WCA January 2007

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From the Americas
25 Wire & Cable ASIA – January/February 2007
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 24th 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.
Aerospace
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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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
25th 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.
Automotive
Nissan Motor Co said on 26th 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 25th 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.
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