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Wednesday, 14 August 2024
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European Business News (EBN), 97-07-14European Business News (EBN) Directory - Previous Article - Next ArticleFrom: The European Business News Server at <http://www.ebn.co.uk/>Page last updated Mon, July 14 5:56 PM CETCONTENTS
[01] ICI sells most of its bulk chemicals businesses to Dupont for $3 billionImperial Chemical Industries said it was selling most of its bulk chemicals businesses to DuPont for $3 billion in a swift further move in the transformation of the company.ICI said its planned deal with DuPont brings to £2.9 billion ($4.6 billion) the total it expects to realize from the sale of the industrial chemical units, the ICI Australia holdings sold earlier this month and the property sales. 'The deal looks very good and the shares should be looking better...especially the speed of the deal will be taken well by the market,' one share dealer said. ICI chief executive Charles Miller Smith said, 'I am delighted that we have been able to move so quickly to establish the new basic shape of the group.' The DuPont sale virtually completes within three months the group's three- year divestment target of £3 billion against the £4.9 billion cost of acquiring the Unilever businesses. The moves shift ICI's focus to speciality chemicals, materials and coatings. The company estimated that 63% of 1996 revenues and 77% of that year's trading profits would have come from those areas had the changes been in place then. In 1996, ICI reported pretax profit of £603 million on revenue of £10.5 billion. The profit figure was down from £951 million reported in 1995. The company expects first-half pretax profit to be £160 million. [02] BA ground workers vote to seek new negotiationsGround workers at British Airways have voted to seek new negotiations - rather than walk out on strike - in a dispute over the airline's plans to sell off its remaining inflight catering operations.A new strike would have been the last thing British Airways needed, as it struggled to rebuild a flight schedule severely disrupted by a three-day walkout by flight attendants. The walkout ended Saturday. British Airways had faced the unwelcome prospect of industrial action on two fronts, but the 9,000 ground workers decided they want to stay on the job and try to reach a peaceful solution. 'The strike action is off,' said the Transport and General Workers Union, which is handling negotiations for the ground workers. British Airways says it already contracts out most of its inflight meals and it needs to get out of the business completely, because the preparation of airplane food is falling increasingly into the hands of global specialist companies. British Airways says it cannot compete with them, so it will sell its catering operations at London's Heathrow Airport. The ground workers have expressed concerns that if these jobs go, no jobs will be safe at British Airways. The union predicted the two sides could enter into new talks in a few days. Meantime, British Airways said business was gradually returning to normal after its biggest flight attendants union walked off the job in a pay dispute. The company cannot say precisly when it will be operating a full schedule, but executives have expressed hopes they can do this by midweek. Strikers and hundreds of flight attendants who phoned in sick during the walkout were coming back on duty, and the airline was getting more airplanes into the skies. But dozens of flights out of Heathrow, the airline's home base, and a much smaller number at London's Gatwick Airport were still grounded. The two sides have not scheduled any new talks. The Transport and General Workers Union, which also handles negotiations for the striking flight attendants, said it was coming up with ideas on achieving the £42 million ($70 million) in annual cost savings demanded by British Airways chief executive Bob Ayling. The airline issued a statement saying that all of the cabin crew who returned to work would be scheduled onto new flights. The company threatened last week to lock out any flight attendants who would not agree to work normally after the strike ended, but said in its statement that all the returning workers had agreed to do so. The union had said it would not negotiate further with the company if anybody had been suspended. [03] British Midland places a $1 billion dollar order with AirbusUK airline British Midland has signed a contract to buy 20 single-aisle aircraft from European aircraft consortium Airbus Industrie.The deal involves 11 A320 aircraft and nine A321s as part of British Midland's fleet renewal program, Airbus said. The value of the order is estimated by industry sources to be $1 billion. Eight of the aircraft are 'firmly ordered and twelve will be operated under a lease agreement from International Lease Finance Corporation,' Airbus said. Delivery of the aircraft will start in spring 1998, the company said. British Midland is the U.K.'s second-largest aircraft after British Airways. The acquisition is the largest single airbus order placed by a U.K.-based airline so far. 'The decision to acquire Airbus Industrie aircraft by British Midland, which has traditionally sourced its aircraft primarily from U.S. manufacturers, is an important vote of confidence in the European air transport industry,' said British Midland chairman Michael Bishop. Jean Pierson, managing director of Airbus, meanwhile, welcomed British Midland's order. 'The decision for the A320 family is yet (further) proof that Airbus Industrie's single-aisle product range is the preferred choice of the airlines,' he said. The European ministers responsible for the Airbus programme recently told Airbus to step up its consolidation and restructuring efforts in an attempt to boost its competitiveness. They noted that the restructuring of Airbus has become more pressing following the planned merger of long-time U.S. rivals Boeing and McDonnell Douglas. That particular merger has been approved by U.S. anti-trust officials, but is expected to be rejected by European Union cartel officials later this month. Airbus is a consortium comprised of Aerospatiale of France (37.9%), Daimler- Benz Aerospace Airbus of Germany (37.9%), British Aerospace (20%) and Construcciones Aeronauticas of Spain (4.2%). [04] EU reportedly gives Boeing an ultimatum to make concessions over the McDonnell Douglas mergerSources at the European Commission say that EU has handed Boeing an ultimatum to make concessions over its proposed merger with McDonnell Douglas by Monday night, or face an EU block on the deal.Both sides said progress was made during talks over the weekend, but EU sources said it was not enough to overcome the Commission's concerns that Boeing would strengthen its dominant position in the market for planes with more than 100 seats. Boeing proposed a change that eased one of the Commission's main concerns about the alliance, one EU source said, declining to give any details. 'Some progress has been made on one of the issues,' he said. But he added: 'Altogether more progress needs to be made, to put it mildly -- before hopefully tonight sometime.' 'They... know the risk they take if they do not come up with proper remedies by midnight (2200 GMT)', the source said. Although the Commission has until July 31 to rule on the deal, it must allow time to consult national antitrust experts and to respect other procedural rules. In practice, it must take a final decision at its weekly meeting on July 23. James Frank, Boeing's European executive vice president for government and public affairs, was hopeful a deal would be struck. 'We still are optimistic that we will find a mutually acceptable solution,' he said. The Commission has often expressed irritation at last-ditch concessions proposed to win EU regulatory approval for corporate alliances and EU sources and antitrust lawyers believe it could well use the Boeing case to show its determination to force early remedies. The $14 billion merger between the two U.S. aircraft manufacturers has come under attack by European Competition Commissioner Karel Van Miert who particularly argues that it will increase Boeing's dominance of the market thanks to McDonnell's strong customer base. Van Miert also sharply criticised Boeing's exclusive supply pacts with major U.S. airlines AMR Corp's American Airlines, Continental Airlines and Delta Air Lines . The merger was cleared by the U.S. Federal Trade Commission earlier this month without conditions. But this did not change Van Miert's stance, the sources warned, recalling that the Commission may prohibit the merger if it is found to harm competition in the 15-nation bloc and fine Boeing if it goes ahead anyway. The EU's advisory committee on mergers and acquisitions on July 4 unanimously backed the opinion of Van Miert's services that the deal should not be allowed in its current form. Boeing has been engaged in intensive talks with the Commission's competition directorate-general, better known as DGIV, ever since. Some lawyers and industry representatives speculate the talks focus on the controversial long-term exclusive supply pacts and the risk that defence contracts money may be used to finance civil aviation projects. [05] Strong pound keeps manufacturing prices subduedBritish industry's raw material costs fell in June because of the strength of sterling, helping to keep a tight lid on the prices of goods leaving factory gates. After adjusting for seasonal influences, producer input prices - the prices manufacturers pay for fuel and raw materials - fell by 0.8% in June after rising 0.6% in May.The fall, which was due to cheaper crude oil and good prices, left input prices 8.4% lower than a year ago. The figures from the Office for National Statistics came as sterling continued to shoot higher against the Deutsche mark, rising above 3.0200 marks for the first time since October 1990. At 0927 GMT, the pound traded as high as 3.0280 marks before settling back to current levels around 3.0215 marks. Late Friday in London, the pound was at 2.9989 marks. Since last August, sterling has risen nearly 26% against the currencies of Britain's major trading partners, with stronger gains against the mark. The rise has made imports cheaper, reducing the pressure on manufacturers to raise the prices they charge for their goods. It has also forced many producers to cut their prices to prevent losing sales to more competitively-priced goods from the European continent. 'Generally speaking the inflation picture is benign and there is little sign of any price pressures at the factory gate,' said Adam Cole U.K. economist at HSBC James Capel in London. Even so, analysts said there is no room for complacency on Britain's inflation outlook. Kevin Gardiner, U.K. economist at Morgan Stanley International in London, said the annual rate of increase in output prices has stopped slowing in recent months and begun to pick up. This suggests manufacturers are using buoyant domestic demand for consumer goods to boost profit margins and offset the impact of weak exports. Signs of a recovery in the fortunes of industry emerged in the latest business opinion survey from the Institute of Directors published Sunday. It showed that while exporters are continuing to struggle because of the strength of the pound, manufacturers producing for the domestic market enjoyed a surge in demand in the second quarter. Moreover, economists say consumer spending is being boosted by windfall gains from building societies issuing shares to account holders as part of their demutualizing process. This they said, is putting upward pressure on prices in the service sector of the economy. Services account for nearly two-thirds of the U.K.'s total economic output, whereas manufacturing accounts for less than a quarter. [06] In his first interview since the elections, Chirac calls for privatisationFrance celebrated Bastille Day with a parade showing off the nation's military might. But President Jacques Chirac scoffed at the role of the French state in the world of commerce, saying it must be reduced.'The state today has nothing more to do in running the competitive sector,' Chirac, a conservative, said in a television interview, his first since he began sharing power in June with a leftist government. 'That is not its role,' he said, pleading for a more economically liberal approach. He said European alliances were needed to compete with U.S. companies, but state-run firms would be shunned by others. Chirac was clearly marking his distance from the leftist government of Premier Lionel Jospin and its decision Friday to forego the privatization of defense company Thomson-CSF. That was one of a series of privatizations planned by the previous government of Alain Juppe, voted out of office in June 1 legislative elections. Jospin has said he would review the privatizations on a case by case basis. Chirac stopped short of saying Jospin should follow the lead of Britain's new prime minister, Tony Blair. 'Blair is very, very liberal,' Chirac said of the Labour Party prime minister. The French president said that changing governments in France in no way means existing problems have been erased. Reforms that contributed to Juppe's unpopularity are still needed, Chirac said. 'We changed governments, but the problems ... are exactly the same,' Chirac said, adding that France still needs to streamline its top-heavy economy and make the sacrifices needed for European union. The president defended the need for European Union countries to reduce their deficits to 3 percent of gross domestic product by year's end, as required by the Maastricht Treaty on European economic and monetary union. Chirac also said France must respect both the Maastricht timetable and the criteria for European monetary union. But he added that he expects an audit of public finances, to be published in a week, to show the 1997 government deficit at 'around 3.5 percent.' The president cautiously avoided open disagreement with Jospin, while making the case for his own approach. He said he expected the so-called cohabitation between right and left to go full term -- five years. The interview was held during the annual garden party at the Elysee Palace, after the military parade down the Champs-Elysees. Fighter jets thundered over the world famous avenue and war machines -- including the new 55-ton Leclerc tank -- rumbled down it to mark Bastille Day. Tens of thousands of spectators lined the broad boulevard for the precision display of military power that also featured firefighters and the plumed Republican Guard astride presidential horses. Chirac oversaw the parade from a grand stand at the Place de La Concorde, and in an unusual move, stood throughout the hour-long event. Bastille Day commemorates the storming by Parisians of the Bastille prison on July 14, 1789, setting off the French Revolution that toppled King Louis XVI and put an end to monarchy. [07] German Economic Ministry says despite continuing growth, weak investment is hampering recoveryGermany's economy has continued to recover during the second quarter thanks to strong exports, butweak investment is hampering recovery, the Economics Ministry said in its latest monthly report.To boost growth and employment, a decisive investment pickup is needed, but confidence has been dampened because of the uncertain fate of government tax reforms. 'The willingness to invest is clearly being hampered by the continuing lack of clarity over the final drafting of important government reforms,' the report said. The opposition Social Democrats threw a government package of 30 billion marks ($17 billion) in tax cuts out of the upper house of parliament this month. The tax reform now faces protracted parliamentary mediation. The report added: 'If these measures...remain blocked in the legislative process, that would mean a major burden on planning to invest and reduces chances for an improvement on the jobs market.' Seasonally-adjusted unemployment, which reflects underlying job market trends, clocked up another post-war high last month of 4.4 million, nearly half a million up on a year earlier. The report said that latest data still supported the view that 'the drawn- out deterioration is coming to an end...at least in western Germany'. The situation was more bleak in the east, where spending on jobs schemes has been cut back. The Economics Ministry said manufacturing industry grew well in April and May, boosted by foreign demand. Industrial output also grew faster in eastern Germany, climbing by 17% in the two months compared to a year earlier. But the building sector remained weak, with orders slow and empty property putting downward pressure on prices and rents. Price pressures remain subdued, with annual inflation rising slightly to 1.7% in June. Rationalisation efforts by companies and modest pay rounds have also helped to cut unit labour costs, boosting German export competitiveness. The report made no forecasts for gross domestic product in the second quarter or for 1997 as a whole, but Finance Minister Theo Waigel last week again said the government expects the economy to grow 2.5% this year. [08] France reportedly favours merging Thomson-CSF with French defence companiesThe French government favours a merger between state defence-electronics company Thomson-CSF and the electronics activities of Alcatel Alsthom, Dassault Industries and state-owned Aerospatiale, French newspapers reported.Publicly-traded French companies Alcatel Alsthom and Lagardere SCA in May had submitted rival bids to acquire Thomson-CSF. But on Friday, the month- old Socialist government canceled the sale, saying that national interests and those of Thomson-CSF's employees needed to be better protected. The previous government, led by conservative Prime Minister Alain Juppe, was in the process of privatizing major French companies in a bid to make them more competitive. Socialist Premier Lionel Jospin, whose leftist coalition defeated the conservatives June 1, had said his government would review each planned privatization case by case. The Le Monde daily quoted a government official as saying any scenario was premature, but that the government had a 'weakness' for linking Thomson-CSF with three other companies - Alcatel Alsthom, Dassault and Aerospatiale. The idea would be to give the state a larger role by selling off smaller pieces of Thomson-CSF. On Saturday, the daily Le Figaro, without citing sources, also said the government wanted Alcatel, Dassault and Aerospatiale to buy into Thomson- CSF. The state currently owns 58% of Thomson-CSF through holding company Thomson, and the rest is publicly traded. Le Figaro said the state wanted to reduce its stake to 40%. A 20% share would be traded, and the rest would be owned by Alcatel, Dassault and Aerospatiale. [09] Raytheon to sell off three Appliance Group business units for $750 millionRaytheon is selling three of the five business segments, and certain receiveables, of its Appliance Group unit for a total of $750 million.In a press release, Raytheon said it is selling the unit's home appliance, heating and air conditioning, and commercial cooking segments to Houston- based Goodman Holding Co. for $550 million in cash. A Raytheon spokesman said the company is selling the Appliance Group's receivables to an undisclosed party for $200 million. Raytheon said it will retain Appliance Group's commercial laundry and electronic controls segments. The company said combined the two segments accounted for 20% of the unit's revenues and 50% of the unit's earnings in 1996. Raytheon said it is continuing its strategic assessment of the two businesses. The company said the proposed sale is subject to government approval. Raytheon expects to complete the sale in the third quarter. [10] Beleaguered South East Asian currencies under attack againBeleaguered South East Asian currencies were sold heavily once again in another dramatic day of foreign exchange trading. And Thailand has said that it could not rule out seeking financial assistance from the international Monetary Fund to help it solve its current economic problems.After Southeast Asia had seen two de facto devaluations - of the Thai baht and the Philippine peso - within a couple of weeks, currency speculators turned their attention to the Malaysian ringgit and were rewarded immediately. The ringgit closed in Kuala Lumpur on Friday at 2.5042/5052 to the dollar. But after the effective devaluations elsewhere in the region, traders decided to test the resolve of Bank Negara, Malaysia's central bank. The ringgit swiftly collapsed to a 16-month low of 2.5500/10. Dealers said Bank Negara was believed to have put up token resistance to the selling by intervening. Central bank officials were unavailable for comment. 'It was a half-hearted intervention. I think Negara was in just to slow down the fall rather than stop the flow,' said a dealer with a European bank in Singapore. As the ringgit became the latest currency to head lower, the Philippine peso started its first day of trading after the de facto devaluation on Friday when the central bank - Banko Sentral ng Pilipinas (BSP) - allowed it to trade at a wider range against the U.S. dollar. [11] Corporate and Economic BriefsThorn says that sterling's current strength will reduce current year profits by about £11 million, of which £5 million has arisen during the first half of the year. Speaking at the company's annual general meeting, Chairman Sir Colin Southgate added the company is also suffering from a lower rental base and a higher rate of insurance premium tax. 'The current year will be challenging for Thorn,' he said. 'During the first quarter of the current financial year, turnover was down by 1% on a constant currency basis and by 8.5% at actual exchange rates.'The European Union Commission approved a joint venture between Denmark's Maersk Data and Cable & Wireless of Britain, called Cable & Wireless Nautec. The Commission said the 50-50 joint venture will market telecommunications and information technology goods to the container transport sector. An E.U. executive said there is 'sufficient potential competition' in the sector. The European Union Commission said that economic growth in 10 East European countries would likely accelerate this year and in 1998 on average because of economic recovery in Western Europe and high domestic demand. But the forecast, included in report on economic reform in Central and Eastern Europe, said economic growth in two of the countries - Bulgaria and Romania - would contract sharply this year compared with 1996. [12] World News BriefsThe Mars Pathfinder rover has been ordered to finally begin its examination of the bear-shaped rock named Yogi, a task delayed for four days by human error on Earth and computer glitches on Mars. The six-wheeled rover, Sojourner, was ordered to begin its work Sunday night. The rover will use its alpha proton X-ray spectrometer to record Yogi's chemical composition.Neapolitans woke up today to the sight of camouflaged army troops patrolling some public buildings under a crime-fighting deployment. The government is sending about 500 soldiers to relieve police of guard duties and free them up to fight a mob-related murder wave that has killed nearly 90 people in and around the southern city this year. A UN tribunal jailed a Bosnian Serb war criminal for 20 years for killing and torturing his Muslim and Croat neighbours. Bosnian Serb Dusan Tadic waved to friends as he was led out of the Yugoslav war crimes tribunal's court room by two United Nations guards following the brief hearing. Judges sentenced him to a total of 97 years for 11 separate war crimes and crimes against humanity, but the longest term was 20 years and the others were to run concurrently. Two Pakistani men convicted of drug-smuggling and a Saudi man found guilty of murder were beheaded in Saudi Arabia, raising to 66 the number of people executed this year in the kingdom. Pakistanis Mohammed Kareem Abdul Hakeem and Omar Khan Imam Khan were found guilty of smuggling an undisclosed quantity of heroin into Saudi Arabia, an Interior Ministry statement said. They were executed in the city of Medina, it said. 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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