EoW September 2008

Transat lant ic Cable

“We are focused on improving Volvo’s business results.” In an interview with Ward’s in April, Ford President and CEO Alan Mulally did indeed assert that the “main strategy on Volvo is to improve and fix the business.” However, as Mr Pope noted in June, much had changed in recent weeks, including the emergence of billionaire Kirk Kerkorian as a major investor in Ford. “Mr Kerkorian, who holds a 6.49% stake in the auto maker, has said he may offer business suggestions from time to time,” observed Mr Pope. “His top lieutenant . . . has publicly stated Ford should divest itself of its Volvo subsidiary.” Other automotive news . . . Chrysler, the third-largest US-based auto maker, said on13 th June that it would raise prices an average of 2% on all 2008 model-year cars and trucks because of rising costs for steel and other commodities. Chrysler, whose sales fell 19% in the first five months of this year, said the increase will bring its prices in line with those of its competitors General Motors and Ford. In December, GM raised its per-vehicle prices as much as $1,500, citing higher commodity expenses; and, on 22 nd May, Ford’s chief executive Alan Mulally said that commodity costs were among the reasons his company was forced to abandon a 2009 profit goal. Chrysler spokesman Stuart Schorr said, of his company’s price increases, “Today’s economic conditions and forecasts indicate unrelenting pressure as to commodity prices, specifically steel, which have forced our hand.” (Bloomberg News)

Aviation

The European Union on 26 ❈ ❈ th June announced a landmark agreement that would cap emissions from aircraft. Beginning in 2012, all airlines operating flights into or out of airports in the EU would be required to buy pollution credits: the emissions-trading technique that treats pollutants like commodities on the open market. Europe’s inclusion of aviation in the system previously confined to heavy industry raises the pitch in an increasingly contentious transatlantic confrontation over global regulation of greenhouse gases. The immediate response of US officials to the new requirements was to question their legality under the convention governing international civil aviation. In Brussels, a spokesman at the United States Mission to the European Union said, “The mandatory application of the European Emissions Trading System to US airlines and airlines of other non-European countries is, we think, both contrary to international law and ultimately unworkable.” “The US [airline] industry is facing its biggest challenge since the ❈ ❈ inception of commercial air travel,” analyst Mark J Schulte told a 25 th June luncheon meeting of the International Aviation Club, in Washington, DC. Citing the $61 billion that US air carriers are projected to pay for jet fuel this year – up $20 billion from a year earlier, and double what they paid in 2004 – he said that options open to cash-strapped executives included selling off assets, taking on more debt, and selling ownership stakes to foreign rivals. American Airlines, the largest US carrier, is hoping that a deep ❈ ❈ round of service cuts will see it through the emergency. On 25 th June, American announced that it was shrinking the number of its flights from NewYork’s LaGuardia airport and eliminating service to four smaller US cities: Albany, New York; Providence, Rhode Island; Harrisburg, Pennsylvania; and San Luis Obispo, California. The cuts, which go into effect in October, follow an announcement in May that the airline would slash its US flying capacity by as much as 12%. In November, American will cease flying from LaGuardia to Reagan National Airport, in the Washington area. Emirates, the largest airline in the Middle East, said in June that it ❈ ❈ would start daily nonstop service between Dubai and Los Angeles on 1 st September; and, on 26 th October, between Dubai and San Francisco. The airline already offered daily non-stop service from Houston, Texas, to Dubai. The largest customer of the Airbus A380, Emirates had previously announced the launch on 1 st August of the first service to the United States with the new European-built superjumbo jetliner: nonstop flights between Dubai and New York’s John F Kennedy International Airport. Sheikh Ahmed bin Saeed Al-Maktoum, the chairman and chief executive, said on 9 th June that the US represents a key focus area in Emirates’ route development plans.

Dorothy Fabian USA Editor

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EuroWire – September 2008