Business Report Wednesday

Siemens plans to cut 16,750 jobs Agence France-Presse . Berlin
German engineering giant Siemens presented on Tuesday one of its biggest restructuring plans ever, saying it would cut 16,750 jobs worldwide, of which nearly one-third would be at home. Siemens, which employs 400,000 people around the globe, said in a statement that most of the cuts, around 12,600, would be in administration and management services, while ‘restructuring projects’ would eliminate another 4,150. Of the total jobs lost, 5,250 would be in Germany, the company said. ‘The speed at which business is changing worldwide has increased considerably and we’re orienting Siemens accordingly,’ Siemens chief executive Peter Loescher was quoted as saying in the statement. ‘Against the backdrop of a slowing economy, we have to become more efficient,’ he added. Among the measures, the group planned to sell its Segment Industrie Montage Services information management division ‘to ensure the continuation of the unit’s service and assembly activities on a competitive basis,’ it said. That would affect 1,200 staff at 35 German locations, it added. Sites that employed the most employees would see the biggest cuts, including German facilities in southern Erlangen, Munich and Nuremberg, and northern Berlin. ‘We want to begin negotiations with the employee representatives quickly in order to make the cuts in a way that will be as socially responsible as possible,’ personnel director Siegfried Russwurm said. ‘Only as a last resort will we terminate employment contracts for operational reasons,’ Russwurm stressed. But the plan quickly drew fire from the trade union IG Metall’s Bavarian chapter, with union leader Werner Neugebauer slamming it as unacceptable. ‘Siemens is in good shape, the order books are full,’ Neugebauer said in a statement.
Protectionist US risks losing economic leadership in Asia Agence France-Presse . Washington
The United States is becoming increasingly protectionist and risks losing its economic leadership position in Asia to China, an official of president George W Bush’s administration warned Monday. ‘It is ironic that in the 21st century, America is turning inward, uncertain whether economic engagement with Asia is in the national interest — even as Asian nations rush to conclude trade and investment agreements with one another,’ said Commerce under secretary Christopher Padilla. ‘Perhaps this seems alarmist. But look at the facts,’ he told a Washington forum, saying many US lawmakers ‘are deeply suspicious’ of expanded trade with allies such as South Korea and ‘downright hostile’ toward trade with China. The Democratic party-controlled US Congress has refused to ratify a free trade agreement with South Korea, the biggest trade deal in 15 years, citing barriers restricting US auto imports among the key reasons. Lawmakers are also considering plans to impose sanctions on China over currency concerns, amid recent turmoil in the American economy following a housing market crisis, falling US dollar and record oil prices. Padilla said he wondered whether America would remain committed to economic openness. If Washington drifted toward trade protectionism and restrictive investment and immigration policies, then Asia was likely to proceed on its own with regional integration, leaving the United States behind, he said. This would leave leadership on the Asian economic playing field largely to China, the fastest-growing Asian economy, he said. ‘A hesitant, timid, and inwardly focused America could give rise to an economic ‘Pax Sinica,’ in which China has the opportunity to shape Asia’s economic architecture as it would prefer, rather than as we might like,’ he said. ‘Others in Asia might have little choice but to accommodate themselves to this economic reality,’ he said. Pax Sinica, Latin for ‘Chinese Peace,’ is a euphemism for periods of peace in East Asia during times of a strong Chinese empire between the 1680s to 1790s, characterised by the dominance of the Chinese civilization. China is again gaining influence in the region, striking trade and investment deals with countries amid rapid economic growth and on the back of a defense buildup and foreign exchange holdings. The Bush administration has been striving to create what it calls building blocks of an Asian economic architecture that includes the United States. It has signed free trade agreements with Singapore, Australia and South Korea, and launched negotiations for similar pacts with Thailand and Malaysia. It recently announced that it would begin work on services and investment with a budding Asia-Pacific grouping called the Trans-Pacific Strategic Economic Partnership Agreement, or ‘P4,’ involving Singapore, Chile, New Zealand and Brunei. The United States also launched talks last month to frame bilateral investment treaties with China and Vietnam.
Eurozone economic outlook dimming Agence France-Presse . Brussels
Signs of an economic slowdown are on the rise in the 15 countries sharing the euro while oil prices are likely to remain high, the head of the Eurogroup of eurozone finance ministers warned Monday. ‘Signs of economic slowdown are multiplying and the second quarter will be much less buoyant than the first was,’ Luxembourg finance minister Jean-Claude Juncker said after chairing a meeting with his eurozone counterparts. ‘We are seeing this in economic confidence indicators,’ Juncker told journalists. Despite financial market turmoil and soaring oil prices, the eurozone economy grew 0.8 per cent in the first three months of the year. Official growth figures have yet to be published for the first quarter. Since then, oil prices have risen even higher to records over 140 dollars a barrel, pinching consumers’ purchasing power and hitting companies’ margins.
Taiwan’s President Chain Store, Britain’s M&S end joint venture Agence France-Presse . Taipei
Taiwan’s food giant President Chain Store Corp and British retailer Marks & Spencer Group PLC said Tuesday they are closing their joint venture on the island due to poor sales. The two companies said they would end their Marks & Spencer brand joint venture and close all three stores on the island. Lily Lin, head of the President Chain Store public relations department, said: ‘There’s a gap between the sales at the Marks & Spencer stores and what we had expected.’ President Chain Store, which operates 7-Eleven stores in Taiwan, holds a 40 per cent stake in the joint venture. The firm would like to focus its resources on ‘better-performing’ channels, Lin said, declining to provide sales figures for the joint-venture, which was formed in January 2007 and has a paid-in capital of five million pounds ($9.87m).
‘Subprime fallout could last two years’ Agence France-Presse . Singapore
The global fallout from the US subprime mortgage crisis could last another two years, the chairman of Singapore-based United Overseas Bank said in a newspaper report Tuesday. ‘I hope I am wrong, but my view is that this crisis will take one to two years to stabilise,’ Wee Cho Yaw, a banker for almost 50 years, told a university commencement ceremony, The Straits Times reported. A bank spokeswoman confirmed the quotes when contacted by AFP. The default crisis in the US subprime — or higher risk — mortgage sector ballooned into a world credit squeeze as banks tightened lending criteria. The crisis has also battered financial markets. ‘What worries me is that no one seems to know the full amount of off-balance sheet securities circulating in the financial markets,’ Wee was quoted as saying. The subprime homeloans were repackaged into securities and sold to investors around the world. The wave of defaults led to billions of dollars in losses on those securities, damaging the balance sheets of major international banks.
CORPORATE BRIEFUBICO teams up with LankaBangla Finance Business Desk
The UAE Bangladesh Investment Company Limited signed an investment management deal with the LankaBangla Finance Limited at the latter’s head office in the Dhaka city recently. SM Akbar, managing director of the UBICO, and Mafizuddin Sarker, managing director of LankaBangla, signed the agreement, said a press release. Faisal Rashid, deputy manager and head of investment, Mumlook Hossain, head of finance and company secretary of the UBICO, and Quamrul Islam, vice-president and CFO, AKM Kamruzzaman, vice-president and company secretary, Mohammad Kamrul Hasan, vice-president, Masum Ali, assistant vice-president, Mohammad Shoaib, AVP, and Fatima Begum, principal officer, of LankaBangla Finance Limited were present on the occasion. According to the deal, LankaBangla Finance will provide a comprehensive management support to the UBICO to invest in the capital market.
Dollar firms against euro Agence France-Presse . London
The dollar firmed against the euro but fell against the yen on Tuesday amid growing jitters that the US financial sector may face a fresh drubbing from the ongoing credit crunch, dealers said. Global stock markets suffered sharp falls Tuesday on fresh fears for the banking sector, with Paris shares hitting a three-year low following big losses in Asia and the United States. In foreign exchange action, the European single currency eased to 1.5725 dollars in early London trade from 1.5730 dollars late on Monday. Against the yen, the dollar dropped to 106.53 yen from 107.10. A statement Tuesday by some of the world’s most powerful leaders at the G8 summit in Japan made no mention of the dollar’s current weakness although US President George W. Bush again said that he was committed to ‘a strong dollar.’ The dollar has found limited support this week after weekend remarks from Bush in favour of ‘a strong dollar’ ahead of the G8 summit. The markets are now awaiting the latest quarterly earnings from many large US corporations and banks to get a fresh lead on the economic outlook. ‘The (foreign exchange) market backdrop remains one of relatively high risk aversion,’ said Calyon analyst Mitul Kotecha. ‘New credit fears overnight following a report that the US (home loan) agencies Fannie Mae and Freddie Mac required more capital as well as news that mortgage lender IndyMac was in urgent need of fresh capital, resulted in an increase in risk aversion.’ US investment bank Lehman Brothers has warned that the big US mortgage re-financing groups, Freddie Mac and Fannie Mae, could have to raise a combined 75 billion dollars (48 billion euros) in fresh funds to meet their commitments. The euro fell against the yen, ‘likely on unwinding of yen-carry trade due to recent risk-aversion trend,’ a senior trader at a major bank in Tokyo told Dow Jones Newswires. ‘During periods of risk aversion, banks usually lend less money. As a result, investors have less money to invest, forcing them to close high-leverage positions including yen-carry trades,’ he noted. The yen had been the subject of carry trades into the months before the US subprime mortgage crisis erupted in mid-2007 as bullish investors bought the currency to fund higher-yielding assets elsewhere. EU finance ministers, meanwhile, gave Slovakia the final greenlight on Tuesday to adopt the euro on January 1, 2009 at the definitive conversion rate with one euro to 30.1260 koruna. The ministers’ approval was the last EU obstacle Slovakia faced on the long path to becoming the sixteenth member of the eurozone. In London trading on Tuesday morning, the euro changed hands at 1.5725 dollars against 1.5730 late on Monday, at 167.49 yen (168.45), 0.7953 pounds (0.7956) and 1.6096 Swiss francs (1.6140). The dollar stood at 106.53 yen (107.10) and 1.0237 Swiss francs (1.0261). The pound was at 1.9778 dollars (1.9765). On the London Bullion Market, the price of gold rose to 929.65 dollars per ounce from 916.75 dollars late on Monday.
Oil prices dip due to G8 warning Agence France-Presse . London
Oil prices fell further on Tuesday as tumbling global stocks and resurgent concerns about an economic slowdown stoked fears about future energy demand, traders said. The oil market, which hit record heights close to 147 dollars a barrel last week, also fell after the Group of Eight (G8) rich nations warned of soaring crude costs and appealed for more production, they added. Brent North Sea oil for August delivery slid 40 cents to 141.50 dollars a barrel in electronic deals. New York’s main oil contract, light sweet crude for August delivery, shed 29 cents to 141.08 dollars. ‘Crude price were a little lower on Tuesday amid concerns over the general health of global economies following a sharp sell off in equities,’ said Sucden analyst Nimit Khamar. ‘Many economies face a bleak economic outlook which could reduce the demand for oil, especially at current prices.’ World stock exchanges suffered sharp falls Tuesday on fresh fears for the banking sector, with the French market hitting a three-year low following big losses in Asia and the United States, dealers said. In Japan on Tuesday, eight of the world’s most powerful leaders called for efforts to cool sizzling oil prices, warning soaring fuel and food costs were a threat to world economic growth. ‘It seems to me like oil traders are looking with some interest at the headlines coming out of the G8 meeting,’ said Dave Ernsberger, Asia director of global energy information provider Platts in Singapore.