EoW July 2007

Transat lant ic Cable

Sarah A Webster reported in the Detroit Free Press (7 th May) that a Ford casting plant in Windsor, Ontario (Canada), will also be closed this year. And she said the auto maker will defer moving production of a new 3.5-litre engine at one of its two Cleveland engine plants to an engine plant in Lima, Ohio, until next spring. Mr Hinrichs gave an update on the progress Ford has made in executing its plan, announced in 2006, to shed 44,000 jobs. In all, 25,000 hourly United Automobile Workers union members have left the company under a buyout programme. About 10,000 workers who accepted buyouts have not yet left. Ohio has borne the brunt of the Ford cuts. A stamping plant in Maumee, near Toledo, and a transmission plant in Batavia, near Cincinnati, are both set to close next year. In addition, Ford has said that by the end of 2008 it will have closed or sold all facilities that it took back as part of a bailout of Visteon Corp, the Michigan parts supplier it had spun off. A component plant in Sandusky, Ohio, is among the operations affected. Ford, which lost $12.7 billion in 2006 and $282 million in the first quarter of this year, has suffered shrinking demand for its older models. The nation’s No 2 auto maker is resting its hopes for a return to profitability on the economies of the Way Forward and a new product line. The election to decide who succeeds President George W Bush will not be held until November 2008, and at this early stage aspirants to the office tend to be long on geniality, short on specifics. Senator Barack Obama, whose beaming smile has already made him a favourite of political cartoonists, generally fits that mould. But on 7 th May the first-term Democratic senator from Illinois surprised almost everyone with a stern call for reform of the US automotive industry, delivered at a meeting of the Detroit Economic Club in the auto makers’ home town. “For years, while foreign competitors were investing in more fuel-efficient technology for their vehicles, American auto makers were spending their time investing in bigger, faster cars,” Mr Obama declared on his first campaign trip to the city. “Here in Detroit, three giants of American industry are haemorrhaging jobs and profits as foreign competitors answer the rising global demand for fuel-efficient cars.” Not content to criticise the auto makers, the senator commenced to apportion blame to the government: “The need to drastically change our energy policy is no longer a debatable proposition. It is not a question of whether, but how – not a question of if, but when. For the sake of our security, our economy, our jobs, and our planet, the age of oil must end in our time.” A feature of the Obama plan to help US auto makers help themselves would provide $3 billion to producers over 10 years for re-tooling their plants to make fuel-efficient cars and trucks. The plan also calls for raising American fuel economy standards by 4% each year, an initiative that Mr Obama tied in with global warming and America’s growing reliance on foreign oil. Focusing on the cars Americans drive and the fuels they use could, he said, save 2.5 million barrels of oil per day. “It starts with our cars, because if we truly hope to end the tyranny of Presidential hopeful Barack Obama scolds the US auto industry

oil the nation must once again turn to Detroit for another great transformation,” Obama told the sold-out meeting of business and political leaders.

Metals

The Swiss mining company Xstrata said on 12 th April that it would sell its Noranda Aluminum business to the American private equity firm Apollo Management for $1.15 billion. Noranda has a primary smelter and three rolling mills in Tennessee, North Carolina, and Arkansas, as well as some other operations. Xstrata gained control of the Canadian mining company Falconbridge last year, winning out over Inco, also of Canada, and the copper miner Phelps Dodge Corp, of the US. The $18.8 billion deal enabled Xstrata to diversify into nickel and aluminum and to enter the North American market. Apollo Management is a limited partnership founded in 1990 in New York, with investments of over $16 billion in companies in a range of industries overseas as well as in the US. Lundin Mining Corp, which has operations in Europe, said it has agreed to acquire Rio Narcea Gold Mines, also Canadian, for US$858 million to take advantage of record nickel prices. The offer was reported to be at a 3.7% premium to the gold miner’s closing price on 3 rd April. Lundin plans to increase Rio Narcea’s nickel and copper operation in southern Spain and might, it said, sell its gold mine in Mauritania. Rio Narcea is based in Toronto; Lundin in Vancouver, British Columbia.

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The economy

International Monetary Fund predicts energetic world economy, sluggish US

The slowest US growth in four years in the first quarter has confirmed the International Monetary Fund’s below-consensus forecast, a deputy chief at the Fund said on 6 th May. “Our 2.2% estimate for US growth this year was already lower than the consensus, so the recent data is pretty much in line with our expectations,” deputy managing director Takatoshi Kato of the IMF said in an interview with Bloomberg News in Kyoto, Japan. “We still expect US growth to recover into next year after the housing market picks up.” On 11 th April, in the latest edition of its World Economic Outlook, the IMF had forecast that the world economy would grow by 4.9% this year and next – even as the US experiences its weakest growth in five years. The 2.2% projection for the US economy in 2007 was down from the 2.9% increase that was forecast in September 2006 – the revision downward attributed by the IMF to the deepening housing market downturn. The US housing market started its decline in 2006 after a five-year boom, and any turnaround in residential construction ‘is still several quarters away,’ according to the IMF in April.

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EuroWire – July 2007