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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: GUSTAVE JAEGER who wrote (65289)	6/21/2005 3:02:13 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 74559

Re: Outside of the fringe recesses of the blogosphere, there's no outlet for dissent. Yes, I'm noticing that, too.

To: GUSTAVE JAEGER who wrote (65289)	6/23/2005 4:26:54 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

Siemens pays the price of Europe's 'social model' folly THREADNEEDLE IT'S difficult to quantify the cost to Eurozone businesses of the regulations imposed on them by the continent's 'social model'. But for Siemens, we now know it is something around €350m. That's the sum Siemens will have to provide to Taiwan's BenQ to persuade the firm to buy its loss-making mobile phone unit. There's more. The deal gives BenQ free use of Siemens' handset-related patents. And Siemens will continue to carry the unit's losses, currently about €1.5m a day, until the transaction is completed. Siemens' mobile business has been a dog for years and the sensible thing would have been to merge it or sell it ages ago, or shut it down and re-employ the workers in more productive areas. Unfortunately German labour laws ban such sensible behaviour. And under pressure from the unions and politicians, Siemens has had to find a solution that will not upset too many workers and suppliers. There'll be no redundancies in Germany before the end of next year - making it difficult to see how BenQ can turn around the business quickly. We in the UK are familiar with the largesse of big German companies: BMW gave the Phoenix consortium a £1bn dowry to take Rover off their hands five years ago. All that did was prop up the company that never made much commercial success anyway for a few more years, enriching a few people on the way. Ultimately it would have been better to all concerned for BMW to have shut Rover or sold it to the always more realistic Alchemy team. As that deal and the Siemens one last week show, you can't buck the market, no matter how generous the sweetener. General Motors ON THE face of it, Rick Wagoner, General Motors' chairman and chief executive, has made what looks like a gutsy move to tackle one of the worst crises in GM's history. To halt the bleeding at the world's largest automaker, Wagoner told shareholders last week he was axing 25,000 jobs in North America and would shut an unspecified number of plants. The announcement made headlines around the world, which is probably what GM strategists had in mind. But the move falls well short of the radical surgery GM needs. The 25,000 job cuts that are supposed to save $2.5bn would be phased in over nearly four years. By the end of 2008, 22% of the hourly workforce would be slashed. But none of the jobs lost would be from layoffs. Instead, Wagoner's cutbacks would result from retirements and resignations as well as from costly buyouts and offers of early retirement. This is the plan GM has already had in place. In the past five years, the company has shed 30,000 jobs using the same methods. Closing plants will also be a lot harder than it sounds. GM will need the approval of the United Automobile Workers union, whose contract with GM doesn't expire until 2007. The current contract says workers displaced by closed plants must be paid anyway until their contract expires. So until then little real saving will be achieved. Which puts GM essentially back to square one. It is stuck with a line-up of vehicles that no one wants to buy. Its debt has been downgraded to junk. It lost $1.3bn in the first quarter. It's rolling out a new line of sports utility vehicles (SUVs) just as petrol prices are making them unattractive to American buyers. GM's attempt to restructure its European businesses - under the Opel brand - inspires no confidence. The company says it has completed most of the 9,000 job cuts announced last year. But the cost has been huge. Some workers were given early retirement or sent to components suppliers, with the bulk offered severance pay and retraining. Some 6,000 Opel workers have received payments of up to €200,000 for their years with the carmaker, and the average severance cheque is around €100,000. Golden handshakes alone have cost GM an estimated €600m. And it doesn't stop there. Many employees have chosen to enter a job training company, funded by the government and Opel. The workers are no longer on GM's official payroll, but they are still collecting money from the company and can for up to two years. A source close to the company said some 4,000 workers are currently in the programme. In all, the downsizing is expected to cost GM's German operations close to €1bn. Yet this is probably still not enough to staunch the bleeding - the company has recorded an operating loss every year this decade and more red ink is expected for 2005 despite buoyant sales of some Opel models. Due to the magnitude of the restructuring and media coverage which swirled around it, the cutbacks were politicised, and management had no choice but to acquiesce to the demands of labour and pressure from elected officials. Opel is still under pressure in the mass-market segment from cross border rival Renault and domestic competitor Volkswagen, which has been offering unheard of rebates on its flagship Golf model to get them off the showroom floor. GM's problem is that its cosseted workforce doesn't make cars good enough to take on the likes of Toyota and Nissan. Wagoner's sticking-plaster solution shows the company still has not got to grips with the scale of the problems. French utilities IT IS likely to be a long hot summer in France. The new government under prime minister Dominique de Villepin has pledged to press ahead with two controversial part-privatisations: state power utility Électricité de France (EdF) and its sister Gaz de France (GdF). If anything it looks like the pace of the sell-offs is to be accelerated: GdF's is slated for later this month, and EdF's much bigger sale will be in October. De Villepin has no doubt come under pressure from his sensible finance minister, Thierry Breton, who ran a part-privatised former state asset, France Telecom. Their decision is sensible, raining much needed cash for the beleaguered government coffers plus - and we have to keep our fingers crossed on this one - opening the way for more competition. But the unions have already demonstrated they are unhappy at the sale. They have campaigned vigorously and even succeeded in cutting off electricity to some officials last year. The resolve of Breton and De Villepin to press on is good news but they will have to show they have a stomach for the inevitable fight.