Posted by: Mark Scott on July 02
So that's it. After an on-again, off-again relationship with rival BHP Billiton, and an unsuccessful link-up with state-owned Aluminum Corporation of China, or Chinalco -- a major customer -- London-listed mining giant Rio Tinto finally has got the money it so desperately needs. On July 1, the company announced almost 97% of shareholders had participated in a $15.2 billion rights issue. Details of a parallel Australian rights issue (Rio is dual listed in Britain and Australia) will be unveiled on July 3.
Rio's capital raising has been a long-time coming. Ever since the miner forked out $38 billion for Canadian mining firm Alcan back in 2007, the company has been saddled with mounting debt. Rio has two trances of debt -- almost $20 billion combined -- that are due by October 2009 and 2010, respectively. That's why Chief Executive Tom Albanese courted Chinalco, and why eventually he ditched the Chinese in favor of a shareholder rights issue and a lucrative joint venture with BHP Billiton.
The fact investors were willing to hand over more cash to Rio just shows how much confidence has returned since early 2009. When the Rio-Chinalco tie-up was first announced, analysts said it was the most viable way for the miner to raise much-needed capital in a short period of time. Since then, global financial markets have somewhat rebounded, and Rio's shareholders balked at being left out of Chinalco deal.
For sure, we haven't returned to the credit-soaked mining mergers of two to three years ago, when the likes of BHP Billiton was (unsuccessfully) offering $160 billion for rival Rio Tinto. But that doesn't mean deals have vanished altogether. The recent offer from Xstrata, the Swiss-based miner, to merge with Anglo American could be a sign of things to come. In response, Anglo is reportedly shopping its Brazilian operations to raise a war chest to see off Xstrata's advances.
Does that mean the commodities industry has survived the worst of the recession? Maybe not just yet. But if shareholders are willing to spend almost $15 billion in Rio's rights issue, the investment case for the mining sector could well pick up in the second half of the year.
Posted by: Carol Matlack on June 26
Three years ago, Airbus looked like a fumbling laggard. While Boeing Co.'s 787 Dreamliner racked up order after order, its European rival had to go back to the drawing board twice, before settling, in mid-2006, on a competing design that airlines wanted to buy.
But in hindsight, that delay may have been a stroke of good luck for Airbus and its forthcoming A350 aircraft.
Boeing has seen a raft of 787 orders evaporate in the past few months, as financially strapped airlines have cancelled more than 70 orders and deferred dozens more. The latest blow came on June 26, when Australia's Qantas announced it was cancelling an order for 15 of the planes and putting off delivery of 15 others from 2010 until 2013. "The operating environment for the world's airlines has clearly changed dramatically," since Qantas initially placed its order in 2005, CEO Alan Joyce said in a statement.
Airbus has been spared that scenario because the A350 isn't scheduled to enter service until 2013, when most analysts figure the aviation business will be well on its way to recovery.
Continue reading "Can Airbus Press Its Advantage Over Boeing"
Posted by: Kerry Capell on June 26
Would you accept a pay cut, or even work for free to save your job? On June 26, British Airways announced that some 17% of its 40,000 strong workforce did. Just under 7,000 of British Airways' staff accepted pay cuts, including 800 of whom followed the lead of CEO Willie Walsh and agreed to work for free for a month.
BA says the moves will save the troubled airline up to $16.5 million. Walsh, who will be forgoing his own salary in July, described his employees offers somewhat patronizingly considering his own $1.2 million salary last year as a "fantastic first response."
That implies Walsh is hoping for more, something union leaders say is unrealistic. Britian's biggest union Unite claims employees were bullied into accepting the cuts through "intimidating e-mails from senior managers."
Having racked up $662 million in losses in the year through March, the biggest in 25 years, BA needed to do something fast. But the savings from these latest moves are just miniscule compared with the carrier's deteriorating financial position.
Walsh argues that moves are necessary to avoid redundancies. But by resporting to such drastic tactics is BA merely making a bad situation worse by magnifying existing employee, and equally as important, shareholder fears?
What do you think?
Posted by: Mark Scott on June 25
So that's it. Faster than you can say Michael Schumacher, the spat between Formula One and teams like Ferrari and McLaren is over. The result? The teams won't set up a rival championship, and the sport's governing body, the Federation Internationale de l’Automobile (FIA), has relaxed attempts to cut costs.
As I said before, some sort of compromise was always likely to happen. What's more interesting, though, is why. The official line is that both sides buried the hatchet. The truth, though, could lie with Luxembourg-based mega private equity firm CVC Capital Partners. The company bought the commercial rights to F1 between 2005 and 2006 for an estimated $3 billion -- mostly funded through debt.
That's a lot of money to pay back. So when most of the big teams voiced plans to jump ship, it's understandable CVC was fretting about owning a franchise that could have lacked big name teams, big name drivers, and -- most importantly -- big name sponsors.
For now, CVC's investment looks safe. Formula One teams agreed to reduce their costs and support new teams with equipment. The FIA also mollified its proposals and controversial FIA president, Max Mosley, has taken a back seat and won't run for re-election in October.
Now, CVC must be hoping people's attention will turn back to motor racing.
Posted by: Stanley Reed on June 25
BP and Royal Dutch Shell watch each others' every move very closely. After all, the two are seen as local champions in London--even though Shell is now mostly based in the Hague--and their shares are frequently played off against each other by financial traders.
So it's fair to ask whether BP is imitating Shell by hiring Carl-Henric Svanberg, CEO of Swedish telecom equipment maker Ericsson, as its new Chairman. The move invites comparison to Shell's appointment of Jorma Ollila, the former CEO of Finnish telecom whizz Nokia, as Chairman in 2006 following a scandal over misreporting oil reserves.
The answer may be that for these very global companies the Nordic countries are a logical place to look for senior business figures to grace their boards. The Nordics are politically non-controversial and their telecom makers are among the most outward looking of global companies, having long been forced to develop markets outside their own rather small home bases. Svanberg will be familiar with such key developing markets as Russia and China, as well as the U.S.
BP has struggled to find a Chairman to replace Peter Sutherland, an Irishman, who is retiring. Svanberg, who gets good marks for turning around Ericsson after its near death experience in the previous recession, doesn't look an absurd choice--though he may lack Ollila's gravitas and may not be familiar with the issues that an oil giant confronts.
Svanberg, who takes over on Jan, 1, 2010, will be replaced at Ericsson by Hans Vestberg, currently EVP and CFO. That transition was expected, though its timing comes as a surprise.
