Faced with growing budget deficits and restive taxpayers, elected officials from Maine to Alabama, Ohio to Arizona, are pushing new legislation to limit the power of labor unions, particularly those representing government workers, in collective bargaining and politics.
State officials from both parties are wrestling with ways to curb the salaries and pensions of government employees, which typically make up a significant percentage of state budgets. On Wednesday, for example, New York’s new Democratic governor, Andrew M. Cuomo, is expected to call for a one-year salary freeze for state workers, a move that would save $200 million to $400 million and challenge labor’s traditional clout in Albany.
But in some cases — mostly in states with Republican governors and Republican statehouse majorities — officials are seeking more far-reaching, structural changes that would weaken the bargaining power and political influence of unions, including private sector ones.
For example, Republican lawmakers in Indiana, Maine, Missouri and seven other states plan to introduce legislation that would bar private sector unions from forcing workers they represent to pay dues or fees, reducing the flow of funds into union treasuries. In Ohio, the new Republican governor, following the precedent of many other states, wants to ban strikes by public school teachers.
Some new governors, most notably Scott Walker of Wisconsin, are even threatening to take away government workers’ right to form unions and bargain contracts.
“We can no longer live in a society where the public employees are the haves and taxpayers who foot the bills are the have-nots,” Mr. Walker, a Republican, said in a speech. “The bottom line is that we are going to look at every legal means we have to try to put that balance more on the side of taxpayers.”
Many of the proposals may never become law. But those that do are likely to reduce union influence in election campaigns, with reverberations for both parties.
In the 2010 elections, Republicans emerged with seven more governor’s mansions and won control of the legislature in 26 states, up from 14. That swing has put unions more on the defensive than they have been in decades.
But it is not only Republicans who are seeking to rein in unions. In addition to Mr. Cuomo, California’s new Democratic governor, Jerry Brown, is promising to review the benefits received by government workers in his state, which faces a more than $20 billion budget shortfall over the next 18 months.
“We will also have to look at our system of pensions and how to ensure that they are transparent and actuarially sound and fair — fair to the workers and fair to the taxpayers,” Mr. Brown said in his inaugural speech on Monday.
Many of the state officials pushing for union-related changes say they want to restore some balance, arguing that unions have become too powerful, skewing political campaigns with their large war chests and throwing state budgets off kilter with their expensive pension plans.
But labor leaders view these efforts as political retaliation by Republicans upset that unions recently spent more than $200 million to defeat Republican candidates.
“I see this as payback for the role we played in the 2010 elections,” said Gerald W. McEntee, president of the American Federation of State, County and Municipal Employees, the main union of state employees. Mr. McEntee said in October that his union was spending more than $90 million on the campaign, largely to help Democrats.
“Now there’s a bull’s-eye on our back, and they’re out to inflict pain,” he said.
In an internal memorandum, the A.F.L.-C.I.O. warned that in 16 states, Republican lawmakers would seek to starve public sector unions of money by requiring each government worker to “opt in” before that person’s dues money could be used for political activities.
“In the long run, if these measures deprive unions of resources, it will cut them off at their knees. They’ll melt away,” said Charles E. Wilson, a law professor at Ohio State University.
Of all the new governors, John Kasich, Republican of Ohio, appears to be planning the most comprehensive assault against unions. He is proposing to take away the right of 14,000 state-financed child care and home care workers to unionize. He also wants to ban strikes by teachers, much the way some states bar strikes by the police and firefighters.
“If they want to strike, they should be fired,” Mr. Kasich said in a speech. “They’ve got good jobs, they’ve got high pay, they get good benefits, a great retirement. What are they striking for?”
Monday, January 3, 2011
India eyes drug industry ownership curbs
An outcry over foreign takeovers of Indian pharmaceuticals companies has prompted the government to consider imposing limits on overseas ownership of domestic businesses in the sector.
India’s drug industry, which specialises in low-cost, high-quality production of generic drugs, has attracted the attention of big global pharmaceuticals companies and led to a spate of high-profile deals.
But the takeovers have raised concerns about whether the change in ownership will lead to higher prices, putting drugs out of reach for India’s poor.
As a result, the commerce and health ministries are considering whether the government should designate the pharmaceuticals industry a “sensitive sector”, which would require foreign companies seeking more than 49 per cent in any Indian drugmaker to first obtain government approval.
India already limits foreign ownership in many sectors but there are no restrictions on pharmaceuticals ownership.
“If multinational companies are successful in taking over, they will jack up the prices,” said one senior health ministry official. “Strict regulation is necessary.”
In 2008, Japan’s Daiichi Sankyo paid $3.6bn to take over Ranbaxy Laboratories, India’s biggest drugmaker. Sanofi-Aventis paid €550m for a controlling stake in Indian vaccine-maker Shanta Biotech in 2009; and last year, Abbott Laboratories of the US paid $3.7bn for Piramal Healthcare’s domestic drug formulation business.
It is not clear whether any takeovers have led to higher prices, but the deals have set alarm bells ringing in a country where the government spends just 0.9 per cent of gross domestic product on public health – one of the world’s lowest levels.
“Manufacturing should be controlled by us, so nobody can hold us to ransom,” said Congress party politician Jyoti Mirdha, who has been pushing for tougher regulation of acquisitions in the sector.
Any change of foreign investment rules would require the backing of the finance ministry, whose minister, Pranab Mukherjee, is believed to share foreign takeover concerns.
India’s drug industry, which specialises in low-cost, high-quality production of generic drugs, has attracted the attention of big global pharmaceuticals companies and led to a spate of high-profile deals.
But the takeovers have raised concerns about whether the change in ownership will lead to higher prices, putting drugs out of reach for India’s poor.
As a result, the commerce and health ministries are considering whether the government should designate the pharmaceuticals industry a “sensitive sector”, which would require foreign companies seeking more than 49 per cent in any Indian drugmaker to first obtain government approval.
India already limits foreign ownership in many sectors but there are no restrictions on pharmaceuticals ownership.
“If multinational companies are successful in taking over, they will jack up the prices,” said one senior health ministry official. “Strict regulation is necessary.”
In 2008, Japan’s Daiichi Sankyo paid $3.6bn to take over Ranbaxy Laboratories, India’s biggest drugmaker. Sanofi-Aventis paid €550m for a controlling stake in Indian vaccine-maker Shanta Biotech in 2009; and last year, Abbott Laboratories of the US paid $3.7bn for Piramal Healthcare’s domestic drug formulation business.
It is not clear whether any takeovers have led to higher prices, but the deals have set alarm bells ringing in a country where the government spends just 0.9 per cent of gross domestic product on public health – one of the world’s lowest levels.
“Manufacturing should be controlled by us, so nobody can hold us to ransom,” said Congress party politician Jyoti Mirdha, who has been pushing for tougher regulation of acquisitions in the sector.
Any change of foreign investment rules would require the backing of the finance ministry, whose minister, Pranab Mukherjee, is believed to share foreign takeover concerns.
Treasuries Fall as Asian Stocks Extend Rally, Report to Show Factory Gain
Treasuries fell as Asian stocks extended a global rally and before data today forecast to show improvement at U.S. factories.
The yield on the benchmark 10-year security fell two basis points to 3.35 percent as of 10:25 a.m. in Tokyo according to BGCantor Market data.
The yield on the benchmark 10-year security fell two basis points to 3.35 percent as of 10:25 a.m. in Tokyo according to BGCantor Market data.
Iran Oil Curbs Swelling Record Deficit May Hold Back Rupee: India Credit
The Indian central bank’s move to block dollar or euro payments for Iranian oil threatens to swell a record current-account deficit, damping investor confidence in the rupee and government debt.
The Reserve Bank of India said on Dec. 27 that trade transactions with Iran must be settled outside the Asian Clearing Union, a regional payment arrangement that had allowed companies to skirt U.S. and European limits on doing business with the Middle Eastern nation. Sourcing the fuel from elsewhere “may impact prices,” B.M. Bansal, chairman of Indian Oil Corp., the nation’s biggest refiner, said last week.
Nomura Holdings Inc. forecasts bond yields will climb and Mumbai-based Kotak Mahindra Bank Ltd. estimates the rupee is likely to fall as much as 4.8 percent this year as the Iran supply disruptions aggravate the cost of rising commodity prices on India’s finances. India’s 10-year bond yield has risen 41 basis points to 7.96 percent since July as crude-oil prices traded in New York climbed 21 percent in the second half of 2010 to $91.38 a barrel.
“In the next three to six months, the current-account deficit is going to get worse, partly accentuated by the Iranian oil-payment issue,” Robert Prior-Wandesforde, the Singapore- based head of India and Southeast Asia economics at Credit Suisse Group AG, said yesterday. “The rupee is getting more vulnerable and bond yields may rise a little.”
Rupee Forecasts
Credit Suisse predicts the shortfall in the current account, which widened to $15.8 billion in the three months ended September from $12.1 billion in the second quarter, may swell to as much as $17 billion by June. India’s foreign exchange reserves were $265.9 billion as of Dec. 24, compared with China’s $2.648 trillion as of Sept. 30.
The rupee will return 3.4 percent in 2011, compared with 5.3 percent for China’s yuan, 0.5 percent for Russia’s ruble and a negative 2.4 percent for Brazil’s real, according to economists surveyed by Bloomberg.
Elsewhere in India’s credit markets, government bonds fell, Indian Overseas Bank began an offering of bonds and IDBI Bank Ltd. Plans to use debt as soon as this week.
Yields on India’s 10-year benchmark bonds increased five basis points to 7.96 percent yesterday. The yield is 461 basis points more than similar-maturity U.S. Treasuries, up from 375 at the end of 2009, data compiled by Bloomberg show. The rate is 46 basis points more than Indonesia’s 7.5 percent, Asia’s second-highest yields.
Yield Forecasts
India’s government bonds returned 5.2 percent last year, according to indexes compiled by HSBC Holdings Plc. The notes underperformed securities in Indonesia, which returned 21.1 percent, the most in Asia. The 7.8 percent security due May 2020 will yield 8.05 percent by the end of this year, according to the median forecast of six economists in a Bloomberg survey.
“Over the next couple of weeks, bond yields may rise to as much as 8.1 percent,” Vivek Rajpal, an interest-rate strategist at Nomura in Mumbai, said in an interview yesterday. “If commodity prices rise sharply, the yield may increase to 8.2 percent.”
Indian Overseas Bank, a state-run lender, began the sale of 9.25 billion rupees ($207 million) of 15-year subordinated bonds yesterday, according to two people familiar with the matter. The so-called upper Tier 2 notes pay a coupon of 9 percent, the people said, asking not to be identified as the information is private. The bonds have an option allowing the company to buy the debt back at the end of the 10th year, the people said.
IDBI Plans Sale
IDBI Bank Ltd., the Indian state-owned lender, plans to sell 10 billion rupees of 10-year bonds as soon as tomorrow, according to two people familiar with the matter. The bonds pay a coupon of 9.04 percent, the people said, asking not to be identified as the information is private.
The United Nations stepped up punitive measures in June against Iran over its nuclear ambitions, applying a fourth round of sanctions, and the U.S. and European Union later imposed additional restrictions. Iran says it is enriching uranium for power generation.
Refiners in India have traditionally used the ACU, which settles payments in dollars and euros, to pay for oil purchases from Iran. Regulations endorsed by the EU in October required deals involving Iran and the euro to be accompanied by a certificate outlining payment details for each and every transaction, the EU said on its website.
ACU Mechanism
Under the ACU mechanism, payments for all trade deals between member countries are settled every two months, with individual transactions not accounted for separately.
“If companies are forced to buy crude at higher prices, that may fuel inflation fears,” Philippe Petit, a senior investment manager in Singapore at Pictet Asset Management SA, which manages $17 billion of emerging-market debt including Indian government and corporate bonds, said in an interview yesterday. “It all depends on how long they take to sort out the payment issue.”
India buys about 21 million metric tons from Iran every year, or about 14 percent of total crude-oil imports, Oil Secretary S. Sundareshan said on Dec. 30. The Middle Eastern nation is India’s second-biggest oil supplier, after Saudi Arabia, Oil Minister Murli Deora said in parliament on April 15.
“Buying such huge quantities of crude on the spot market isn’t feasible, and you don’t get any sweetheart deals there,” Praveen Kumar, the Singapore-based head of the South Asia oil- and-gas team at consultancy and advisory firm FACTS Global Energy, said in an interview yesterday. “They would want to resolve this as soon as possible because I don’t think they have a Plan B here.”
‘In Focus’
The rupee, which gained 4.1 percent last year, was unchanged at 44.7150 per dollar yesterday, according to data compiled by Bloomberg.
“In 2011 we are talking about a depreciation of the rupee rather than an appreciation as the wide current-account deficit will continue to be in focus,” Indranil Pan, chief economist at Kotak Mahindra Bank in Mumbai, said in an interview yesterday. He forecasts the currency, whose movements will be “extremely volatile,” could slide to as much as 47 per dollar.
The cost of protecting the debt of government-owned State Bank of India, which some investors perceive as a proxy for the nation, was 160 basis points on Dec. 31. Prices for the credit- default swaps, which pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements, climbed 42 basis points last year. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
Bonds of Indian Oil, which imports about 3 million metric tons of crude a year from Iran, fell for a third consecutive month in December. The yield on the 4.75 percent notes due January 2015 climbed 24 basis points to 3.91 percent last month, according to data compiled by Bloomberg.
The Reserve Bank of India said on Dec. 27 that trade transactions with Iran must be settled outside the Asian Clearing Union, a regional payment arrangement that had allowed companies to skirt U.S. and European limits on doing business with the Middle Eastern nation. Sourcing the fuel from elsewhere “may impact prices,” B.M. Bansal, chairman of Indian Oil Corp., the nation’s biggest refiner, said last week.
Nomura Holdings Inc. forecasts bond yields will climb and Mumbai-based Kotak Mahindra Bank Ltd. estimates the rupee is likely to fall as much as 4.8 percent this year as the Iran supply disruptions aggravate the cost of rising commodity prices on India’s finances. India’s 10-year bond yield has risen 41 basis points to 7.96 percent since July as crude-oil prices traded in New York climbed 21 percent in the second half of 2010 to $91.38 a barrel.
“In the next three to six months, the current-account deficit is going to get worse, partly accentuated by the Iranian oil-payment issue,” Robert Prior-Wandesforde, the Singapore- based head of India and Southeast Asia economics at Credit Suisse Group AG, said yesterday. “The rupee is getting more vulnerable and bond yields may rise a little.”
Rupee Forecasts
Credit Suisse predicts the shortfall in the current account, which widened to $15.8 billion in the three months ended September from $12.1 billion in the second quarter, may swell to as much as $17 billion by June. India’s foreign exchange reserves were $265.9 billion as of Dec. 24, compared with China’s $2.648 trillion as of Sept. 30.
The rupee will return 3.4 percent in 2011, compared with 5.3 percent for China’s yuan, 0.5 percent for Russia’s ruble and a negative 2.4 percent for Brazil’s real, according to economists surveyed by Bloomberg.
Elsewhere in India’s credit markets, government bonds fell, Indian Overseas Bank began an offering of bonds and IDBI Bank Ltd. Plans to use debt as soon as this week.
Yields on India’s 10-year benchmark bonds increased five basis points to 7.96 percent yesterday. The yield is 461 basis points more than similar-maturity U.S. Treasuries, up from 375 at the end of 2009, data compiled by Bloomberg show. The rate is 46 basis points more than Indonesia’s 7.5 percent, Asia’s second-highest yields.
Yield Forecasts
India’s government bonds returned 5.2 percent last year, according to indexes compiled by HSBC Holdings Plc. The notes underperformed securities in Indonesia, which returned 21.1 percent, the most in Asia. The 7.8 percent security due May 2020 will yield 8.05 percent by the end of this year, according to the median forecast of six economists in a Bloomberg survey.
“Over the next couple of weeks, bond yields may rise to as much as 8.1 percent,” Vivek Rajpal, an interest-rate strategist at Nomura in Mumbai, said in an interview yesterday. “If commodity prices rise sharply, the yield may increase to 8.2 percent.”
Indian Overseas Bank, a state-run lender, began the sale of 9.25 billion rupees ($207 million) of 15-year subordinated bonds yesterday, according to two people familiar with the matter. The so-called upper Tier 2 notes pay a coupon of 9 percent, the people said, asking not to be identified as the information is private. The bonds have an option allowing the company to buy the debt back at the end of the 10th year, the people said.
IDBI Plans Sale
IDBI Bank Ltd., the Indian state-owned lender, plans to sell 10 billion rupees of 10-year bonds as soon as tomorrow, according to two people familiar with the matter. The bonds pay a coupon of 9.04 percent, the people said, asking not to be identified as the information is private.
The United Nations stepped up punitive measures in June against Iran over its nuclear ambitions, applying a fourth round of sanctions, and the U.S. and European Union later imposed additional restrictions. Iran says it is enriching uranium for power generation.
Refiners in India have traditionally used the ACU, which settles payments in dollars and euros, to pay for oil purchases from Iran. Regulations endorsed by the EU in October required deals involving Iran and the euro to be accompanied by a certificate outlining payment details for each and every transaction, the EU said on its website.
ACU Mechanism
Under the ACU mechanism, payments for all trade deals between member countries are settled every two months, with individual transactions not accounted for separately.
“If companies are forced to buy crude at higher prices, that may fuel inflation fears,” Philippe Petit, a senior investment manager in Singapore at Pictet Asset Management SA, which manages $17 billion of emerging-market debt including Indian government and corporate bonds, said in an interview yesterday. “It all depends on how long they take to sort out the payment issue.”
India buys about 21 million metric tons from Iran every year, or about 14 percent of total crude-oil imports, Oil Secretary S. Sundareshan said on Dec. 30. The Middle Eastern nation is India’s second-biggest oil supplier, after Saudi Arabia, Oil Minister Murli Deora said in parliament on April 15.
“Buying such huge quantities of crude on the spot market isn’t feasible, and you don’t get any sweetheart deals there,” Praveen Kumar, the Singapore-based head of the South Asia oil- and-gas team at consultancy and advisory firm FACTS Global Energy, said in an interview yesterday. “They would want to resolve this as soon as possible because I don’t think they have a Plan B here.”
‘In Focus’
The rupee, which gained 4.1 percent last year, was unchanged at 44.7150 per dollar yesterday, according to data compiled by Bloomberg.
“In 2011 we are talking about a depreciation of the rupee rather than an appreciation as the wide current-account deficit will continue to be in focus,” Indranil Pan, chief economist at Kotak Mahindra Bank in Mumbai, said in an interview yesterday. He forecasts the currency, whose movements will be “extremely volatile,” could slide to as much as 47 per dollar.
The cost of protecting the debt of government-owned State Bank of India, which some investors perceive as a proxy for the nation, was 160 basis points on Dec. 31. Prices for the credit- default swaps, which pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements, climbed 42 basis points last year. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
Bonds of Indian Oil, which imports about 3 million metric tons of crude a year from Iran, fell for a third consecutive month in December. The yield on the 4.75 percent notes due January 2015 climbed 24 basis points to 3.91 percent last month, according to data compiled by Bloomberg.
Sunday, January 2, 2011
Diplomats Help Push Sales of Jetliners on the Global Market
WASHINGTON — The king of Saudi Arabia wanted the United States to outfit his personal jet with the same high-tech devices as Air Force One. The president of Turkey wanted the Obama administration to let a Turkish astronaut sit in on a NASA space flight. And in Bangladesh, the prime minister pressed the State Department to re-establish landing rights at Kennedy International Airport in New York.
Each of these government leaders had one thing in common: they were trying to decide whether to buy billions of dollars’ worth of commercial jets from Boeing or its European competitor, Airbus. And United States diplomats were acting like marketing agents, offering deals to heads of state and airline executives whose decisions could be influenced by price, performance and, as with all finicky customers with plenty to spend, perks.
This is the high-stakes, international bazaar for large commercial jets, where tens of billions of dollars are on the line, along with hundreds of thousands of high-paying jobs. At its heart, it is a wrestling match fought daily by executives at two giant companies, Boeing and Airbus, in which each controls about half of the global market for such planes.
To a greater degree than previously known, diplomats are a big part of the sales force, according to hundreds of cables released by WikiLeaks, which describe politicking and cajoling at the highest levels.
It is not surprising that the United States helps American companies doing business abroad, given that each sale is worth thousands of jobs and that their foreign competitors do the same. But like the other WikiLeaks cables, these offer a remarkably detailed look at what had previously been only glimpsed — in this case, the sales war between American diplomats and their European counterparts.
The cables describe letters from presidents, state visits as bargaining chits and a number of leaders making big purchases based, at least in part, on how much the companies will dress up private planes.
The documents also suggest that demands for bribes, or at least payment to suspicious intermediaries who offer to serve as “agents,” still take place. Boeing says it is committed to avoiding any such corrupt practices.
State Department and Boeing officials, in interviews last month, acknowledged the important role the United States government plays in helping them sell commercial airplanes, despite a trade agreement signed by the United States and European leaders three decades ago intended to remove international politics from the process.
The United States economy, said Robert D. Hormats, under secretary for economic affairs at the State Department, increasingly relies upon exports to the fast-growing developing world — nations like China and India, as well as those in Latin America and the Middle East.
So pushing sales of big-ticket items like commercial jets, earth-moving equipment or power plants (or stepping in to object if an American company is not being given a fair chance to bid) is central to the Obama administration’s strategy to help the nation recover from the recession.
Boeing earns about 70 percent of its commercial plane sales from foreign buyers, and is the single biggest exporter of manufactured goods in the United States. Every $1 billion in sales — and some of these deals carry a price tag of as high as $10 billion — translates into an estimated 11,000 American jobs, according to the State Department.
The Equalizers
“That is the reality of the 21st century; governments are playing a greater role in supporting their companies, and we need to do the same thing,” Mr. Hormats, a former top executive at Goldman Sachs, said in an interview.
Said Tim Neale, a Boeing spokesman, “The way I look at it, it levels the playing field.”
But Charles A. Hamilton, a former Defense Department official who is a consultant to Airbus, said the government’s advocacy undermined arguments by Boeing and the United States that Airbus had an unfair advantage because of its subsidies from European governments.
“The bottom line is anything goes to get the business,” said Mr. Hamilton, adding that he was speaking for himself, and not for Airbus. “If they feel like they are losing, they will do just about anything to save a deal.”
Airbus executives would not discuss details of their own sales campaigns — and the WikiLeaks documents are mostly focused on American efforts. But one Airbus official, who was not authorized to speak on the record, conceded that, international agreements aside, “commercial jet sales are not totally decoupled from political relationship building.”
One example of the horse-trading involved Saudi Arabia, which in November announced a deal with Boeing to buy 12 777-300ER airliners, with options for 10 more, a transaction worth more than $3.3 billion at list prices.
That announcement was preceded by years of intense lobbying by American officials.
One pitch came from the highest levels, the cables show. In late 2006, Israel Hernandez, a senior Commerce Department official, hand-delivered a personal letter from President George W. Bush to the Jeddah office of King Abdullah, urging the king to buy as many as 43 Boeing jets to modernize Saudi Arabian Airlines and 13 jets for the Saudi royal fleet, which serves the extended royal family.
Each of these government leaders had one thing in common: they were trying to decide whether to buy billions of dollars’ worth of commercial jets from Boeing or its European competitor, Airbus. And United States diplomats were acting like marketing agents, offering deals to heads of state and airline executives whose decisions could be influenced by price, performance and, as with all finicky customers with plenty to spend, perks.
This is the high-stakes, international bazaar for large commercial jets, where tens of billions of dollars are on the line, along with hundreds of thousands of high-paying jobs. At its heart, it is a wrestling match fought daily by executives at two giant companies, Boeing and Airbus, in which each controls about half of the global market for such planes.
To a greater degree than previously known, diplomats are a big part of the sales force, according to hundreds of cables released by WikiLeaks, which describe politicking and cajoling at the highest levels.
It is not surprising that the United States helps American companies doing business abroad, given that each sale is worth thousands of jobs and that their foreign competitors do the same. But like the other WikiLeaks cables, these offer a remarkably detailed look at what had previously been only glimpsed — in this case, the sales war between American diplomats and their European counterparts.
The cables describe letters from presidents, state visits as bargaining chits and a number of leaders making big purchases based, at least in part, on how much the companies will dress up private planes.
The documents also suggest that demands for bribes, or at least payment to suspicious intermediaries who offer to serve as “agents,” still take place. Boeing says it is committed to avoiding any such corrupt practices.
State Department and Boeing officials, in interviews last month, acknowledged the important role the United States government plays in helping them sell commercial airplanes, despite a trade agreement signed by the United States and European leaders three decades ago intended to remove international politics from the process.
The United States economy, said Robert D. Hormats, under secretary for economic affairs at the State Department, increasingly relies upon exports to the fast-growing developing world — nations like China and India, as well as those in Latin America and the Middle East.
So pushing sales of big-ticket items like commercial jets, earth-moving equipment or power plants (or stepping in to object if an American company is not being given a fair chance to bid) is central to the Obama administration’s strategy to help the nation recover from the recession.
Boeing earns about 70 percent of its commercial plane sales from foreign buyers, and is the single biggest exporter of manufactured goods in the United States. Every $1 billion in sales — and some of these deals carry a price tag of as high as $10 billion — translates into an estimated 11,000 American jobs, according to the State Department.
The Equalizers
“That is the reality of the 21st century; governments are playing a greater role in supporting their companies, and we need to do the same thing,” Mr. Hormats, a former top executive at Goldman Sachs, said in an interview.
Said Tim Neale, a Boeing spokesman, “The way I look at it, it levels the playing field.”
But Charles A. Hamilton, a former Defense Department official who is a consultant to Airbus, said the government’s advocacy undermined arguments by Boeing and the United States that Airbus had an unfair advantage because of its subsidies from European governments.
“The bottom line is anything goes to get the business,” said Mr. Hamilton, adding that he was speaking for himself, and not for Airbus. “If they feel like they are losing, they will do just about anything to save a deal.”
Airbus executives would not discuss details of their own sales campaigns — and the WikiLeaks documents are mostly focused on American efforts. But one Airbus official, who was not authorized to speak on the record, conceded that, international agreements aside, “commercial jet sales are not totally decoupled from political relationship building.”
One example of the horse-trading involved Saudi Arabia, which in November announced a deal with Boeing to buy 12 777-300ER airliners, with options for 10 more, a transaction worth more than $3.3 billion at list prices.
That announcement was preceded by years of intense lobbying by American officials.
One pitch came from the highest levels, the cables show. In late 2006, Israel Hernandez, a senior Commerce Department official, hand-delivered a personal letter from President George W. Bush to the Jeddah office of King Abdullah, urging the king to buy as many as 43 Boeing jets to modernize Saudi Arabian Airlines and 13 jets for the Saudi royal fleet, which serves the extended royal family.
VW Extends CEO Winterkorn's Contract in Quest to Surpass Toyota
Volkswagen AG extended Chief Executive Officer Martin Winterkorn’s contract by five years, giving the executive the time to complete a merger with Porsche SE and surpass Toyota Motor Corp. as the biggest automaker.
VW’s supervisory board unanimously backed the CEO’s appointment through 2016, the Wolfsburg, Germany-based company said yesterday. Winterkorn, 63, took over as CEO on Jan. 1, 2007 and his current contract expires at the end of this year.
Under Winterkorn, Europe’s largest carmaker added Swedish truckmaker Scania AB to its portfolio and is now merging with Porsche, maker of the 911 sports car. The CEO plans to double production capacity in China with two new plants and open a factory in the U.S. this year as he seeks to beat Toyota in sales and profitability by 2018.
“He has the full support of workers,” Bernd Osterloh, the supervisory board’s deputy chief and head of VW’s works council, said in a statement. “Volkswagen is giving continuity at the top of the company so we can fully concentrate on the details of our tasks.”
VW’s preferred shares, which have replaced the common stock on Germany’s DAX Index since the Porsche deal, have more than doubled since the beginning of 2007. The stock gained 86 percent last year, the best performance in the benchmark index, which added 16 percent.
Golf, Audi A7
Sales chief Christian Klingler forecast on Dec. 10. that annual deliveries would exceed 7 million vehicles for the first time in 2010. Volkswagen is benefitting from demand for models including the VW brand Golf compact and Audi A7 coupe, as well as booming sales in China, its largest market.
Volkswagen aims to sell more than 8 million cars by 2012 and 10 million as early as 2015, three years earlier than a 2018 official target, a person with knowledge of the matter said in October.
Nine-month net income jumped fivefold to 3.78 billion euros ($5.1 billion). In November, Toyota raised its profit forecast, saying net income may total 350 billion yen ($4.3 billion) for the fiscal year ending in March.
Volkswagen plans to invest 51.6 billion euros in the automotive business over the next five years. The expansion relies on success in China, where VW is adding factories to double production to 3 million cars within four years.
Profit Margins
Winterkorn, who previously headed VW’s Audi luxury unit, took the top job from Bernd Pischetsrieder, who was ousted less than a year after receiving a contract extension.
German supervisory boards typically decide whether to keep their CEOs a year before the contract’s end. On Sept. 8, Osterloh told workers at the carmaker’s headquarters that Winterkorn would receive a contract extension.
Winterkorn aims for a pretax profit as a percentage of sales of more than 8 percent in 2018. VW’s nine-month pretax margin was 5.9 percent. Toyota City, Japan-based Toyota had a first-quarter margin of 5.4 percent.
Winterkorn has the backing of Lower Saxony, the German state with a 20 percent stake in the carmaker and the power to veto major decisions.
“We support Martin Winterkorn’s ambitious goal to make VW No. 1 in the auto market worldwide by 2018,” Prime Minister David McAllister told Bloomberg News in a June interview.
Volkswagen paid $2.5 billion for a stake in Suzuki Motor Corp. in January last year to expand in India and is taking over Porsche’s sports-car business, adding a 10th brand to VW marques that include Skoda, Seat and luxury brands Audi, Lamborghini and Bentley.
VW’s supervisory board unanimously backed the CEO’s appointment through 2016, the Wolfsburg, Germany-based company said yesterday. Winterkorn, 63, took over as CEO on Jan. 1, 2007 and his current contract expires at the end of this year.
Under Winterkorn, Europe’s largest carmaker added Swedish truckmaker Scania AB to its portfolio and is now merging with Porsche, maker of the 911 sports car. The CEO plans to double production capacity in China with two new plants and open a factory in the U.S. this year as he seeks to beat Toyota in sales and profitability by 2018.
“He has the full support of workers,” Bernd Osterloh, the supervisory board’s deputy chief and head of VW’s works council, said in a statement. “Volkswagen is giving continuity at the top of the company so we can fully concentrate on the details of our tasks.”
VW’s preferred shares, which have replaced the common stock on Germany’s DAX Index since the Porsche deal, have more than doubled since the beginning of 2007. The stock gained 86 percent last year, the best performance in the benchmark index, which added 16 percent.
Golf, Audi A7
Sales chief Christian Klingler forecast on Dec. 10. that annual deliveries would exceed 7 million vehicles for the first time in 2010. Volkswagen is benefitting from demand for models including the VW brand Golf compact and Audi A7 coupe, as well as booming sales in China, its largest market.
Volkswagen aims to sell more than 8 million cars by 2012 and 10 million as early as 2015, three years earlier than a 2018 official target, a person with knowledge of the matter said in October.
Nine-month net income jumped fivefold to 3.78 billion euros ($5.1 billion). In November, Toyota raised its profit forecast, saying net income may total 350 billion yen ($4.3 billion) for the fiscal year ending in March.
Volkswagen plans to invest 51.6 billion euros in the automotive business over the next five years. The expansion relies on success in China, where VW is adding factories to double production to 3 million cars within four years.
Profit Margins
Winterkorn, who previously headed VW’s Audi luxury unit, took the top job from Bernd Pischetsrieder, who was ousted less than a year after receiving a contract extension.
German supervisory boards typically decide whether to keep their CEOs a year before the contract’s end. On Sept. 8, Osterloh told workers at the carmaker’s headquarters that Winterkorn would receive a contract extension.
Winterkorn aims for a pretax profit as a percentage of sales of more than 8 percent in 2018. VW’s nine-month pretax margin was 5.9 percent. Toyota City, Japan-based Toyota had a first-quarter margin of 5.4 percent.
Winterkorn has the backing of Lower Saxony, the German state with a 20 percent stake in the carmaker and the power to veto major decisions.
“We support Martin Winterkorn’s ambitious goal to make VW No. 1 in the auto market worldwide by 2018,” Prime Minister David McAllister told Bloomberg News in a June interview.
Volkswagen paid $2.5 billion for a stake in Suzuki Motor Corp. in January last year to expand in India and is taking over Porsche’s sports-car business, adding a 10th brand to VW marques that include Skoda, Seat and luxury brands Audi, Lamborghini and Bentley.
India’s exchange regulator causes alarm
Recommendations by a state-appointed panel over the regulation of stock exchanges in India are causing widespread alarm among investors and local bourses.
An 85-page report by a committee headed by Bimal Jalan, a former Reserve Bank of India governor, has proposed tough new rules restricting profits, ownership and executive payment and barring their public listing.
The report was commissioned by the Securities and Exchange Board of India, the stock market regulator, and has been put out for a public consultation that ends at the end of December.
Since the report’s release last month, some regional stock exchanges, hopeful of eventual public listings, have considerably dropped in investor appeal. Twenty one exchanges had opted for demutualisation, a decision that now may lead to uncertain outcomes if new regulation is introduced by the finance ministry.
Some critics warn that the proposals will set back the development of India’s capital markets at a time of fast paced economic growth.
JR Verma, a professor of finance at the Indian Institute of Management, called the recommendations a “backdoor nationalisation” of India’s booming equity markets.
“If these recommendations are accepted, we will extinguish the essential spark of dynamism that has given India a world class equity market,” he said.
“They would ensure that Indian exchanges never become pan-Asian institutions. Worse, Indian exchanges could even become completely unviable, if the business moves to exchanges outside India that may offer better service at more competitive prices.”
Writing in the Financial Times, Patrick Young, chairman of UK-based Derivatives Vision, a securities exchange advisory company, said the proposals were “deeply worrying” and would lead to Indian exchanges losing out to international competitors.
He said they would serve as “regulatory sabotage” that risked reversing the gains made by prominent Indian exchanges like the National Stock Exchange, the Bombay Stock Exchange and a number of smaller exchanges over the past decade.
“Allowing free and open operation and ownership of exchanges and clearing houses is a key aspect of the road map towards India being an open, international economy,” Mr Young said.
“Restricting the market infrastructure is neither a sensible way for India to develop its own economy nor is it a way to demonstrate that India is increasingly open to foreign investment.”
The growth in India’s capital markets has attracted foreign investment. Goldman Sachs, Softbank Asian Infrastructure Fund and Temasek, the Singaporean sovereign wealth fund, have invested in the NSE. Dubai Holdings, Deutsche Börse, Singapore Exchange and Argonaut, a private equity firm, have bought into the BSE.
Likewise, innovative Indian exchange technology has been in demand for other trading platforms in Africa, the Middle East and Asia.
An editorial earlier this month in the Economic Times, an Indian daily newspaper, warned that Mr Jalan threatened to take one of the most vibrant areas of the Indian economy back to a socialist era where it took years to get a telephone line and the choice of cars was restricted to outmoded Ambassadors and Fiats.
Mr Jalan, a highly respected former central banker, has argued that a cautious approach needs to be taken to Indian stock exchanges to protect the credibility of the capital markets in the fastest growing large economy after China. Market infrastructure institutions, he believes, should be considered as public utilities rather than companies seeking to maximise profits.
An 85-page report by a committee headed by Bimal Jalan, a former Reserve Bank of India governor, has proposed tough new rules restricting profits, ownership and executive payment and barring their public listing.
The report was commissioned by the Securities and Exchange Board of India, the stock market regulator, and has been put out for a public consultation that ends at the end of December.
Since the report’s release last month, some regional stock exchanges, hopeful of eventual public listings, have considerably dropped in investor appeal. Twenty one exchanges had opted for demutualisation, a decision that now may lead to uncertain outcomes if new regulation is introduced by the finance ministry.
Some critics warn that the proposals will set back the development of India’s capital markets at a time of fast paced economic growth.
JR Verma, a professor of finance at the Indian Institute of Management, called the recommendations a “backdoor nationalisation” of India’s booming equity markets.
“If these recommendations are accepted, we will extinguish the essential spark of dynamism that has given India a world class equity market,” he said.
“They would ensure that Indian exchanges never become pan-Asian institutions. Worse, Indian exchanges could even become completely unviable, if the business moves to exchanges outside India that may offer better service at more competitive prices.”
Writing in the Financial Times, Patrick Young, chairman of UK-based Derivatives Vision, a securities exchange advisory company, said the proposals were “deeply worrying” and would lead to Indian exchanges losing out to international competitors.
He said they would serve as “regulatory sabotage” that risked reversing the gains made by prominent Indian exchanges like the National Stock Exchange, the Bombay Stock Exchange and a number of smaller exchanges over the past decade.
“Allowing free and open operation and ownership of exchanges and clearing houses is a key aspect of the road map towards India being an open, international economy,” Mr Young said.
“Restricting the market infrastructure is neither a sensible way for India to develop its own economy nor is it a way to demonstrate that India is increasingly open to foreign investment.”
The growth in India’s capital markets has attracted foreign investment. Goldman Sachs, Softbank Asian Infrastructure Fund and Temasek, the Singaporean sovereign wealth fund, have invested in the NSE. Dubai Holdings, Deutsche Börse, Singapore Exchange and Argonaut, a private equity firm, have bought into the BSE.
Likewise, innovative Indian exchange technology has been in demand for other trading platforms in Africa, the Middle East and Asia.
An editorial earlier this month in the Economic Times, an Indian daily newspaper, warned that Mr Jalan threatened to take one of the most vibrant areas of the Indian economy back to a socialist era where it took years to get a telephone line and the choice of cars was restricted to outmoded Ambassadors and Fiats.
Mr Jalan, a highly respected former central banker, has argued that a cautious approach needs to be taken to Indian stock exchanges to protect the credibility of the capital markets in the fastest growing large economy after China. Market infrastructure institutions, he believes, should be considered as public utilities rather than companies seeking to maximise profits.
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