WCA January 2007

From the Americas

The carrier, which already operates an extensive Pacific route system with a hub in Tokyo, said in October that the new 787s would allow it to begin additional long-haul trans-Pacific routes. In other news of Boeing, the company said on 25 th October that its third-quarter 2006 earnings fell 31% to $694 million, down from $1.01 billion a year earlier. Profit was hurt by a charge for discontinuing the in-flight Internet service Connexion. That offset higher jet sales and a 19% increase in total revenue, reflecting a thriving commercial plane business. But Chicago-based Boeing also said that its 787 Dreamliner programme was causing concern over weight and supplier-related issues. Boeing will have to spend hundreds of millions of dollars more than anticipated to the end of 2007 on research and development for the super-jumbo jet. Nissan Motor Co said on 26 th October that its sales in the US market dropped 10% to 513,000 vehicles in the July-September quarter, even as the company’s profit rose 31% worldwide over the period. The Japanese car maker attracted attention earlier in the year on word of a possible alliance with General Motors of the US. In a bid to strengthen its market position, Nissan together with partner Renault SA of France entered into talks with GM about forming a three-way partnership. The talks were abandoned after Nissan and Renault declined to pay a premium for what GM said would have been a too-high share of the benefits of the union. A $1.5 billion third-quarter loss at Chrysler Group prompted some industry analysts to question whether its parent company would put it up for sale. But on 25 th October Chrysler executives denied that the company might be abandoned by the German parent that took it over almost a decade ago. DaimlerChrysler’s chief executive Dieter Zetsche, who ran Chrysler until 2005, has in fact stressed his intention to keep it. But as Detroit’s ‘Big Three’ – General Motors, Ford, and Chrysler – struggle to return to profitability, the talk in the US auto industry is of a potential suitor. Carlos Ghosn, the chief executive of Renault and Nissan who tried for the alliance with GM, has made no secret of his desire to acquire a North American partner. Beyond Mr Ghosn the likeliest contender for Chrysler might be a company from China, whose auto makers are eager to expand into North America. But, at least in the view of one analyst, the main attraction for the Chinese would be Chrysler’s brand names and dealerships — not its factories and employees. In other news of DaimlerChrysler, the company is believed to have reached a broad understanding with Chery Automobile of China to export cars to the US for the first time. While some details of the joint venture were still being worked out in early October (no timelines or prices were disclosed), two auto industry managers told the trade press that the companies had begun negotiating with suppliers of auto parts. Automotive

Reconstruction of Iraq

Wasteful practices dissipate millions meant for restoration of electricity, water and oil distribution, hospitals and schools A growing list of investigations indicates that the $18.4 billion of US taxpayer-financed reconstruction, approved by Congress in 2004 for Iraq, is missing its purpose – and not from the necessity of providing physical security to the building sites. By US government estimates, the disappointing results are attributable for the most part to shoddy contract writing, lax oversight, and absent supervision. In a report by the Special Inspector General for Iraq Reconstruction, released on 24 th October, overhead costs for some projects were found to have eaten up more than 50% of the design and construction allocation. The overhead costs ranged from under 20% to as high as 55% of budget, but actual overhead costs for many reconstruction projects might be even higher. The report said that the government agencies charged with supervision of these projects did not systematically track overhead expenses. This latest report provides the first official notice that, in some cases, more money was spent on housing and feeding employees, completing paperwork, and other such services than on actual pick-and-shovel work. On comparable construction projects in the US, those costs might run to a few per cent of the total bill. The government report cited the costly down-time that resulted from dispatching contractors and equipment to Iraq in advance of need. In some cases the delay between ‘mobilisation’ – the arrival of workers and equipment in Iraq – and the start of construction was as long as nine months. The highest proportion of overhead was incurred under oil-facility contracts awarded to KBR Inc, the Halliburton subsidiary formerly known as Kellogg Brown & Root, whose billings have frequently been challenged by critics in Congress and elsewhere. KBR (Houston, Texas) has contracts in Iraq worth up to $18 billion, including the single no-bid contract ‘Restore Iraqi Oil’ which has an estimated worth of $7 billion. Estimates of the total cost of the rebuilding programme in Iraq, including all American and Iraqi contributions, range from $30 billion to $45 billion. The Defense Authorisation Act signed by President George Bush in October 2006 states that the inspector general’s office will halt its examination of these expenditures by October of 2007.

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Aerospace

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Northwest Airlines Corp (Eagan, Minnesota) said it expects to take delivery of its first Boeing 787 Dreamliner in the third quarter of 2008, becoming the first North American airline to fly the new long-haul aircraft. Northwest has ordered 18 of the planes, with options and purchase rights for 50 more. ❖

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Wire & Cable ASIA – January/February 2007