Archive for June 10th, 2009

Fine weather helps Homebase sales
Sales of gardening and outdoor products at Homebase have been boosted by the recent good weather.Home Retail Group said like-for-like sales at the store rose 3.8% to 465m in the 13 weeks to 30 May compared with the same period a year ago. Like-for-like sales at Argos, also owned by Home Retail Group, fell 2.8%, but its owner said the performance was better than expected. It added that the furniture and homewares markets were challenging. “At this early stage of the financial year we continue to plan cautiously, with our trading focus remaining on driving cash gross margin and achieving further cost efficiencies,” said Home Retail Group chief executive Terry Duddy. Home Retail Group saw its profits in the last financial year fall 24% as consumers cut back on their spending in the economic downturn.
Source:BBC

Chinese exporters see record drop
Chinese exports have dropped by a record amount in May as demand for its goods from the US and Europe slumped.Exports fell 26.4% from the same month earlier, more than February’s previous record drop. As the downturn has also affected China, and its imports have also declined. They dropped by 25.2% in May. As a result, China’s trade surplus, the difference between what it exports and imports, narrowed by 33% to 13.4bn from the same month last year. This might mean that the politically sensitive trade gap with the US has narrowed. China did not report separate figures for its US trade, but the US figures for the previous month showed the trade gap was still growing. On Wednesday, the US said its trade deficit has widened for the second straight month in April. The deficit with China widened by 7.3% to 16.8bn. In the past, the US has accused China of boosting exports by keeping its currency, the yuan, artificially low. Separately, a state news agency said that China’s investment in fixed assets – such as factories and real estate – surged 32.9% in the first five months of the year from the same period last year. The government has begun spending some of its 586bn stimulus package announced last December to boost domestic demand as exports dropped.
Source:BBC

Japan GDP shrinks at record pace
by Roland Buerk
BBC News, Toyko
Japan’s economy shrank less than previously thought in the first three months of the year, but still contracted at a record pace.Gross domestic product – the sum of the nation’s goods and services – shrank by 3.8%, equivalent to 14.2% over a year. Earlier it was estimated at 4%, but there have been brighter signs in recent weeks. Japan has been hit hard by the global downturn because it relied on consumers abroad to buy its cars and electronics. People in Japan are starting to hope that the worst might be over. The Government now says in the first three months of the year the economy shrank by 3.8%, less than was earlier estimated but still the worst on record. The reason for the revision is that capital expenditure – spending on factories and equipment – was cut by less than had been previously thought. Modest growth?In this quarter the world’s second largest economy is forecast to grow modestly. Firms are benefiting from increasing demand from China where the Government is spending nearly 600bn (365.5bn), some of it on infrastructure. And massive stimulus measures by Japan’s Government, including cash handouts, are starting to have an effect. But Japan’s exports are still around a third lower than a year ago and factories are being run far below full capacity. If companies continue to cut jobs and investments it could cause a fragile recovery to stall.
Source:BBC

Brazil to make 10bn loan to IMF
By Gary Duffy
BBC News, Sao Paulo
Brazil says it is to offer 10bn in financing to the IMF to help improve the availability of credit in developing countries.It is the first time that South America’s biggest economy has ever made a loan of this kind. Brazil’s Finance Minister Guido Mantega said it was part of a united approach by Brazil, Russia, India and China to help boost global financial stability. He said China had plans to invest 50bn and Russia 10bn. In the past Brazil was more accustomed to seeking help from the International Monetary Fund and the fact that it is now able to offer a loan instead is a striking indication of how its position has changed. In tougher times the IMF was a target of enormous resentment and furious protests here, because it was seen, particularly by the left, as a tool for Washington to impose its terms on Latin America. Developing strengthThe loan announcement came just a day after South America’s biggest economy entered a technical recession – but one that at least some analysts are predicting will not last for long. The Brazilian government currently has around 200bn in international reserves and it is to use money from there to invest in IMF bonds, in order to help make credit available in other developing nations. Mr Mantega said the move was part of a joint approach by the so-called Bric countries – Brazil, Russia, India and China. The term has been used to group these four nations together, because of their developing economic strength. There are signs that the four countries are now starting to consider the wider potential of acting in unison, with Brazil in particular encouraging this strategy. The Bric countries will hold their first major summit in Russia next week, and an ambitious agenda will include discussion of the need to revamp the international financial system
Source:BBC

WASHINGTON: Bank of America CEO Ken Lewis heads to Capitol Hill on Thursday, and he’s likely to be grilled by lawmakers about the government’s role in ensuring that the bank complete its controversial merger with Merrill Lynch.According to emails released Wednesday that pull back the curtain on heated negotiations, Federal Reserve Chairman Ben Bernanke had suggested that “management is gone,” if BofA managers tried to flee the deal and later on needed further government assistance.The revelations come thanks to Congressional subpoenas demanding that the Fed disclose emails related to Bank of America’s purchase of Merrill. CNNMoney.com acquired copies of some of the emails circulated among House Republicans late Wednesday.Lewis is the sole witness of a House Committee on Oversight and Government Reform hearing Thursday about the BofA-Merrill deal titled “Bank of America and Merrill Lynch: How Did a Private Deal Turn into a Federal Bailout?” He is expected to be asked specifically about whether the Federal Reserve and other government officials pressured Bank of America (BAC, Fortune 500) into completing the merger even after BofA realized how badly Merrill Lynch’s fourth-quarter losses would be.The BofA-Merrill Lynch deal was valued at 50 billion when it was announced in mid-September — the same day that Lehman Brothers declared bankruptcy. But the deal’s worth dropped to 19 billion after Bank of America’s shares plunged in following months. Regulators eventually agreed to give BofA 20 billion in new capital and 118 billion in asset guarantees to cover possible losses tied to the transaction.Lewis told investigators in the New York Attorney General’s office earlier this year that he felt his job was on the line if he didn’t go through with the deal. Once Lewis learned last December of Merrill Lynch’s deterioration, he told then Treasury Secretary Henry Paulson that BofA was considering backing out of the deal, according to his testimony to investigators.Paulson said that Lewis and the BofA board would be replaced if they sought to end the merger, which Paulson viewed as integral to the health of the U.S. financial system. Paulson told New York investigators that he threatened Lewis’ job at the behest of Fed chief Ben Bernanke.According to a Dec. 21 email released Wednesday, Bernanke called BofA’s threat to pull out of the deal a “bargaining chip,” saying “we do not see it as a very likely scenario.”In another email, Federal Reserve Bank of Richmond President Jeffrey Lacker said that Bernanke considered Bank of America’s threat to pull out “irrelevant” and “not credible.”Lacker added that Bernanke “also intends to make clear that if they play that card and they need assistance, management is gone,” Lacker wrote. BofA is based in Charlotte, N.C., which is in Lacker’s district.The series of emails and other documents released Wednesday also called into question the notion that Merrill Lynch’s last hope lied with the BofA deal. It appeared that the Fed was willing to provide support to Merrill in order to avoid another collapse like Lehman Brothers.In one document that listed contingency plans for Merrill if BofA decided to abandon the merger, the Fed said that there were “emergency liquidity provision actions that could be taken to provide some time for the sale/disposition of [Merrill Lynch] businesses and assets.”A Federal Reserve spokeswoman declined to comment on the emails.Bank of America spokesman Lawrence Di Rita said that while he wouldn’t comment on internal documents he hasn’t seen, he pointed out the unusually tense and crisis-mode environment that overshadowed the negotiations.”Stepping back, though, it is important to remember the circumstances in which these discussions were taking place: a crisis in financial markets and in the economy generally,” Di Rita said. “Serious people were working hard to make decisions to stabilize and improve the situation. In hindsight, it’s interesting to look at all of that, but we’re looking forward.”CNN Congressional correspondent Brianna Keilar contributed to this report.

Source:CNN

Councils rapped over Iceland cash
Some local councils with money in Icelandic banks demonstrated a “lack of expertise” when dealing with public funds, a committee of MPs has said.Investment decisions revealed “a significant level of misunderstanding, misinformation and complacency”. The Communities and Local Government Select Committee studied councils’ 1bn of potential losses following the collapse of Icelandic banks in 2008. But a group representing councils said that they had received poor advice. Since 2004, councils have been able to regulate their own borrowing and investment. Rules state they can only put money in institutions with high credit ratings, they must invest in sterling and it must mature within a year. Councils were warned in late September 2008 of changes in credit ratings for Icelandic banks, before the country’s financial sector collapsed the following month, but some still invested after September. The government welcomed the report and stressed that no council has cut services or raised council tax because of the investments. “It is right that councils continue to make responsible investments of taxpayers’ money,” a spokesperson for Communities and Local Government said. “But the report also makes clear councils need further support in making investment decisions.” CriticismThe committee’s inquiry set out to investigate current practice in local authority investment, the roles and responsibilities of various groups and individuals involved, and the need to limit the exposure of funds to such risk in the future.
Numerous local authorities, charities, public bodies and UK savers had money within the Icelandic banking system when it collapsed during the height of the global financial crisis. The committee said that councils’ position was made worse by poor management of finances. “While few predicted the events that shook the financial system last year, their exceptional nature provides no excuse for the substantial failures that occurred in local authority financial arrangements,” said Dr Phyllis Starkey, who chaired the committee. “Our inquiry has exposed a significant level of misunderstanding, misinformation and complacency – not just within local authorities, but also among those who provide them with specialist investment advice.” The Audit Commission, which put 10m of its own funds in Icelandic banks, was singled out for failing to spot the heightened risk to Icelandic investments at the time. But the commission’s chief executive Steve Bundred, said: “The Commission continues to acknowledge mistakes were made in the management of its own deposits with Icelandic banks but rejects the view that it should have issued stronger guidance to auditors before the banks failed.” The committee also claimed the Audit Commission did not issue rigorous enough auditing guidelines after the Icelandic banks collapsed. The Commission agreed that safeguards should be re-examined. RecommendationsLocal authorities should still be able to decide where they invest their funds, the report found. However, it came up with a string of recommendations, including: Better information and advice needed to be provided to councils’ treasury departments on where to invest More scrutiny of investment decisions, with an emphasis on security ahead of liquidity and profit Adequate training for local authority staff and for each council to have an audit committee Auditors of councils should focus more on their treasury management The committee also called for a fresh examination of the role played by advisers to treasury departments, including a full investigation by the City watchdog – the Financial Services Authority – into these advisers’ services and potential conflicts of interest. The Local Government Association (LGA) also blamed the advice handed out to councils.
“This report clearly shows that councils were largely let down by the organisations that they were relying on to provide up-to-date and accurate advice,” said Councillor Richard Kemp, vice chairman of the LGA. “Failings across the entire system have affected not just councils but also other parts of the public sector as well as charities, businesses and individual savers.” He expected councils to get up to 90% of this money back through the administration process. “Many local authorities have already overhauled the way that they invest and accept things need to be done differently in the future, but these investments have generated hundreds of millions of pounds every year that go towards keeping council tax down and frontline services in place.” A recent Treasury Select Committee report claimed that charities in the UK that lost millions of pounds when the Icelandic banking system collapsed should get a bail-out from the government, but local authorities should not be compensated.
Source:BBC

Hovercraft still afloat 50 years on
By Brian Milligan
Business reporter, BBC News
It all began with a tin of cat food, an empty coffee tin and a hairdryer.
When air was forced between the two tins, the ensemble began to float on its own little cushion of air. Thus, through a combination of eccentricity and genius, Sir Christopher Cockerell invented the hovercraft, in a shed, in a boatyard, in Norfolk. For years afterwards, the invention was kept top secret, as the government wanted to explore its military potential. But on 11 June 1959, the SRN-1 was finally unveiled to the world’s press, at the Saunders Roe boatyard at Cowes on the Isle of Wight. Until then, the company had been known as a manufacturer of flying boats. In response to pressure from the photographers present, the SRN-1 was then towed out to sea and took to the water for the first time. Five weeks later, the same hovercraft crossed the Channel, from Calais to Dover, on the 50th anniversary of Louis Bleriot’s pioneering flight in 1909. “People called it the flying saucer, because it looked so strange,” says Stuart Syrad, one of only four SRN-1 pilots still alive. “Driving it was very sweaty work.” Heyday of hoverIn the years that followed, before noise and fuel economy was ever an issue, the hovercraft certainly looked like it might become a regular form of public transport.
A commercial service was launched across the River Dee in 1962. By 1968, two giant SRN-4’s were plying their way across the Channel. Over 33 years of service, the Princess Anne and the Princess Margaret carried about 80 million passengers and cars in what was then the fastest crossing time. But competition from the Channel tunnel, and the end of duty-free alcohol and cigarettes, meant the service became uneconomic. It closed in 2000. The only remaining passenger hovercraft now work between Portsmouth and Ryde on the Isle of Wight. Craft skillsWhile there may not be much demand for passenger-carrying hovercraft in the UK, there is huge demand from other countries, particularly from Indonesia and India. Swamps, deserts, mudflats and river deltas are perfect territory for the hovercraft. One British company, Griffon Hoverwork, boasts that more than half the operational hovercraft in the world were made at its factories on the Solent. “The UK has sold more commercial hovercraft than any other country in the world,” says Ben Bradley-Watson of Griffon. “The UK leads the world in design, manufacture and operation of hovercraft.”
One man who has lived and loved hovercraft as much as Sir Christopher Cockerell is John Gifford, the technical director of Griffon. At the age of just 15, he had already built his first machine. Since his father was friends with Sir Christopher, he even managed to get it inspected by the inventor himself. We caught up with him as he piloted a Griffon 2000 across the choppy waters of the Solent. “We’ve got a very wide range of customers,” he says. “The RNLI, the Royal Marines, coastguards, and oil exploration companies.” Business is apparently booming. “We’re getting bigger demand rather than less demand,” he says. In a series of unobtrusive sheds at Hythe, on the west side of Southampton Water, you see what he means. In the first one, a hovercraft for the Kuwaiti coastguard is taking shape. Next door, a hybrid hover-and-landing craft is being built for the Ministry of Defence. “It’s a typical mix of our business these days,” says the boss of Griffon, Adrian Went. Less bovverOne spin-off of Sir Christopher Cockerell’s invention has been the hover mower. Like its counterpart, it works on the principle of a cushion of air.
Hovercraft technology is used in gardens across the UK
The leading brand, Flymo, has a 40% share of the British lawnmower market. But although gardeners in the UK have adopted the hover technology in their millions, very few of the mowers are exported. Flymo is owned by a Swedish company, but the mowers are still built in County Durham, where the factory supports hundreds of jobs. So Sir Christopher’s tin of Maxwell House and tin of Kit-e-Kat have quite a lot to answer for. For that reason, they are the star exhibits at the world’s one and only hovercraft museum. Appropriately that is based on the Solent, the spiritual home of a British invention and a British business which is still very much afloat.
Source:BBC

‘Hidden cost’ of Colombian biofuel
By Margarita Rodriguez
BBC Mundo, Colombia
Colombia’s government proudly claims that it is the biggest producer of biodiesel and ethanol in Latin America after Brazil, but human rights groups do not share that enthusiasm.Critics warn that the cultivation of palm trees to produce biodiesel is a threat to Colombia’s indigenous groups and other minorities, including Afro-Colombians. In rural areas, there is evidence that some people have been forcibly displaced to make way for biofuel production. Last year, the United Nations stopped its investment in the sector in Colombia. But while ethanol production in Brazil has been pored over by experts and activists, the challenges faced by Colombia remain relatively unexamined. Colombia’s agriculture minister, Andres Fernandez, stresses that one of the main aims of President Alvaro Uribe’s administration is to keep the production of biofuels “on a growing path”. Mr Fernandez argues that this is “not one government’s policy, but State policy”. He dismisses accusations that the production of biofuels squeezes food output. “There are 4.5 million hectares of cultivated land and another 4.5 million of hectares of uncultivated land, [but] that land would not be used for food production – it would stay just as it is,” he says. Fuel or food?Last year, UN food chiefs warned that governments had to review urgently their policies on growing crops for biofuels. The UN Food and Agriculture Organisation (FAO) said biofuels were of “limited use” for solving the planet’s energy needs. At the same time, they pushed up food prices by diverting valuable crops such as sugar maize and oilseed from food use to energy use.
Mr Fernandez says he respects the UN viewpoint and its decision to suspend investment in biofuels in Colombia, but he says his country has its own perspective. He argues that bio-fuels have had a “wonderful effect” and have led to investment in deprived areas of the country benefiting peasants and minority groups. But this effect is not viewed quite as wonderfully by many rural workers in the Choco province, in north-west Colombia. They complain of being forced off their land to make way for palm trees – and accuse the government of being deaf to their pleas for help. One of the workers, Eustaquio Polo Rivera, told BBC Mundo that he lost his land after an incursion by right-wing paramilitaries in 1996. “We used to produce what we needed for ourselves: bananas, corn, rice. But one day, soldiers just arrived and took our land. They destroyed everything in the community,” he says. “They told me they needed the land to fight the guerrillas, but we soon realized that the point was to take our land. “We tried to resist, but the armed men warned us they would take no responsibility for the families who decided to stay.” Violations denouncedAccording to Mr Polo, more than 500 people fled immediately. “When we tried to go back, our land was planted with palm trees,” he says. “In my own community, there are between 30 and 40 hectares of palm trees. “The government hasn’t shown any interest in returning our land because the paramilitaries carry on moving from one location to another and the big companies have powerful allies.” Fidel Mingorance is chairman of Human Rights Everywhere (HRE), one of several NGOs denouncing the forced displacement of communities, often of African descent, to make way for palm trees. “It all started in Tumaco, in South Colombia, and now there are all sorts of violations – forced displacement, assassinations, property invasion,” he says. Leonidas Tobon, the director of technological development at the Ministry of Agriculture, accepts there was a case of forced displacement in Choco, but says it was a one-off. “The cultivation of palm trees is concentrated in four regions. Only 10% of it is in areas occupied by Afro-Colombians and 30% of land used to grow the trees belongs to small farmers in any case,” he says.
Source:BBC

US economic activity ’still weak’
US economic activity remains weak but some areas of the country saw signs that the decline was beginning to ease, the US Federal Reserve says.The Fed report said that economic conditions were weak or deteriorated further although five regions said the downward trend was moderating. It added that labour markets were not recovering, with wages flat or falling. The report, known as the beige book, is based on a survey of regional Fed banks and it is compiled eight times a year. The latest report covered the period from mid-April to mid-May. “Contacts from several districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year,” the beige book report said The reported indicated the retail spending remained weak, with consumers steering clear of luxury items and new car purchases. Comments on the housing market were more optimistic, with New York, Philadelphia , Cleveland, Richmond, Chicago, Kansas City and San Francisco districts reporting more home sales. The Fed will meet next on June 23-24 to decide on whether to take extra measures to bolster the economy. It has already cut interest rates to a historic low and announced a 1.2 trillion programme to spur the economy by purchasing government bonds to get more money circulating in the economy.
Source:BBC

NEW YORK (Reuters) — A U.S. bankruptcy judge told auto parts maker Delphi Corp. Wednesday to open the sale of its assets to other potential bidders who could compete with an offer from private equity firm Platinum Equity.Judge Robert Drain said Delphi should provide information to other potential bidders, subject to confidentiality agreements, and suggested the company set up a sales process for an auction of its assets in July.Delphi (DFG), which was spun off from General Motors Corp. (GMGMQ) in 1999 and filed for bankruptcy in 2005, said last week it reached a deal to sell most of its global operations to private equity firm Platinum Equity, allowing the car parts supplier to emerge from its nearly four-year bankruptcy.However, several lenders that provided bankruptcy funding to Delphi said in U.S. bankruptcy court in Manhattan Wednesday that they were seeking to make their own competing offer for Delphi’s assets.The lenders, which provided senior debtor-in-possession financing to Delphi, said they would like access to information about agreements between Platinum and GM so they could decide whether to submit their own “credit bid” for Delphi.In bankruptcy, secured lenders can make a “credit bid” for a company up to the full amount of their claim and cancel the debt, as opposed to making a straight cash offer.”We are prepared to exercise our credit bid right,” Glenn Siegel, a lawyer representing Delphi lenders Kensington International Ltd., Manchester Securities Corp, and Springfield Associates, told the court.However, John Butler, a lawyer for Delphi, rejected the lenders’ claims that Delphi had not been transparent about the sale, saying the lenders could have made this offer at any earlier date and specifically told Delphi it should plan to go forward without any additional capital from them.”Despite all of the access the DIP lenders have had to information in the last six months … the only feasible, fully funded transaction we have to move forward with is the one before us,” Butler told the court, noting that the company had been working for 14 months to come up with such a transaction to resolve its bankruptcy process.0:00
/4:42Brave new world for automakersBut Judge Drain said he was concerned about provisions in Delphi’s deal with Platinum that could prevent Delphi from working with other parties that want to make competing offers.”Why are we not permitting a process that’s one where there can be a higher bidder?” Drain asked Butler, saying litigation could arise from preventing other bidders’ offers and he was not sure why Platinum should get these special protections.”As far as I’m concerned, they (Platinum) are just guys in suits. Why can’t other guys in suits pay more?” Drain said.A potential new bidder would have to secure some agreements from Delphi’s union, and from General Motors, which is providing more than 4 billion to support the new Delphi under the Platinum deal, lawyers said in court. The lenders seeking to make the competing bids said they were specifically seeking information about what equity stake GM would have in the new Delphi under the Platinum deal.Judge Drain said he thought a more open sale process would make all parties more comfortable with the outcome. “People, in my experience, have come out of the woodwork,” Drain said.The judge also gave Delphi preliminary approval to access 250 million in funding from GM that is expected to support Delphi until it can emerge from bankruptcy.Delphi remains one of GM’s key suppliers and GM has taken more than 11 billion of charges to help the company’s reorganization along. GM, which has also filed for bankruptcy, received court approval at a hearing last week to continue providing support to its suppliers.

Source:CNN