TheState.com: Business - Wire

Challenges abound for Bush at last economic summit

Sat, 05 Jul 2008 15:56 EDT

The problems do not get any easier as President Bush attends his final summit with leaders of industrialized democracies.

Disputes over global warming, worries about soaring oil prices and uncertainty about Iran and North Korea's nuclear ambitions pose daunting challenges for Bush when he sits down with presidents and prime ministers Monday.

There are fewer than 200 days left in his term, and Bush's dwindling presidency is a major factor hanging over the meetings involving leaders from Japan, Germany, Britain, France, Italy and Canada at a Group of Eight summit in Toyako, on the northern Japanese island of Hokkaido.

With Bush en route to Japan on a nonstop flight Saturday, there is a mix of high challenges and low expectations for the summit.

Atop the agenda is reaching a deal that would set targets for reducing the pollution that causes global warming. But few expect major headway or concessions from Bush. He insists on holding China and India, fast-growing economies and among the world's biggest polluters, to the same emission-reduction standards as older, developed economies.

Smooth sailing for yacht builders despite economy

Sat, 05 Jul 2008 00:31 EDT

Fuel prices are soaring and credit markets tightening, but the super-rich are still lining up to pay tens of millions of dollars for mega yachts.

The well-heeled buyers of the floating mansions are increasingly coming from emerging economies - in the Middle East, Russia and South America. The source of their wealth runs the gamut - technology, venture capitalism, new industries. And, yes, oil.

"There are a lot of people with new wealth looking for relaxation and enjoyment," said John Dane III, president of privately owned Trinity Yachts, the largest U.S. builder.

These days, the biggest problem at Trinity's shipbuilding yards is having enough workers to handle the 24 custom contracts the company currently is working for the luxury vessels.

"Nobody is buying these yachts because they need them," said William S. Smith III, Trinity's vice president. "They're buying them because they want them."

Small-cap stock run could herald broader recovery

Sat, 05 Jul 2008 04:26 EDT

Even as Wall Street skids lower almost by the day, and the major indexes have touched the levels of a bear market, some analysts are actually finding some signs in the performance of small-company stocks that might be pointing to the early stages of a much broader recovery.

Small-cap stocks are now doing better than the overall market - and that has some analysts hopeful. These stocks typically get knocked lower during tough economic times as investors look to safer investments, but historically are the first to rise when the economy rebounds.

In the year following the end of each of the past 10 recessions, small stocks rose an average of 28 percent compared to 19 percent for large stocks, according to T. Rowe Price. And, the Russell 2000 index of smaller companies has performed significantly better than larger-company indexes so far this year.

While the Dow Jones industrials are down about 15 percent for the first half of the year, the Russell 2000 has fallen 10 percent. And, since the lows of mid-March, the Russell has risen almost 7 percent compared to the less than 1 percent gain by the broader Standard & Poor's 500 index.

"The classic thinking is that if you're going to bet on a recovery, small-caps are going to lead the charge," said John Thornton, co-portfolio manager of Houston-based Stephens Investment Management Group. "And when all you hear about is oil prices, interest rates and credit exposure, in the small-cap world you can find unique companies that can grow despite a bad economy."

Nigeria's first oil well is still source of woe

Sat, 05 Jul 2008 15:31 EDT

Three decades after pumping its last drop, the first oil well in Nigeria is marked by a decrepit signboard bearing what would seem an uncontroversial statement:

Oloibiri Well No. 1, drilled June 1956, 12,008 feet.

But this well, furred with rust, is at the center of an increasingly vitriolic feud between two villages over who owns the land beneath it. The conflict is fed by hopes that soaring prices will tempt big business to squeeze more oil from the well and give a pittance to the village that owns the land.

The tussle between Oloibiri and Otabagi brings into stark relief how villages that sit on the prodigious oil reserves in Nigeria, Africa's biggest producer of crude, have barely profited from the booming industry. Corrupt officials have hoarded the government's cut of profits, and energy firms have compensated locals with paltry payments worth a fraction of the hundreds of billions generated by drilling.

In both villages, children wander unclothed past heaps of burning trash. Oil spills have sullied the farmlands and spoiled the water. Fields once crammed with ears of corn, and nets full of flapping fish, have become distant memories.

9 convicted in Austria fraud case

Sat, 05 Jul 2008 04:31 EDT

Nine people, including a prominent executive who fled to France in an attempt to elude justice, were convicted Friday of criminal charges in a major Austrian bank fraud case linked to the 2005 collapse of New York-based commodities brokerage Refco Inc.

Vienna Federal Court Judge Claudia Bandion-Ortner found the defendants responsible for 1.4 billion euros ($1.9 billion) in losses at BAWAG, Austria's No. 4 bank.

The defendants include two former BAWAG executives, Helmut Elsner and Johann Zwettler, and U.S.-based investment banker Wolfgang Floettl.

All nine had proclaimed their innocence on charges of breach of trust, aiding breach of trust, false accounting and fraud.

Bandion-Ortner denounced Elsner's actions as "aggressive and recklessly risky" and said he gambled with depositors' assets as though he were "in a casino."

Travel experts: US share of foreign tourists slips

Sat, 05 Jul 2008 04:21 EDT

Despite the weak U.S. dollar, a boom in international travel around the world hasn't translated into an explosion of foreign tourists to the United States.

Explanations range from post-9/11 security headaches and lower airfares elsewhere to poor marketing by the U.S. Whatever the cause, travel industry experts say the U.S. is missing an opportunity to make up for the shortfall in domestic tourism caused by high fuel prices.

At Heli USA Airways, one of several operators that whisk visitors on aerial tours of the Las Vegas Strip and nearby Grand Canyon, vice president of marketing and sales John Power said the faltering U.S. economy and competition from other countries are crimping business.

"Right now, there's some other worldwide destinations that are taking some of the marketplace," said Power.

According to the U.N. World Tourism Organization, the United States had 51 million international visitors in 2000, more than 7 percent of the 682 million international arrivals worldwide. But as international arrivals worldwide jumped to 846 million in 2006, the U.S. saw roughly the same number of visitors as it used to - dropping its share to 6 percent.

SocGen fined over trading scandal

Sat, 05 Jul 2008 04:26 EDT

France's central bank announced Friday that it has fined Societe Generale $6.3 million for "serious shortcomings" in its internal controls that led to nearly $7.8 billion in trading losses announced earlier this year.

The Bank of France's banking commission also issued a formal warning to SocGen, France's second-biggest bank, saying shortcomings in "hierarchical controls" for extended periods in 2007 fueled the problem.

Societe Generale officials in Paris declined to comment on the decision, made Thursday but announced Friday on the Bank of France Web site.

The commission's ruling noted "significant weaknesses" in Societe Generale's computer security systems and said that traders and those meant to monitor them were not sufficiently independent of each other. It noted, however, the bank's quick efforts to rectify control failures after the losses were discovered.

Societe Generale has accused futures trader Jerome Kerviel of betting tens of billions of the bank's money without permission, which led to massive losses announced in January. Investigating judges have filed preliminary charges against Kerviel for forgery, breach of trust and unauthorized computer use.

Canadian telecom BCE, suitor agree on terms

Sat, 05 Jul 2008 04:31 EDT

BCE Inc, Canada's largest telecommunications company, said Friday it has agreed on terms of a $35 billion sale to a group led by the Ontario Teachers' Pension Plan in the biggest leveraged buyout ever. The deal is expected to be completed by mid-December.

The announcement ends suspense that the banks funding the biggest buyout to date in Canada would try to back out of the deal or that the price would have to be lowered.

The acquisition price remains at 42.75 Canadian dollars ($42.08) per share in cash.

Citigroup, Deutsche Bank, Royal Bank of Scotland and Toronto-Dominion Bank are slated to provide billions in financing to complete the deal. Including assumed debt, the transaction is worth $51 billion.

The acquisition by Teachers Private Capital, joined by U.S. investment firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity, will close "on or before Dec. 11," BCE said in a statement

Companies begin quest for oil, gas off Fla. coast

Sat, 05 Jul 2008 09:06 EDT

Oil companies once viewed drilling in the deep waters off Florida as cost prohibitive. Politicians feared even the slightest sign of support would be career suicide.

No more. Record crude oil prices are fueling support for oil and natural gas exploration off the nation's shores. In Florida, movement was underway even before President Bush called on Congress last month to lift a federal moratorium that's barred new offshore drilling since 1981.

The early activity here stems from a 2006 Congressional compromise that allows drilling on 8.3 million acres more than 125 miles off the Panhandle - an area that had been covered by the moratorium, which was enacted out of environmental concerns. In exchange, the state got a no-drilling buffer along the rest of its beaches.

Florida may turn out to be a prelude for other coastal states. If oil or natural gas deposits are found in the newly opened region, experts say it could further the push to explore other once-protected areas everywhere. It also could be a rallying point for critics, who say the new exploration isn't a license to expand exploration.

With gas topping $4 a gallon, recent polls show Americans, Floridians included, more supportive of drilling in protected areas. Some politicians - including Gov. Charlie Crist - have switched sides.

Gas prices hit another high for holiday weekend

Fri, 04 Jul 2008 21:06 EDT

Fireworks aren't the only thing skyrocketing on this Fourth of July. The price of gas has hit another all-time high.

The AAA fuel-gauge report puts the national average price of a gallon of regular at a fraction over $4.10.

The price of premium as of today is $4.51.

A month ago, regular was going for $3.98 a gallon and a year ago you could gas up for $2.95 a gallon.

Japan's key stock index extends losses

Fri, 04 Jul 2008 05:26 EDT

Japan's key stock index extended its longest slide in more than a half-century, as record oil prices intensified concerns over the impact on corporate earnings and consumer demand.

The benchmark Nikkei 225 Stock Average lost 27.51 points, or 0.21 percent, to 13,237.89. The broader Topix index of all First Section issues on the Tokyo Stock Exchange slipped 0.01 percent to 1,297.88.

The Nikkei has lost more than eight percent of its value over the 12-day fall, which is the longest losing streak since the index stumbled for 15 straight trading days starting April 28, 1954.

Light, sweet crude for August delivery surged to a record close of $145.29 on the New York Mercantile Exchange Thursday and held near $145 in Asia Friday.

Among losers Friday in Tokyo were paper makers, retailers and power companies.

American Airlines workers brace for job cuts

Fri, 04 Jul 2008 06:01 EDT

Many more job cuts, likely totaling more than 6,000, are likely at American Airlines as the nation's largest airline hunkers down and tries to survive record high fuel costs.

American notified its flight attendants union on Wednesday that it will cut up to 900 jobs starting Aug. 31, but that appears to be the tip of the iceberg.

Although American has not given a total figure, the airline says it expects to shed 8 percent of its work force. With about 85,500 workers, including those at sister airline American Eagle, that would represent more than 6,800 jobs.

"The mood is fairly glum," said Karl Schricker, an American pilot and union spokesman. "They brought back 30 furloughed pilots in June. Those guys quit other jobs to come back ... and now they wonder if they'll be out the door."

American plans to cut domestic capacity 11 percent to 12 percent this fall. Overall, including international flying, that translates to a pullback of about 8 percent.

Japan's ANA may purchase Airbus A380

Fri, 04 Jul 2008 06:01 EDT

All Nippon Airways Co. is studying buying about five Airbus superjumbo A380s or other aircraft for long-haul routes, the Japanese carrier said Friday.

The nation's No. 2 airline set up a panel Thursday to decide which jets to buy, ANA spokeswoman Nana Kon said.

"We have several options including the A380, from which we plan to choose the optimal equipment," Kon said. The airline is also considering Boeing aircraft such as the 787 and 747, she said.

If the airline selects the A380, it would need about five jets for long-haul routes such as round-trip flights between Tokyo and New York, she said.

All purchases will be for long-distance flights to the United States and Europe, in time for a planned runway expansion at Tokyo's Narita International Airport set for 2010, Kon said.

Farmers say salmonella scare has hurt tomato sales

Fri, 04 Jul 2008 22:21 EDT

Expect fewer slices of red, ripe tomatoes next to the grill this holiday weekend.

With a salmonella scare causing many customers to shun what's normally a summertime favorite, tomato farmers nationwide have had to plow under their fields and leave their crop to rot in packinghouses.

As losses across the supply chain top $100 million, industry leaders are calling for a congressional investigation into the government's handling of the outbreak, the source of which hasn't been determined.

McDonald's Corp., Wendy's International Inc. and Yum Brands Inc. resumed offering some tomatoes on their menus in the last few weeks.

But now, during one of the biggest barbecue weekends of the year, tomato farmers say their summer season has already withered despite the government's recent announcement that some other type of fresh produce might have caused the salmonella outbreak, which has sickened 922 people.

UBS may post small loss for 2Q

Fri, 04 Jul 2008 13:56 EDT

UBS AG, Switzerland's largest bank, said Friday it expects its second-quarter results to be "at or slightly below break-even" due to a tax credit that will at least partly offset investment losses. It also said it won't need to ask for more capital when it reports the results next month.

Analysts had been expecting a second-quarter loss of as much as $4.9 billion from the bank that has been hammered by big losses related to the U.S. subprime lending crisis.

Shares in the crisis-hit bank jumped 8.2 percent to 22.74 Swiss francs ($22.17) on the announcement but soon fell back as analysts noted that without the unexpected tax credit of 3 billion Swiss francs ($2.9 billion) that UBS would record a significant loss.

The bank's shares closed down 2.6 percent at 20.48 francs ($20.01) on the Zurich exchange.

Worsening market conditions led to write-downs and losses in its investment business during the second quarter, UBS said.

BHP, China's Baosteel agree iron ore price hike

Fri, 04 Jul 2008 11:46 EDT

BHP Billiton Ltd. said Friday that China's Baosteel, negotiating on behalf of the Chinese steel industry, agreed to price hikes of up to 96.5 percent for iron ore supplies this year following protracted negotiations.

The increase is in line with an agreement Baosteel made last month with Rio Tinto, another major supplier, and comes as surging global demand for steel has squeezed iron ore supplies and sharply boosted prices.

Prices will rise 79.88 percent for iron ore fines and 96.5 percent for iron ore lump and are retroactive to April 1, BHP Billiton said.

"We are happy to have been able to settle the prices announced with one of our most important customers and we've been particularly pleased with the spirit in which both Baosteel and BHP Billiton undertook negotiations," said Marcus Randolph, BHP Billiton's chief executive for ferrous and coal, in the statement.

"At the end of what has been a long process, we believe our relationship with our customers remains as positive and strong as ever."

AP Executive Morning Briefing

Fri, 04 Jul 2008 05:41 EDT

The top business news from The Associated Press for the morning of Friday, July 4, 2008:

G-8 leaders face ominous economic woes this year

SAPPORO, Japan (AP) - Between surging oil prices, food inflation and a credit crunch that's depressed global growth, leaders from the Group of Eight economic powers face the gravest combination of economic woes in at least a decade when they gather next week. The outlook has darkened dramatically since last year's summit in Germany, when the leaders declared the global economy was in "good condition" and oil cost $70 a barrel - which seemed high at the time.

---

Chrysler looks at auto alliance with Chinese

European shares fall, Asia markets mixed

Fri, 04 Jul 2008 17:36 EDT

European markets fell and Asian markets were mixed Friday as investors digested uneven readings on the U.S. economy and oil prices that remained near records. Japan posted its 12th straight day of losses.

Trading was subdued as U.S. financial markets were closed for the July Fourth holiday.

In Europe, Britain's FTSE 100 closed down 1.16 percent to 5,412.80, German's DAX fell 1.28 percent to 6,272.21, and France's CAC-40 slid 1.80 percent to 4,266.00.

In Asia, Indonesia's main index rebounded after selling off nearly 4 percent the prior session. Hong Kong and Australia equities also were higher.

With stocks hit hard recently, some Asian investors were returning to the market to take advantage of lower prices. Others who bet on falling prices were starting to take profits, further supporting prices.

Australia's Origin Energy rejects BG's $13B bid

Fri, 04 Jul 2008 06:01 EDT

Origin Energy Ltd., Australia's second largest power retailer, rejected a $13 billion takeover bid Friday from British natural gas producer BG Group.

BG Group last month launched a hostile bid of 15.50 Australian dollars per Origin share, almost four weeks after Origin rejected an unsolicited proposal from BG Group at the same price. That was revised up from an initial offering of 14.70 Australian dollars a share in April.

Origin said in a statement to the Australian Securities Exchange on Friday that the board had considered BG Group's cash offer and had decided to recommend that shareholders reject it.

BG Group wants Origin's gas resources in eastern Australia to feed a liquefied natural gas plant it is planning to build in Queensland state.

Origin plans to monetize its vast coal seam gas reserves by inviting third parties to buy into or partner with them in developing the resources. The tender process ends Friday evening.

Oil steady above $145 in Asia on Saudi declaration

Fri, 04 Jul 2008 05:56 EDT

Oil prices remained near record highs above $145 a barrel in Asia after Saudi Arabia's oil minister suggested his country doesn't plan to boost production.

Light, sweet crude for August delivery was up 23 cents at $145.52 a barrel in Asian electronic trading on the New York Mercantile Exchange, midafternoon in Singapore. Crude futures rose to $145.85, a record high, in New York on Thursday before settling at a record finish of $145.29 a barrel.

Oil prices have risen more than 50 percent so far this year.

Saudi Arabian Oil Minister Ali Naimi said Thursday in Madrid that the world's biggest oil exporter had no immediate plans to boost crude output because there was no need to do so. Naimi said Saudi Arabia is ready to raise production if the kingdom determines supply-and-demand fundamentals have changed. But for now, "all our buyers are satisfied and happy," he said.

Gains by the dollar Thursday against the euro helped keep oil prices from rising further. The greenback strengthened after the European Central Bank raised its benchmark interest rate an expected quarter point but signaled it didn't expect additional rate hikes that might further boost euro.