The world this week

Business this week

Feb 12th 2009
From The Economist print edition

Bankers in America and Britain faced a roasting at hearings in Congress and Parliament. The chief executives of eight banks, including Bank of America, Citigroup and Goldman Sachs, were contrite in their testimony to congressmen, who wanted to know how the public aid that the banks receive is being spent, and when it would be repaid. Politicians in both countries also blasted bankers for continuing to pay out large bonuses. See article

Crosby defenestrated

At the parliamentary hearing the former head of risk at HBOS said he had been dismissed in 2004 for warning the bank that it was expanding too quickly. The allegation prompted James Crosby, HBOS’s chief executive at the time, to resign from his current job as deputy chairman of the Financial Services Authority. The FSA felt compelled to issue a statement that it had raised its own concerns about risk management at HBOS as far back as 2002. See article

UBS posted an annual net loss of SFr19.7 billion ($18.2 billion), the biggest-ever in Swiss corporate history. Net outflows from private clients at the bank’s wealth-management division continued apace in the last quarter of 2008. Still, UBS reported that net new money was “positive” in January, and that it expects to turn a profit in 2009.

Barclays, which has not received funding from the British government, made a pre-tax profit of £6.1 billion ($11.9 billion) last year. The bank gained, among other things, from its acquisition of Lehman Brothers’ American business.

BNP Paribas’s takeover of Fortis’s Belgian banking operations was thrown into doubt after an angry meeting of Fortis shareholders. They rejected two (already completed) deals crafted by the Belgian and Dutch governments that split Fortis’s assets, forcing the abandonment of a third vote on the BNP Paribas acquisition.

The Securities and Exchange Commission reached a deal with KBR and Halliburton, two engineering contractors based in Houston, that resolves charges relating to the bribery of Nigerian officials. The penalties and fines of $579m constitute the largest combined settlement ever paid by American companies under the Foreign Corrupt Practices Act.

Intel unveiled plans to invest $7 billion in factories in America that will make new, 32-nanometre chips and support 7,000 high-tech jobs.

State returns

The French government said it would provide separate €3 billion ($3.9 billion) five-year loans to both Renault and PSA Peugeot-Citroën in return for the companies agreeing to keep factories open in France. Nicolas Sarkozy’s suggestion that Peugeot close its plants in other countries caused much consternation in Slovakia and the Czech Republic, where Peugeot has factories. The Czech prime minister accused the French president of protectionism and called a summit.

Nissan forecast a big annual loss, its first since Carlos Ghosn was parachuted in to head the Japanese carmaker when it struck an alliance with Renault, which holds a 44% stake. Nissan will shed 20,000 jobs.

General Motors cut 14% of its salaried workforce, or 10,000 employees, as part of a viability plan that it must soon submit to Congress in order to keep its bail-out money.

China’s exports fell by 17.5% in January, compared with a year earlier. Imports plunged by 43%. The figures were worse than expected. Taiwan, Japan and South Korea, which supply China with many of the components used in its factories, have all recorded much steeper declines in exports.

Rio Tinto made public the terms of an investment from Chinalco. The state-owned Chinese aluminium producer will provide a $19.5 billion injection to the Anglo-Australian mining giant in return for stakes in some of Rio’s mining assets and convertible bonds, which could eventually give Chinalco a near-20% stake in Rio. The deal is controversial, not least in Australia, which promptly began re-examining its foreign-ownership laws. See article

Alaska Airlines asked for a public inquiry into Virgin America's “citizenship status”. Virgin America began regular flights in the United States in August 2007 after three years of wrangling over the status of its foreign ownership. To operate on domestic routes, a carrier must be at least 75% owned by American investors.

Born to run?

Live Nation and Ticketmaster announced their long-rumoured merger, which will create a behemoth in the business of promoting concerts and other live events. Antitrust regulators will look closely at the deal. Some artists, including Bruce Springsteen, have complained that they are steadily being given less of a say about their tours.


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