Business this week: 10th – 16th February 2007

Business this week

Feb 15th 2007
From The Economist print edition

A cost-cutting programme at Chrysler was unveiled. The troubled carmaker made an operating loss of $1.4 billion last year and now more than 13,000 jobs are to go. Chrysler’s parent company, DaimlerChrysler, said it could find partners for its North American division, but a sale was not ruled out either. See article

The European Court of Justice’s advocate-general rejected the German law protecting Volkswagen from takeovers. This was seen as boosting the potential of a bid for VW from its biggest shareholder, Porsche. It also solidifies the role of Ferdinand Piëch, who is a member of the Porsche family, as VW‘s chairman. The premier of Lower Saxony, which is VW‘s second-biggest shareholder, acknowledged this by changing tack and ending his opposition to Porsche having a third representative on VW‘s board.

FirstGroup, a British bus and train operator, expanded its American business by agreeing to pay $3.6 billion for Laidlaw, which specialises in school and inter-city bus services. If successful, the deal will give FirstGroup a sizeable chunk of America’s school-bus market, but there was speculation it may sell Laidlaw’s other concern, the iconic Greyhound bus line.

It makes the world go round

A plan to boost the use of mobile money was unveiled at a telecoms conference. The project, set up between a group of mobile-phone operators and MasterCard, is targeted at migrant workers and enables funds to be securely transferred from one phone to another back home, where the credit can be spent. See article

Vodafone won the bidding to take control of Hutchison Essar, a mobile-phone operator in India, agreeing to pay $11.1 billion for the 67% stake held by a subsidiary of Hong Kong’s Hutchison Whampoa. Arun Sarin, Vodafone’s chief executive, said the deal would be “transformational” for his company, which thinks it can increase profits by acquiring phone operators in high-growth developing markets. But some of Mr Sarin’s critics said he had paid too much.

A court in Brussels ruled that Google had infringed the copyright of Belgian newspapers by publishing links to their stories on Google News. The case, in which the newspapers argued that the internet company was giving away articles they were charging for, was closely watched by other press proprietors. Google is to appeal.

Delta Air Lines made a fourth-quarter net loss of $2 billion as it booked charges related to its bankruptcy- restructuring plans.

Better to have loved and lost

NASDAQ‘s $5.3 billion hostile bid for the London Stock Exchange was spurned by shareholders (fewer than 0.5% accepted the offer). It was the second time in less than a year that NASDAQ‘s advances had been rebuffed and it joins a long line of suitors seen off by the LSE because, it says, they have not valued it properly. Speculation turned to the possibility of future partners for both bourses.

Deutsche Börse agreed to take a 5% strategic stake in the Bombay Stock Exchange, underlining the fashion for consolidation among global exchanges.

EMI‘s share price hit a low note after it issued its second profits warning of the year. The music company has been particularly hit by poor sales in North America, where, it said, the market for CDs had declined by 20% this year.

With the share prices of big aluminium companies rising amid rumours of takeovers, India’s Hindalco Industries said it would pay nearly $6 billion for Novelis, a Canadian maker of rolled aluminium used to make beverage cans. The deal is the second-biggest foreign acquisition by an Indian company and comes two weeks after Tata Steel won the battle for Corus.

SXR Uranium One and UrAsia Energy agreed to merge, creating the world’s second-biggest uranium miner. The price of the raw material for reactor fuel has more than tripled over the past three years, in line with the increased enthusiasm for nuclear power.

Gazprom said its third-quarter net profit rose by more than half, to $4.6 billion. The Russian gas monopoly is benefiting from rising exports and the higher prices it charges to former Soviet republics.

Time for another row

America’s trade deficit in goods reached $836 in 2006. Congressional Democrats seized on the figure to lambast the Bush administration and called for “actions to stand up for America” by ending the “unfair trade practices” of the countries and regions that account for most of the deficit: China ($233 billion), the European Union ($117 billion) and Japan ($88 billion).