Posted by: Ian Rowley on October 06
If Mitsubishi Motors chief Osamu Masuko is unduly concerned about slumping auto sales in the U.S., Japan, and Europe he wasn't showing it at a media lunch in Tokyo today.
While realistic about the current global economic situation and its impact on auto sales, he emphasized the progress made at the automaker since its painful divorce from DaimlerChrysler three years ago, which followed recall scandals in Japan and a disastrous incentive scheme in the U.S. The carmaker probably wouldn't have survived if it wasn't for a $2.6 billion lifeline from other Mitsubishi keiretsu partners.
In the year through March this year, Mitsubishi had its best ever year for operating profits and its employees no longer believe the company is on the verge of collapse: when Masuko took over as president in January 2005, the company had been losing 70-100 employees a month from its development division alone, he said. Masuko also laughed off a question that Mitsubishi is better placed to weather the U.S. downturn because it sells so few vehicles these days.
But perhaps of most interest is that Mitsubishi will be the first Japanese automaker to begin selling an electric vehicle when it launches the i-Miev next summer. Based on the popular i minicar, the i-Miev can be recharged at home, promises a range of 100 miles and no C02 emissions (Taking into account the C02 produced to generate the electricity, Mitsubishi reckons the i-Miev, in Japan, emits 28% of the C02 of a gasoline equivalent). Running costs will be either 1/3 or one 1/9 of the gasoline version depending if charging is done at day or night. Sales will start in Japan only but exports are expected from 2010.
Reports in Japan suggest the car could initially be between a pricey $23,000 and $28,000, although the figure is expected to drop as production increases from an initial 2,000 a year to over 10,000 a year by 2011. Given safety concerns over lithium ion batteries--not to mention Mitsubishi's painful history of recalls--Masuko said Mitsubishi's cells are "100% secure." He added that using its EV know-how, Mitsubishi is also working on plug-in hybrids for longer distance driving.
Of course, such small volumes are unlikely to worry Toyota, which plans to sell a million hybrids a year by 2010s, and other larger carmakers. Still, few would begrudge Mitsubishi, which doesn’t sell a conventional hybrid, a little success after its brush with the scrapheap.
Posted by: David Rocks on October 05
I flew into Delhi on Saturday evening, and our correspondent here, Mehul, handed me a copy of that day's Hindustan Times. I glanced at the front page, and was pleased to see an article about BusinessWeek's Power 100. The Indian paper, of course, was most interested in the fact that two cricket heavyweights had made it onto the list!
On the same page, there was a more disheartening story, about Tata Motors abandoning its plans to build a factory to produce its Nano microcar (remember the $2,500 car?). Because of ongoing protests among local residents angry that they weren't adequately compensated for their land, Tata chief Ratan Tata has decided to build his plant elsewhere--a decision that will likely delay the launch of the Nano. While there's been plenty of finger-pointing on all sides and I won't try to apportion blame here, the whole affair is simply a sad commentary on the continuing difficulty of actually getting things done in India.
Posted by: Frederik Balfour on October 05
While much of Hong Kong hunkered down just hours before the arrival of the umpteenth typhoon of this summer on Saturday , those who attended Sotheby’s prestigious Modern and Contemporary Asian Art night auction witnessed first hand the buffeting effects of the financial storm on Wall Street. Of the 47 works that went under the hammer, more than 40% of the pieces went unsold. What’s more, earnings for Sotheby, including auctioneer’s commission known as “buyer’s premium,” was a paltry $15 million, accounting for just 41% of Sotheby’s estimated takings for the night. Among the biggest upsets were the unsold work by India's hot-selling artist Subodh Gupta [Untitled, estimated price $1.55 million to $2.05 million] and Chinese cynical realist painter Liu Wei's The Revolutionary Family Series [Triptych] which failed to find a bidder willing to meet the $1.55 million suggested minimum.
As the weather deteriorated Sunday morning, so did things in the auction hall. Only 39 out of 110 paintings from the 20th Century Chinese Art Sale found buyers, while 71 will have to be packed up and shipped back to their sellers. By the time I arrived for the afternoon session, the usual buzz I’d come to expect at Hong Kong’s contemporary Chinese art auctions was sorely absent. At one point during the sale, the auctioneer mistook a woman covering her mouth to stifle a yawn for her wishing to bid, prompting a valiant attempt to inject some levity into the proceedings as he asked if “anyone else is yawning in the room.”
Yawns gave way to disbelief a little later, at least for me, when two works by white hot Chinese artist Zhang Xiaogang went unsold. That’s a huge reversal for the Beijing-based artist whose paintings have routinely fetched prices for millions of dollars, well in excess of auction estimates. Yue Minjun and Zeng Fanzhi, two other of the hottest selling Chinese contemporary artists did manage to sell, although well within the estimates.
You connect the dots. Wall Street goes into meltdown, and Sotheby’s auction bombs in Hong Kong. There’s got to be some connection, right? Well, not the way Kevin Ching, Sotheby’s CEO for Asia spun it to me. “I hope there is no immediate direct correlation between the financial market and the art market,” he says, pointing to the widely successful auction of enfant terrible Damien Hirst’s works in London within days of Lehman’s going bust. “Auction houses including ourselves, we avoid talking about art as an investment and even less so of using art as a vehicle for speculation,” he adds.
I think recent history suggests otherwise, at least where Chinese contemporary art is concerned. A huge amount of buying has been fueled by investment bankers and hedge fund managers who helped push prices up exponentially for several years. But aren’t auction houses partly to blame for the run-up in prices too, I ask? “All I can say, we basically sell objects which are demanded, where there is a demand, and we sell them at what we consider the market prices at the time. But when we have consignors who want aggressive estimates over and above what market can accept they would have to occasionally accept the consequences, and I think that’s what happened here last night,” Ching explains.
I admire him for trying to put the best face on the lousy sales, and to be fair, a couple of Indonesian artists, including I Nyoman Masriadi, set new world record for a Southeast Asian artist with a painting that went for $620,000, about 12 times the high estimate. But Ching agrees that it’s high time that prices for Chinese contemporary artists started to fall back to earth.
I also have to give him credit for some creative ambush marketing by agreeing to host a charity auction of works commissioned by Olympic Sponsor Adidas based on, guess what? The theme of sports. I caught most of that sale, too, and I can only tell you that an auction room nine tenths empty is not my favorite place to spend part of a Sunday evening. I don’t know yet how much money was raised, the proceeds to go to building sports facilities for kids who survived the Sichuan Earthquake, but I think that as a charitable exercise, it was somewhat flawed. Serious art collectors didn’t show up for the sale, which meant that the two works by Chinese artist Tang Zhigang that were expected to raise about $750,000 combined, went unsold. Works by David Beckham, Russian Olympic pole-vaulter Yelena Isinbayeva, Australian swimmer Michael Thorpe and U.S. 400 meter sprinter Jeremy Wariner also failed to sell, despite asking prices of between $6,500 and $10,000. But after seeing these paintings, all I can say is, “Guys, please don’t quit your day jobs.”
For his part, Ching says the exercise was extremely worthwhile. “For us it’s fantastic marketing. Sotheby’s is known not just to our clientele, but to their [Adidas] network. And in presale exhibitions in China, our name was associated with the Olympics.”
Southeast Asian Art Sale a Boom
*Oct 6 UPDATE*
What a difference a day makes. The mood was positively ebullient at Sotheby's on Monday as buyers crammed the room and Sotheby's employees manned the phones to handle the enthusiastic overseas bidding. The reason for this sea change in sentiment? Well for one thing, today's auction of Southeast Asian Contemporary Paintings was far more affordable than the works from China and India on sale during the weekend, and collectors seem to have finally cottoned onto the notion that Indonesian, Vietnamese and Filipine artists represent opportunities to own some great art.
At the top end of the market, the name on everyone's lips today was I Nyoman Masriadi. He had already set a record on Saturday when his huge canvas featuring Batman and Superman sitting on adjacent toilets sold for $620,000. But he broke his own record today with a painting of boxers that seems part Botero, part Leger, which fetched a whopping $833,000. A bit later, during furious bidding for yet another Masriadi, the auctioneer even exclaimed "this is really, really fun," and the room broke into applause when the work finally sold for a very respectable $307,000.
Filipino artists also made a strong showing. One work by up and coming painter Geraldine Javier sold for $32,000, more than three times the high estimate. An intimate portrait of a woman and child by Vietnamese painter Mai Trung Thu also sold for triple the estimate, fetching $23,000.
Related story: Pop Goes the Bubble in Chinese & Indian Art
Posted by: Frederik Balfour on October 03
Executives at Ping An Insurance must be breathing a collective sigh of relief. A deal for the Chinese company to pay about $3 billion for a 50% stake in Fortis' asset management arm was scrapped following the $15.4 billion emergency government bailout at Belgian bank Fortis announced on September 28. Ping An must be smarting from the drubbing it has taken since buying a 4.2% stake in Fortis itself, for which it paid $2.7 billion. That stake is now worth a fraction of what Ping An paid.
Ping An isn’t the only Chinese company to have narrowly escaped a bum banking deal. In March, Citic Securities dodged a bullet when a deal to pay about $120 per share for a 6% stake in Bear Stearns fell apart after the collapse of the Wall Street Investment Bank, whose shares had plummeted to $6 before JP Morgan took it over.
But China’s sovereign fund, China Investment Corp, or CIC, has made some pretty horrendous stumbles investing in the U.S. financial sector since it was set up last year. Its investment in Blackstone made about a year ago before the private equity company went public has done nothing but go south since. And the $5 billion CIC paid for a 9.9% stake in Morgan Stanley more than a year ago hasn’t fared much better.
Rather than being once burned, twice shy, perhaps those controlling the purse strings at China’s cash rich institutions should be taking their cue from Japan, and taking advantage of the carnage on Wall St. to scoop up financial assets on the cheap. Nomura has bought up Lehman’s Asian operations, and Mitsubishi took a stake in Morgan Stanley—diluting CIC’s share in the process.
One deal to watch: Bank of China’s September purchase of a 20% stake in France’s venerable Rothschild banking operations. Whether that merchant bank will emerge from the financial crisis unscathed remains an open question.
Posted by: Bruce Einhorn on October 02
The poisoned milk scandal keeps spreading. Today Taiwanese government officials yanked Nestle products from store shelves after tests showed trace amounts of melamine, the industrial chemical added to Chinese milk. According to the Associated Press Taiwan's Health Minister, Yeh Ching-chuan, said Nestle powdered milk from northeastern China's Heilongjiang province had between 0.3 and 0.85 parts per million of melamine. "Such minor doses of melamine will not affect people's health," Yeh said, "but we will take them off shelves according to our recommended procedures."
Nestle argues that the move is unnecessary. In a statement sent to reporters today, the Swiss giant said "the company immediately complied with authorities’ request, even though the Department of Health itself confirmed that these products are absolutely safe by any recognized international standards. Moreover, these products had already received official certification as being safe from the Department of Health."
The company also takes a stab at trying to contain a melamine panic among health officials. Yes, there's some of the chemical in Nestle's milk, the company says, but the amounts not only are so small as to be insignificant to health, they also would probably be there regardless of what unscrupulous Chinese dairy industry players did. "According to international experts the levels of melamine detected in these products by Taiwan's Department of Health are so minute that they are almost certainly present in any food product anywhere in the world. Such minute traces exist in the natural food cycle. Indeed, the EU and the US have long had limits for the presence of melamine in food and the WHO recently issued recommendations which were used by other countries including New Zealand to set their own standards. The 0.05 ppm detection limit currently applied in Taiwan is up to 50 times below recognized and accepted international standards."
Perhaps Nestle does have science on its side. But right now the science doesn't much matter. Given the shocking news from China and the heartbreaking photos of Chinese babies suffering from melamine-induced kidney stones, I seriously doubt Nestle or any other company will be able to make much headway in stopping the momentum against Chinese-made dairy products.
