Santander to float UK banking business?
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Posted by:
Editor, 8.2.2010
Santander could be about to float its UK banking business according to press reports over the weekend.
The Sunday Times reported yesterday that the Spanish banking giant was considering selling a minority stake in it's UK baking business of 25% in order to raise capital to open more bank branches.
The UK banking business includes the former Abbey, Alliance & Leicester and Bradford & Bingley savings business.
Santander is considering buying the 300 bank branches that Royal Bank of Scotland has been forced by the European Union to put up for sale.
It is believed the bank will seek to float it's UK banking business after successfully floating its Brazilian business last year. Brazil is a key market for Santander. The UK accounts for just 16% of the banking giant's global profits, with Latin America and Spain its biggest markets.
Santander refused to comment on the speculation over the weekend.
The Bank managed to increase deposits by 8 per cent in 2009 as UK savers opened 1.1 million new bank accounts. Loans grew by 5 per cent, while the group now claims a 19% market share of UK gross new mortgage lending. Santander bought Abbey in 2005 for £9 billion while the proposed floatation could raise as much as £15 billion.
The rebranding of Abbey and Bradford & Bingley branches was completed at the end of January and all three UK banks will be known as Santander by the end of the year.
Meanwhile, customers of Santander were yesterday unable to use cash manchines or online servies after the bank suffered a power cut.
The power failed at 11.00 am on Sunday following internal testing which affected more than 2,000 cash machines for the UK's third largest retail bank.
Customers were still able to use cards at tills for products up to a certain, undisclosed, value and for cash-back.
A Santander spokesman said power was returned at around 5.30pm with all ATMs and online banking services restored..
The Santander spokesman said its customers were able to withdraw cash from other banks' ATMs within three hours of the power failure.
He apologised for any inconvenience and said individuals with any outstanding issues or who felt they were financially disadvantaged should contact the company.
Tags: Santader, UK, Business, Banking, Float
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Lending to businesses shrank in September
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Posted by:
Editor, 19.11.2009
Lending to British businesses shrank by 4.6 percent in September, driving the 12-month growth rate to a record low, the Bank of England said Thursday.
Major banks expect subdued demand for new lending through the fourth quarter, supporting expectations of slow recovery in the British economy.
Meanwhile, government borrowing was 11.4 billion pounds in October, raising net debt to 829.7 billion pounds, equivalent to 29 percent of gross domestic product, the Office for National Statistics said.
September's fall in corporate borrowing followed negative lending flows in the first and second quarters, and the 12-month rate fell to minus 6 percent, the bank said.
"While some business contacts of the Bank's agents particularly from larger firms outside of the property sectors reported that credit availability had eased, many others continued to report concerns over access to finance," the Bank of England said.
"The major U.K. lenders reported that an increase in competitive pressures had led to some narrowing of spreads on lending to larger businesses."
Net lending was down 0.7 percent in the first quarter, 5.1 percent in the second quarter, 15.6 percent in July and 1.1 percent in August.
Elsewhere, the Council of Mortgage Lenders said gross mortgage lending in Britain rose to 13.5 billion pounds in October, up 5 percent from September but 27 percent below a year ago.
Lending for house purchases has risen but re-mortgaging activity is at the lowest level in a decade, the council said.
"The annual comparison should start to improve a little in the coming months as underlying lending volumes dropped sharply in the latter part of 2008 and early 2009," the Council said.
Tags: Business, Lending, Shrink, September, 2009
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Bank MPC voted 9-0 for status quo on QE
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Posted by:
Editor, 22.7.2009
All nine Bank policymakers voted this month to maintain the 125 billion pound asset-buying total and keep interest rates at 0.5 percent, and said August would be a better time to see if policy needed to change.
Minutes of the Monetary Policy Committee's July 8-9 meeting showed the key question for them was whether an "immediate" change in the quantitative easing total was required.
But they judged there had not been enough evidence to justify this and the forecasts prepared for the August Inflation Report would "provide an opportunity to reassess the stock of asset purchases."
Still, sterling jumped almost half a U.S. cent and gilt futures fell more than 20 ticks as some investors had anticipated a clearer steer on more QE.
"It might mean they don't sanction the extra 25 billion pounds at the next meeting. But it's a close call -- unless the data surprises on the downside, I suspect they won't." said George Buckley, chief UK economist at Deutsche Bank.
The Bank has the leeway to take the QE total to 150 billion pounds. Beyond that, it would have to get permission from the government.
The MPC noted that it was the stock of QE purchases that was important for determining the degree of stimulus rather than the flow and agreed that the pace of asset purchases would be slowed to complete the 125 billion pound total to just before their next meeting.
It judged that the medium-term outlook for the economy had not changed very much since May, though the near-term downside risks to GDP had probably diminished and the immediate inflation outlook may be a little higher.
Tags: Bank, Policy, Interest, Asset, Stock, Purchases
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Business: Why go Internet?
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Posted by:
Editor, 3.7.2009
Why start a home based business web site?
What benefits does such an online business have over any other business?
What benefits does it have over a traditional “bricks and mortar” type business?
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What benefits does it have over any other type of home based business, such as a multi level marketing business or a lawn mowing business or an accounting business?
Simply stated, starting an internet or home based business web site has three very clearly defined advantages which then lead to further benefits of which can not be obtained with other businesses.
These two advantages are…
1. Potential income earnings and market growth.
2. Low initial monetary outlay or business setup costs.
3. The ability to work on your business part time.
Potential Income Earning and Market Growth…..
Saying that business online has grown rapidly since inception of the internet, is not only a fact but also an understatement.
Constant news of increased spending online litters the news on a weekly basis, more people buying a much wider variety of goods, services and niche market products.
Additional markets that were not present on the web five years ago are now not only opening up but expanding at huge rates. Countries such as China, India and even Bulgaria are now online and their economies are growing at staggering rates. India would have to be the prominent leading example to date with its economy currently growing at about ten percent per year!
Many people in such countries now wish to have all the benefits that we in the west have been experiencing for many years. The house, the car, the TV, the microwave, the computer and the internet and all the benefits that such technologies can bring, not withstanding status within their given society.
In addition, our own society has become much more familiar with the internet and the many benefits it brings. Expanded communication with friends and family, social forums and discussion lists on all sorts of topics, even dating is now a huge industry online.
This familiarity is now facilitating a trust of all things internet related and thus people are turning to purchases online with much less trepidation than years gone past.
And to put that in dollar terms, online spending has risen from $28 billion in 2000 to an estimated $81 billion in 2006. Total people shopping online has gone from 66 million in 2002 to an estimated 136 million in 2007.
The fact that people are looking for such a wide variety of information has allowed thousands of solopreneurs working from home to earn more than better incomes. Incomes are being made from people offering information on their hobbies, their current business skills and many other tangible and intangible products.
Even people without their own products are bringing in profits by selling other companies goods and services, or even just selling advertising.
The potential for already established offline businesses is also huge. A good example of this is the tourism industry whereby most of the major players such as airlines, governments of major tourist destinations and some major hotel chains have been quick to capitalize on internets growth.
However there are a staggering amount of businesses of varying sizes that are missing huge opportunities to substantially increase customers and profits by developing and marketing their business online. This include hotels, restaurants, clubs, sporting, leisure and health services just to name a few.
The fact is, no matter your current business size – online or off, your current experience with business – a lot or none, whether you wish to have a business working from home or start with an office, there is no rival for the potential of income or growth in any form in the world today.
Low Initial Monetary Outlay or Business Setup Costs
Cost to start a restaurant? $100,000 to $1 million.
Cost to setup a shop in a major shopping centre? Maybe a little less than the above.
Cost to start a service business from home, say a carpenter? All your tools, advertising and insurance plus many extra's, maybe 10 to $20,000.
How much to start an online business?
A website (domain name) and hosting - $100 dollars a year.
However, if you have no experience with the internet there will be additional costs such as learning materials and additional software. All up you may spend anywhere between 1 to $5,000.
The fact is, the experimentation and implementation of an online business or web based business web site is affordable for the average working person, something that cannot be said of traditional business due to the usual immense start up costs.
Even the running costs of a web based business web site are so little compared to traditional costs. Then there are the advertising and marketing costs to consider, much lower than what offline business pays and something that they are even yet to fully to comprehend.
The Ability To Work On Your Business Part Time
This has been left until last because it represents why many people don’t go into business…. risk!
In most cases building and starting a business means taking many risks. A loan may be required, extensive experience in your business field, applying yourself to the business full time without backup income or another job, putting on employee's and the list goes on.
A home based business web site can be started and established while still working a full time job.
It therefore eliminates risk form your daily life.
The mortgage payments, the kids schooling, the income to the house and your current lifestyle are in no way threatened. The business can be worked on part time from home, at the point that it establishes enough income to live off, your full time work can then be terminated.
If ever there was a time where the initial outlay in terms of money, time and risk to start a business was the least, now is that time and the internet is the platform.
No matter your experience or subject knowledge, there is money and a very good living to be made online whether you are an established business or wish to build a home based business web site.
Will you be grabbing your share today?
Tags: internet, business,
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How To Set Up A Small Business
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Posted by:
talkingbusiness, 16.4.2009
 One of the side effects of a recession is that many people get made redundant. For some, this can be a once in a lifetime opportunity to take the severance payment and use some of it to start a business for themselves or in conjunction with a few work colleagues or friends.
The allure of working for oneself rather than others has an appeal of freedom and self determination. Using the skills acquired over many years at the expense of others can generate an income and a different lifestyle than not previously considered when working in a regular job earning a steady wage.
Small businesses form the backbone of the economy. Failure rates are, however, high but that should not deter you from trying and, provided you are careful to manage the risks, can lead to a rewarding career change and source of income.
Setting up in business sounds daunting but the process is relatively straightforward for all but the most adventurous business ideas.
Firstly, do a little research on what is involved in setting up a business. Business Link (a government supported organisation) provides excellent first port of call for information to help you get underway.
One of the early decisions will be to decide as to how you want to trade. If it is just yourself, then you may consider starting as a sole trader - the easiest and lowest cost method of starting in business. The procedures are relatively straightforward since all you need decide the trading name for your business and advise Customs and Revenue of the date that you will commence trading. There are forms as well as information on the consequences of starting a business on the Customs and Revenue website. You will also be able to decide whether you wish to be VAT registered or not - it is compulsory if you exceed, or expect to exceed, the minimum turnover threshold of £67,000 per annum.
If you are intending to start a business with colleagues, then you may be looking at a partnership arrangement. Here, it is wise to consult a lawyer to make sure that you document the terms of the partnership especially the decision making processes, distribution of any profits and who has what responsibilities. It seems strange to be thinking of all the issues that can go wrong in a business before you start - but getting good input early can avoid all sorts of issues in the future.
Setting up a limited company affords a certain amount of protection for the directors that sole traders and partners are directly exposed to. However, whilst there are low cost ways to register a business and get it established in trade, it is wise to get some legal assistance when drawing up the framework for the business.
Trading up from a sole trader to partnership and on to a limited company is relatively straightforward with the right assistance. Once established as a limited company, it is hard to dissolve back into a partnership or sole trader status. The costs of running a limited company can be higher than either a sole trader or partnership since there are additional legal filings that have to be made and maintained with Companies House.
Determining the trading name for a business can be tricky. For example, trading as `John Smith Plumbers` may seem an obvious choice but there could already be an established plumbers business in your area of the same name leading to a potentially expensive `Passing Off` action by the existing business! Similarly, close associated names that could confuse may lead to an action against you. Getting assistance with registering your business or trading name may be advisable if you want to avoid any potential conflicts in the future.
Applying for a business bank account can be a time consuming and involved process - especially in today`s volatile markets. If you do not require an overdraft or loan for your business, the process will be more straightforward. In each case you will have to supply information confirming your identity and your business` existence (if a limited company) to secure a bank account. If you are looking for an overdraft or loan, you will almost certainly need to provide a copy of a business plan.
A Business Plan is a thorough description of what your business does, its structure, competitive position in the market and plans for the future. It must also contain a financial projection of what you expect sales and expenses to be in the coming years. Most banks have a standard format they expect to be completed though a sensibly structured document in any format should suffice. A business advisor can help you put a comprehensive business plan together and help t negotiate your facilities with you for around £3,000 - £3,500 plus VAT.
Armed with you business name, business plan, VAT registration and any investment funds, you are now ready to start trading! Sales are crucial since they generate the income to pay the bills. Make sure that you know what your competitors are offering by way of price and service and that you can profitably compete. Turnover without profit is worthless.
In the early years, keep a close eye on costs and pricing. It is easy to get carried away generating a market presence by buying your way into the market but you need to make sure that you have a sustainable proposition that can generate enough income to cover your costs, provide the necessary investment to grow and is diverse enough to withstand the loss of a critical customer or supplier. Well spread sales and supplier bases can make sure that you know what is happening to input and output prices. Keeping you finger on the marketing pulse will ensure you know what your business costs to run.
Most people who run small businesses come from and engineering or marketing background. They tend not to be skilled in accountancy or numbers so, if this is true for you, make sure that you have a good handle on your finances by either hiring someone to focus on this and advise you or can provide you with timely and understandable financial management information. You must keep a firm hand on the finances in the early years until you are well established and more experienced in what makes you business tick.
Business advisers can provide help on how to register a companies name or a short term overview of your business and bring some critical but objective input to help you keep on track.
Tags: small business, how to, freedom, self-determinati...
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Media Headlines on 23 December
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Posted by:
Susanne, 23.12.2008
Reprieve for publisher Mecom (FT)
* Mecom, the UK-based European newspaper publisher, has won breathing space from banks to secure asset sales that will cut its net debt, people close to the company said.
* With approaches for various parts of its businesses in Norway, Denmark, Poland and the Netherlands, Mecom was facing a debt covenant test on New Year's Eve.
* While those close to the group say there was no certainty the company would have gone over the limit of 3.5 times earnings before interest, tax, depreciation and amortisation, they added that extending the test until the end of February would help in deal negotiations.
* Mecom had £540m in net debt at the end of June, but because it borrows in euros and reports in sterling, currency movements have punished the company. Shares have fallen below 1p from a high in the year of 48½p. Yesterday, they closed at 0.86p, valuing the equity at £17m. Ben Fenton
BSkyB talks over Tiscali's UK business stall (Telegraph)
* Talks between BSkyB and Tiscali over the acquisition of the Italian group's UK business have hit the rocks after a disagreement over price.
* Following a period of due diligence in the past six weeks, sources said that BSkyB was not willing to pay anywhere close to the mooted £450m price tag, with the price it was offering closer to £350m.
* Sources close to BSkyB, run by chief executive Jeremy Darroch, said last night that talks had ended and "the ball is now in the Italian's court".
* Tiscali management are now understood to be in crucial talks to decide whether they will sell the business, although BSkyB sources are not expecting their latest offer to be accepted.
* An acquisition of the Tiscali UK business by BSkyB would have doubled the satellite broadcaster's number of broadband customers to 3.6m.
* Other bidders for Tiscali's UK business included Carphone Warehouse and Vodafone, who both dropped out of the process following concerns over price.
Kangaroo offers to sacrifice joint selling of shows to achieve launch (Guardian)
* Broadband TV service Project Kangaroo has offered to scrap plans to jointly sell catch-up and archive shows to rivals, in order to gain a green light from competition regulators to launch, warning that the joint venture will be scrapped if more restrictive measures are implemented.
* The venture between ITV, the BBC's commercial arm BBC Worldwide and Channel 4 argued that scrapping plans to jointly sell prime catch-up TV content would address the competition issue in its submission to the CC.
* Under the proposal submitted by the Project Kangaroo partners on Friday, ITV and Channel 4 would separately sell their catch-up TV content to third party online video providers. BBC Worldwide does not have catch-up TV content to syndicate as it this provided free via BBC iPlayer.
* The Kangaroo partners believe this should address competition concerns over the venture dominating the nascent UK online video market. However, if this is not deemed adequate by the competition authorities the partners have also agreed to scrap plans to jointly sell archive TV programming.
T.Italia Media says unit stake sale talks abandoned (Reuters)
* Telecom Italia Media plans to put up for auction next year a stake in its digital terrestrial television business, after a private equity fund pulled out, the company said on Monday.
* The unit of telecommunications group Telecom Italia had been in exclusive talks with the fund after receiving a non-binding expression of interest in acquiring a stake in the business, known as TIMB.
* "Owing to prevailing market conditions, the private equity fund ... has since withdrawn its interest," it said in a statement on Monday.
* "It (the board) has received several other non-binding expressions of interest from the market, and will ... proceed with a competition auction during the first quarter of 2009."
Alma Media says shareholder wants Talentum merger (Reuters)
* Finnish publishing house Alma Media said on Monday a major shareholder wants the company to merge with smaller rival Talentum and has demanded a shareholder meeting to decide the issue.
* Herttaassa, which holds 13.5 percent of Alma Media, said an extraordinary shareholder meeting should consider the merger with three Talentum shares equalling one Alma Media share.
* Alma Media chief executive Kai Telanne, who last month said a Talentum merger is a "real option" for Alma Media, said in a statement that there are no merger negotiations going on between the firms.
EU Approves News Corp.-Permira Deal to Take NDS Private (Bloomberg)
* The European Union approved a deal by News Corp. and hedge fund Permira Advisers LLP to take pay-TV-technology provider NDS Group Plc private.
* The European Commission, the EU executive in Brussels, announced the approval in a statement today.
Sirius Issues Stock for Debt; Accounting Chief Leaves (Bloomberg)
* Sirius XM Radio Inc. plans to issue 108.1 million shares of common stock in exchange for convertible notes, part of the pay-radio company's efforts to reduce debt.
* The satellite radio operator also said Chief Accounting Officer James Rhyu will leave in January to join another company, according to a regulatory filing today.
* Sirius XM, facing about $1 billion in loan repayments next year, has $193.6 million in convertible bonds maturing in February. Last week, shareholders approved a reverse stock split and voted to boost the number of authorized shares to 8 billion from 4.5 billion.
* Adrienne Calderone was named to succeed Rhyu as chief accounting officer. Calderone, 41, has been senior vice president and controller since August 2006 and was principal accounting officer prior to the acquisition of XM Satellite. Sirius didn’t identify the company Rhyu is joining.
ESPN to launch new interactive TV features in 2009 (Reuters)
* ESPN will launch three interactive features in 2009 that will let viewers use remote controls to access scores and statistics from its website and vote in polls while watching ESPN on television, officials told Reuters Monday.
* The cable sports network, owned by Walt Disney Co, has dabbled in interactive TV features in the past through limited programs with several distributors, but it now plans to phase-out those programs and pitch the new system to all of its 800 distributors early next year, said Sean Bratches, ESPN sales and marketing executive.
* The network hopes to deliver a multi-platform mass audience to advertisers, and new connectivity to viewers, through a marriage of its TV programming, data-rich website and mobile offerings, Bratches said.
* "Ultimately, it is our goal to create national ubiquity," Bratches said. "Advertiser interest is very high in what we have done. We have gotten advertisers to partner on all the smaller ones, and now we really want to make an investment."
Newspaper Shuns Web, And Thrives (New York Times)
* With 2008 drawing to a brutal close on the media beat -- bankruptcies, daily newspapers that are no longer daily, magazines that are downsizing into brochures -- a little ray of light appeared in my e-mail inbox. It was from a newspaper owner, of all people.
* Into the teeth of a historic recession, the newspaper had just published the biggest issue in its history. The product is double-digit profitable, and it has been growing at a clip of about 10 percent a year since it was founded in 1999, right about the time the Web was beginning to put its hands around print's neck.
* Finally, I thought, a story about a print organization that has found a way to tame the Web and come up with a digital business approach that could serve as a model. Except that TriCityNews of Monmouth County, N.J., is prospering precisely because it aggressively ignores the Web. Its Web site has a little boilerplate about the product and lists ad rates, but nothing more. (The address is trinews.com, for all the good it will do you.)
* ''Why would I put anything on the Web?'' asked Dan Jacobson, the publisher and owner of the newspaper. ''I don't understand how putting content on the Web would do anything but help destroy our paper. Why should we give our readers any incentive whatsoever to not look at our content along with our advertisements, a large number of which are beautiful and cheap full-page ads?''
Sina to buy Focus Media assets to increase advertising revenues (FT)
* Sina Corporation, China's leading internet news portal, is to buy the core assets of Focus Media, the country's leading digital media company, for more than $1bn in a bold attempt to seek a growth engine for its advertising revenues.
* Under the deal, Sina will gain control of Focus Media's network of outdoor advertising posters and LCD screens in hotels, offices and residential buildings. Focus Media will keep Allyes, its online advertising agency business, some traditional billboards and its cinema advertising business.
* The deal, announced amid fears that China's previously robust advertising revenues could slow down during the global economic downturn, consolidates the country's advertising landscape outside traditional media.
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Auto News
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Reason
Posted by:
Susanne, 18.12.2008
Detroit Court Changes Rules, Prepares for Big Filing (Bloomberg)
The federal bankruptcy court in Detroit, preparing for large reorganizations including possible filings by General Motors Corp., Chrysler LLC or Ford Motor Co., has changed some of its rules. Efforts to make the jurisdiction more business-friendly may prompt automakers to seek protection in their Michigan home, rather than in the traditional, big-business venues of New York and Delaware. Among the changes the court is making is the ability for the chief judge to choose which bankruptcy judge handles the main case, according to an administrative order signed Dec. 10. The Sixth U.S. Judicial Circuit, which includes Detroit, is “the backyard” of the United Auto Workers union as well as the circuit most protective of health-care benefits promised to retirees, which makes it less likely to attract a bankrupt auto company that would likely seek to terminate those benefits, said Colleen Medill, an employee-benefits law professor at the University of Nebraska. Still, the district's judges are well versed in the auto industry, having handled bankruptcies of auto-parts makers including Collins & Aikman Corp., Intermet Corp. and Plastech Engineered Products Inc. “There is no district in the country that has a greater stake in the outcome of a filing by one of the Big 3 than the Eastern District of Michigan,” said Chief Judge Steven Rhodes, referring to the formal name of his Detroit-based court. The court is reviewing staffing, security and technology functions so as to be ready to handle a case the size of an automaker.
U.S. President George W. Bush said he's “considering all options” for a federal bailout of the auto industry after the Senate rejected a plan last week. GM, based in Detroit, and Chrysler are seeking $14 billion to keep operating through March 31. Chrysler, based in Auburn Hills, is controlled by Cerberus Capital Management LP. Dearborn-based Ford Motor Co. isn’t seeking short-term aid. “We have a plan to make it through the recession and get back to profitability in 2011 and begin repairing the balance sheet,” Ford Chief Executive Officer Alan Mulally said yesterday in a Bloomberg Television interview.
In the past, Michigan-based companies such as auto-parts makers Delphi Corp. and Tower Automotive Inc., now known as TA Delaware Inc., forswore the U.S. Bankruptcy Court in Detroit in favor of Manhattan, which along with the U.S. Bankruptcy Court for the District of Delaware in Wilmington has a reputation as a sophisticated court that handles large bankruptcies quickly, and isn’t afraid to alter or discard union agreements. Those two courts have long drawn the largest bankruptcies and will be the top choices for GM or Chrysler, should they choose to seek court protection, said Lynn LoPucki, who teaches bankruptcy law at Harvard University. Under the reforms implemented in Detroit, whichever judge gets the case may then assign adversary suits and contested matters related to the bankruptcy to other judges to ensure the case runs efficiently, according to the order. In the past, a judge would be selected at random and would likely handle all related matters, slowing reorganization. There is a clear sense among judges around the country that it isn’t fair that so many companies are filing in New York and Wilmington, said a former bankruptcy judge who didn’t want to be identified by name. He cited the recent example of Chicago-based Tribune Co. filing in the Delaware court.
The U.S. Bankruptcy Court in New York, located just a few blocks from Wall Street, draws many of the biggest bankruptcies because it is regarded as business-friendly. “It is sophistication and efficiency” that brings troubled companies there, said Donald Workman, a bankruptcy partner at the law firm Baker Hostetler. It's “their ability to efficiently handle mega, or even mega-mega, cases.” Judges in Manhattan have handled many of the biggest Chapter 11 cases in history, including WorldCom Inc., Enron Corp. and Delta Airlines Inc. On Sept. 15, New York-based Lehman Brothers Holdings Inc. filed the biggest U.S. bankruptcy ever there, with $613 billion in debt. “New York is the most likely venue,” said LoPucki. Delaware, also known as business-friendly, would be a second choice, he said. The Wilmington court is currently overseeing the bankruptcies of SemGroup LP and Washington Mutual Inc. The Delaware bankruptcy court has become the nation's hotspot for large corporate filings, said LoPucki. About 60 percent of Chapter 11 cases involving companies with more than $250 million in assets were filed in Delaware from January 2007 to June of this year, LoPucki said.
One of the biggest liabilities the Detroit court has in attracting the automakers is its proximity to unionized workers who will likely suffer in their collapse. Automakers need to shrink by cutting plants, dealers and employees, said Daniel Kasper, a managing director at the consulting firm LECG. The case law in New York for rejecting union contracts is “usually considered a little more favorable to debtors” than in other districts, Kasper said. “You have judges with a lot of experience in this that are less likely to be swayed by emotional arguments like, ‘We were promised this,’” added Nebraska's Medill. Bankruptcy judges in New York have allowed companies to reject union contracts and impose wage cuts while blocking unionized workers from striking. In October, bankrupt discount carrier Frontier Airlines Inc. won approval from U.S. Bankruptcy Judge Robert Drain to reject a contract with unionized machinists. The union is appealing.
Last year, U.S. Bankruptcy Judge Adlai Hardin in Manhattan blocked pilots at Delta's Comair unit represented by the Air Line Pilots Association from striking over pay reductions. Typically, companies without headquarters in New York put a New York-based unit into Chapter 11 and then file bankruptcy there, saying its other businesses are related cases, LoPucki said. GM's only New York-based subsidiary is a bank that isn’t eligible for Chapter 11 protection, he said. As a result, the automaker would have to set up a New York unit before filing bankruptcy, following the example of Winn-Dixie Stores Inc. GM has hired the law firms Weil, Gotshal & Manges and Dewey & LeBoeuf, both based in midtown Manhattan, to advise on a potential bankruptcy, a person familiar with the matter said. Harvey Miller of Weil Gotshal didn’t return a call seeking comment. Martin Bienenstock of Dewey & LeBoeuf declined to comment. Ford spokesman Mark Truby and spokeswoman Marcey Evans didn’t return calls seeking comment. Chrysler spokeswoman Shawn Morgan declined to comment.
GM rose 12 cents to $4.35 in New York Stock Exchange composite trading. Ford rose 1 cents to $3.14. Medill said an auto company would want to avoid, at all costs, filing in the Sixth U.S. Judicial Circuit, which encompasses the Detroit court as well as the rest of Michigan, Ohio, Kentucky and Tennessee. The court's experience, however, with companies related to the auto industry makes it better qualified to handle the reorganization of a major automaker, said Stephen Gross, a lawyer with McDonald Hopkins LLC in Bloomfield Hills, Michigan. UAW spokesman Roger Kerson didn’t return a call for comment. “The judges here are more inclined to do whatever it takes to keep the company alive,” said Gross, who represents auto- parts company Getrag Transmission Manufacturing LLC that filed for bankruptcy in Detroit. In New York, he said, they run the risk of being “just another big case.”
UK to set 'Tough' Conditions to Bail Out Car Makers (Financial Times)
The U.K. government will impose “very tough” conditions on rescue packages it may offer British automakers, to avoid setting precedents for possible bail-outs in other industries, the Financial Times reported, citing unidentified U.K. government representatives familiar with the matter. The U.K.'s Treasury plans to ensure that any credit guarantees or loans offered to auto companies will be provided on similar terms to those commercial lenders would require, the newspaper said. The measures may involve taking the companies’ shares as collateral, the newspaper added.
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Capital Goods News
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Reason
Posted by:
Susanne, 18.12.2008
FLSmidth to Meet Goals, Slow Purchases, Chief Says (Bloomberg)
FLSmidth A/S, the Danish provider of mineral-handling equipment, is sticking to profit and revenue targets for 2008 after mining company Anglo American Plc cut its spending forecast by more than half, its chief executive officer said. “We haven’t experienced the kind of problems one might expect, judging from statements that have come from the big mineral companies,” Joergen Huno Rasmussen, CEO of the Copenhagen-based company, said today in a telephone interview. Still, FLSmidth will slow its acquisition strategy in the mineral division as financing becomes harder and global demand wanes, Rasmussen said. Anglo American, the world's fourth- biggest diversified mining company and an FLSmidth customer, today cut planned investment as a rout in metals prices thwarted its $45 billion expansion program. Outotec Oyj, the Finnish company whose flash-smelting equipment is used to produce half the world's copper, today lowered its year-end order backlog forecast. “The business atmosphere has been weak in minerals during the last six months, but we haven’t felt further deterioration during the last four weeks,” Rasmussen said.
The minerals division hasn’t seen any cancellations and only 5 percent of the group's order book has been delayed or suspended, he said repeating a figure from the company's Nov. 19 third-quarter report. Revenue from minerals operations has tripled in two years, helped by acquisitions including the 2007 purchase of a sorting business of Groupe Laperriere & Verreault Inc. for 4.8 billion kroner ($910 million). The unit is catching up with the division that supplies machinery to the cement industry, contributing 40 percent of group sales in the fist nine months of 2008, compared with 25 percent two years earlier. Mining and construction companies will reduce capital spending by 40 percent in 2009 and 2010, amid falling commodity prices, Citigroup Inc. said in an Oct. 27 report. “We’re now protecting our liquidity; we have no plans of larger acquisitions in minerals or in cement,” Rasmussen said, adding the company may still pursue “small acquisitions” worth less than $100 million, if “very attractive and well-fitting opportunities should appear.” FLSmidth will provide profit and sales forecasts for 2009 in its fourth-quarter report due for release Feb. 26, Rasmussen said.
GE's Decision to End Forecast May Ease Lumpy Ride (Bloomberg)
General Electric Co.'s decision to stop providing per-share forecasts for quarterly and annual profit may be the right step as a global financial crisis batters its shares and limits customers’ plans to place orders. “We’re in a period where it's likely to be lumpy,” said Bill Batcheller, who helps manage $700 million in assets including GE shares at Butler Wick & Co. in Youngstown, Ohio. “Looking quarter-to-quarter probably isn’t the way you want to look at business anyway.” Chief Executive Officer Jeffrey Immelt told investors yesterday the company will instead outline earnings goals focused more on individual units, adding enough detail that analysts can come to their own conclusions about potential per-share results. Giving per-share forecasts “just adds needless volatility,” he told reporters after GE's 2009 outlook meeting in New York. Investors have cut GE's market value by about half since April, when Immelt missed analysts’ quarterly estimate by about 7 cents a share amid turmoil in global markets. GE had never strayed even a full penny from the estimates in the prior 12 quarters, reflecting a tradition that dates to predecessor Jack Welch in the 1990s, according to data compiled by Bloomberg. “There are a lot of companies that have changed the way they communicate,” Immelt told reporters after the presentation. “This is something I’ve been thinking about for a long time. We’re going to give all the transparency, all the access to management. This aligns shareholders more with the way we run the place.”
GE fell 53 cents, or 3 percent, to $17.39 at 4:01 p.m. in New York Stock Exchange composite trading. The stock has declined 53 percent this year. The company's rating was reduced to “sell” from “hold” by Sterne Agee & Leach Inc. analyst Nick Heymann, who cited economic challenges facing all its business units. “In essence, GE's new ‘core’ investor is the retail investor, which is supplanting institutional investors” who want better balance between growth and yield, Heymann wrote in a note to clients today. The analyst has covered the stock for 25 years. Profit at the Fairfield, Connecticut-based company's industrial businesses, which includes NBC-Universal, will rise no more than 5 percent next year, GE said yesterday. That's less than a targeted range of 10 percent to 15 percent given in September. GE Capital, the finance arm, will still have about $5 billion in profit, Immelt said. That's down from about $9 billion this year excluding restructuring costs.
The finance arm contributed about half of profit last year and may shrink to less than 40 percent in 2009. GE is likely to undertake a “supersonic shrink” of its GE Capital division, wrote Heymann, slicing as much as 28 percent of its 75,000 member workforce. The company will continue to disclose segment details like revenue, cash flow, orders and operating profit quarterly. GE joins a minority of large companies that issue no earnings per- share guidance, including Google Inc. and General Motors Corp. Other companies such as United Technologies Corp. and Time Warner Inc. give annual per-share projections, though not quarterly. United Parcel Service Inc. gave only annual guidance for the first time in the third quarter because of the uncertain economy, and hasn’t said whether it will give quarterly or annual forecasts in 2009.
“The move away from quarterly guidance has been a long time coming and should be liberating for businesses,” Nicole Parent, a Credit Suisse analyst in New York, wrote in a note to investors yesterday. She has a “neutral” rating on the stock. “We’ve maintained for a while that it is impossible for a company this large to manage earnings per share within a few cents on a quarterly basis.” The company said it will continue to run the Consumer & Industrial unit, which includes lighting and appliances, instead of spinning it off or selling it as planned earlier this year. GE also will maintain its $1.24 a share dividend next year and sees keeping its highest-available AAA debt rating as “important,” Immelt said. GE has the resources to do both, the executive said. Some analysts including Parent said GE's presentation put more emphasis on its commitment to paying the dividend and less on the credit rating. About 40 percent of GE's shareowners are individual investors, Immelt noted during the presentation. Other analysts, including Deutsche Bank's Nigel Coe, characterized Immelt's comments as “aggressively” defending the AAA rating and the dividend. The pair can co-exist and “remain non-negotiable,” he wrote.
“It is hard to disagree with this point, considering $30 billion of cash on the balance sheet and just $5 billion of required capital injections into GE Capital at this stage,” Coe, who rates the stock “hold,” wrote in a note to investors yesterday. “Clearly, GE is sacrificing its capacity for M&A and share buybacks, but the reality is there aren’t too many industrials investing in these arenas right now.” Cost reductions that include as much as $1.4 billion in this year's fourth quarter will help shave $5 billion of what Immelt called the company's cost base in 2009, Immelt said. GE doesn’t provide aggregate job-loss numbers but there will be fewer employees “for sure,” he said. Next year, analysts are predicting a 21 percent decline in per-share profit from continuing operations to $1.48 a share, the average of 14 estimates in a Bloomberg survey. The estimate fell 3 cents since yesterday's meeting.
GE reiterated its profit forecast of 50 cents to 52 cents for the current quarter. Immelt cut his 2009 backlog forecast by about $20 billion to $170 billion. About 70 percent of the backlog is service-contract related, with margins of about 30 percent, he said. The CEO on Sept. 25 slashed his forecast for 2008 profit for the second time this year to $1.95 to $2.10 a share as the financial crisis deepened. In October, GE raised an additional $3 billion in the sale of preferred shares to investor Warren Buffett's Berkshire Hathaway Inc. and $12.2 billion in common stock. Immelt said he doesn’t “envision any need to do new capital.” Immelt, who took the job on Sept. 7, 2001, began disclosing more details about each unit than previously done under Welch, including starting the practice of holding quarterly conference calls. He has reshaped it by divesting more than $60 billion in assets such as plastics and insurance, while buying into water treatment, wind turbines, media and health care. The company is unlikely to make any large industrial acquisitions, though it will still add smaller purchases to its main business lines, Immelt said.
Schneider Electric Cut Targets as Crisis Worsens (Bloomberg)
Schneider Electric SA, the world's biggest maker of circuit breakers, cut its targets for 2008, citing weakening demand. The company expects like-for-like sales growth of about 5.5 percent this year, down from its earlier forecast of 8 percent, and operating profit at “close to 15 percent” of sales, down from “at least” 15 percent, according to a statement today. “Business conditions for Schneider Electric decelerated in October but the deterioration was particularly sharp in November,” Chief Executive Officer Jean-Pascal Tricoire said in the statement. “We do not anticipate the trend to improve in December.”
The Rueil-Malmaison-based company, which has been diversifying away from declining construction markets through acquisitions, doesn’t have “enough visibility” to provide targets after 2008, Tricoire was quoted as saying Oct. 25 in an interview with weekly newspaper Investir. The shares have fallen 41 percent this year as demand for light and heavy equipment decreased worldwide. Schneider will implement cost-cutting measures to generate 600 million euros ($859 million) in annual savings by 2011, the company said. It will also cut back on temporary workers and production capacity. Schneider “enjoys a comfortable liquidity position” and will be able to meet its commitments, including a dividend for 2008, the company said in today's statement.
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