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Lufthansa flies back to profit |
German airline Lufthansa has returned to profit in 2004 after posting huge losses in 2003. |
In a preliminary report, the airline announced net profits of 400m euros ($527.61m; £274.73m), compared with a loss of 984m euros in 2003. Operating profits were at 380m euros, ten times more than in 2003. Lufthansa was hit in 2003 by tough competition and a dip in demand following the Iraq war and the killer SARS virus. It was also hit by troubles at its US catering business. Last year, Lufthansa showed signs of recovery even as some European and US airlines were teetering on the brink of bankruptcy. The board of Lufthansa has recommended paying a 2004 dividend of 0.30 euros per share. In 2003, shareholders did not get a dividend. The company said that it will give all the details of its 2004 results on 23 March. |
Winn-Dixie files for bankruptcy |
US supermarket group Winn-Dixie has filed for bankruptcy protection after succumbing to stiff competition in a market dominated by Wal-Mart. |
Winn-Dixie, once among the most profitable of US grocers, said Chapter 11 protection would enable it to successfully restructure. It said its 920 stores would remain open, but analysts said it would most likely off-load a number of sites. The Jacksonville, Florida-based firm has total debts of $1.87bn (£980m). In its bankruptcy petition it listed its biggest creditor as US foods giant Kraft Foods, which it owes $15.1m. |
Analysts say Winn-Dixie had not kept up with consumers' demands and had also been burdened by a number of stores in need of upgrading. A 10-month restructuring plan was deemed a failure, and following a larger-than-expected quarterly loss earlier this month, Winn-Dixie's slide into bankruptcy was widely expected. The company's new chief executive Peter Lynch said Winn-Dixie would use the Chapter 11 breathing space to take the necessary action to turn itself around. "This includes achieving significant cost reductions, improving the merchandising and customer service in all locations and generating a sense of excitement in the stores," he said. Yet Evan Mann, a senior bond analyst at Gimme Credit, said Mr Lynch's job would not be easy, as the bankruptcy would inevitably put off some customers. "The real big issue is what's going to happen over the next one or two quarters now that they are in bankruptcy and all their customers see this in their local newspapers," he said. |
US economy still growing says Fed |
Most areas of the US saw their economy continue to expand in December and early January, the US Federal Reserve said in its latest Beige Book report. |
Of the 12 US regions it identifies for the study, 11 showed stronger economic growth, with only the Cleveland area falling behind with a "mixed" rating. Consumer spending was higher in December than November, and festive sales were also up on 2003. The employment picture also improved, the Fed said. |
"Labour markets firmed in a number of districts, but wage pressures generally remained modest," the Beige Book said. "Several districts reported higher prices for building materials and manufacturing inputs, but most reported steady or only slightly higher overall price levels." The report added that residential real estate activity remained strong and that commercial real estate activity strengthened in most districts. "Office leasing was especially brisk in Washington DC, and New York City, two of the nation's strongest commercial markets," the Fed said. |
Saab to build Cadillacs in Sweden |
General Motors, the world's largest car maker, has confirmed that it will build a new medium-sized Cadillac BLS at its loss-making Saab factory in Sweden. |
The car, unveiled at the Geneva motor show, is intended to compete in the medium-sized luxury car market. It will not be sold in the US, said GM Europe president Carl-Peter Forster. As part of its efforts to make the US marque appeal to European drivers, the car will be the first Cadillac with a diesel engine. |
GM's announcement should go some way to allay fears of the Saab factory's closure. The factory in Trollhaettan has been at the centre of rumours about GM's planned severe cutbacks in its troubled European operations. But the group's new commitment to the Swedish factory may not be welcomed by the group's Opel workers in Ruesselsheim, Germany. They may now have to face a larger proportion of GM's cuts. |
Neither will the announcement be seen as unalloyed good news in Sweden, since it reflects Saab's failure to make significant inroads into the lucrative European luxury car market. For years, Saab has consistently said it is competing head-on with BMW, Mercedes and Jaguar. The segment's leaders do not agree. |
GM's plans to build the American marque in Sweden is part of its efforts to push it as an alternative luxury brand for European drivers. In the US, it has long been established as an upmarket brand - even the presidential limousine carries the badge. Yet it could prove tough for Cadillac to steal market share from the majors in Europe. Other luxury car makers, most notably the Toyota subsidiary Lexus, have enjoyed tremendous success in the US without managing to make significant inroads in Europe. There, German marques Mercedes Benz and BMW have retained their stranglehold on the luxury market. |
Bringing Cadillac production to Sweden should help introduce desperately-needed scale to the Saab factory, which currently produces fewer than 130,000 cars per year. That is about half of what major car makers consider sufficient numbers for profitable operations, and Saab is losing money fast - albeit with losses halved in 2004 to $200m (£104m; 151m euros) from $500m the previous year. Beyond the 12,000 job cuts announced last year at its European operations, GM is reducing expenditure by building Saabs, Opels - badged as Vauxhalls in the UK - and now Cadillacs on the same framework, and by allowing the different brands to share parts. Another way to further reduce Saab's losses could be to shift some of the production of Saabs to the US, a market where drivers have adopted it as an upmarket European car. Doing so would remove the exposure to the weak US dollar, which is making Saabs more expensive to US consumers. But not everyone in the industry agree that it would be the best way forward. "We know that in five years the US dollar will be stronger than it is today," the chief executive of a leading European car maker told BBC News. The current trend towards US production was "stupid", he said. |
In a separate announcement, GM unveiled a new scheme to allow European consumers the chance to test drive its Opel and Vauxhall models. It is to deploy a fleet of 35,000 test cars across 40 countries, inviting potential buyers to try out a vehicle for 24-hours. It follows a similar initiative by GM in the US. GM said it wanted to change "customers' perceptions" about Opel and Vauxhall cars, showing them that the quality had improved in recent years. |
Bank voted 8-1 for no rate change |
The decision to keep interest rates on hold at 4.75% earlier this month was passed 8-1 by the Bank of England's rate-setting body, minutes have shown. |
One member of the Bank's Monetary Policy Committee (MPC) - Paul Tucker - voted to raise rates to 5%. The news surprised some analysts who had expected the latest minutes to show another unanimous decision. Worries over growth rates and consumer spending were behind the decision to freeze rates, the minutes showed. The Bank's latest inflation report, released last week, had noted that the main reason inflation might fall was weaker consumer spending. |
However, MPC member Paul Tucker voted for a quarter point rise in interest rates to 5%. He argued that economic growth was picking up, and that the equity, credit and housing markets had been stronger than expected. |
The Bank's minutes said that risks to the inflation forecast were "sufficiently to the downside" to keep rates on hold at its latest meeting. However, the minutes added: "Some members noted that an increase might be warranted in due course if the economy evolved in line with the central projection". Ross Walker, UK economist at Royal Bank of Scotland, said he was surprised that a dissenting vote had been made so soon. He said the minutes appeared to be "trying to get the market to focus on the possibility of a rise in rates". "If the economy pans out as they expect then they are probably going to have to hike rates." However, he added, any rate increase is not likely to happen until later this year, with MPC members likely to look for a more sustainable pick up in consumer spending before acting. |
Industrial revival hope for Japan |
Japanese industry is growing faster than expected, boosting hopes that the country's retreat back into recession is over. |
Industrial output rose 2.1% - adjusted for the time of year - in January from a month earlier. At the same time, retail sales picked up faster than at any time since 1997. The news sent Tokyo shares to an eight-month high, as investors hoped for a recovery from the three quarters of contraction seen from April 2004 on. The Nikkei 225 index ended the day up 0.7% at 11,740.60 points, with the yen strengthening 0.7% against the dollar to 104.53 yen. Weaker exports, normally the engine for Japan's economy in the face of weak domestic demand, had helped trigger a 0.1% contraction in the final three months of last year after two previous quarters of shrinking GDP. Only an exceptionally strong performance in the early months of 2004 kept the year as a whole from showing a decline. The output figures brought a cautiously optimistic response from economic officials. "Overall I see a low risk of the economy falling into serious recession," said Bank of Japan chief Toshihiko Fukui, despite warning that other indicators - such as the growth numbers - had been worrying. |
Within the overall industrial output figure, there were signs of a pullback from the export slowdown. Among the best-performing sectors were key overseas sales areas such as cars, chemicals and electronic goods. With US growth doing better than expected the picture for exports in early 2005 could also be one of sustained demand. Electronics were also one of the keys to the improved domestic market, with products such as flat-screen TVs in high demand during January. |
Khodorkovsky ally denies charges |
A close associate of former Yukos boss Mikhail Khodorkovsky has told a court that fraud charges levelled against him are "false". |
Platon Lebedev has been on trial alongside Mr Khodorkovsky since June in a case centring around the privatisation of a fertiliser firm. The pair claim they are being punished by the authorities for the political ambitions of Mr Khodorkovsky. Mr Lebedev said there were "absurd contradictions" in the case. Opening his defence, he said he could not see the legal basis of the charges he faced, which also include allegations of tax evasion. "To my embarrassment, I could not understand the file of complaints against me," he told a Moscow court. Mr Lebedev headed the Menatep group, the parent company of Yukos. |
Mr Lebedev and Mr Khodorkovsky, who each face a possible 10 year jail sentence if convicted, will be questioned by a judge over the next few days. Mr Khodorkovsky began his testimony last week, telling the court that he objected to the way that the "running of a normal business has been presented as a work of criminal fiction". The charges are seen by supporters as politically motivated and part of a drive by Russian President Vladimir Putin to rein in the country's super-rich business leaders, the so-called oligarchs. Yukos has been presented with a $27.5bn (£13bn) tax demand by the Russian authorities and its key Yugansk division was auctioned off to part settle the bill. The company's effort to gain bankruptcy protection in the US - in a bid to win damages for the sale - were dismissed by a court in Texas. |
China keeps tight rein on credit |
China's efforts to stop the economy from overheating by clamping down on credit will continue into 2005, state media report. |
The curbs were introduced earlier this year to ward off the risk that rapid expansion might lead to soaring prices. There were also fears that too much stress might be placed on the fragile banking system. Growth in China remains at a breakneck 9.1%, and corporate investment is growing at more than 25% a year. The breakneck pace of economic expansion has kept growth above 9% for more than a year. Rapid tooling-up of China's manufacturing sector means a massive demand for energy - one of the factors which has kept world oil prices sky-high for most of this year. In theory, the government has a 7% growth target, but continues to insist that the overshoot does not mean a "hard landing" in the shape of an overbalancing economy. A low exchange rate - China's yuan is pegged to a rate of 8.28 to the dollar, which seems to be in relentless decline - means Chinese exports are cheap on world markets. China has thus far resisted international pressure to break the link or at least to shift the level of its peg. To some extent, the credit controls do seem to be taking effect. Industrial output grew 15.7% in the year to October, down from 23% in February, and inflation slowed to 4.3% - although retail sales are still booming. |
Verizon 'seals takeover of MCI' |
Verizon has won a takeover battle for US phone firm MCI with a bid worth $6.8bn (£3.6bn), reports say. |
The two firms are expected to seal the deal on Monday morning, according to news agency reports, despite what was thought to be a higher bid from Qwest. The US telecoms market is consolidating fast, with former long-distance giant AT&T being bought by former subsidiary SBC earlier this year for $16bn. MCI exited bankruptcy in April, having gone bust under previous name WorldCom. The bankruptcy followed its admission in 2002 that it illegally booked expenses and inflated profits. |
Shareholders lost about $180bn when the company collapsed, while 20,000 workers lost their jobs. Former Worldcom boss Bernie Ebbers is currently on trial, accused of overseeing an $11bn fraud. Qwest has itself come under suspicion of sub-standard behaviour, paying the Securities and Exchange Commission $250m in October to settle charges that it manipulated its results to keep Wall Street happy. |
MCI is the US's second-biggest long distance firm after AT&T. Consolidation in the US telecommunications industry has picked up in the past few months as companies look to cut costs and boost client bases. A merger between MCI and Verizon would be the fifth billion-dollar telecoms deal since October. Last week, SBC Communications agreed to buy its former parent and phone trailblazer AT&T for about $16bn. Buying MCI would give either Qwest or Verizon access to MCI's global network and business-based subscribers. The rationale is similar to the one underpinning SBC's AT&T deal. Verizon is by far the bigger company and has its own successful mobile arm - factors which may have swung the board in its favour since both suitors are offering a mixture of cash and shares. |
Crossrail link 'to get go-ahead' |
The £10bn Crossrail transport plan, backed by business groups, is to get the go-ahead this month, according to The Mail on Sunday. |
It says the UK Treasury has allocated £7.5bn ($13.99bn) for the project and that talks with business groups on raising the rest will begin shortly. The much delayed Crossrail Link Bill would provide for a fast cross-London rail link. The paper says it will go before the House of Commons on 23 February. |
A second reading could follow on 16 or 17 March. "We've always said we are going to introduce a hybrid Bill for Crossrail in the Spring and this remains the case," the Department for Transport said on Sunday. Jeremy de Souza, a spokesman for Crossrail, said on Sunday he could not confirm whether the Treasury was planning to invest £7.5bn or when the bill would go before Parliament. |
However, he said some impetus may have been provided by the proximity of an election. |
The new line would go out as far as Maidenhead, Berkshire, to the west of London, and link Heathrow to Canary Wharf via the City. Heathrow to the City would take 40 minutes, dramatically cutting journey times for business travellers, and reducing overcrowding on the tube. The line has the support of the Mayor of London, Ken Livingstone, business groups and the government, but there have been three years of arguments over how it should be funded. The Mail on Sunday's Financial Mail said the £7.5bn of Treasury money was earmarked for spending in £2.5bn instalments in 2010, 2011 and 2012. |
Small firms 'hit by rising costs' |
Rising fuel and materials costs are hitting confidence among the UK's small manufacturers despite a rise in output, business lobby group the CBI says. |
A CBI quarterly survey found output had risen by the fastest rate in seven years but many firms were seeing the benefits offset by increasing expenses. The CBI also found spending on innovation, training and retraining is forecast to go up over the next year. However, firms continue to scale back investment in buildings and machinery. |
The CBI said companies are looking to the government to lessen the regulatory load and are hoping interest rates will be kept on hold. "Smaller manufacturers are facing an uphill struggle," said Hugh Morgan Williams, chair of the CBI's SME Council. "The manufacturing sector needs a period of long-term stability in the economy." The CBI found some firms managed to increase prices for the first time in nine years - but many said increases failed to keep up the rise in costs. Of the companies surveyed, 30% saw orders rise and 27% saw them fall. The positive balance of plus 3 compared with minus 10 in the previous survey. When firms were questioned on output volume, the survey returned a balance of plus 8 - the highest rate of increase for seven years - and rose to plus 11 when looking ahead to the next three months. |
Deutsche Boerse boosts dividend |
Deutsche Boerse, the German stock exchange that is trying to buy its London rival, has said it will boost its 2004 dividend payment by 27%. |
Analysts said that the move is aimed at winning over investors opposed to its bid for the London Stock Exchange. Critics of the takeover have complained that the money could be better used by returning cash to shareholders. Deutsche Boerse also said profit in the three months to 31 December was 120.7m euros ($158.8m; £83.3m). Sales climbed to 364.4m euros, lifting revenue for the year to a record 1.45bn euros. |
Frankfurt-based Deutsche Boerse has offered £1.3bn ($2.48bn; 1.88bn euros) for the London Stock Exchange. Rival pan-European bourse Euronext is working also on a bid. Late on Monday, Deutsche Boerse said it would lift its 2004 dividend payment to 70 euro cents (£0.48; $0.98) from 55 euro cents a year earlier. "There is a whiff of a sweetener in there," Anais Faraj, an analyst at Nomura told the BBC's World Business Report. "Most of the disgruntled shareholders of Deutsche Boerse are complaining that the money that is being used for the bid could be better placed in their hands, paid out in dividends," Mr Faraj continued. Deutsche Boerse is "trying to buy them off in a sense", he said. |
Japanese growth grinds to a halt |
Growth in Japan evaporated in the three months to September, sparking renewed concern about an economy not long out of a decade-long trough. |
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