltsjoe-Boo, practices curling four to five times a week, and does physical training three times weekly. In curling , teams slide 19.1-kilogram (42.1-pound) rocks down a 42-meter (138-foot) ice sheet, similar to shuffleboard. Curlers guide the rocks by brushing the ice with brooms. Norberg started curling because her parents played in the Swedish coastal town of Haernoesand, a 430-kilometer (267-mile) drive north of Stockholm. Norberg said she enjoyed mathematics at school and studied the topic at Uppsala University near Stockholm. She fell into the insurance industry “much by chance” because it let her work with people and numbers. On the ice, Norberg led the Swedish team to gold at the Olympics in Turin, Italy, in 2006, beating Switzerland in the final. More Competition “Competition has increased a lot in the past four years, so it’ll be much harder this time,” Norberg said. “Our big challenge is to get to the finals — there are 10 good teams and you have to be among the top four to get there.” Swiss freestyle skier Lambert is also making a return to the Winter Olympics, aiming to improve on his 14th-place finish in aerials at Turin. His sport involves skiing down a ramp, launching into the air, performing a series of acrobatic moves, and making a graceful landing. His big move for the Games is a jump called the “Rudy Randy Full,” a triple somersault with five twists. “If I do it really nice and land it properly and nicely, I can get a lot of points,” Lambert, 25, said. “This jump can make a difference.” Olympic Sponsorship Lambert has practiced the trick since last summer while working at Raiffeisenbank Thalwil , a branch of the St. Gallen, Switzerland-based cooperative bank. He joined the bank in May 2008 after getting a bachelor’s degree from the University of Zurich with majors in economics and finance. “It’s hard to earn enough money to do sports such as freestyle skiing in Switzerland,” he said. Lambert also has a two-year sponsorship from his employer, which helps pay the bills when he skis full-time between November and April. For the rest of the year, Lambert works part-time at the bank, assisting the branch manager with forecasts, developing mortgage products and marketing. “There’s a few challenges because I work about 25 hours a week on average and I also try to train for 20 to 25 hours a week,” Lambert said. He initially found it hard separating the job from sport. Hours after finishing work, he’d sometimes be standing on top of a practice ramp at a training facility while mentally drafting e-mails to bank clients. “I had to learn to forget my work for the moment and concentrate on aerials,” said Lambert , who lives in Mettmenstetten near Zurich. Broken Jaw Lambert, who broke his jaw landing his first jump during his last trip to the Olympics, is aiming for a top-eight finish in Vancouver. “Everything better is bonus,” he said. “When you’re in the finals, anything can happen.” Canada’s Williamson , a downhill skier who’s been blind since he was six, is aiming for podium finishes in five events at the Paralympics . “I’ve got pretty high expectations,” said Williamson, who has no sight in his right eye and 6 percent in his left due to an eye disease. “I want to win five medals, and I’d prefer them to be gold.” This marks his third trip to the Paralympics. The Markham, Ontario, athlete won gold in the slalom in Salt Lake City in 2002, and four years later won silver and bronze in Turin. He’s confident after coming off a season where he earned his 50th World Cup win of his career. Ski Guide Williamson skis with a guide, relying on radios to communicate as they race down a course at speeds as fast as 120 kilometers an hour (75 miles an hour). When he’s not competing, he works for Royal Bank , Canada’s largest lender and an Olympic sponsor. He’s been with the Toronto-based bank for almost six years. “Royal Bank helps a lot with just being able to give me time to do my sport and time with my family,” the 37-year-old married father of two said. “But it’s a juggling act; you’ve got to prioritize.” To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net ; Niklas Magnusson in Stockholm at +46- nmagnusson1@bloomberg.net

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U.S. `Takes Seriously’ Report of Second American Detained in North Korea

January 28, 2010

By Sangim Han Jan. 29 (Bloomberg) — The U.S. “takes seriously” a report that North Korea has detained a second American in the past month, a State Department spokesman said. North Korea is questioning a U.S. citizen who it said was caught trespassing over its border with China on Jan. 25, the official Korea Central News Agency said yesterday. The communist country last month said it detained an American, identified by U.S. officials as Robert Park, for illegally entering from China. “We’re operating on the assumption that it’s entirely possible that we have a second American citizen detained in North Korea in addition to Robert Park,” State Department spokesman Philip J. Crowley told reporters yesterday in Washington. “It’s obviously something we take seriously.” The U.S., which has no diplomatic ties with North Korea, is seeking information through Swedish authorities, Crowley said. If the report is confirmed, “we would seek consular access urgently and immediately, so that we can determine who it is and verify his condition,” he said. The United Nations has described Park as an American missionary who walked into North Korea to protest the country’s prison system. Secretary-General Ban Ki-moon has asked for Park’s release on humanitarian grounds, according to the world body. Former U.S. President Bill Clinton in August traveled to the North Korean capital of Pyongyang and met with leader Kim Jong Il to secure the release of two American journalists who were arrested last March near the border with China. Kim’s regime is under UN sanctions for last year’s test of an atomic weapon and the launching of several short- and medium- range missiles. The country has refused to return to six-nation nuclear disarmament talks unless the sanctions are lifted. To contact the reporter on this story: Sangim Han in Seoul at sihan@bloomberg.net

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GM’s Whitacre Reaches Agreement on Saab, Advances Pledge of Loan Payback

January 26, 2010

By Katie Merx, Jeff Green and Ola Kinnander Jan. 27 (Bloomberg) — General Motors Co., by reaching a $500 million deal yesterday to sell its Saab division to Spyker Cars NV, has moved closer to fulfilling Chief Executive Officer Ed Whitacre’s pledge to pay back government loans by June. Saab may become the first brand GM sells since emerging from a U.S.-backed bankruptcy on July 10. Arrangements to sell its Opel and Saturn units fell through, as did earlier negotiations over the Swedish brand. A definitive agreement with Sichuan Tengzhong Heavy Industrial Machinery Co. to buy Hummer is pending regulatory approval. “It’s a big accomplishment for them to be able to sell the brand,” said Rebecca Lindland , director of automotive research at IHS Global Insight in Lexington, Massachusetts. “It’s symbolic from a standpoint of getting something accomplished, because the Saturn sale fell through, Koenigsegg walked away from Saab and they had to wind down Pontiac.” Whitacre, 68, had said since mid-December that GM was winding down Saab after earlier talks with Spyker, and before that Koenigsegg Group AB, ended. Now the CEO known for building AT&T Inc. with acquisitions, has sold the Swedish car brand for more than $400 million in cash and preferred stock, aiding his pledge to repay U.S. and Canadian taxpayers by June. The transaction is subject to a 400 million-euro ($563 million) European Investment Bank loan for Saab, GM and Spyker said yesterday. Spyker will pay $74 million in cash and $326 million in preferred shares in the new company that would emerge from the deal, called Saab Spyker Automobiles, the companies said. ‘Additional Consideration’ GM will receive some “additional consideration” from the deal, John Smith , GM vice president of planning and alliances, said on a conference call, declining to elaborate. The Detroit- based automaker will also keep $100 million of Saab’s existing liquidity, said one person familiar with the matter. Deutsche Bank advised GM on the transaction, the company said in an e-mail. The automaker’s effort to pay back $5.7 billion in remaining U.S. debt benefits more from avoiding wind-down expenses than from the cash proceeds, said a person familiar with the company’s aims, who asked not to be identified because the plans aren’t public. “A significant part of the government’s return will come when GM becomes a public company again and will depend on whether investors think GM is a strong company with a good return ahead of it,” said Tom Wilkinson , a company spokesman. “Finishing a successful sale of Saab is the most desirable way to wind down our relationship with Saab.” Spreads Costs “It helps spread the cost of components and vehicle development for GM,” said Joe Phillippi , president of AutoTrends Consulting in Short Hills, New Jersey. “And GM gets a nice chunk of cash for an asset that was not worth much at all.” GM bought 50 percent of Saab in 1990 for about $700 million and purchased the rest of the Trollhaettan, Sweden-based company for $125 million and assumed debt in 2000 from Sweden’s Wallenberg family. Whitacre, who said Jan. 25 he would end a search for a new CEO and keep the job himself, leads a board that includes three directors from the private-equity world. Daniel Akerson , David Bonderman and Stephen Girsky have helped Whitacre chart an activist course. Akerson and Bonderman were chosen in part for their deal- making skills and hardball management approach, a former task force member said. Girsky was appointed to represent a union retiree health-care trust and is a paid adviser to Whitacre. Opel Rejection The three were instrumental in rejecting the sale of Opel to a group led by Magna International Inc. , the Aurora, Ontario- based auto-parts maker, and Russian lender OAO Sberbank, people familiar with the deliberations said at the time. Under Whitacre and his board, GM would sell Saab to Spyker on the condition that Russian businessman Vladimir Antonov , the chairman and biggest investor in the Zeewolde, Netherlands-based sports-car maker, exit the company, a person familiar with the talks said this month. As part of yesterday’s agreement, Tenaci Capital BV, a company owned by Spyker CEO Victor Muller , will take over Antonov’s 4.6 million shares when the deal is completed. Antonov, Martins Bondars and Naglis Stancikas will step down as supervisory board members, Spyker said. Two Installments Spyker will pay the cash in two installments, $50 million on the day the transaction is completed, expected by Feb. 15, and $24 million by July 15. As backup financing, Spyker received a 150 million-euro credit facility from GEM Global Yield Fund Ltd. that can be repaid in Spyker shares. Swedish sports-car maker Koenigsegg, backed by Beijing Automotive Industry Holding Co., walked away from a deal to buy Saab in November. Beijing Auto later paid $200 million to buy some car technology from Saab to use in its own vehicles. “It’s been a long march,” GM’s Smith told reporters on the conference call. “As part of finding a sustainable solution for Saab, we’re happy with the structure Victor Muller has put in place.” GM will continue to provide powertrain components, finished vehicles in the form of 9-4x and some “transition-oriented engineering services” to Saab Spyker, Smith said. GM also may generate some goodwill among fans of the brand and other European buyers, said Phillippi, the consultant. “I would think there was a lot of pressure to get a deal done,” said Stephen Spivey , a senior auto analyst at Frost & Sullivan Inc. in San Antonio. “This has fallen apart once or twice already. I would be willing to bet that was a consideration in this deal, that they just can’t have another one fall apart.” A deal to sell Hummer to Chengdu, China-based Sichuan Tengzhong is pending Chinese regulatory approval. Tengzhong CEO Yang Yi told China Daily in October that he hoped to win approval for the deal by early 2010. That deal is worth about $150 million, people familiar with the deal said in October, about 70 percent less than GM valued it in court. To contact the reporters on this story: Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net ; Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net ; Ola Kinnander in Stockholm at okinnander@bloomberg.net

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GM Will Sell Saab to Spyker in Deal Saving 72-Year-Old Swedish Auto Brand

January 26, 2010

By Jeff Green and Ola Kinnander Jan. 26 (Bloomberg) — General Motors Co. is close to announcing a deal to sell its Saab division to Spyker Cars NV , said two people familiar with the negotiations. An announcement may be made as early as late afternoon in Sweden after an agreement is final, said they people, who asked not to be named before official news releases. Spyker shares were suspended in Amsterdam trading at 1:45 p.m. local time. Spyker, led by Chief Executive Officer Victor Muller , agreed to pay $74 million in cash and $326 million in preferred shares in the company that would emerge from the deal, said one of the people. GM would get $100 million of Saab’s existing liquidity, the person said. A deal also hinges on Sweden agreeing to guarantee a 400 million-euro ($563 million) loan from the European Investment Bank for the Swedish carmaker, people familiar have said. Saab is among four brands, along with Pontiac, Saturn and Hummer, that Detroit-based GM is unloading to focus on Chevrolet, Buick, GMC and Cadillac in the U.S. after its bankruptcy exit on July 10. A sale of Saab, which GM is in the process of winding down, may save many of the 3,500 jobs at Saab’s main factory in Trollhaettan in southwestern Sweden. GM spokesman Tom Wilkinson declined to comment. Muller couldn’t immediately be reached for comment. Spyker spokesman Mike Stainton said negotiations with GM are still ongoing. Other Saab bidders included Genii Capital, the private- equity firm that teamed up with Formula One tycoon Bernie Ecclestone ; a group headed by former Swedish deputy Prime Minister Jan Nygren; and a Wyoming-based group led by Merbanco Inc. President Chris Johnston . Koenigsegg Deal Swedish sports-car maker Koenigsegg Group AB, backed by Beijing Automotive Industry Holding Co., walked away from a deal to buy Saab in November. Beijing Auto later paid $200 million to buy some car technology from Saab to use in its own vehicles. European and Swedish authorities may take a week to approve a loan for Trollhaettan-based Saab after GM and Spyker agree on a deal, Johnny Kjellstroem , a Swedish official who is negotiating the case with the European Union’s regulatory arm, said yesterday in an interview. Saab would face a tough future under the ownership of Spyker, according to Sergio Marchionne , chief executive officer of Fiat SpA and Chrysler Group LLC. “I like the Saab brand,” Marchionne said at an event in Stockholm today. “I think it’s very difficult to be a niche player and profitable.” Saab’s sales in the U.S. slumped 59 percent to 8,680 vehicles last year. European deliveries also fell 59 percent, to 26,567 cars. The compact 9-3 sedan makes up a majority of Saab’s sales. A redesigned 9-5 model is due to launch this year. Liquidators Saab CEO Jan-Aake Jonsson handed over power to liquidators on Jan. 12 and the board was disbanded. The Swedish Companies Registration Office has named GM nominees AlixPartners LLP Managing Director Stephen Taylor and Peter Toerngren of Swedish law firm Toerngren Magnell, to supervise the wind-down. “Marginal players will continue to be marginalized,” Marchionne said. The CEO said last year that he was interested in buying Saab while Turin, Italy-based Fiat was bidding for GM’s Opel division. GM decided to keep Opel in November, backing out of an accord to sell it to a group led by Magna International Inc. Saab, which traces its roots to aircraft company Svenska Aeroplan AB, was founded in 1937 to secure production of Swedish warplanes. The first car left the factory a decade later. GM bought half of Saab in 1990 and took full ownership in 2000. Spyker shares last traded at 3.91 euros, valuing the company at 84.8 million euros. The stock is suspended until further notice and pending a press release, Dutch securities regulator AFM said in a statement on its Web site. To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net ; Ola Kinnander in Stockholm at okinnander@bloomberg.net

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Ericsson Fourth-Quarter Profit Slumps 92% as Phone Companies Cut Spending

January 25, 2010

By Diana ben-Aaron Jan. 25 (Bloomberg) — Ericsson AB , the world’s largest maker of wireless networks, reported a 92 percent drop in fourth-quarter profit, falling short of analysts’ expectations as phone companies reduced spending on networks. Net income slumped to 314 million kronor ($43.4 million) from 3.89 billion kronor a year earlier, Stockholm-based Ericsson said today in a statement. Analysts had anticipated profit of 2.5 billion kronor, the average of 17 estimates compiled by Bloomberg. Revenue slipped 13 percent to 58.3 billion kronor, shy of the 59 billion-kronor average of 34 analysts’ estimates. Ericsson is expanding in services as revenue in its network-equipment business decline on lower spending by carriers and price competition from Chinese vendors. The company last year began a seven-year contract to manage networks for Sprint Nextel Corp. as well as a five-year management agreement with Zain in Nigeria. “During the second half of 2009, networks’ sales were impacted by reduced operator spending in a number of markets,” Chief Executive Officer Hans Vestberg said in the statement. Ericsson is building the core network for Swedish carrier TeliaSonera AB’s fourth-generation network in the country and in Norway, scoring a victory after Telenor ASA and Tele2AB chose China’s Huawei Technologies Co. to build their fourth-generation network in Sweden. Fourth-generation, or long-term evolution, is a technology for transferring data faster over mobile broadband networks. To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

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EU Calls on Greece to Step Up Budget-Deficit Cuts as Fiscal Crisis Spreads

January 19, 2010

By Simone Meier and Frances Robinson Jan. 19 (Bloomberg) — European finance chiefs said Greece’s fiscal crisis is affecting other countries and called on the government to step up its budget-cutting efforts. “The fate of one is the fate of all,” European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said at a press conference today after a meeting of EU finance ministers in Brussels. “This situation in Greece is having effects on other countries.” Concern that Greece and other European nations may struggle to contain their budget deficits has eroded the value of the euro and pushed up bond yields. Moody’s Investors Service said today that the Greek budget plan’s success “cannot be taken for granted.” “Markets are obviously increasingly looking at other countries,” said Christoph Weil , an economist at Commerzbank AG in Frankfurt. “But Greece is still the main topic, it’s almost hysteria. It’s possible that Greece will continue to weigh on the euro for some time to come.” Greek bond yields have surged more than 120 basis points in the past three months, pushing the yield on the 10-year security to 5.9 percent. The premium investors demand to hold Greek bonds instead of benchmark German bunds widened to 264 basis points today from about 30 points two years ago. The spreads of Spanish and Irish securities over German debt are at least eight times what they were in January 2008. The euro has dropped 5.7 percent against the dollar since Nov. 25 and traded at $1.4293 at 3 p.m. in London, down from $1.4384 yesterday. ‘Tough Love’ “The general approach can be described as tough love,” said Nick Kounis , chief European economist at Fortis Bank Nederland NV in Amsterdam. “They really have to deliver now in terms of deficit reductions but also in terms of sorting out their statistics once and for all.” Greece last week presented its plan to push down a budget deficit that is still more than four times the EU limit of 3 percent of gross domestic product. The proposals call for about 10 billion euros ($14.4 billion) of spending cuts and revenue increases this year to cut the deficit from 12.7 percent of GDP to 8.7 percent by year end. The plan also includes 2.5 billion euros in state asset sales this year. While Greece’s deficit-cutting proposals “are a step in the right direction, we’ll have to see whether they’re enough,” Luxembourg’s Jean-Claude Juncker said yesterday. The Greek program “needs to be more substantial,” said Dutch Finance Minister Wouter Bos . ‘Still Doubts’ Greece’s proposals “obviously didn’t entirely convince” finance ministers, said Klaus Baader , co-chief European economist at Societe Generale SA in London. “Markets have still doubts to what extent the program can be taken seriously.” The government’s worsening finances last month prompted rating companies to cut the country’s creditworthiness. Moody’s said in an e-mailed note today that Greek fiscal statistics have been “undermined by years of mismanagement.” “The key uncertainty is the Greek government’s ability to implement this program,” Sarah Carlson, a London-based sovereign analyst at Moody’s, said in the statement. “The heavy legislative program for the first quarter of 2010 and Greece’s poor track record in implementing fiscal reform mean that success can’t be taken for granted.” The government in Athens presented a “credible and serious” budget-cutting program, Greek Finance Minister George Papaconstantinou said today in Brussels. Greece said on Jan. 14 that the 2010 deficit may be less than the projected 8.7 percent of GDP. At the same time, the economy may contract 0.3 percent this year, according to government forecasts. ‘Unknown Factor’ “The credibility of the plan will always be very low until they prove to the market that they can take efficient action,” Swedish Finance Minister Anders Borg said. Greek officials have already pledged to provide more- reliable statistics after the EU earlier this month complained of “severe irregularities” in the country’s economic data. As part of that effort, the government will name an EU representative to the board of its national statistics agency, Papaconstantinou said. “There’s still an unknown factor regarding the credibility of Greek statistics,” said Sylvain Broyer , chief euro-region economist at Natixis in Frankfurt. “Greece will now have to convince markets. The country’s reputation has been damaged.” To contact the reporters on this story: Simone Meier in Brussels at smeier@bloombert.net ; Frances Robinson in Brussels at frobinson6@bloomberg.net .

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Dollar No Match for Aussie, Loonie Approaching Parity as Commodities Rally

January 11, 2010

By Oliver Biggadike and Candice Zachariahs Jan. 11 (Bloomberg) — The biggest monthly rebound in the Dollar Index since January means faster gains for Australia’s and Canada’s currencies as the recovering U.S. economy boosts demand for their commodities. The Canadian and Australian dollars will strengthen to trade at parity with the greenback or better together in 2010 for the first time in 34 years, appreciating at least 2.6 percent and 7.4 percent, three of last year’s four best forecasters for both currencies say. Traders are favoring the so-called loonie and Aussie over the dollar on the Chicago Mercantile Exchange even while betting more than ever on the Dollar Index advancing. Accelerating U.S. growth will spur demand for Canadian oil and natural gas as China’s expansion boosts purchases of Australian iron ore and coal, pushing both currencies higher, said Sacha Tihanyi , a foreign-exchange strategist in Toronto at Bank of Nova Scotia. The loonie and Aussie both rose last week even as the People’s Bank of China took steps to curb lending. “The global economy is going to strengthen, and the recovery is going to broaden out from what has so far been a China-, Asia-led global recovery,” said John Kyriakopoulos , head of currency strategy in Sydney at National Australia Bank Ltd., the most accurate predictor for both currencies last year. “We’re forecasting parity for the Aussie dollar, and we actually think the Canadian dollar will go through parity” by March, he said. The bank is the most bullish of last year’s most accurate forecasters on the two currencies, predicting gains of about 11 percent for each by Sept. 30. Most Since 2007 The Australian dollar rose 0.7 percent to 93.16 U.S. cents as of 2:15 p.m. in Sydney and was 2009’s third-best performer among the 16 most-traded currencies. Canada’s loonie, nicknamed for the aquatic bird on its dollar coin, advanced 0.4 percent to C$1.0260, after gaining the most since 2007 last year. IntercontinentalExchange Inc.’s Dollar Index — a gauge against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona — has rallied 3.7 percent since Nov. 25 after a 16.7 percent slide from 2009’s March 5 closing high. Three of the four best loonie forecasters in 2009 — National Australia, Royal Bank of Scotland Group Plc, JPMorgan Chase & Co. — predict parity by June 30; the other, Canadian Imperial Bank of Commerce, sees it there by Dec. 31. As for the best Aussie predictors, National Australia says that currency will equal the greenback by March 31; CIBC sees it there by year-end; JPMorgan estimates it will be stronger than parity in the second quarter and Commonwealth Bank of Australia is calling for it to stop 2 cents short of one U.S. dollar. Biggest Gains Of the most active currencies, the Aussie, loonie, Brazilian real, Norwegian Krone, South African rand and New Zealand dollar, known as commodity currencies, posted 2009’s biggest gains against the dollar. The Reuters/Jefferies CRB Index of raw material prices had its best performance since 1979, gaining 23.5 percent. History shows that a U.S. recovery coincides with increases in commodities, the Aussie and loonie. After the U.S. came out of the 2001 recession, the currencies rose 48 percent and 23 percent, respectively, in the two years ending with 2003 as the world’s biggest economy expanded almost 6 percent. After falling 31 percent in 2001, the Standard & Poor’s GSCI Index of 24 commodities rose 39 percent and 11 percent in the next two years. The Australian and Canadian dollars have rallied about 49 percent and 27 percent from last year’s lows as U.S. growth rebounded to 2.2 percent in the third quarter after shrinking 6.4 percent in the first. Economic Forecasts The U.S. economy’s expansion will accelerate to 2.6 percent in 2010, compared to 3.1 percent for Australia and 2.55 percent for Canada, according to the median estimates in Bloomberg economist surveys. Goldman Sachs Group Inc. predicts the S&P GSCI Enhanced Total Return Index of commodities will gain 17.5 percent this year. “A lot of the Canadian dollar gains up to now have been happening in the absence of strong growth in the U.S.,” said Tihanyi of Bank of Nova Scotia. “Through this year, you’re going to see growth come back to what you might see in a normal year, and along with that you’re going to see a pickup in trade and demand for Canadian products.” Canada’s third-largest lender forecasts parity by June 30. The Canadian dollar rose versus the greenback for a fourth day on Jan. 5, when the U.S. Commerce Department reported that automakers increased sales in December. The loonie climbed again the next day for its longest winning streak in two months. Record Lending The Canadian and Australian dollars are gaining support from the global recovery as China’s central bank tries to curb record lending. The nation may have exceeded its 8 percent growth target for 2009 by 0.5 percentage point, said Zhang Xiaoqiang , deputy head of the National Development and Reform Commission, in a Jan. 5 statement. Commonwealth Bank of Australia , among the five most- accurate forecasters for the Aussie and loonie, expects both currencies to end 2010 short of parity after peaking in the second quarter as Federal Reserve interest-rate increases add to the greenback’s appeal. Median Bloomberg survey forecasts see the Australian dollar falling 3.4 percent by Dec. 31 as the Canadian currency drops 5 percent. “The U.S. dollar will strengthen in anticipation of rate hikes,” said Richard Grace , chief currency strategist in Sydney at Commonwealth Bank. Canadian policy makers will warn traders against pushing the loonie higher to prevent damage to the economy, said Sebastien Galy , a foreign-exchange strategist at BNP Paribas SA in New York. ‘Pretty Vociferous’ “The problem with the Canadian dollar is the reaction function of the central bank; they’ve been pretty vociferous about talking down the currency,” Galy said. Seven days after the loonie reached C$1.0207 on Oct. 15, its closest brush with parity since July 2008, Bank of Canada Governor Mark Carney said action to weaken the currency “is always an option.” Within two weeks, it fell 6.1 percent to a one-month low of C$1.0870. Measured in U.S. cents, Canada’s dollar hit 97.97 before falling to 92. For the Aussie, the risk is a pause in rate increases. Reserve Bank of Australia Deputy Governor Ric Battellino described its monetary policy on Dec. 16 as “back in the normal range” because lenders had raised rates more than the policy makers had. Weighing on Aussies “Any paring back of those interest-rate hike expectations will weigh on the Aussie,” said Sue Trinh , a senior currency strategist at RBC Capital Markets in Sydney, who sees the currency peaking at 93 U.S. cents. “A sooner and stronger-than- expected recovery in the U.S. is going to benefit Canada more than the likes of Aussie.” Currency strategists have pushed up first-quarter forecasts for the Australian dollar, with the median prediction now at 93 U.S. cents, from 65 cents in March, more than estimates for the New Zealand dollar, real, krone, ruble and Canadian dollar. Futures traders are becoming more bullish about the loonie and Aussie even as they increase bets on the U.S. dollar, data from the U.S. Commodity Futures Trading Commission show. Contracts profiting from gains against the greenback outnumbered bearish wagers by more than 40,000 on each currency last week, the most in five weeks for the Aussie and 10 for the loonie . Investors had an unprecedented 51,050 bets that the Dollar Index would rise as of Dec. 29, according to the CFTC data. Even after such wagers fell to 48,623 last week, bullish contracts outnumbered bearish ones by more than 5 to 1, the most since March, when the dollar started last year’s slide. Major Exports Canada sits on the largest pool of oil reserves outside the Middle East. The nation is also the world’s third-largest exporter of natural gas after Russia and the U.S., according to the Energy Information Administration. Australia is the biggest shipper of iron ore and coal . Merchandise exports to China, the nation’s largest trading partner, grew 29 percent in 2009’s first 11 months from the same period in 2008. Australia also sells gold, crude oil and liquefied natural gas. The Aussie and the loonie last traded at parity together in 1976, before the November election of a secessionist Parti Quebecois government in Quebec helped trigger “a protracted selloff” in the Canadian dollar, according to James Powell’s “A History of the Canadian Dollar” on the Bank of Canada’s Web site. Past Parity The loonie most recently had the same value as an American dollar in July 2008 after rising to that level in September 2007 for the first time in three decades. It hit its strongest level of 90.58 Canadian cents per U.S. dollar two months later. The Aussie last reached parity in 1982, before the government allowed it to float freely the following year. With the U.S. dollar showing renewed strength, Barclays Plc’s wealth management unit is advising investors to maximize returns on bets that the Aussie and loonie will rise along with commodity prices by purchasing the currencies with yen. “If you had to pick a country in the world that’s most short of commodities, it’s Japan,” said Aaron Gurwitz head of global investment strategy at Barclays Wealth in New York. To contact the reporter on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net ; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net .

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Ecclestone Confirms Plan to Bid for GM’s Saab With Partner Genii Capital

January 7, 2010

By Adam Ewing and Ola Kinnander Jan. 8 (Bloomberg) — Formula One tycoon Bernie Ecclestone and his partner Genii Capital are among bidders that plan to make last-ditch efforts to buy General Motors Co. ’s Saab unit as a sale deadline passed. Genii Capital, a private-equity firm that agreed to buy a majority stake in Renault SA’s Formula One team last month, intends to hand in a cash offer, according to Lars Carlstroem , the Swedish investor who is working with Genii. Spyker Cars NV said it submitted a revised offer before a Jan. 7, 5 p.m. deadline in New York. Genii Capital “has decided that given an adequate and short timeframe for finalizing its offer, it will aggressively work towards a successful closing of the transaction with all the relevant stakeholders of the company,” the Luxembourg-based company said in an e-mailed statement yesterday. Genii said it will bid for a majority stake in Saab together with Ecclestone. “It’s a good brand,” Ecclestone said in a phone interview. “It’s a good brand that has probably been neglected by the current owners. We don’t own it yet, so let’s see what happens,” Ecclestone said. Forbes ’ 2009 list estimates Ecclestone and his family’s net worth at $3.7 billion. Ecclestone declined to divulge the financing details of the planned offer. No Qualified Buyer Detroit-based GM is proceeding with its decision to close Saab, Chief Executive Officer Ed Whitacre told a roundtable of reporters Jan. 6. No qualified buyer has emerged, he said, and GM doesn’t foresee a sale. “It’s real easy — show up with the money and you can have it,” Whitacre said when asked whether GM had made a good-faith effort to sell Saab. Trollhaettan, Sweden-based Saab Automobile AB is expected to hold a board meeting today where it will examine if it can restart production Jan. 11 after a four-week break, board member Haakan Danielsson said an interview. Board members may also discuss any possible new bids for Saab, he said. “It is a true opportunity and we’re surprised that more investors haven’t identified this opportunity,” Carlstroem said in a telephone interview. Luxembourg-based Genii “loves brands and Saab is a strong brand on the same level as Porsche and BMW.” GM extended a deadline for Saab bids until yesterday, giving bidders more time to come up with financing, people familiar with the matter have said. Negotiations Collapsed Negotiations to sell Saab to Spyker, headed by Victor Muller , collapsed Dec. 18 and Spyker submitted a second offer Dec. 20, which it revised yesterday. “Now there’s nothing more we can do, we just have to wait and see,” Muller said in a telephone interview. “Whoever is the shepherd of Saab, the main thing is that it survives.” Genii plans to use former bidder Koenigsegg Group AB’s business plan for Saab and make the automaker profitable by 2012 with production of 105,000 vehicles a year, Carlstroem said. The Saab brand is among four, with Pontiac, Saturn and Hummer, being sold or shut as GM focuses on Chevrolet, Buick, GMC and Cadillac in the U.S. after its July 10 bankruptcy exit. Saab’s board could be dissolved as early as today as the wind-down process begins, a person familiar with the matter said. Even so, GM could still decide to accept a bid, he said. The failed initial talks with Spyker marked the second time efforts faltered to sell Saab. Swedish sports-car maker Koenigsegg, which had backing from Beijing Automotive Industry Holding Co. , walked away from a deal in November. Beijing Auto paid $200 million to buy some car technologies from Saab to use in its own vehicles. ‘Build the Cars’ “We have customers who have ordered cars, especially the 9-3” model, Saab board member Danielsson, who is also head of Saab’s engineering union, said in a telephone interview. “We have the materials and we’ll just go out and build the cars unless we hear differently.” Danielsson said that Saab board members have not received an agenda for today’s meeting. A Swedish government delegation will travel to Detroit at the start of next week to meet with GM’s management, Svenska Dagbladet reported, citing Joeran Haegglund , state secretary at the Industry Ministry. “As we have understood the situation, GM has not yet closed the door for a sale even if a wind-down is the official track,” Haegglund told the newspaper. “Now, we want to make absolutely sure that they have all the necessary information and that there are no misunderstandings” on issues such as a loan for Saab from the European Investment Bank, the European Union’s lending arm, he said. Wind Down “We made the decision last month to wind down Saab, but in that process we have said that we will review any bids that come in sincerely,” said Stefan Weinmann , a GM Europe spokesman. Saab sales in the U.S. slumped 59 percent to 8,680 vehicles last year. European deliveries through November also fell 59 percent to 25,093 cars. About 50 Saab enthusiasts in around 35 vehicles gathered outside GM’s headquarters on Jan. 5 to appeal to the carmaker to sell its Swedish brand to Spyker or one of the other potential bidders, according to Ryan Emge, who organized the meeting. “What we need now is for GM to sell Saab so that they can get back to selling cars again,” said Emge, who operates the Saab History Web Site from Portland, Maine. No enthusiasts had rallied for the other car brands GM is shedding, he said. To contact the reporters on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net ; Adam Ewing in Stockholm at aewing5@bloomberg.net .

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Dollar Slides Against Yen, Treasuries Rise on Tumble in Pending Home Sales

January 5, 2010

By Michael P. Regan Jan. 5 (Bloomberg) — The dollar slid the most against the yen in four weeks and Treasuries rose for a second day following a bigger-than-estimated drop in pending home resales. Oil approached $82 a barrel, heating oil traded at a 16-month high and orange juice jumped on cold U.S. weather. The dollar fell as much as 1.4 percent to 91.26 yen and touched the weakest level versus the euro in almost three weeks as traders pared bets on the outlook for interest rate increases by the Federal Reserve. Ten-year Treasury note yields touched 3.76 percent, the lowest level in almost two weeks. The Dow Jones Industrial Average lost 0.4 percent, while the Standard & Poor’s 500 Index was little changed at 2:54 p.m. in New York. The National Association of Realtors reported a 16 percent drop in the number of contracts to buy previously owned homes in November as Americans waited for a first-time buyer tax credit to be extended. The report spurred concern that the industry whose slump led the world’s largest economy into recession has yet to recover without the help of government stimulus. “GDP growth near-term is going to be pretty strong because of the stimulus measures still in place,” said Noman Ali , part of a group that manages $3 billion of U.S. equities at MFC Global Investment Management Inc. in Toronto. “It’s the sustainability of that growth in the second half of the year that’s going to be a question mark.” The MSCI World Index of 23 developed nations’ stocks fluctuated. The MSCI Emerging Markets Index advanced 0.9 percent, heading for its highest close since August 2008. Stock indexes of energy producing countries were among the biggest gainers, with Kazakhstan’s KASE Stock Exchange index climbing 1.9 percent in its first day of trading this year. Europe’s Dow Jones Stoxx 600 Index slipped less than 0.1 percent, while the MSCI Asia Pacific Index climbed to a 16-month high. Buffett Votes on Kraft Cadbury Plc tumbled in U.K. trading after Warren Buffett’s Berkshire Hathaway Inc., the top stockholder in Kraft Foods Inc., voted against Kraft’s proposal to issue as many as 370 million shares to help buy Cadbury. Cadbury dropped 3.2 percent, while Kraft rallied 3.3 percent in New York. The yen rose against 15 of the 16 most-traded currencies, led by a 1.8 percent gain against the Swedish krona, a 1.5 percent advance versus the Brazilian real and a 1.4 percent gain versus the British pound amid speculation some Japanese exporters converted overseas earnings into their own currency. ‘Good News for Oil’ Below-average temperatures from Beijing to Berlin this week boosted energy prices as crude traded neared a 14-month high, adding to last year’s 78 percent advance. The National Weather Service forecast below-normal temperatures across the eastern U.S. states through Jan. 14. The Met Office said Britain endured the coldest December since 1995 and the freeze is set to continue. “Colder weather than average in the U.S., even hitting the north of Florida, has been pretty good news for oil,” said Hannes Loacker , an analyst with Raiffeisen Zentralbank Oesterreich AG in Vienna. “If the cold remains, the inventory gain we normally see in mid-January may be delayed.” Orange-juice futures for March delivery rose 10 cents, or 7.5 percent, to $1.4355 a pound, the most allowed by the ICE Futures U.S. in New York, on concern cold weather will threaten crops in Florida. Yesterday, the price gained 3.5 percent, after earlier rising by the exchange’s daily limit of 10 cents. White, or refined, sugar for March delivery rose $1.30, or 0.2 percent, to $723 a metric ton on the Liffe exchange, the highest closing price since at least 1989. The contract climbed as high as $734.70. Prices more than doubled last year after excess rains in Brazil and a weak monsoon in India hurt sugar- cane output in the world’s two biggest growers. To contact the reporter on this story: Michael P. Regan in New York at mregan12@bloomberg.net ;

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Centrica Wind-Farm Funding Success Shows Improved Liquidity for U.K. Sites

January 5, 2010

By Kari Lundgren Jan. 5 (Bloomberg) — Centrica Plc’s deal to fund U.K. offshore wind farms through a stake sale and bank debt may become a blueprint for competitors in the country’s $160 billion push to develop sites in deeper and more remote waters. The Crown Estate, the authority which administers 55 percent of the coastline on behalf of the monarchy, is assessing bids from 18 companies in its third offshore wind licensing round and aims to quadruple planned capacity by adding farms in the North Sea, Irish Sea and English Channel. It anticipates announcing winners, who will need to find financing, this month. Centrica, the U.K.’s largest utility, sold 50 percent of three projects to Societe Generale’s TCW Group in October and was able to raise 340 million pounds ($550 million) in debt for the sites, freeing up cash. Denmark’s Dong Energy A/S traded stakes in U.K. wind projects last month, while Germany’s E.ON AG sold an asset in the Thames estuary in 2008. “The number of banks comfortable with financing offshore wind is fairly limited and the Centrica deal has expanded that base,” said Marcel Gerritsen , global head of renewable energy and infrastructure finance at Rabobank Nederland NV. “It creates additional liquidity in the offshore wind farm U.K. area, which is necessary given the pipeline of projects coming up.” Centrica’s refinancing freed up funds for investment in new areas, amid a revival in lending as the credit crisis abated. Utilities will need to tap sources such as infrastructure funds and attract new banks for financing, according to Sarwjit Sambhi , managing director of power generation at Centrica. London Array “There are still a lot of round two projects that need to be built,” Sambhi said. “Once we’ve done those, then it’s all about how you fund the build-out of round three, and that’s going to be more challenging.” E.ON in 2008 sold a 20 percent stake in London Array , planned as the world’s biggest offshore farm, to Abu Dhabi’s Masdar . Dong, partnered by Siemens Project Ventures, bought 50 percent of the Lincs offshore wind-farm from Centrica last month, while the Danish company sold a 25 percent stake in the Irish Sea Walney project to Scottish & Southern Energy Plc. “The amount of capital needed to build all those wind farms is extremely large and utilities will need to bring in third-party investors,” said Jean-Daniel Borgeaud , a managing director at TCW, a Los-Angeles-based investment company. “It’s a new trend. If you had asked me two years ago if we’d work with Centrica I would have said no because utilities have typically used their own balance sheets.” U.K. Target Five wind parks are under construction, including Scottish & Southern’s 504-megawatt Greater Gabbard project, Dong’s Gunfleet Sands I and II and Swedish Vattenfall AB’s 300-megawatt Thanet project. Another 10 have been approved. “People are looking at different ways of sharing the cost and the risk,” Dave Rogers, E.ON’s U.K. director of renewable energy , said in an interview. “These are very large investments and the time-scale in which they need to be committed is relatively short.” The U.K. is targeting 15 percent of energy from renewable sources in 2020, of which 70 percent will have to come from offshore projects, according to the Carbon Trust. The Crown Estate is seeking to add 25,000 megawatts in the third round, up from a combined 8,000 megawatts in the first rounds, and estimates potential market investment at 100 billion pounds. The U.K. has nine operating offshore farms with capacity of about 690 megawatts, enough for 400,000 homes, according to the British Wind Energy Association . Spreading Risk Declared bidders among 18 companies competing in the third round include Scottish & Southern, RWE AG , E.ON, Iberdrola SA ’s Scottish Power unit, Dong and Vattenfall as well as Norway’s Statoil ASA , Statkraft AS and Fred. Olsen Renewables Ltd. Centrica is also likely to make an offer, given the proximity of several of its fields to new sites, Credit Suisse Group AG analyst Mark Freshney said. Centrica spokesman Julian Mears declined to comment yesterday. “We will look into all kinds of financing when it comes up,” said Bjorn Drangsholt, head of Statkraft’s offshore wind power department. “There are a number of alternatives to be investigated.” The U.K. government supports offshore wind by handing out two so-called Renewable Obligations Certificates per megawatt- hour of output to generators, which can be sold on to suppliers needing them to meet clean energy targets. An average offshore wind turbine generates enough power in a year to supply 2,500 households. Debt Refinanced Across Europe, about a dozen offshore projects are likely to seek debt financing in the coming year, including the Blackstone Group LP -backed Meerwind project in Germany and C- Power NV’s Belgian Thornton Bank farm, according to Jerome Guillet, head of energy project finance at Dexia SA. Centrica refinanced debt on its Lynn and Inner Dowsing offshore farms and the land-based Glens of Foudland wind farm by tapping non-recourse financing, which secures loans with cash generated by projects rather than the balance sheet. Fourteen banks, including Mitsubishi UFJ, KfW IPEX-Bank GmbH, Dexia and Rabobank, were behind the Centrica loan. “It’s still difficult to get financing, but the market is slowly coming together,” said Alexander von Dobschuetz, head of structured finance at Munich-based bank Bayerische Landesbank. “The proposed structures and risk allocations are becoming more appropriate.” To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

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Believing Barclays Means Minimum 8% in Dollar-Yen Trade as Japan Retreats

January 4, 2010

By Matthew Brown Jan. 4 (Bloomberg) — For clues to why the dollar is gaining strength after its worst year since 2007, look no further than Japan. While Fed funds futures show the Federal Reserve may raise interest rates as soon as August, the Bank of Japan is likely to keep borrowing costs near zero percent through 2011 as deflation persists, according to the median estimate of economists surveyed by Bloomberg. Betting the dollar will appreciate versus the yen is the top 2010 recommendation at UBS AG, the second- largest foreign-exchange trader. For the first time since before credit markets began to seize up in 2007, investors are starting to favor selling the yen instead of the dollar to fund higher-yielding investments. The European Central Bank, grappling with debt crises in Greece, Spain and Ireland, may wait until at least October before increasing borrowing costs, a separate survey shows. “We like buying the dollar in 2010 and that’s quite a change in view,” said Adarsh Sinha , a foreign-exchange strategist at Barclays Capital in London. “We are looking for the very loose monetary conditions in the U.S. to end. The dollar will start firming up well ahead of any rate hike.” After falling 7.9 percent in the first 11 months of 2009, the Dollar Index, which measures the greenback’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, gained 4 percent in December. That’s the first monthly gain since June, and the biggest since it rose 5.8 percent in January. Currency Forecasts The dollar will strengthen to $1.40 per euro in 2010, from $1.4290 today, and to 100 yen, from 92.78, according to Barclays. An investor selling 12-month yen-denominated bills and buying equivalent-maturity Treasury bills and holding to maturity will earn 7.8 percent if the dollar hits Barclays’ yen target. The U.S. currency will advance 2.3 percent against the euro in 2010, according to Frankfurt-based Deutsche Bank AG, the world’s largest foreign-exchange trader. “A relative rise in U.S. rates would be dollar supportive as long as it is materializing in an environment of reasonably robust growth,” said Henrik Gullberg , a currency strategist at Deutsche Bank in London. U.S. gross domestic product will expand 2.6 percent this year, better than the 1.2 percent for the 16 euro-member nations and 1.35 percent for Japan, according to the median estimate of economists surveyed by Bloomberg. The Fed’s target rate of zero to 0.25 percent compares with 1 percent for the ECB and 0.1 percent for the Bank of Japan. Reversing Bets Slower growth outside the U.S. is turning dollar bears into bulls at a pace not seen since the third quarter of 2008, according to data from the Commodity Futures Trading Commission in Washington. Wagers by hedge funds and other large speculators that the currency will fall against the euro, yen, pound, Swiss franc, Canadian, New Zealand and Australian dollars, and the Mexican peso outnumbered bullish bets by 93,387 contracts on Dec. 22. The difference was 280,855 on Dec. 1. That’s the fastest reversal since so-called net shorts of 241,216 on July 21, 2008, turned into a net long position of 73,049 four weeks later. The Dollar Index rallied 23 percent between July 15 and Nov. 21 that year. The dollar’s December gain was a “relief bounce,” according to Gareth Fielding , who manages $2.2 billion as chief investment officer at Quantum Global Wealth Management in Zurich. Dollar Reserves That doesn’t change the fact that the U.S. is playing a smaller role in the global economy where growth is being led by China. Ultimately, that’ll mean diminishing demand for dollars, he said. “Fundamentally, things haven’t changed,” Fielding said. “The dollar’s pre-eminent role in the global economy will diminish. Central banks are likely to continue to diversify away from the U.S. dollar.” The dollar’s share of global currency reserves fell in the third quarter to the lowest level in a decade while the euro’s rose to a record, according to International Monetary Fund data released on Dec. 30. The U.S. currency’s portion dropped to 61.6 percent in the period ended Sept. 30, from 62.8 percent in the prior quarter and 64.5 percent a year earlier. The euro’s share rose to 27.7 percent from 27.4 percent. Dollar Weakness Record debt sales by the U.S. to fund a $1.4 trillion budget deficit may restrain the dollar, after Congress raised the limit on federal borrowing to $12.39 trillion. Also, the currency may remain relatively weak against the currencies of nations whose economies depend on commodities, such as Australia, New Zealand and emerging markets, according to surveys of strategists by Bloomberg News. The Australian dollar, after surging 27 percent in 2009, may rise as much as another 5.5 percent this year, forecasts show. Korea’s won will gain 7 percent, after strengthening 8.2 percent last year. “Higher-octane currencies, like the Aussie, the kiwi and the emerging-market currencies such as the won, might perform the best, followed by the dollar, and lagging the whole bunch will be the euro and the yen,” said Stephen Jen , a money manager at BlueGold Capital Management LLP in London and the former head of foreign exchange at Morgan Stanley. Signs of an improving U.S. economy are pushing up interest rates, making some dollar assets more attractive than those priced in the euro or the yen. Rate Outlook The premium investors demand to own 10-year U.S. Treasuries against equivalent-maturity Japanese government bonds rose to 2.58 percentage points today, the most since December 2007. U.S. 10-year yields were 0.49 percentage point more than German bunds on Dec. 22, the biggest gap since July 2007. The Fed will increase its target rate for overnight loans between banks as much as 0.75 percentage point by the end of the year, according to the median of 68 forecasts compiled by Bloomberg. The ECB will raise its main rate by half a percentage point, based on the median of 16 forecasts, and the BOJ will leave its target unchanged, according to 21 predictions. As U.S. rates rise, the yen may regain its role as the pre- eminent currency for carry trades, taking over from the dollar. The cost of borrowing dollars for three months between banks in London fell below the equivalent yen rate for the first time in 16 years in August. The three-month London interbank offered rate, or Libor, for such loans in dollars was 2.69 basis points lower than yen Libor on Dec. 31, compared with 7.25 basis points on Sept. 8. A basis point is 0.01 percentage point. Japanese Deflation “We see an intensification of the long-term carry trade where Japanese investors send money abroad,” said Geoffrey Yu , a foreign-exchange strategist at UBS in London. “They’ll get even more interested in sending money overseas as the BOJ keep rates low.” Japanese consumer prices have fallen on an annual basis since February. BOJ Governor Masaaki Shirakawa told TV Tokyo on Dec. 21 that the central bank will “persistently” keep rates at “virtually zero” to fight deflation. UBS expects the dollar will appreciate above 100 yen this year, compared with the median estimate of 98 in a survey of 38 strategists and economists. Strategists are struggling to keep up with the currency’s gain versus the euro. A separate survey shows they expect it to rise every quarter this year, to $1.45 by year-end from $1.51 in the first three months. ‘Catch-22’ In Europe, Greece’s credit was downgraded last month by Standard & Poor’s and Fitch Ratings after the government failed to sufficiently address its growing fiscal deficit in its 2010 budget. The outlook on Spain’s AA+ rating was lowered to “negative” by S&P as it predicted the debt burden will rise to as much as 90 percent of GDP by the middle of this decade. German Chancellor Angela Merkel said on Dec. 10 Europe has a “responsibility” to help Greece. A day later, ECB President Jean-Claude Trichet said the country must take “courageous action” on its own. “The euro-zone is in a Catch-22,” said Yu. “If they bail out the weak countries you rip apart the stability pact and introduce a huge moral hazard. If you don’t, you risk destabilization. It’s a significant risk for the euro and I don’t think there’s a plan.” Dollar bulls are encouraged by trading that shows the currency has started to rally in response to better-than- forecast economic news. For much of the past two years, the greenback weakened on signs of a recovery, which encouraged traders to borrow in dollars and use the proceeds to buy riskier assets outside the nation. Withdrawing Reserves The Dollar Index surged to a three-month high on Dec. 22 after an industry report showed sales of existing homes rose in November more than economists estimated. The Fed is taking steps to begin withdrawing money from the financial system. Policy makers will end most emergency lending programs and debt purchases by March because of “improvements in the functioning of financial markets” and stabilizing labor markets, the Federal Open Market Committee said on Dec. 16. “In the U.S., the political incentive is to keep the fiscal stimulus going, pressuring the Fed to tighten early,” said Jen, who sees the dollar strengthening to $1.35 per euro this year. “The political incentive in Europe is to start to tighten on the fiscal front as fast as possible, putting pressure on the ECB to keep policy loose. That’s more constructive for the dollar than the euro.” To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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General Motors extends Saab deadline to Jan. 7 (Worcester Telegram & Gazette)

January 3, 2010

General Motors Co. will extend the deadline for talks on its Saab unit until Jan. 7, giving Spyker Cars NV more time to come up with financing to buy the Swedish brand, a GM official briefed on the matter said last week.

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Spyker Makes New Offer to GM for Saab, Saying It Addresses All ‘Obstacles’

December 20, 2009

By Mike Harrison Dec. 20 (Bloomberg) — Spyker Cars NV today said it has submitted a renewed offer for General Motors Co.’s Saab unit. “An 11-point proposal had been submitted to GM, addressing each of the issues that arose during the due diligence process” which will “remove each of the obstacles that were standing in the way of a swift transaction,” Spyker Chief Executive Officer Victor R. Muller said in a statement. GM last week said it will shut the money-losing Saab unit after talks collapsed on a sale to Spyker, the second failure in less than a month to keep the 72-year-old Swedish brand alive. GM and Spyker decided there was “no point in carrying on” after encountering issues that couldn’t be resolved, GM Vice President John Smith said on a conference call on Dec. 18. “We have made every effort to resolve the issues that were preventing the conclusion of this matter and we have asked GM and all other involved parties to seriously consider this offer,” Muller said in today’s statement. “We are very confident that our renewed offer will remove the impasse that was standing in the way of an agreement on Friday, and this would still allow us to conclude the deal prior to the expiry of the deadline originally set by GM of Dec. 31,” he said. Spyker said it’s renewed offer is valid to 5 p.m. Eastern Standard Time tomorrow.

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