NEW DELHI — The head of Satyam Computer Services confessed to making up more than 10,000 employees to siphon money from the software company and to using his elderly mother’s name to buy land with the cash, a prosecutor said in a court appearance Thursday.
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B. Ramalinga Raju, the founder and chairman of Satyam, has been held in custody since his arrest two weeks ago.
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B. Ramalinga Raju, the founder and chairman of Satyam, an Indian information services outsourcing company, also confessed to forging documents related to bank deposits, K. Ajay Kumar, a prosecutor with the Crime Investigation Department of the Indian police, told a court in the southern city of Hyderabad.
Mr. Raju’s lawyer, S. Bharat Kumar, told the court that the prosecutor’s claims were false and reiterated the denial afterward, news agencies reported. The accusation of “diversion of funds is nothing but imagination,” Bloomberg News reported the lawyer as saying. “All through the interrogation there were no questions about any diversion of funds, laundering of funds. And there were no admissions.”
The prosecutor argued that Mr. Raju, his brother and the chief financial officer of Satyam should remain in police custody, which a judge extended until Friday.
Ajay Kumar, the prosecutor, told the court that Satyam had 40,000 employees, far fewer than the nearly 53,000 it claimed. The money recorded as having been paid to those employees was actually used by Mr. Raju to buy land in other people’s names. Mr. Raju had conducted nearly 400 such “benami” land deals — or deals under a fake name — including some under his mother’s name, Mr. Kumar said.
Satyam, which is based in Hyderabad, has global clients and listings on the New York Stock Exchange and Euronext. It became the focus of the highest-profile fraud case in India after Mr. Raju said on Jan. 7 that he had fabricated about $1 billion in cash at the company and padded profit margins — though conversations with investigators and the prosecutors’ account appeared to indicate that the extent of the fraud was much more severe than that.
Making up employees might sound complicated, but investigators said it was not that difficult. “Employees are just code numbers in your system,” explained one person involved in the investigation, who was granted anonymity to provide details about it. “You can create any amount of them. All you need to do is make sure the income tax is deducted properly” and insurance is paid.
Satyam’s new state-appointed board has hired KPMG and Deloitte Touche Tohmatsu to restate the accounts, Bloomberg reported. The growing size and scope of the fraud is forcing many of its corporate clients to rethink their software and back-office operations, analysts say. The revelation that employee numbers may have been fudged could intensify such re-evaluations, as clients question whether their invoices have been padded.
Satyam claims a third of the Fortune 500 companies as clients; General Motors, General Electric and Nestlé do business with Satyam. So far, just one client, State Farm Insurance, has publicly broken ties with Satyam.
The company’s global links, and its international stock listings, mean that prosecutors and investigators from India are joining forces with those from the United States to determine how far the fraud went and how it was committed. Investigators in India say that the Securities and Exchange Commission in Washington is working with the Indian market regulator, the Securities and Exchange Board of India.
Friday, January 23, 2009
Asian Stocks Drop for Third Week on Growth, Earnings Concerns
Jan. 24 (Bloomberg) -- Asian stocks slumped for a third week amid mounting concern the financial crisis is reigniting as the deepening global recession cut into corporate profits.
HSBC Holdings Plc, Europe’s largest bank, lost 11 percent for the week after the U.K. and U.S. governments were forced to provide new bailouts for banks and Nouriel Roubini said credit losses could surpass $3 trillion. Sony Corp. plunged 13 percent after forecasting a record loss, while Samsung Electronics Co., the world’s largest liquid-crystal display television maker, dropped 5.8 percent after posting its first quarterly loss.
The MSCI Asia Pacific Index slid 5.2 percent this week to 80.32, the lowest level since Dec. 5. The benchmark measure fell for a third consecutive week, the first time since October it has done so.
“Market jitters remain as banks’ asset quality worsens in slowing economies,” said Kim Young Il, head of equities at Korea Investment Trust Management Co. in Seoul, which manages the equivalent of $6.2 billion. “The attention is now on whether this signals a second round in the financial crisis.”
Financial companies posted the biggest declines on the benchmark index, which slumped by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to cut jobs amid slumping profits.
Japan’s Nikkei 225 Stock Average lost 5.9 percent in the week as the yen’s climb to the highest since 1995 against the dollar added to exporters’ woes. Most benchmark indexes retreated across the region, except in China, where the central government unveiled additional measures to support the economy.
‘Effectively Insolvent’
Concerns banks will be nationalized weighed on shares of lenders throughout the world. The U.K. government moved to raise its stake in Royal Bank of Scotland Group Plc, while Bank of America Corp. received a bailout and was forced to slash its dividend to 1 cent.
HSBC tumbled 11 percent to HK$57.45. Morgan Stanley and Goldman Sachs Group Inc. have predicted the bank, which gets about a fifth of its revenue in North America, may have to raise additional capital.
U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” New York University Professor Nouriel Roubini, who predicted last year’s economic crisis, said on Jan. 20. Institutions worldwide have so far reported writedowns and losses of more than $1 trillion.
Mizuho Financial Group Inc., Japan’s second-largest listed lender, dropped 15 percent to 212 yen. National Australia Bank Ltd., the country’s biggest by assets, slumped 12 percent to A$16.94.
Sony, Samsung Electronics
Sony, the maker of PlayStation3 game consoles, lost 13 percent to 1,802 yen. The company said it expects a record 260 billion yen ($2.9 billion) operating loss for the year ending in March amid falling demand, the strong yen and costs to restructure its business.
“Sony’s loss forecast was an order of magnitude greater than what some analysts had estimated,” Soichiro Monji, chief strategist at Daiwa SB Investments Ltd., which manages the equivalent of $53 billion, said in an interview with Bloomberg Television. “The bad news about earnings and economies is accumulating.”
China this week reported its slowest rate of growth in seven years as the economy expanded at an annualized 6.8 percent pace in the fourth quarter. South Korea’s central bank also said the country’s economy shrank a 5.6 percent last quarter, the biggest decline since the Asian financial crisis a decade ago.
Samsung lost 5.8 percent to 442,000 won as it reported a fourth-quarter net loss amid slumping demand for its computer chips, televisions and mobile-phone handsets. Angang Steel Co., China’s second-largest steelmaker, tumbled 21 percent to HK$6.45 in Hong Kong after saying 2008 profit plunged 55 percent.
HSBC Holdings Plc, Europe’s largest bank, lost 11 percent for the week after the U.K. and U.S. governments were forced to provide new bailouts for banks and Nouriel Roubini said credit losses could surpass $3 trillion. Sony Corp. plunged 13 percent after forecasting a record loss, while Samsung Electronics Co., the world’s largest liquid-crystal display television maker, dropped 5.8 percent after posting its first quarterly loss.
The MSCI Asia Pacific Index slid 5.2 percent this week to 80.32, the lowest level since Dec. 5. The benchmark measure fell for a third consecutive week, the first time since October it has done so.
“Market jitters remain as banks’ asset quality worsens in slowing economies,” said Kim Young Il, head of equities at Korea Investment Trust Management Co. in Seoul, which manages the equivalent of $6.2 billion. “The attention is now on whether this signals a second round in the financial crisis.”
Financial companies posted the biggest declines on the benchmark index, which slumped by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to cut jobs amid slumping profits.
Japan’s Nikkei 225 Stock Average lost 5.9 percent in the week as the yen’s climb to the highest since 1995 against the dollar added to exporters’ woes. Most benchmark indexes retreated across the region, except in China, where the central government unveiled additional measures to support the economy.
‘Effectively Insolvent’
Concerns banks will be nationalized weighed on shares of lenders throughout the world. The U.K. government moved to raise its stake in Royal Bank of Scotland Group Plc, while Bank of America Corp. received a bailout and was forced to slash its dividend to 1 cent.
HSBC tumbled 11 percent to HK$57.45. Morgan Stanley and Goldman Sachs Group Inc. have predicted the bank, which gets about a fifth of its revenue in North America, may have to raise additional capital.
U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” New York University Professor Nouriel Roubini, who predicted last year’s economic crisis, said on Jan. 20. Institutions worldwide have so far reported writedowns and losses of more than $1 trillion.
Mizuho Financial Group Inc., Japan’s second-largest listed lender, dropped 15 percent to 212 yen. National Australia Bank Ltd., the country’s biggest by assets, slumped 12 percent to A$16.94.
Sony, Samsung Electronics
Sony, the maker of PlayStation3 game consoles, lost 13 percent to 1,802 yen. The company said it expects a record 260 billion yen ($2.9 billion) operating loss for the year ending in March amid falling demand, the strong yen and costs to restructure its business.
“Sony’s loss forecast was an order of magnitude greater than what some analysts had estimated,” Soichiro Monji, chief strategist at Daiwa SB Investments Ltd., which manages the equivalent of $53 billion, said in an interview with Bloomberg Television. “The bad news about earnings and economies is accumulating.”
China this week reported its slowest rate of growth in seven years as the economy expanded at an annualized 6.8 percent pace in the fourth quarter. South Korea’s central bank also said the country’s economy shrank a 5.6 percent last quarter, the biggest decline since the Asian financial crisis a decade ago.
Samsung lost 5.8 percent to 442,000 won as it reported a fourth-quarter net loss amid slumping demand for its computer chips, televisions and mobile-phone handsets. Angang Steel Co., China’s second-largest steelmaker, tumbled 21 percent to HK$6.45 in Hong Kong after saying 2008 profit plunged 55 percent.
Australia Won’t ‘Hesitate’ to Boost Economy, Treasurer Says
Jan. 24 (Bloomberg) -- Australia’s government won’t hesitate to stimulate the economy further should the need arise amid the global recession, Treasurer Wayne Swan said.
Swan, speaking to the New York investment community, said the government could add to some A$45 billion ($29 billion) in stimulus already announced should economic conditions worsen.
“We will not hesitate to take whatever further action is necessary to support growth and jobs,” Swan, 54, said in speech notes received via e-mail. “Major financial institutions, some of which have withstood world wars and the Great Depression, have either collapsed or been bailed out.”
Since October, Australia’s government has announced almost A$45 billion in aid for families, pensioners, bond markets, home buyers, and extra spending on schools and roads. Reserve Bank of Australia Governor Glenn Stevens, meanwhile, has embarked on the biggest round of interest-rate cuts in almost two decades.
Australia’s “strong balance sheet” and positive net worth position have given the government and central bank “more room” than most countries to adjust settings, Swan said.
The government’s recent spending boost came after credit markets froze following the bankruptcy of Lehman Brothers Holdings Inc. on Sept. 15, prompting governments and central banks around the world to bail out financial institutions and try to revive growth.
Trading Partners
Australia’s biggest trading partners of China and Japan are suffering as the global recession pummels exports. China, which accounts for a fifth of global growth, expanded at its weakest pace in seven years in the fourth quarter; Japan’s first recession since 2001 is deepening.
Australia’s economy expanded at its weakest pace in eight years in the third quarter. The unemployment rate rose to 4.5 percent in December, the highest in almost two years, as mining companies, airlines, and automakers fired full-time workers, adding to signs the economy faces its first recession since 1991.
The nation’s economy is not immune to the global financial crisis, but is nonetheless well-placed to weather it, Swan said.
“The appreciation of the Australian dollar is helping provide a substantial stimulus to the domestic economy,” Swan said. “Australia’s housing market also has positive characteristics.”
The government, in its latest forecast, said the economy will grow 2 percent in the year ending June 30, 2009. The central bank in November lowered its 2008 economic growth forecast to 1.5 percent from 2 percent.
Swan, speaking to the New York investment community, said the government could add to some A$45 billion ($29 billion) in stimulus already announced should economic conditions worsen.
“We will not hesitate to take whatever further action is necessary to support growth and jobs,” Swan, 54, said in speech notes received via e-mail. “Major financial institutions, some of which have withstood world wars and the Great Depression, have either collapsed or been bailed out.”
Since October, Australia’s government has announced almost A$45 billion in aid for families, pensioners, bond markets, home buyers, and extra spending on schools and roads. Reserve Bank of Australia Governor Glenn Stevens, meanwhile, has embarked on the biggest round of interest-rate cuts in almost two decades.
Australia’s “strong balance sheet” and positive net worth position have given the government and central bank “more room” than most countries to adjust settings, Swan said.
The government’s recent spending boost came after credit markets froze following the bankruptcy of Lehman Brothers Holdings Inc. on Sept. 15, prompting governments and central banks around the world to bail out financial institutions and try to revive growth.
Trading Partners
Australia’s biggest trading partners of China and Japan are suffering as the global recession pummels exports. China, which accounts for a fifth of global growth, expanded at its weakest pace in seven years in the fourth quarter; Japan’s first recession since 2001 is deepening.
Australia’s economy expanded at its weakest pace in eight years in the third quarter. The unemployment rate rose to 4.5 percent in December, the highest in almost two years, as mining companies, airlines, and automakers fired full-time workers, adding to signs the economy faces its first recession since 1991.
The nation’s economy is not immune to the global financial crisis, but is nonetheless well-placed to weather it, Swan said.
“The appreciation of the Australian dollar is helping provide a substantial stimulus to the domestic economy,” Swan said. “Australia’s housing market also has positive characteristics.”
The government, in its latest forecast, said the economy will grow 2 percent in the year ending June 30, 2009. The central bank in November lowered its 2008 economic growth forecast to 1.5 percent from 2 percent.
Larsen Raises Stake in Satyam as Board Arranges Funds
Jan. 23 (Bloomberg) -- Larsen & Toubro Ltd., India’s biggest engineering company, raised its stake in Satyam Computer Services Ltd. to 12 percent to give it greater say in the rescue of the fraud-hit software exporter.
Larsen bought shares in the open market to triple its holding from 4 percent, Chief Financial Officer Y.M. Deosthalee said in by telephone from Mumbai, where the company is based.
Satyam’s state-appointed board has almost arranged funds to help tide over a cash crunch till the end of March, the Hyderabad-based company said today. Larsen said it is raising its holdings to safeguard the engineering company’s interest, amid a flurry of interest from potential bidders to buy the software provider, which is battling to keep customers from defecting.
“This is a win-win both for government and Satyam as Larsen will provide the stability,” said Sanjay Makhija, head of institutional sales at Fortune Financial Services Ltd. in Mumbai. “This investment will provide” a base for Larsen, he said.
Deosthalee declined to comment if Larsen would increase its stake beyond the 15 percent threshold that would trigger a mandatory offer for the company.
“There’s a lot of corporate action happening in the company, we need to make sure we have a meaningful stake in Satyam to safeguard our interest,” Deosthalee said. “We have not made up our mind whether we want to buy the company.”
Final Stages
Satyam, at the center of India’s biggest fraud inquiry, said today arrangements to raise funds were in the final stages and details would be announced before Jan. 28.
“The immovable properties of the company, including all campuses owned by it, are free of any” charge, the company said in a statement sent to the Bombay Stock Exchange at the end of a meeting of its state-appointed board of directors in Hyderabad. “Collections from the receivables have been robust.”
The Indian software provider plans to expedite collection from its customers and take steps to cut costs, the board said.
“The board has also met and interacted with a number of investment bankers and will take a decision in the next few days,” Satyam said in the statement.
Government-appointed directors plan to hire a financial adviser to devise a rescue plan, Deepak Parekh, a nominee on the Satyam board said on Jan. 21.
CEO, CFO Shortlist
The board has short-listed three candidates each for the positions of chief executive officer and chief financial officer and an announcement will be made next week, Satyam said today.
Satyam is struggling to raise cash to pay salaries after its former Chairman Ramalinga Raju said he had inflated assets by more than $1 billion. The provider is also battling to ward off customers from joining State Farm Mutual Automobile Insurance Co. in canceling contracts.
“The selected person will be uniquely qualified to lead the company during this period of transition and will be a leader of global standing and recognition,” Satyam said.
The U.S. Securities and Exchange Commission is said to be investigating whether Satyam misled investors, following inquiries by India’s fraud office, auditing body, markets regulator and local police.
Satyam padded employee numbers to siphon off cash and forged documents to support fake bank deposits, a public prosecutor said in a court in Hyderabad yesterday.
Satyam had about 33 billion rupees ($670 million) of “fictitious and non-existent” accounts, public prosecutor K. Ajay Kumar told a hearing for the company’s arrested founder Raju. The Hyderabad-based company had 40,000 employees, short of the 53,000 claimed by Satyam, he said.
‘No Basis to Doubt’
“The board has confirmed that prima facie, there appears to be no basis to doubt” the employee strength, Satyam said today. “The independent investigation process is expected to reaffirm this fact in the coming weeks.”
Satyam’s state-appointed board this month hired KPMG and Deloitte Touche Tohmatsu to restate the accounts.
India’s government is building a case against Raju two weeks after his admission he’d falsified earnings sparked a plunge in Satyam’s stock.
The charge of diversion of funds was “nothing but imagination,” Raju’s lawyer S. Bharat Kumar told reporters yesterday.
Raju and his younger brother Rama were arrested on Jan. 9 after the former chairman said he had fabricated accounts at India’s fourth-largest software provider for several years. The company’s stock gained 31 percent today, paring its loss since Raju’s admission to 78 percent.
The falsified employee data was used to siphon off 200 million rupees every month and one fixed deposit receipt from HDFC Bank Ltd. was forged, the prosecutor told the 6th Additional Chief Metropolitan Magistrate’s court in Hyderabad.
The employee data as was available on the company’s system was right, Hari Thalapalli, head of marketing and former human resources chief at Satyam, said from Hyderabad yesterday. The provider had 48,000 employees a year ago, Thalapalli said on Jan. 20, citing data from when he headed the human resources department. The computer services provider was likely to have added more employees in subsequent quarters, he said at the time.
Approached by Buyers
Satyam has been approached by potential buyers, board member Tarun Das said this week.
Larsen & Toubro Ltd. has a rescue plan which it will present to Satyam’s board, the Economic Times reported yesterday, without saying where it got the information.
Patni Computer Systems Ltd. and General Atlantic LLC may team up in a bid to buyout Satyam, the Economic Times reported, citing unidentified investment bankers.
Separately, Satyam has finalized short-term funds from India’s Punjab National Bank and Bank of Baroda to meet its working capital needs, the Financial Chronicle reported, without saying where it got the information. Citibank N.A. will maintain an account where money paid by the software company’s customers will be deposited, the newspaper said.
Delays in raising funds and appointing a chief executive officer are costing Satyam customers. At least two of them have given notice about terminating their contracts, according to board member Kiran Karnik, who declined to name the clients in a text message on Jan. 21.
Larsen bought shares in the open market to triple its holding from 4 percent, Chief Financial Officer Y.M. Deosthalee said in by telephone from Mumbai, where the company is based.
Satyam’s state-appointed board has almost arranged funds to help tide over a cash crunch till the end of March, the Hyderabad-based company said today. Larsen said it is raising its holdings to safeguard the engineering company’s interest, amid a flurry of interest from potential bidders to buy the software provider, which is battling to keep customers from defecting.
“This is a win-win both for government and Satyam as Larsen will provide the stability,” said Sanjay Makhija, head of institutional sales at Fortune Financial Services Ltd. in Mumbai. “This investment will provide” a base for Larsen, he said.
Deosthalee declined to comment if Larsen would increase its stake beyond the 15 percent threshold that would trigger a mandatory offer for the company.
“There’s a lot of corporate action happening in the company, we need to make sure we have a meaningful stake in Satyam to safeguard our interest,” Deosthalee said. “We have not made up our mind whether we want to buy the company.”
Final Stages
Satyam, at the center of India’s biggest fraud inquiry, said today arrangements to raise funds were in the final stages and details would be announced before Jan. 28.
“The immovable properties of the company, including all campuses owned by it, are free of any” charge, the company said in a statement sent to the Bombay Stock Exchange at the end of a meeting of its state-appointed board of directors in Hyderabad. “Collections from the receivables have been robust.”
The Indian software provider plans to expedite collection from its customers and take steps to cut costs, the board said.
“The board has also met and interacted with a number of investment bankers and will take a decision in the next few days,” Satyam said in the statement.
Government-appointed directors plan to hire a financial adviser to devise a rescue plan, Deepak Parekh, a nominee on the Satyam board said on Jan. 21.
CEO, CFO Shortlist
The board has short-listed three candidates each for the positions of chief executive officer and chief financial officer and an announcement will be made next week, Satyam said today.
Satyam is struggling to raise cash to pay salaries after its former Chairman Ramalinga Raju said he had inflated assets by more than $1 billion. The provider is also battling to ward off customers from joining State Farm Mutual Automobile Insurance Co. in canceling contracts.
“The selected person will be uniquely qualified to lead the company during this period of transition and will be a leader of global standing and recognition,” Satyam said.
The U.S. Securities and Exchange Commission is said to be investigating whether Satyam misled investors, following inquiries by India’s fraud office, auditing body, markets regulator and local police.
Satyam padded employee numbers to siphon off cash and forged documents to support fake bank deposits, a public prosecutor said in a court in Hyderabad yesterday.
Satyam had about 33 billion rupees ($670 million) of “fictitious and non-existent” accounts, public prosecutor K. Ajay Kumar told a hearing for the company’s arrested founder Raju. The Hyderabad-based company had 40,000 employees, short of the 53,000 claimed by Satyam, he said.
‘No Basis to Doubt’
“The board has confirmed that prima facie, there appears to be no basis to doubt” the employee strength, Satyam said today. “The independent investigation process is expected to reaffirm this fact in the coming weeks.”
Satyam’s state-appointed board this month hired KPMG and Deloitte Touche Tohmatsu to restate the accounts.
India’s government is building a case against Raju two weeks after his admission he’d falsified earnings sparked a plunge in Satyam’s stock.
The charge of diversion of funds was “nothing but imagination,” Raju’s lawyer S. Bharat Kumar told reporters yesterday.
Raju and his younger brother Rama were arrested on Jan. 9 after the former chairman said he had fabricated accounts at India’s fourth-largest software provider for several years. The company’s stock gained 31 percent today, paring its loss since Raju’s admission to 78 percent.
The falsified employee data was used to siphon off 200 million rupees every month and one fixed deposit receipt from HDFC Bank Ltd. was forged, the prosecutor told the 6th Additional Chief Metropolitan Magistrate’s court in Hyderabad.
The employee data as was available on the company’s system was right, Hari Thalapalli, head of marketing and former human resources chief at Satyam, said from Hyderabad yesterday. The provider had 48,000 employees a year ago, Thalapalli said on Jan. 20, citing data from when he headed the human resources department. The computer services provider was likely to have added more employees in subsequent quarters, he said at the time.
Approached by Buyers
Satyam has been approached by potential buyers, board member Tarun Das said this week.
Larsen & Toubro Ltd. has a rescue plan which it will present to Satyam’s board, the Economic Times reported yesterday, without saying where it got the information.
Patni Computer Systems Ltd. and General Atlantic LLC may team up in a bid to buyout Satyam, the Economic Times reported, citing unidentified investment bankers.
Separately, Satyam has finalized short-term funds from India’s Punjab National Bank and Bank of Baroda to meet its working capital needs, the Financial Chronicle reported, without saying where it got the information. Citibank N.A. will maintain an account where money paid by the software company’s customers will be deposited, the newspaper said.
Delays in raising funds and appointing a chief executive officer are costing Satyam customers. At least two of them have given notice about terminating their contracts, according to board member Kiran Karnik, who declined to name the clients in a text message on Jan. 21.
Thursday, January 22, 2009
Obama Issues Directive to Shut Down Guantánamo
WASHINGTON — President Obama signed executive orders Thursday directing the Central Intelligence Agency to shut what remains of its network of secret prisons and ordering the closing of the Guantánamo detention camp within a year, government officials said.
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The orders, which are the first steps in undoing detention policies of former President George W. Bush, rewrite American rules for the detention of terrorism suspects. They require an immediate review of the 245 detainees still held at the naval base in Guantánamo Bay, Cuba, to determine if they should be transferred, released or prosecuted.
And the orders bring to an end a Central Intelligence Agency program that kept terrorism suspects in secret custody for months or years, a practice that has brought fierce criticism from foreign governments and human rights activists. They will also prohibit the C.I.A. from using coercive interrogation methods, requiring the agency to follow the same rules used by the military in interrogating terrorism suspects, government officials said.
But the orders leave unresolved complex questions surrounding the closing of the Guantánamo prison, including whether, where and how many of the detainees are to be prosecuted. They could also allow Mr. Obama to reinstate the C.I.A.’s detention and interrogation operations in the future, by presidential order, as some have argued would be appropriate if Osama bin Laden or another top-level leader of Al Qaeda were captured.
The new White House counsel, Gregory B. Craig, briefed lawmakers about some elements of the orders on Wednesday evening. A Congressional official who attended the session said Mr. Craig acknowledged concerns from intelligence officials that new restrictions on C.I.A. methods might be unwise and indicated that the White House might be open to allowing the use of methods other than the 19 techniques allowed for the military.
Details of the directive involving the C.I.A. were described by government officials who insisted on anonymity so they could not be blamed for pre-empting a White House announcement. Copies of the draft order on Guantánamo were provided by people who have consulted with Mr. Obama’s transition team and requested anonymity for the same reason.
In remarks prepared for delivery at his confirmation hearings to become director of national intelligence in the Obama administration, Dennis C. Blair, a retired admiral with a long background in intelligence, endorsed the new approach and promised to enforce it rigorously. “It is not enough to set a standard and announce it,” he said.
“I believe strongly that torture is not moral, legal or effective,” he told the Senate Select Committee on Intelligence. “Any program of detention and interrogation must comply with the Geneva Conventions, the Conventions on Torture, and the Constitution. There must be clear standards for humane treatment that apply to all agencies of U.S. Government, including the Intelligence Community,” his written statement said.
As for closing Guantanamo, he said that would take time but must be done because it has become “a damaging symbol to the world.”
“It is a rallyingcry for terrorist recruitment and harmful to our national security, so closing it is important for our national security,” Admiral Blair’s statement said.
“The guiding principles for closing the center should beprotecting our national security, respecting the Geneva Conventions and the rule of law, and respecting the existing institutions of justice in this country. I also believe we should revitalize efforts to transfer detainees to their countries of origin or other countries whenever that would be consistent with these principles. Closing this center and satisfying these principles will take time, and is the work of many departments and agencies.”
The executive order on interrogations is certain to be received with some skepticism at the C.I.A., which for years has maintained that the military’s interrogation rules are insufficient to get information from senior Qaeda figures like Khalid Sheikh Mohammed. The Bush administration asserted that the harsh interrogation methods were instrumental in gaining valuable intelligence on Qaeda operations.
The intelligence agency built a network of secret prisons in 2002 to house and interrogate senior Qaeda figures captured overseas. The exact number of suspects to have moved through the prisons is unknown, although Michael V. Hayden, the departing director of the agency, has in the past put the number at “fewer than 100.”
The secret detentions brought international condemnation, and in September 2006, President Bush ordered that the remaining 14 detainees in C.I.A. custody be transferred to Guantánamo Bay and tried by military tribunals.
But Mr. Bush made clear then that he was not shutting down the C.I.A. detention system, and in the last two years, two Qaeda operatives are believed to have been detained in agency prisons for several months each before being sent to Guantánamo.
A government official said Mr. Obama’s order on the C.I.A. would still allow its officers abroad to temporarily detain terrorism suspects and transfer them to other agencies, but would no longer allow the agency to carry out long-term detentions.
Since the early days after the 2001 attacks, the intelligence agency’s role in detaining terrorism suspects has been significantly scaled back, as has the severity of interrogation methods the agency is permitted to use. The most controversial practice, the simulated drowning technique known as water-boarding, was used on three suspects but has not been used since 2003, C.I.A. officials said.
But at the urging of the Bush administration, Congress in 2006 authorized the agency to continue using harsher interrogation methods than those permitted for use by other agencies, including the military. Those exact methods remain classified. The order on Guantánamo says that the camp, which received its first hooded and chained detainees seven years ago this month, “shall be closed as soon as practicable, and no later than one year from the date of this order.”
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Room for Debate: Torture's Blowback (January 14, 2009)
Room for Debate: The Challenges of Closing Guantánamo (January 13, 2009)
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Readers' Comments
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The orders, which are the first steps in undoing detention policies of former President George W. Bush, rewrite American rules for the detention of terrorism suspects. They require an immediate review of the 245 detainees still held at the naval base in Guantánamo Bay, Cuba, to determine if they should be transferred, released or prosecuted.
And the orders bring to an end a Central Intelligence Agency program that kept terrorism suspects in secret custody for months or years, a practice that has brought fierce criticism from foreign governments and human rights activists. They will also prohibit the C.I.A. from using coercive interrogation methods, requiring the agency to follow the same rules used by the military in interrogating terrorism suspects, government officials said.
But the orders leave unresolved complex questions surrounding the closing of the Guantánamo prison, including whether, where and how many of the detainees are to be prosecuted. They could also allow Mr. Obama to reinstate the C.I.A.’s detention and interrogation operations in the future, by presidential order, as some have argued would be appropriate if Osama bin Laden or another top-level leader of Al Qaeda were captured.
The new White House counsel, Gregory B. Craig, briefed lawmakers about some elements of the orders on Wednesday evening. A Congressional official who attended the session said Mr. Craig acknowledged concerns from intelligence officials that new restrictions on C.I.A. methods might be unwise and indicated that the White House might be open to allowing the use of methods other than the 19 techniques allowed for the military.
Details of the directive involving the C.I.A. were described by government officials who insisted on anonymity so they could not be blamed for pre-empting a White House announcement. Copies of the draft order on Guantánamo were provided by people who have consulted with Mr. Obama’s transition team and requested anonymity for the same reason.
In remarks prepared for delivery at his confirmation hearings to become director of national intelligence in the Obama administration, Dennis C. Blair, a retired admiral with a long background in intelligence, endorsed the new approach and promised to enforce it rigorously. “It is not enough to set a standard and announce it,” he said.
“I believe strongly that torture is not moral, legal or effective,” he told the Senate Select Committee on Intelligence. “Any program of detention and interrogation must comply with the Geneva Conventions, the Conventions on Torture, and the Constitution. There must be clear standards for humane treatment that apply to all agencies of U.S. Government, including the Intelligence Community,” his written statement said.
As for closing Guantanamo, he said that would take time but must be done because it has become “a damaging symbol to the world.”
“It is a rallyingcry for terrorist recruitment and harmful to our national security, so closing it is important for our national security,” Admiral Blair’s statement said.
“The guiding principles for closing the center should beprotecting our national security, respecting the Geneva Conventions and the rule of law, and respecting the existing institutions of justice in this country. I also believe we should revitalize efforts to transfer detainees to their countries of origin or other countries whenever that would be consistent with these principles. Closing this center and satisfying these principles will take time, and is the work of many departments and agencies.”
The executive order on interrogations is certain to be received with some skepticism at the C.I.A., which for years has maintained that the military’s interrogation rules are insufficient to get information from senior Qaeda figures like Khalid Sheikh Mohammed. The Bush administration asserted that the harsh interrogation methods were instrumental in gaining valuable intelligence on Qaeda operations.
The intelligence agency built a network of secret prisons in 2002 to house and interrogate senior Qaeda figures captured overseas. The exact number of suspects to have moved through the prisons is unknown, although Michael V. Hayden, the departing director of the agency, has in the past put the number at “fewer than 100.”
The secret detentions brought international condemnation, and in September 2006, President Bush ordered that the remaining 14 detainees in C.I.A. custody be transferred to Guantánamo Bay and tried by military tribunals.
But Mr. Bush made clear then that he was not shutting down the C.I.A. detention system, and in the last two years, two Qaeda operatives are believed to have been detained in agency prisons for several months each before being sent to Guantánamo.
A government official said Mr. Obama’s order on the C.I.A. would still allow its officers abroad to temporarily detain terrorism suspects and transfer them to other agencies, but would no longer allow the agency to carry out long-term detentions.
Since the early days after the 2001 attacks, the intelligence agency’s role in detaining terrorism suspects has been significantly scaled back, as has the severity of interrogation methods the agency is permitted to use. The most controversial practice, the simulated drowning technique known as water-boarding, was used on three suspects but has not been used since 2003, C.I.A. officials said.
But at the urging of the Bush administration, Congress in 2006 authorized the agency to continue using harsher interrogation methods than those permitted for use by other agencies, including the military. Those exact methods remain classified. The order on Guantánamo says that the camp, which received its first hooded and chained detainees seven years ago this month, “shall be closed as soon as practicable, and no later than one year from the date of this order.”
Reliance Net Beats Estimate as Interest Income Surges
Jan. 22 (Bloomberg) -- Reliance Industries Ltd., India’s biggest company by market value, posted earnings that beat estimates as interest almost quadrupled, offsetting lower demand for fuels and petrochemicals caused by the global recession.
Net income dropped 9.8 percent to 35 billion rupees ($713 million), or 23.5 rupees a share, in the three months ended Dec. 31, the refiner and explorer said in a statement in Mumbai. The median estimate of nine analysts was for a profit of 31.2 billion rupees. Sales fell 9.3 percent to 325.3 billion rupees.
Earnings growth may accelerate after billionaire Chairman Mukesh Ambani started the company’s second refinery on Dec. 25 and is close to beginning gas production at India’s biggest field. Interest income surged after the company invested cash from additional shares bought by Ambani in bank deposits.
“Other income seems to have boosted their third-quarter earnings helped by the capital introduced by the promoters,” said Ballabh Modani, Mumbai-based analyst at Enam Securities Pvt., whose profit forecast of 33.5 billion rupees was the closest to the result. Modani has an “outperform” rating on the stock.
Interest income rose to 5.46 billion rupees from 1.41 billion rupees a year earlier. Cash reserves rose to 258 billion rupees after Ambani bought 120 million Reliance shares. More that 95 percent of the company’s cash is held in fixed deposits, according to the statement.
Warrant Conversion
The chairman paid $3.6 billion to buy shares in India’s largest warrant conversion on Oct. 3. The company had allotted the warrants to Ambani in February 2007, entitling him to buy shares at 1,402 rupees apiece in 18 months.
Ambani still needs to convince investors that his new refinery and gas sales, currently banned by a court, will boost profit. Reliance shares have dropped 52 percent in a year, more than the 47 percent decline in the Bombay Stock Exchange’s Sensitive Index.
The drop in third-quarter profit was the first in three years. In the first nine months, net income rose 3.4 percent to 117.3 billion rupees on sales of 1.22 trillion rupees.
Earnings in the year-earlier period excluded gains from an asset sale. Including the one-time gain, net income was 80.8 billion rupees.
Reliance earned $10 on every barrel processed at its 660,000 barrel-a-day plant in Gujarat, the company’s first refinery, compared with $15.4 a barrel a year earlier. Margins at complex refineries in Singapore, Asia’s biggest oil trading centre, were $8.4 a barrel in the week ended Dec. 26, according to a Bank of America report.
Refining Margins
Margins have narrowed as gasoline and diesel prices fell because of a slump in global demand. Prices of fuels including gasoline and naphtha are lower than the oil from which they are produced. Exports account for 70 percent of Reliance’s revenue.
The price of wholesale gasoline loaded on barges near Amsterdam was as much as $7.98 a barrel lower than North Sea Brent crude oil in the three months ended Dec. 31, according to data from broker PVM Oil Associates Ltd.
Falling demand has prompted U.S. refiners, including Valero Energy Corp. and Exxon Mobil Corp., the world’s largest oil company, to reduce runs and shut units for seasonal maintenance.
Mumbai-based Reliance operates complex refineries, which use advanced technology to convert cheap, high-sulfur crude and low- quality products such as fuel oil into gasoline and diesel. Almost no oil is wasted.
‘Slower Demand’
Refining accounted for 45 percent of Reliance’s pretax profit in the third quarter, while oil and gas contributed about 15 percent.
“Refining margins are expected to remain muted till the end of 2010-11 due to overcapacity concerns and slower demand growth,” said Niraj Mansingka, assistant vice-president at Edelweiss Capital Ltd. in Mumbai. “Gas production will offset most of the decline.”
Reliance shares, which declined 37 percent in the third quarter, rose 1.5 percent to 1,136.3 rupees in Mumbai. The earnings were released after the market close.
Reliance’s gas project and new refinery may help the company achieve 66 percent earnings growth in the next two years, Harshad Katkar and Nirmal Raghavan, Mumbai-based analysts at UBS AG, said in a Jan. 19 report.
Ambani is investing $5.2 billion to develop the first phase of the KG-D6 field in the Krishna-Godavari basin, off India’s east coast. The area may hold as much as 9.2 trillion cubic feet of gas, according to partner Calgary, Canada-based Niko Resources Ltd., making it India’s largest gas find.
Gas Lawsuit
The sale of gas from the field has been banned by the Bombay High Court, which is hearing a price dispute between Reliance and its customers, state-owned NTPC Ltd. and Reliance Natural Resources Ltd. The Indian government has asked the court to lift the ban to help overcome shortages of the fuel faced by power utilities and fertilizer makers.
Reliance declined to comment on gas sales because of the lawsuit, the company said in an e-mailed reply to questions on Jan 20.
UBS expects Reliance to start gas production by the end of this quarter after the court passes an interim order allowing sales, analysts Katkar and Raghavan wrote.
Reliance’s new refinery cost 262.2 billion rupees and is 5 percent owned by Chevron Corp. Along with the adjacent, older plant, it is the world’s largest refining complex, according to the company.
Net income dropped 9.8 percent to 35 billion rupees ($713 million), or 23.5 rupees a share, in the three months ended Dec. 31, the refiner and explorer said in a statement in Mumbai. The median estimate of nine analysts was for a profit of 31.2 billion rupees. Sales fell 9.3 percent to 325.3 billion rupees.
Earnings growth may accelerate after billionaire Chairman Mukesh Ambani started the company’s second refinery on Dec. 25 and is close to beginning gas production at India’s biggest field. Interest income surged after the company invested cash from additional shares bought by Ambani in bank deposits.
“Other income seems to have boosted their third-quarter earnings helped by the capital introduced by the promoters,” said Ballabh Modani, Mumbai-based analyst at Enam Securities Pvt., whose profit forecast of 33.5 billion rupees was the closest to the result. Modani has an “outperform” rating on the stock.
Interest income rose to 5.46 billion rupees from 1.41 billion rupees a year earlier. Cash reserves rose to 258 billion rupees after Ambani bought 120 million Reliance shares. More that 95 percent of the company’s cash is held in fixed deposits, according to the statement.
Warrant Conversion
The chairman paid $3.6 billion to buy shares in India’s largest warrant conversion on Oct. 3. The company had allotted the warrants to Ambani in February 2007, entitling him to buy shares at 1,402 rupees apiece in 18 months.
Ambani still needs to convince investors that his new refinery and gas sales, currently banned by a court, will boost profit. Reliance shares have dropped 52 percent in a year, more than the 47 percent decline in the Bombay Stock Exchange’s Sensitive Index.
The drop in third-quarter profit was the first in three years. In the first nine months, net income rose 3.4 percent to 117.3 billion rupees on sales of 1.22 trillion rupees.
Earnings in the year-earlier period excluded gains from an asset sale. Including the one-time gain, net income was 80.8 billion rupees.
Reliance earned $10 on every barrel processed at its 660,000 barrel-a-day plant in Gujarat, the company’s first refinery, compared with $15.4 a barrel a year earlier. Margins at complex refineries in Singapore, Asia’s biggest oil trading centre, were $8.4 a barrel in the week ended Dec. 26, according to a Bank of America report.
Refining Margins
Margins have narrowed as gasoline and diesel prices fell because of a slump in global demand. Prices of fuels including gasoline and naphtha are lower than the oil from which they are produced. Exports account for 70 percent of Reliance’s revenue.
The price of wholesale gasoline loaded on barges near Amsterdam was as much as $7.98 a barrel lower than North Sea Brent crude oil in the three months ended Dec. 31, according to data from broker PVM Oil Associates Ltd.
Falling demand has prompted U.S. refiners, including Valero Energy Corp. and Exxon Mobil Corp., the world’s largest oil company, to reduce runs and shut units for seasonal maintenance.
Mumbai-based Reliance operates complex refineries, which use advanced technology to convert cheap, high-sulfur crude and low- quality products such as fuel oil into gasoline and diesel. Almost no oil is wasted.
‘Slower Demand’
Refining accounted for 45 percent of Reliance’s pretax profit in the third quarter, while oil and gas contributed about 15 percent.
“Refining margins are expected to remain muted till the end of 2010-11 due to overcapacity concerns and slower demand growth,” said Niraj Mansingka, assistant vice-president at Edelweiss Capital Ltd. in Mumbai. “Gas production will offset most of the decline.”
Reliance shares, which declined 37 percent in the third quarter, rose 1.5 percent to 1,136.3 rupees in Mumbai. The earnings were released after the market close.
Reliance’s gas project and new refinery may help the company achieve 66 percent earnings growth in the next two years, Harshad Katkar and Nirmal Raghavan, Mumbai-based analysts at UBS AG, said in a Jan. 19 report.
Ambani is investing $5.2 billion to develop the first phase of the KG-D6 field in the Krishna-Godavari basin, off India’s east coast. The area may hold as much as 9.2 trillion cubic feet of gas, according to partner Calgary, Canada-based Niko Resources Ltd., making it India’s largest gas find.
Gas Lawsuit
The sale of gas from the field has been banned by the Bombay High Court, which is hearing a price dispute between Reliance and its customers, state-owned NTPC Ltd. and Reliance Natural Resources Ltd. The Indian government has asked the court to lift the ban to help overcome shortages of the fuel faced by power utilities and fertilizer makers.
Reliance declined to comment on gas sales because of the lawsuit, the company said in an e-mailed reply to questions on Jan 20.
UBS expects Reliance to start gas production by the end of this quarter after the court passes an interim order allowing sales, analysts Katkar and Raghavan wrote.
Reliance’s new refinery cost 262.2 billion rupees and is 5 percent owned by Chevron Corp. Along with the adjacent, older plant, it is the world’s largest refining complex, according to the company.
Fiat’s Marchionne Considers European Tie-up After Chrysler Deal
Jan. 23 (Bloomberg) -- Fiat SpA Chief Executive Officer Sergio Marchionne, architect of a planned tie-up with Chrysler LLC, may still regard a European alliance as his top priority.
Marchionne, credited with transforming Fiat from the laggard of the European auto industry into one of the continent’s most fashionable brands, said yesterday he’s “willing to start a dialogue” with any company that favors consolidation.
“A partnership with a European rival is vital,” said Emanuele Vizzini, who helps manage about $1.2 billion at Investitori SGR in Milan and lists PSA Peugeot Citroen of France and Germany’s BMW as two “natural candidates” for a merger with the Turin, Italy-based company.
European car sales plunged the most in 15 years in 2008, causing automakers to lay off workers and idle plants to clear stocks. Fiat yesterday cut its earnings forecast and said it won’t pay a dividend. Marchionne last month suggested the crisis could leave three European volume producers standing: Volkswagen AG, Renault SA and a third company built in a bout of consolidation.
The CEO acknowledged yesterday that many in the industry view a Fiat-Peugeot combination as a “marriage made in heaven.” He said he needs to proceed “softly and quietly” toward his goals.
Fiat’s alliance with Chrysler will see it transfer small-car technology to the Auburn Hills, Michigan-based automaker in return for a 35 percent stake and access to its U.S. plants, the companies said Jan. 20.
No Solution
With Fiat’s sales strongest in Europe and Latin America and Chrysler focused on producing larger autos and SUVs for North America, the deal entails little overlap in products or markets. In a recession, that may be no good thing, said David Arnold, an analyst at Credit Suisse in London.
“The Chrysler deal does nothing to solve the overcapacity problem,” said Arnold, who also favors a tie-up between Fiat and Peugeot. An all-European deal could “offset spiraling costs and declining volumes with savings from joint procurement, capital expenditure and research and development.”
Obvious overlaps between the activities of Fiat and Peugeot “would allow significant potential savings via joint purchasing from common suppliers,” Credit Suisse said in a note Jan. 12, when it predicted a tie-up between the two companies some time this year. Technology and components would also be spread across more models, reducing overall development costs, the bank said.
Marchionne, 56, is targeting the U.S. following his success in ending four years of losses at Fiat in 2005 with the introduction of new versions of the Punto and Panda and a revival of the 500 minicar, as well as partnerships with competitors to spread costs.
Not Last
Addressing analysts following an earnings announcement yesterday, Marchionne refused to comment directly on the prospects for Fiat getting together with specific companies.
“Chrysler is a first step in that direction -- it’s certainly not the last,” Marchionne said, adding that the U.S. company will have a “pretty good opportunity” to recover from the brink of bankruptcy with the help of Fiat’s technology and opportunities for joint savings.
Fiat, controlled by the Agnelli family, said 2009 profit will be “in excess of 300 million euros,” compared with an initial target of at least 2.9 billion euros. The company burned 30 million euros a day in the fourth quarter, causing net income to tumble 71 percent to 163 million euros.
“We’re telling our clients not to be distracted,” said Adam Jonas, an analyst at Morgan Stanley in London who rates the company “underweight.” “The stock’s not going to trade on how well re-badged Fiats are going to do in the U.S. in 2012.”
When Fiat supplies small cars in the U.S., they will be “re-badged” under one of Chrysler’s brands.
World No. 3
A combination of Fiat, Chrysler and Peugeot-Citroen would create the world’s third-biggest carmaker by volume after Toyota Motor Corp. and General Motors Corp. and would be tough to manage, said Sven Kreitmair, a credit analyst at UniCredit in Munich who cautions against a three-way deal. Obstacles would include the involvement of three different governments, he said.
Peugeot spokesman Pierre-Olivier Salmon declined to comment on the likelihood of a deal with Fiat. Bayerische Motoren Werke of Germany, the largest maker of luxury cars, aims to continue talks about cooperation between its Mini unit and Fiat’s Alfa Romeo brand, spokesman Marc Hassinger said Jan. 21. The company couldn’t be reached for further comment yesterday.
The French state, which has pledged as much as 6 billion euros to help Peugeot and Renault survive the recession, has already sounded a cautious note about any tie-up with Fiat.
“I’m not convinced consolidation is the answer,” Industry Minister Luc Chatel said in a Bloomberg Television interview Jan. 13. “What we need to do is improve compeitiveness so that we can keep automobile production in France.”
Marchionne, credited with transforming Fiat from the laggard of the European auto industry into one of the continent’s most fashionable brands, said yesterday he’s “willing to start a dialogue” with any company that favors consolidation.
“A partnership with a European rival is vital,” said Emanuele Vizzini, who helps manage about $1.2 billion at Investitori SGR in Milan and lists PSA Peugeot Citroen of France and Germany’s BMW as two “natural candidates” for a merger with the Turin, Italy-based company.
European car sales plunged the most in 15 years in 2008, causing automakers to lay off workers and idle plants to clear stocks. Fiat yesterday cut its earnings forecast and said it won’t pay a dividend. Marchionne last month suggested the crisis could leave three European volume producers standing: Volkswagen AG, Renault SA and a third company built in a bout of consolidation.
The CEO acknowledged yesterday that many in the industry view a Fiat-Peugeot combination as a “marriage made in heaven.” He said he needs to proceed “softly and quietly” toward his goals.
Fiat’s alliance with Chrysler will see it transfer small-car technology to the Auburn Hills, Michigan-based automaker in return for a 35 percent stake and access to its U.S. plants, the companies said Jan. 20.
No Solution
With Fiat’s sales strongest in Europe and Latin America and Chrysler focused on producing larger autos and SUVs for North America, the deal entails little overlap in products or markets. In a recession, that may be no good thing, said David Arnold, an analyst at Credit Suisse in London.
“The Chrysler deal does nothing to solve the overcapacity problem,” said Arnold, who also favors a tie-up between Fiat and Peugeot. An all-European deal could “offset spiraling costs and declining volumes with savings from joint procurement, capital expenditure and research and development.”
Obvious overlaps between the activities of Fiat and Peugeot “would allow significant potential savings via joint purchasing from common suppliers,” Credit Suisse said in a note Jan. 12, when it predicted a tie-up between the two companies some time this year. Technology and components would also be spread across more models, reducing overall development costs, the bank said.
Marchionne, 56, is targeting the U.S. following his success in ending four years of losses at Fiat in 2005 with the introduction of new versions of the Punto and Panda and a revival of the 500 minicar, as well as partnerships with competitors to spread costs.
Not Last
Addressing analysts following an earnings announcement yesterday, Marchionne refused to comment directly on the prospects for Fiat getting together with specific companies.
“Chrysler is a first step in that direction -- it’s certainly not the last,” Marchionne said, adding that the U.S. company will have a “pretty good opportunity” to recover from the brink of bankruptcy with the help of Fiat’s technology and opportunities for joint savings.
Fiat, controlled by the Agnelli family, said 2009 profit will be “in excess of 300 million euros,” compared with an initial target of at least 2.9 billion euros. The company burned 30 million euros a day in the fourth quarter, causing net income to tumble 71 percent to 163 million euros.
“We’re telling our clients not to be distracted,” said Adam Jonas, an analyst at Morgan Stanley in London who rates the company “underweight.” “The stock’s not going to trade on how well re-badged Fiats are going to do in the U.S. in 2012.”
When Fiat supplies small cars in the U.S., they will be “re-badged” under one of Chrysler’s brands.
World No. 3
A combination of Fiat, Chrysler and Peugeot-Citroen would create the world’s third-biggest carmaker by volume after Toyota Motor Corp. and General Motors Corp. and would be tough to manage, said Sven Kreitmair, a credit analyst at UniCredit in Munich who cautions against a three-way deal. Obstacles would include the involvement of three different governments, he said.
Peugeot spokesman Pierre-Olivier Salmon declined to comment on the likelihood of a deal with Fiat. Bayerische Motoren Werke of Germany, the largest maker of luxury cars, aims to continue talks about cooperation between its Mini unit and Fiat’s Alfa Romeo brand, spokesman Marc Hassinger said Jan. 21. The company couldn’t be reached for further comment yesterday.
The French state, which has pledged as much as 6 billion euros to help Peugeot and Renault survive the recession, has already sounded a cautious note about any tie-up with Fiat.
“I’m not convinced consolidation is the answer,” Industry Minister Luc Chatel said in a Bloomberg Television interview Jan. 13. “What we need to do is improve compeitiveness so that we can keep automobile production in France.”
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