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Wednesday, 14 August 2024
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European Business News (EBN), 97-06-13European Business News (EBN) Directory - Previous Article - Next ArticleFrom: The European Business News Server at <http://www.ebn.co.uk/>Page last updated Fri, June 13 7:14 PM CETCONTENTS
[01] Lockheed in talks with Airbus about military, commercial projectsU.S. defence contractor Lockheed Martin and Airbus Industrie, the European airplane consortium, are in talks about working together on future military and commercial projects.Executives from both companies confirmed the discussions, but said neither company is considering a merger or cross-ownership arrangement. If the negotiations prove successful, Lockheed could become an important long-term supplier for Airbus jets, while Lockheed would combine with Airbus partners to offer tanker and transport aircraft to the Pentagon. Initial talks started a year ago, but executives said they picked up in recent months following the proposed merger of Boeing and McDonnell Douglas. That merger would create the world's largest aerospace company, challenging Lockheed in the military market and Airbus in the commercial market. 'Both sides are looking to create a counterweight to Boeing-McDonnell Douglas,' one industry executive familiar with the discussions said. The source was not identified. David Vens, a spokesman for Airbus, which has its headquarters in Toulouse, France, said the consortium is interesting in winning Lockheed's involvement and investment in a new jumbo jet that Airbus plans to develop, at a cost of $8 billion, to compete with Boeing's 747. 'There is a powerful dynamic at play in this industry right now, given the degree of consolidation going,' Vens said. 'European firms are trying to determine how best to organize themselves to compete against the Boeing Goliath.' The possible collaboration could help Airbus sell its planes in the U.S. now Boeing has signed three airlines for exclusive supplier deals. Lockheed, based in Bethesda, Maryland, remains heavily dependent on tightening Pentagon procurement budgets, so an alliance with Airbus could mean more access to European defense markets and the $500 billion that the world's airlines are expected to spend for commercial jets over the next decade, the report said. 'I'd say we're still in the dating stage,' said Micky Blackwell, president of Lockheed Martin's aeronautics division. 'We've had our second date and both sides are hoping for more,' he said. Boeing chairman Philip Condit said that he was unconcerned by the prospect of closer ties between his two main rivals. He said his 'best guess' was that the Federal Trade Commission would approve the merger. [02] PacifiCorp confirms $9.6 billion bid for Britan's Energy GroupPacifiCorp has confirmed it plans to acquire Britain's Energy Group for $9.6 billion, and will be selling its Pacific Telecom unit for $1.5 billion as part of the deal.PacifiCorp, a diversified energy company in the U.S. and Australia, said it is paying 6.955 pounds, or $11.35, per share and will be assuming Energy Group's $3.8 billion of debt. But Energy shares closed on down two pence at 646 pence, off a high of 663 pence, pressured by concerns that the new Labour government might hamper the deal. 'There is a good chance the bid might be referred to competition authorities,' the analyst said. The boards of directors of both companies unanimously approved the transaction, valued at $9.6 billion in debt and equity, the company said. The deal is to be consummated by PacifiCorp's unit, PacifiCorp Holdings. In addition, PacifiCorp said it plans to shed its Pacific Telecom subsidiary to focus on the energy industry. It is selling the unit to Century Telephone Enterprises Inc for $1.5 billion in cash, plus assumption of Pacific Telecom debt. [03] EU and US reach mutual recognition accordThe European Union Commission has announced that it has reached an agreement with the U.S. on mutual recognition of product standards. The so- called MRA accord will allow U.S. and E.U. companies to have a wide range of their products, certified in their home markets, to be recognized in each other's markets.The Commission said the agreement covers more than $40 billion worth of transatlantic trade in key sectors such as telecommunications equipment, medical devices and pharmaceuticals, and electronic goods. The agreement is expected to be signed formally next week. The Commission said the MRA Accord will 'substantially cut the time it takes to launch new products' for U.S. and E.U. companies in the others' markets, while opening up 'significant new opportunities' in both markets too. [04] U.S. May PPI unexpectedly drops 0.3%U.S. producer prices unexpectedly fell 0.3% in May, a decline that pushed prices down 3.9% year-to-date, the Bureau of Labor Statistics said.The May decline marked the fifth consecutive monthly drop in producer prices - the first time since 1952 this has happened. Wholesale price developments in the first five months of 1997 resulted in a modest 0.3% rate of increase for the last 12 months. The last time the producer price index rose at a 0.3% rate for 12 months was in June 1994. Excluding the volatile food and energy components, or 'core,' the PPI also fell 0.3% in May. That was the largest decline registered since producer prices fell 0.4% in October 1994. The May decline differed from most analysts' expectations. A Dow Jones Newswires survey of 23 economists published on Wednesday found a median estimate of a 0.1% rise in May producer prices. The April decline in producer prices remained unrevised at 0.6% and 0.1% excluding food and energy. The Commerce Department also reported that U.S. business inventories rose 0.3% in April to a seasonally adjusted $1.021 trillion, rising for the fourth month in a row.. The April increase followed a revised rise of 0.2% in March to an adjusted $1.017 trillion. The last time inventories dropped was December 1996, when they fell 0.1%. The March increase was previously estimated at 0.3%. Total business stocks equalled 1.37 months' sales in April, unchanged from March. Auto inventories rose 1.2% in April from March, after an 0.2% increase a month earlier. Overall business sales in April increased 0.3% to an adjusted $746.34 billion after falling 0.2% the month before to an adjusted $744.38 billion. On an unadjusted basis, overall business inventories in April rose 0.9% to $1.026 trillion from the previous month's $1.017 trillion and were up 2.4% from a year earlier. [05] Chirac and Kohl fail to agree but expect Stability Pact signing in AmsterdamFrench President Jacques Chirac said after meeting with German Chancellor Helmut Kohl that he was positive about signing the so-called Growth and Stability Pact at the E.U. summit in Amsterdam on June 16 and 17.The German and French finance ministers said they too have so far failed to agree on a common position on the Stability Pact, but also maintained a positive outlook. 'We are on the right path,' Chirac said, but added that the final details of any agreement have yet to be finished. France has been pushing to include a beefed-up jobs and economic growth component in this pact and presented several proposals to Germany. There has been no agreement between the two parties yet, but both parties remain hopeful they could work out their differences over the weekend. 'The president presented the new situation in France, where things were said in the campaign and expectations were created that may be an additional complicating factor in achieving the criteria,' a French source said. Emerging from a meeting with his French counterpart Dominique Strauss-Kahn, a relaxed-looking German finance minister Theo Waigel said: 'We are making progress at least, but we aren't finished yet,' when asked if the two had agreed a formula that would be acceptable to both sides. For his part, Strauss-Kahn merely noted 'We are advancing' when asked a similar question by reporters. Meanwhile, Kohl said that no decision had yet been made on how many new countries should be invited to join NATO. 'There has been no preliminary decision thus far,' Kohl told a news briefing after a Franco-German summit. The United States surprised its NATO allies yesterday by saying it backed only Poland, Hungary and the Czech Republic for participation in NATO's next wave of expansion. Although Washington's position is expected to be decisive, some of its European allies are expected to press for invitations for Slovenia and Romania at a NATO summit next month in Madrid. Earlier, a German government official said Bonn backed the U.S. decision but assumed it meant there would soon be a second round of enlargement to include other countries eager to join the alliance. Unlike several of its European partners, Germany has avoided making any clear statements on its preferences for new NATO members, although Bonn has long been a keen supporter of enlargement in general. [06] Japan unveils 'Big Bang' plan to boost Tokyo as a financial centreJapan's Finance Ministry unveiled a blueprint for financial deregulation designed to put Tokyo on an equal footing with London and New York as an international financial centre.Three ministry panels released recommendations for change that Japanese officials have compared to London's ''Big Bang'' reforms in the 1980s. They would go into effect in stages, with all implemented by the end of 2001. Among major reforms, brokerage commissions would be liberalized in two stages, in April 1998 and by December 1999. Banks, insurance companies and brokerages would be allowed to enter each other's business areas, with banks entering the equities business through subsidiaries by March 31, 2000. Restrictions on the design of derivatives products would be removed by March 31, 1999. ''This is exactly the sort of easing that's going to rekindle Tokyo as a financial center of the world,'' said Jesper Koll, an economist at J.P. Morgan. ''It's going to provide tremendous business opportunities for foreign companies.'' Most items in the blueprint had already been made public in the past few months. A final decision hasn't been reached on some items, particularly those involving tax changes such as the proposed abolition of the securities transaction tax. But Finance Minister Hiroshi Mitsuzuka is expected to approve almost all the proposals, and work on necessary legislation is likely to begin soon. [07] UK's Brown says central bank accountability is 'final building block' in monetary reformBritish Chancellor of the Exchequer Gordon Brown held out the prospect of lowering his inflation target if the country can be put on a sustainable growth path.In his first Mansion House bankers' speech - the second most important event in the chancellor's calendar after the budget - Brown said that making the Bank of England accountable if it fails to meet his new inflation target was the 'final building block' in his reform of monetary policy. Under these 'more rigorous, precise and open procedures,' if underlying inflation, excluding mortgage interest payments, is one percentage point higher or lower than the 2.5% target, the Bank of England governor must send an 'open letter' to the Chancellor explaining the reasons for the divergence. Unlike the previous government's target of '2.5% or less,' the new target sets floor to discourage the Bank of England's Monetary Policy Committee from aiming deliberately low and raising interest rates excessively although some analysts thought the move implied a relaxation of monetary discipline. 'Over the coming years I want the British economy to enjoy the far greater underlying strength that comes from a base of low and stable inflation,' Brown said. He added: 'If we succeed in strengthening the ability of the British economy to sustain growth with low inflation, and if international conditions permit, I would hope to lower the inflation target. Brown, who spurned the traditional black tie dress code and instead wore a lounge suit, set out five long term commitments - to monetary stability, fiscal stability, higher investment, welfare modernisation and free trade - to help Britain climb up the world economic league. He pledged that his first budget on July 2, whose centrepiece will be a windfall tax on the privatised utilities to fund a youth employment program, would take a 'long term view.' Pledging once more to sell assets the government does not need - spending departments have been asked to draw up a national register of assets by November -, Brown made clear his determination to keep a tight rein on public spending and warned the public sector unions there would be no big pay rises. 'Just as we will resist any other irresponsible demand on public spending, we will resist irresponsible public sector pay demands,' he said. And he would introduce 'tough' rules for government borrowing. 'Two central principles will guide our approach. First, meeting the golden rule for borrowing. Over the economic cycle, the government will only borrow to finance public investment and not to fund public consumption. 'Second, alongside this golden rule commitment, we will keep the ratio of government debt to gross domestic product stable on average over the economic cycle at a prudent and sensible level. 'This platform of fiscal stability will deliver more investment, more growth and more jobs,' he said. Turning to Europe, Brown promised to keep Britain in the European Union and to press ahead with completing the single market. 'Our long-term commitment to Europe means that it is essential that we must play a leading role in shaping Europe's future. 'We will pursue a British agenda to equip Europe for long-term success. That is what the British initiative I launched last week to get Europe to work was all about,' he said. He pledged to improve the competitiveness of the marketplace to enable investment levels to rise and to modernise the tax and benefits system 'to ensure that people have jobs, are able to keep the jobs they have and are able to move into better jobs'. He concluded: 'In our monetary and fiscal policy we are determined to chart a consistent course, not for a few months or even a year or two, but for the long term. 'By being better equipped for the future, Britain and the British people can and will be better off'. [08] Britain's George asserts he won't use new authority to set restrictive interest ratesBank of England Governor Eddie George sought to calm fears that the newly- independent central bank would pursue an excessively tight monetary policy that threatened economic growth and employment.'I am well aware that some observers have been concerned that, in exercising its new responsibility, the Bank will adopt an unduly cautious approach, thereby imparting a restrictive bias to the economy. That will not be our intention,' George said. 'What in fact monetary policy is trying to do, in order to maintain price stability, is to keep overall demand growth continuously in line with the growth of the supply-side capacity of the economy to meet that demand - no more, no less. 'If we are successful there is no reason why the economy should not continue to grow at around the underlying rate of capacity growth,' which in turn depends on structural and supply-side reforms such as more flexible labour markets and welfare reform, he said. George recognised the central bank's former role as supervisor to the banking system, which has now been handed to a beefed-up Securities and Investment Board, poses a potential conflict of interests. 'And I certainly will not mourn the passing of the criticism - whether or not it is justified - that is visited upon the banking supervisor whenever a significant bank does in fact fail,' he added. But forging close relations with the super-SIB would help the central bank to fulfil its responsibilities towards monetary and systemic financial stability, said George. While praising the advantages of a single super-regulator, George said there is a danger it could become too standardised and restrictive. 'I have no doubt that we will indeed be able to establish the necessary close relationship - in our mutual interest - not least because the new super-SIB will be headed by our own deputy governor, who will be taking many of our own banking supervisors with him,' he added. [09] Japan's GDP grows beyond all expectationsJapan's gross domestic product grew 3% in the fiscal year ended March 31, easily surpassing the official government forecast of 2.5%. In the October- December quarter, GDP grew 1% from the previous quarter. Many private economists believe growth this fiscal year is likely to be between 2.5% and 3.0%, exceeding the government's forecast of 1.9%.However, there are still considerable areas of concern for the economy. Last quarter was aided by 4.6% growth in personal consumption, which accounts for around 60% of GDP, as consumer spending shot up before the sales tax rose to 5% from 3% on April 1. Since the tax, consumer spending has been slower in the April-June quarter, enough so that GDP may have fallen back. ''April to June is likely to be negative,'' J.P. Morgan's Koll said. ''The numbers were up because of the tax hike, and now there's going to be a payback.'' Announcing the data, Economic Planning Agency deputy director general Shinpei Nukaya said he wouldn't be surprised if the current quarter recorded negative growth. Another area of concern is corporate capital spending, which rose only 0.7% last quarter, below the 2.2% growth in the previous quarter. Nukaya noted that capital investment last fiscal year fell short of the goverment's forecast, growing by 6.1% instead of 7.1%. ''Capital expenditures could definitely be a little stronger,'' Lehman Brothers's Jones said. In sectors such as telecommunications, companies are investing in upgrading systems, but there aren't a lot of entirely fresh outlays, economists say. 'It's mostly capital deepening, not capital spending,' said J.P. Morgan's Koll. 'Nobody's building factories.' Capital spending is believed to be one of the key factors influencing the Bank of Japan's decision on whether it can afford to raise its official discount rate from the current historic low of 0.5%. Other factors also suggest that conditions aren't yet ripe for a rate hike, analysts said. Japan's banks are still saddled with huge amounts of bad debts, many companies are continuing to restructure, unemployment is relatively high and there is no sign of inflation. [10] Corporate and Economic BriefsGerman wholesale prices showed a sharp 1.7% rise in May from the previous month, fuelled by higher prices for agricultural products. The month-on- month rise was the largest since January 1989 and unsettled the picture of stable consumer prices in Germany. Prices were up 3.1% from the year- earlier month.Spain's consumer price index was up 0.1% in May from April, lowering the year-on-year rate to 1.5% from 1.7% in April, the National Statistics Institute said. Underlying inflation, a measure of consumer prices excluding fresh food and energy prices, increased 0.1% in May, leaving unchanged the year-on-year underlying, or 'core' rate at 1.9% from April. The increase was the lowest year-on-year rise in inflation in the month of May since 1968. Spain's inflation meets requirements for European monetary union, which call for inflation figures to fall within 1.5 percentage points of the top three E.C. economies in terms of price stability. U.S. House Republicans sent a five-year, $85 billion tax cut package to the floor Friday morning, minus any proposed new levies on Indian gambling casinos. By a party-line 22-16 vote, the House Ways and Means Committee approved legislation that promises sharp cuts in capital gains taxes, relief from estate taxes, and a range of tax and savings incentives for higher education. House floor action has not been scheduled. Ways and Means Chairman Bill Archer, R-Texas, had a surprising setback when a half dozen Republicans joined Democrats to defeat his plan to impose $1.9 billion in new taxes over five years on Indian gambling casinos and other businesses. Mannesmann's group sales in the first five months of 1997 rose 16% to 14.3 billion marks ($8.3 billion), and that earnings in the period improved further. The automotive, telecommunications, and pipes and trading divisions contributed to the improvement, the company said in a statement distributed at its annual general meeting. Two top Dai-Ichi Kangyo Bank executives were arrested by Tokyo prosecutors on suspicion of making illegal loans to a 'sokaiya' corporate racketeer. The development brought to 10 the number of former and present DKB executives arrested in a widening racketeering scandal that also involves Nomura Securities, the nation's top brokerage, and reinforces suspicions that the bank's payoffs were systematic. The Tokyo District Public Prosecutors Office arrested DKB Vice President Ichiro Fujita, 58, and Senior Managing Director Takeo Fukushima, 56, on suspicion of authorizing some 7.35 billion yen () in loans via a DKB affiliate to a realtor run by the younger brother of racketeer Ryuichi Koike. Shares in U.K. leisure and entertainment company Rank Group shares went down, after brokers cut back their full year forecasts in the wake of a trading update of the company. Rank said its sales were up 10% in the first five months of the year, while operating profit was 7% ahead of the same period a year ago. 'This update confirms what we have been saying for a couple of weeks,' said Greg Feehley at Kleinwort Benson. Feehley said he will be cutting his full year pre-tax profit forecast by between £5 million and £10 million from his current £345 million ($552 million) estimate. The Italian cabinet approved a decree setting out guidelines to privatise state telecoms company Telecom Italia, the new group to be born out of a merger between Telecom and Stet, Prime Minister Romano Prodi said. He told a news conference the prime ministerial decree would now go to parliament's lower house. The state telecoms group is due to be privatised by mid- October after holding company Stet's merger with Telecom Italia is complete. The company created by the merger will keep the name of Telecom Italia and is due to become operational on July 18. In an effort to boost sagging newspaper sales, the Italian government introduced legislation that would allow newspapers to be sold in gas stations, book stores, coffee bars and supermarkets. Sales have been limited to newsstands because of the strong newsdealers lobby, and for years newspaper publishers have pushed for legislation that would allow wider distribution. According to the Federation of Italian Newspaper Publishers, sales dropped from 112 copies sold for every 1,000 people in 1993 to 105 copies in 1995, with a further decline expected for last year. The legislation, which must be approved by parliament, calls for an 18- month test of the sales network before the government makes a final decision. Norway's trade surplus for May rose 29% to 8.249 billion Norwegian kroner ($1.1 billion) from the same month last year, according to Statistics Norway, the state statistics agency. A rise in oil and natural gas exports was behind the year-on-year increase in the trade surplus, said the agency. World insurance premiums have broken through the $2,000 billion mark for the first time, but while Asia is booming, growth in Europe and America has fallen off, according to reinsurers Swiss Re. In its latest Sigma research report, Swiss Re said insurance premium volume in 1995 was $2,143.4 billion, an increase of 3.7% on the previous year. 'This indicated growth which, like the previous year, was below the long term average of 4.6%, the report said. In a sluggish year, non life insurance achieved a turnover of $906.8 billion, up 2.2 per cent, mostly from Europe and the U.S. Life insurance counted for $1,236.6 billion, up 5.3%, reaching highs in Japan and South Korea, South Africa and Switzerland. [11] World News BriefsPol Pot, the leader of Cambodia's Khmer Rouge guerrillas, was on the run from his own comrades after having one of his top lieutenants executed for treason, government officials said. Factional fighting broke out in the guerrillas' last remaining stronghold at Anlong Veng in northern Cambodia after Pol Pot had Son Sen, a veteran commander, killed for allegedly holding peace talks with Cambodian Co-Premier Hun Sen, said a government military commander. The officer, a deputy commander in the northwest who asked not to be named, said his information was based on intercepts of the guerrillas's radio transmissions. Another government official said that it appeared that Pol Pot's other top commander, Ta Mok, had also turned against him.Declaring himself 'saddened' by a U.S. Congress resolution recognizing Jerusalem as the capital of Israel, King Hussein of Jordan said that this undermined Washington's role as mediator. 'It's very sad, very unfortunate that such a decision should have emanated from the United States at this particular point in time,' Hussein said. He reiterated his view that Israel should become an 'open city' and capital of both Palestine and Israel. The U.S. House of Representatives voted 406-17 on Tuesday to recognize Jerusalem as the undivided capital of Israel - a position opposed by the Clinton administration as a hindrance to Mideast peace efforts. Battles between government soldiers and a private militia diminished, giving Brazzaville its first relative quiet in more than a week, but militiamen were reported to be making new advances. French soldiers who have airlifted more than 3,000 foreigners from the city flew out more people and said their mission was drawing to a close. 'In my opinion, our operation will wind down in 36 hours,' a French military spokesman, Col. Henri Pelissier, said as another plane left Brazzaville's airport carrying civilians to the coastal city of Pointe-Noire. The French departure could open the window to new fighting because the airport where the French are based is hotly contested by the warring sides. Italian airport workers unions said they would stage a national strike on June 25, the latest stoppage in a protracted dispute over working conditions and job cuts. Congo's former Marxist President said that a ceasefire between his forces and those of President Pascal Lissouba would hold only if an international peace force was deployed. 'For the ceasefire to be maintained, an international force must be deployed,' ex-President Denis Sassou Nguesso told the French daily newspaper Le Figaro. Reports from the embattled capital Brazzaville said gunfire continued to rattle around the city after another day of fighting between supporters of Lissouba and his predecessor dashed hopes of a ceasefire. China's restive Himalayan region of Tibet plans to issue rules on the selection of reincarnated buddhas in a move aimed at blocking the influence of exiled spiritual leader the Dalai Lama, officials said. The new regulations would govern the search for and selection of young children considered to be the reincarnated souls of the 'living buddhas' who reside in Tibet's temples and monasteries, said a religious affairs official. The rules would help to combat the influence of the Dalai Lama, Beijing's greatest rival for Tibetan loyalties, the official said by telephone from Tibet. Haiti indefinitely postponed a parliamentary runoff election that had been set for Sunday. Prime Minister Rosny Smarth resigned this week after charging the initial April 6 vote had been rigged in favour of candidates loyal to ex-President Aristide. From the European Business News (EBN) Server at http://www.ebn.co.uk/European Business News (EBN) Directory - Previous Article - Next Article |
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