MJ concert organiser faces the music

S Kalyana Ramanathan / London June 28, 2009

Michael Jackson’s death is turning into a nightmare for the organiser of “This is It”, the 50-concert gig of the pop icon scheduled to have begun on July 13 at London’s famous The O2 Arena. While refund of the 750,000 tickets seems inevitable at this stage, the financial implication of the canceled tour is far from clear. Some experts have estimated the loss could be upwards of £50 million.

UK’s popular tabloid The Sun today reported that “the promoter AEG Live now faces the prospect of a £300million black hole in its finances. Jacko’s death has hit it with a £51million bill for ticket refunds”.

AEG, in a statement issued after Jackson’s death, said, “On behalf of the entire AEG organisation, we extend our deepest condolences to Jackson’s family and friends during this tragic time. Full ticket refund information and procedures will be released early next week for all Jackson “This Is It” shows. Fans are advised to hold on to their ticket vouchers/proof of purchase.”

When Jackson’s London tour was made official in March, ticket sales for the July shows broke new records. It was estimated that ticket sales were in the order of 11 per second, 657 per minute and nearly 40,000 an hour.

It was reported that third party sales of tickets on auction sites like ebay were ranging between £75 and £10,000.

Seatwave.com, one of the official channels selling the tickets, said, “We would like to reassure you that your Jackson ticket purchase is fully covered by our TicketCover guarantee. You can claim your complete refund by downloading our claim form...”

The show was also expected to resurrect the personal finances of the debt-ridden singer who was expected to make £50 million for his London performances.

Late Friday evening, AEG Live President & CEO Randy Phillips had said in a statement: “Yesterday was a day I will never forget, or want to remember. Jackson was weak and strong, clever and kind, talented beyond belief and equally insecure. He was a doting father, respectful son, loving brother, and caring uncle. He was my friend. I take great solace in the pride and confidence he exhibited during production rehearsals on Wednesday night. That is the memory I will cherish for the rest of my life.”

An AEG spokesperson said the updated ticketing statement will be issued later. It could not be ascertained if AEG had insured itself against such an event.

Photo: Bloomberg

A first: Ficci pick up stake in company

S Kalyana Ramanathan / London June 12, 2009

The Federation of Indian Chambers of Commerce and Industry (Ficci) has for the first time picked up a stake in a company — Skills Development Corporation set up by Government of India.

Ficci Secretary-General Amit Mitra, on an official visit here as part of a trade delegation, said this new not-for-profit organisation had been set up to improve the availability of skilled manpower in India and Ficci had picked a 10 per cent stake in this company for Rs 51 lakh.

The Skills Development Corporation itself is empowered with a corpus of Rs 1,000 crore. A Ficci representative will also be on the board of this company.

Further, Ficci has also been authorised by the Ministry of Labour to be an official testing centre for students coming out of ITIs. “In the last three months, nearly 12,000 people have taken tests at Ficci with a stringent pass rate of 25 per cent,” Mitra said. Tests are conducted in several areas like carpentry, metal working and welding, Mitra said.

Meanwhile, the visiting Ficci delegation met UK-based Commonwealth Business Council and has agreed to form a “clearing house” kind of institution to aggregate and disseminate information on companies in India and the UK that are keen on possible mergers and acquisitions.

Without specifying a time frame to get this idea rolling, Mitra said that a working group within Ficci would be formed to enable this at the earliest. The idea is to increase capital flows between India and the UK and also allow small and medium sized technology driven companies to find a big market like India.

A 17-member delegation from Ficci headed by its president, Harsh Pati Singhania, was in the UK on a two-day visit ending on June 10 to understand the ways and means to improve trade relations between the two countries. The delegation included CEOs from sectors such as pharmaceuticals, mining, cement, FMCG, energy, and information technology.

“We are trying to see how we can increase M&A between India and the UK and make a list of potential acquisitions and joint ventures that are possible in both countries,” said Mitra.

Singhania said that while large acquisitions in the UK by Indian groups like Tatas had been well known, several small and medium sized companies in the UK had also been acquired by Indian companies.

“While most other countries are looking at China, UK is clearly re-focusing on India. Particularly, tech-centric companies will find a large market in India by doing this,” said Singhania.

Ficci members also met with representatives of the Nuclear Industry Association for possible civil nuclear energy collaboration between India and the UK, particularly in the manufacturing sector., In

UK survey ranks Pune most suitable place in India for British investments

S Kalyana Ramanathan / London June 10, 2009

A survey conducted by trade facilitation body UK-India Business Council (UKIBC) has ranked Pune as the most suitable place for British investments in India. The survey report, titled ‘Opportunities for UK Plc in Emerging Cities in India’, also ranks eight other cities — Ahmedabad, Chandigarh, Jaipur, Goa, Indore, Kochi, Nagpur and Vadodara — as the most conducive destinations for UK investments in India.

The report is a product of “qualitative research through a process of in-depth interviews, reviews and perception surveys across various professional and social networks”. The report said in its preamble that close to 200 survey responses were analysed and over “150 key informants” were conducted to ensure an extensive and representative coverage.

While the report’s annexure lists 41 cities in the survey's ranking with Pune holding the top rank and Ranchi getting the lowest rank, it provides a detailed study of nine cities that merit UK investment the most.

UKIBC’s CEO Sharan Bamford, however, cautioned that the immediate priority of the report was to take the investments forward by pointing at prospective cities for UK investments.

The rankings are based on physical, social and cultural infrastructure and key economic indicators. Good quality roads, power connections, number of banks, health institutions and colleges, per capita income of each city and market size are some of the key parameters considered for the final listing.

European football clubs shoot for India

S Kalyana Ramanathan / London June 07, 2009

European football clubs have finally begun to tap their large fan base in India. English clubs like Chelsea, Liverpool and Manchester United as well as Germany’s Bayern Munich have queued up to capitalise on their fan base in the country and create new business opportunities.

Experts have estimated that the huge following for European football in India is good reason for these clubs to get active in the country.

Berlin-based www.Indianfootball.com’s CEO and Editor-in-Chief, Arunava Chaudhuri, has estimated that there are over 160 million football fans in India and 20 million active footballers. In comparison, Germany — where the sport has a long tradition — has 16.3 million active footballers.

The clubs have taken different approaches to the Indian market. Liverpool, for example, is planning to set up a centre of excellence in Pune, which is expected to be formally inaugurated next week. While the club could not be reached for comments, it is believed that this new centre will first look to develop support infrastructure such as management and physiotherapists before it gets into active training.

Bayern Munich is working with the West Bengal government to set up an academy in Burdwan. Manchester United had earlier announced plans to work with the Bharti Group to set up a National Football Academy. The status of this $100-million project is, however, not clear now. Manchester United has also made its content available exclusively to Airtel subscribers in India. Subscribers will also get to train at the Manchester United Soccer Schools run by Manchester United Merchandising.

Merchandise, which is an important source of revenue for these clubs, is actually the big reason that is driving the football clubs to India. At a recent seminar hosted by the UK-India Business Council on bringing European sports to India, Adidas’ head of global sports marketing, Jocelyn Robiot, said that the estimated size of the sportswear market in India is ¤370 million (Rs 2,300 crore) of which Adidas along with Reebok controls 75 per cent. “After cricket, football is clearly the second most popular sport in India, followed by badminton and tennis,” he said.

“Merchandise is big business for these clubs. In Germany, even water and milk are branded with the club logos and they sell well,” said Chaudhuri. As a keen follower of the game worldwide, he believes that other European teams like Barcelona, AC Milan and Real Madrid too are now eyeing India to develop a fan base.

Most business interests in bringing European football to India in a big way rests on the sheer size and buying power of the youth in India. The 325 million Indians in the age group of 20-35 are a compelling destination for these clubs.

Chelsea Football Club’s CEO, Peter Kenyon, said that football in India is bracketed with other popular youth activities likes fashion, music and films. After scouting for business opportunities in India for over a year now, he said, the youth in India are looking at football as their game as much as cricket was their fathers’. Kenyon said the lack of sports infrastructure and star players are two of the biggest challenges for the success of football in India so far. He added that these are also the areas of expertise the European clubs can bring to India.

Corus out to save purchase contract for Teesside plant

S Kalyana Ramanathan / London June 03, 2009, 0:23 IST

CEO Kriby Adams expected to meet members of the international consortium of buyers who had walked out of a 10-yr contract.


Kriby Adams, CEO of the Tata Steel-owned European steel company Corus, is expected to meet members of the international consortium of buyers who had walked out of a 10-year contract to buy from Corus’ North-East Teesside plant.

Adams will initiate a new round of discussion to avoid the plant’s closure, which could potentially kill 2,000 jobs in the company.

The Corus chief is expected to meet the consortium members in Seoul, South Korea where one of the buyers Dongkuk is based. This developments comes at a time when Corus has already initiated legal proceedings to ensure that the consortium

honours the contract which will end in 2014. A Corus spokesman refused to confirm or deny Adams’ plans to meet the consortium members later this week.

“I will be careful not to use the word re-negotiations. However, Corus has always maintained that it is open for discussion,” he said.

Early last month, the consortium of four buyers — Marcegaglia of Italy, Dongkuk of South Korea, the Swiss-headquartered Duferco and Alvory of Uruguay — had decided to stop buying steel from the Teesside plant due to a fall in the global prices of steel.

The consortium had signed a deal with Corus in 2004 to buy up to 78 per cent of the plant’s output, stretching into 2014.

The loss of this contract forced Corus to announce earlier that it would be left with little choice but to temporarily shut down this plant.

The termination of the contract by the consortium members had triggered a political wave in UK that has, so far, seen Prime Minister Gordon Brown, Business Secretary Peter Mandelson and Redcar (where the Teesside plant is located) Labour MP Vera Bair voicing their support for Corus. Bair visited Italy last month to meet the leader of the consortium Antonio Marcegaglia.

It has been widely reported that two of the members of this consortium might be willing to buy the Teesside plant which could potentially avoid the job losses.

On March 29, Tata Steel UK, a 100 per cent indirect subsidiary of Tata Steel and the holding company of Corus, had received lender approval to reset the covenants in its £3.7-billion acquisition-related senior debt facility. The lenders had voted unanimously in favour of the company’s proposal to reset the covenants.

As part of the agreement reached with the banks, earnings-related covenants will largely be suspended till March 2010 and will then resume with significantly higher flexibility than in the case of the original covenants. It has also been agreed that there will be no increase in the current level of interest costs for the remaining life of the loan.

The revised covenant package does not involve any additional finance from the lenders or rescheduling of its debt-servicing commitments. Further, Tata Steel will inject £425 million into Tata Steel UK in a phased manner, of which around £200 million will be used to prepay debt and de-leverage the European balance sheet

Corus is Europe’s second-largest steel producer with annual revenues of more than £12 billion and a crude steel capacity of about 20 million tonnes. Corus is a subsidiary of Tata Steel, one of the world’s top ten steel producers.

The Indian conglomerate had bought Corus in 2007, taking the total crude steel making capacity of the group to 28 million tonnes and the number of its employees to approximately 82,700 across four continents.

Apollo Tyres looks to be among world's top 10

S Kalyana Ramanathan / London May 22, 2009

Apollo Tyres, post its acquisition of Dutch tyre maker Vredestein Banden BV, is now keen to take its manufacturing footprint into the Asean (Association of South East Asian Nations) region.

After enjoying the status of a significant tyre maker in India for over 30 years, the company now wishes to move into the global league to be among the top 10 tyre makers in the world in the next five years.

The company’s 38-year old Vice-Chairman and Joint Managing Director Neeraj Kanwar (pictured) says that, given the intrinsic bulkiness of a product like automotive tyres, manufacturers like Apollo, who are keen on a global presence, will have to set up manufacturing bases in important markets.

Three years ago, Apollo made its first foreign acquisition by buying Dunlop’s South African operations. Last week, the company completed the acquisition of Vredestein Banden for an undisclosed sum. On a consolidated basis, the group’s turnover now stands at around $1.5-1.6 billion, making it the largest tyre company from India. The Dutch acquisition, with a top line contribution of nearly $425 million (Rs 2,000 crore), accounts for a fourth of this.

With its current operations in India, Africa and Western Europe, the group hopes to cross $2 billion (nearly Rs 10,000 crore) in turnover by March 2011, says Kanwar.

“It took us 30 years to cross the first billion-dollar mark in sales. The next should come in just about three years,” he adds. Now with Europe and Africa being part of its global presence, the next move will be either in China or relatively smaller Asean countries.

“Exports cannot be more than 30 per cent from any location. Without a strong domestic demand, we will not buy or set up greenfield projects anywhere,” says Kanwar. Within Asean itself, Thailand, Philippines and Indonesia count as prominent targets for the company, says an insider.

While the company continues to expand its global presence, its Indian operations are also fast reaching a critical stage. The new plant in Chennai, in which the company will be completing its first phase of expansion by November 2009 and second phase by September 2009, will have a capacity to make 100,000 truck and bus radial (TBR) tyres and 7.5 lakh passenger car radial (PCR) tyres a month, making this plant the company’s largest plant in the country.

In all, the company will be investing close to Rs 1,600 crore in this new plant. Three years after acquiring Dunlop South Africa, Apollo will make its first major expansion there with an investment of $40-50 million (around Rs 190-240 crore) over the next 16 to 18 months, which will double its capacity to make TBR to 1,400 tyres per day and a 25 per cent increase in PCR to 12,500 tyres a day.

Kanwar says that integrating the three operations (India, Africa and Western Europe) will be the next big challenge. Apart from accessto lucrative markets, technology, brands and R&D capabilities have been strong reasons for acquisitions outside India. The 90-member R&D team in Vredestein Banden can play a pivotal role for product development strategy for the entire Apollo group in the coming years. Members from the group in India will meet their new Dutch colleagues in the first week of June to discuss the road map for this integration work.

“Integration of technology, along with what to sell to which market and at what price will be discussed,” says Kanwar.

Even traditional critics of the tyre industry in India, like S P Singh, the convenor of the All-India Tyre Dealers’ Association, agree that the only way Indian tyre makers can access technology to make safety-regulated products is by acquiring companies outside India.

“This is the best way to access European markets, which have very stringent safety standards,” says Singh.

Despite its global plans, the most difficult challenge for the company today is, however, from its operation that is closest to home. The plant in Kalamassery in Kerala (Apollo has its registered office in Kerala), which makes technologically outdated cross-ply tyres, has reached a point where it cannot be expanded.

The company wishes to move this plant to Irapuram (also in Kerala) that is 40 kms from its Kalamassery plant. This move has been opposed by the union.

“At 80 tonnes a year output, the plant is not profitable on a standalone basis. Unless we can take that to 200 tonnes, it will not be profitable,” says Kanwar.

If and when the union agrees, it will be the next big expansion for Apollo Tyres in India after the new plant in Chennai goes into commercial production.

Corus management, Teesside plant union to form 'all-party' group

S Kalyana Ramanathan / London May 16, 2009
The management of Tata Group-owned European steel conglomerate Corus and the union at the Teesside plant (North East England) today met and decided to set up an “all-party group” to consider all options available to overcome the impending job loss at the plant.
The retrenchment was on account of the cancellation of a long-term order that should have ended in 2014. A member of the union who was at this meeting told Business Standard the talks were very fruitful and the all-party group will meet next week to take the discussion forward. This member said everything is being considered to avoid any job loss in this plant.
Earlier this month, a consortium of four buyers – Marcegaglia of Italy, Dongkuk of South Korea, the Swiss-headquartered Duferco and Alvory of Uruguay – had decided to stop buying steel from the Teesside plant due to a fall in the global price of steel.
The consortium had signed a deal with Corus in 2004 to buy up to 78 per cent of the plant’s output stretching into 2014. The loss of this contract forced Corus to announce earlier that it would be left with little choice but to temporarily shut down this plant.
It is believed that, though the number of direct workers at the beleaguered plant is 1,920, the total may rise to 10,000, taking into account other indirect support institutions attached to this plant.
The only silver lining to the challenge faced by Corus was the instant support it had received from the government, with both UK Prime Minister Gordon Brown and Business Secretary Peter Mandelson voicing their views and support to ensure there would no job loss in the plant.
Mandelson, soon after the news broke, urged the company to consider possible legal action to ensure the consortium honours the contract it had signed in 2004. The consortium apparently had saved several million pounds since 2004, as Corus was supplying its output at cost as agreed between the parties.
The Teesside plant, as of date, is operating even though its future is in doubt.

Little option but to close UK unit: Tata

S Kalyana Ramanathan & Ishita Ayan Dutt / London/kolkata May 10, 2009

Unacceptable, says British government; charges fly back and forth.

The British government today said it was “not prepared” to accept an announcement by Tata Steel and its European subsidiary, Corus, that there seemed no option but to indefinitely suspend operations at one of the latter’s factories in north-east England, which means loss of around 2,000 jobs.

This comes just four months after Tata-Corus’ announcement that it would have to cut 3,500 jobs at three steel units of Corus in Europe (two in the UK).

The threatened mothballing now is of Corus’ steel cast products unit at Teesside. Corus said yesterday that it was beginning talks with labour unions to discuss how to mitigate the impact of the threatened closure.

‘We are not prepared to reconcile ourselves to the inevitable closure of this plant,” said Peter Mandelson, the minister concerned in the British government. GMB, the union which represents many employed in both the threatened plant and among the firms of contractors who supply it, said it was urgently petitioning the government to intervene and save the jobs.

The closure, said Tata and Corus, was because of the cancellation of a 10-year agreement signed in 2004 between Corus and four steel producers, in which the latter had agreed to jointly buy 78 per cent of Teesside’s output . The four firms are Marcegaglia of Italy, Dongkuk of South Korea, the Swiss-headquartered Duferco, and Alvory of Uruguay.

The four firms said they had notified Corus of their termination of the 2004 agreement on April 7, citing market conditions in the industry. Last week, the World Steel Association said global demand would fall by 15 per cent in 2009, the steepest yearly decline since the second world war.

The four which withdrew, all steel slab makers, said the 2004 agreement had provided for such withdrawal in this sort of situation. They noted that Corus had tried to get a court stay on their move, but this was refused.

This was in reply to Corus and Tata saying the termination of the ‘Offtake Framework Agreement’ (OFA)was both unwarranted and probably a breach of contract.

An anxious Mandelson said it was “essential that Corus does everything it can legally, and with the government’s assistance, to reinstate the OFA. It is unacceptable that such a development should threaten jobs on such a scale, with such a potentially devastating impact on the area.”

His boss, Prime Minister Gordon Brown, gave Tata more cheer, saying the government would do “everything in our power to ensure the (terminated OFA) contract is upheld”.

Ironically, it was only this January that Corus had signed a formal “memorandum of understanding” to sell 80 per cent of its equity at Teesside to Marcegaglia and Dongkuk (56 per cent and 24 per cent, respectively), two of the four OFA terminators.. The said MOU was valid only till end-June and Corus said it assumed, though there was no formal word, that the proposed deal was also dead.

Tata has more problems ahead in its British operations. Jaguar Land Rover, its automobile subsidiary, is also in deep financial trouble and Rata Tata, the group chairman, has already publicly warned of significant job losses if he doesn’t get government help there. A deal with the British government to provide a guarantee for a proposed loan of 340 million pounds from the European Investment Bank to JLR is close to collapse, according to media reports.

Talks still on for securing JLR loan: UK

S Kalyana Ramanathan / London May 7, 2009

The United Kingdom’s Department of Business, Enterprise and Regulatory Reform (BERR) continues to insist that it is in talks with India’s Tata Motors’ owned Jaguar Land Rover (JLR) for guaranteeing the £340 million loan recently approved by Luxembourg-based European Investment Bank (EIB). “These negotiations are continuing,” BERR said in a statement. “Any government financial assistance must, of course, protect taxpayers' money. But on this basis we are prepared to help, although not on any terms,” it added.

The media in the UK, over the last fortnight, has been reporting that the talks between JLR and the UK government have been heading for a collapse over differences in the terms of the guarantee to be provided by the UK government.

The BBC said on its website said that financial support for Jaguar Land Rover from EIB was in jeopardy after a dispute over the terms of the loan. Quoting industry experts close to the talks, it said the carmaker would not accept the tough conditions imposed by the British government in return for guaranteeing the loan.

Jaguar close to Rs 5,840 crore loan

S Kalyana Ramanathan / London April 13, 2009

The Sunday Times reports Tata Group has agreed in principle to invest £100m alongside refinancing.

After months of dogged lobbying, Tata Group-owned British car maker Jaguar Land Rover (JLR) is now close to clinching a loan of £800 million (Rs 5,840 crore) from a syndicate led by Royal Bank of Scotland and Lloyds, according to The Sunday Times here.

The paper further reported today that Tata Group has “agreed in principle to invest another £100m alongside the refinancing.” A JLR spokesperson, however, said the report was speculative.

The report also said the UK government has apparently agreed to guarantee up to 75 per cent of the £340 million loan that European Investment Bank (EIB) had approved last week, to develop environmentally-friendlier cars. JLR is expected to place its assets (properties, factories and stocks of cars) as a security for the balance 25 per cent.

If JLR indeed manages to secure this loan, it would come as a major relief for the cash-short firm. Group chairman Ratan Tata had, last month in a television interview, openly said that if flow of money into JLR continues to be an issue, “the damage is going to be quite devastating”, with possible job losses and temporary closure of plants.

Despite the economic recession and the falling sales of automobiles here, JLR has been seeing some positive developments lately. Last week saw formal approval of the EIB loan. In February, it got a £600 million order for supplying 13,000 cars to Chinese buyers over the next three years.

Despite these positive developments, operations continue to be under stress for want of capital, which a loan of £800 million can sufficiently address. JLR has three major plants in the Midlands — Castle Bromwich makes the Jaguar XF, XF and XJ, Solihull makes the Land Rover Defender and Discovery 3, the Range Rover Sport and Range Rover; and Halewood makes the Jaguar X-TYPE and Land Rover Freelander 2. In all, the company employs close to 14,500 people and an estimated 60,000 people are employed by 200 of its parts suppliers.

VW gets Rs 664 cr for Pune plant

S Kalyana Ramanathan / London April 08, 2009

The board of Luxembourg-based European Investment Bank (EIB) today approved a Euro 100 million (Rs 664 crore) loan to Volkswagen India to part-finance its Euro 580 million (Rs 3,900 crore) investment in India. This investment by Volkswagen India will be for its new plant in Pune in Maharashtra that will have a capacity to produce 110,000 cars a year at full capacity.

VW India had formally inaugurated the plant on March 31. It is expected to start commercial production by May this year.

A VW India spokesperson said the inauguration of the plant did not mean that the proposed investments had been completed. “There is no contradiction between the fact of inauguration and a loan under progress. An investment process is not finished with an inauguration. As you know, we will start production in May (2009) with the Skoda Fabia, followed by the Volkswagen Polo in the beginning of the next year and a Volkswagen sedan in the second half of 2010,” said a VW India spokesperson in an e-mail response.

The group entered the Indian market in 2001 with Skoda and followed this with the launch of its premium and luxury brand, Audi, in 2004. The entry of the mother brand, VW, was finalised in 2006 with plans to set up a new plant in Chakan near Pune.

The approval of the loan to VW India will mark the European bank’s first major direct investment in a plant in India. EIB’s exposure in India has until now been dominated by support to EXIM Bank. In December 2008, EIB approved a Euro 150 million loan to EXIM Bank to support energy companies’ investments in renewable energy projects. EIB’s first exposure in India dates back to 1993, when it supported Power Grid Corporation’s effort to upgrade the national grid.

G20 agrees to $1.1 trillion stimulus package

S Kalyana Ramanathan / London April 3, 2009

To take action against non-cooperative jurisdictions, including tax havens

The G20 members, comprising 21 of the world’s wealthiest nations and nine international institutions, today announced a $1.1 trillion stimulus package to tackle the worst economic recession since the Great Depression.

The summit also agreed to take action against non-cooperative jurisdictions, including tax havens, and impose oversight on large hedge funds and credit rating agencies.

THE FINAL PUSH

* Main points in the declaration ‘Strengthening the Financial
System’ issued by G20 on Thursday:
* Establishment of a new Financial Stability Board (FSB) as a
successor to the Financial Stability Forum (of which India became a member recently)
* FSB to collaborate with IMF to provide an early warning of
macroeconomic and financial risks
* Take action against non-cooperative jurisdictions, including tax havens
* To extend regulatory oversight and registration of credit rating agencies

“We are undertaking an unprecedented and concerted fiscal expansion, which will save or create millions of jobs that would otherwise have been destroyed. It will, by the end of next year, amount to $5 trillion, raise output by 4 per cent and accelerate the transition to a green economy,” said UK Prime Minister Gordon Brown, the chairman of London Summit 2009, before even taking into account the extra commitments from the summit.

Brown said agreements had been reached today to treble resources available to the International Monetary Fund (IMF) to $750 billion, to support a new SDR (Standard Drawing Rights) allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs (Multilateral Development Banks) to ensure a further $250 billion of support for trade finance, to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, and constitute an additional $1.1 trillion programme of support of credit, growth and jobs in the world economy.

The G20 also affirmed its commitment to the World Trade Organization, supporting free trade and a check on protectionism by its members. Additional trade finance of $250 billion over the next two years will be made available through export credit, investment agencies and MDBs.

Brown’s statement came when there was an overall scepticism over the success of this G20 summit in reaching any concrete agreements over what is good for the global economy.

An immediate fund flow of $240 billion to IMF will come from three sources, of which the European Union and Japan will contribute $100 billion each and China a further $40 billion.

Brown said that other members of the IMF (which include India) too will provide additional funds to the IMF over the coming months.

Though the London Summit was a follow up to the G20 meet in Washington last year, today’s meeting assumed far greater importance in the light of collapse of the global financial system over the past few months. The overall agenda of this meeting was to find ways and means to overcome the global recession and impose stricter regulations over the global banking sector.

JLR may get Rs 2,100 cr to work on emission control

S Kalyana Ramanathan / London March 25, 2009

Luxembourg-based European Investment Bank (EIB) is considering a £275 million (Rs 2,100 crore) loan to the Tata group-owned Jaguar Land Rover that will part-fund the group’s proposed £550 million (Rs 4,200 crore) research and development work at reducing the CO2 emission from its future products.
This comes under the category of a supporting loan that the European automotive industry gets to produce vehicles that are environment friendly.

The UK government provides guarantee for loans that EIB gives to the automotive sector for work to reduce emissions. This package, nnounced by the UK government earlier this year, included loans up to £1.3 billion from EIB and another £1 billion from the UK government.

Earlier this month, JLR received the UK government approval for a grant of £27 million (Rs 192 crore) for producing a new eco-friendly car based on Land Rover’s LRX Concept, which was first showcased at the 2008 edition of the Geneva Motor Show.

The EIB said, “The project will contribute to the increase of the promoter’s knowledge and know-how in development of technology for small hybrid powertrains and new lightweight vehicle architecture. The project aims at a very significant reduction in fuel consumption of the promoter’s (JLR’s) future range of vehicles; it is expected to bring about positive environmental results. The completion of this project will assist the promoter to comply with the upcoming European CO2 emission requirements.”

The bank said the support would be focused on the development of new engines designed to meet the CO2 emission targets set by the EU Commission, particularly the development of smaller diesel engines, the development of micro-hybrid and full hybrid downsized drivetrains.

The EIB is also considering a £370 million loan to Japanese car maker Nissan to part-finance a similar project in the company’s facilities in the UK and Spain. Nissan has estimated the total cost of its project at £920 million.

A JLR spokesperson said the likely date of formal approval from EIB was not known yet.

FSA may expand regulatory role to examine working of banks

S Kalyana Ramanathan / London March 19, 2009

The current global financial crisis has forced UK’s Financial Services Authority (FSA) to tighten its grip over the financial services sector, with some of the options being considered including monitoring the working of banks and other financial services players.

FSA in the UK, from a regulatory perspective, is the equivalent of such Indian regulatory bodies as the Securities and Exchange Board of India and the Reserve Bank of India, and can also be compared to the Securities Exchange Commission in the US. It is an independent, non-governmental body which has been given statutory powers under the Financial Services and Markets Act 2000.

The FSA published today the Turner Review, authored by Lord Adair Turner, chairman of the FSA, that has made recommendations on the ‘changes in regulation and future supervisory approach needed to create a more robust banking system.’

The Turner review has said in no ambiguous terms that the role of FSA must now be expanded to look at the business models, strategies and even risks and outcomes of banks, rather than just focus primarily on systems and processes. This will be a considerable departure from the ‘principle-based approach’ adopted by the regulator so far.

Lord Turner said, “The (current global) financial crisis has challenged the intellectual assumptions on which previous regulatory approaches were largely built and, in particular, the theory of rational and self-correcting markets. Much financial innovation has proved of little value, and market discipline of individual bank strategies has often proved ineffective.”

“The changes recommended are profound, and the banking system of the future will be different from that of the last decade. The world’s economy will be better served as a result,” he added.

The Turner Review comes less than a week after FSA’s CEO Hector Sants’ said that “...people should be very frightened of the FSA.”

At the time, Sants too had said that a “...principle-based approach must give way to outcomes-focused supervision. A principles-based approach does not work with individuals who have no principles.”

The Turner Review is a product of six months of work which was carried out at the behest of The Chancellor of the Exchequer in October 2008. The 126-page report covers a wide range of financial services players, including credit rating agencies and hedge funds, apart from banks. The Review broadly identifies three underlying causes of the crisis – macro-economic imbalances, financial innovation of little social value and important deficiencies in key bank capital and liquidity regulations.

“These were underpinned by an exaggerated faith in rational and self-correcting markets,” the reports said.

In addition, the Review highlights areas where it is has not recommended a specific action, but where wide-ranging options need to be considered, which include product regulation in retail (mortgage) and wholesale markets ( like Credit Default Swap).

BRIC calls for more balanced IMF

S Kalyana Ramanathan / Horsham (near London) March 15, 2009

Brazil, Russia, India & China (known collectively as BRIC) today sought a re-balancing of representation on the executive board and the International Monetary and Financial Committee of the International Monetary Fund (IMF). The committee is the policy-making arm of the IMF.

The demand was made at the G20 finance ministers’ meeting being held near London. India was represented by the Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, RBI Governor Duvvuri Subbarao and the Secretary, Department of Economic Affairs, Ministry of Finance, Ashok Chawla.

The BRIC economies also said that protectionism was becoming an increasingly real threat to the global economy. They also sought commitment from the world leaders that they would walk towards a prompt and successful completion of the Doha round.

A joint communiqué issued by the BRIC economies said: “We consider that the IMF’s resources are clearly inadequate and should be very significantly increased through various channels. Borrowings should be a temporary bridge to a permanent quota increase as the fund is a quota-based institution. Hence, we call for completion of the next general review of quotas by January 2011.”

They also asked for speeding up of the second phase of voice and representation reform in the World Bank group by April 2010. G20 nations broadly agreed on curbing tax havens. The BRIC members, in their communiqué, said: “We consider that all financial activities must be subject to adequate regulation and supervision.”

UK says auto aid package now open

S Kalyana Ramanathan / London March 12, 2009,

UK’s Business Minister Ian Pearson today said the £2.3 billion Automotive Assistance Programme is now open for automobile and automobile parts makers. Speaking at a seminar on supply chain in the automotive sector, Pearson said, “The Automotive Assistance Programme is now open for business. We are determined that this scheme delivers support as quickly as possible, and today's event was an important opportunity for companies and banks to understand how to access the scheme. We have already received a number of EoIs and look forward to other companies.”

The scheme to facilitate loan and loan guarantees now has clearance from the European Commission and is inviting applications. It applies to the UK automotive sector and supply chain with a turnover of over £25 million.

“The government has put the scheme in place and has now clearly set out the criteria against which applications will be judged. Now it's up to companies to come forward with their bids,” he said.

JLR to get UK grant for green car

S Kalyana Ramanathan / London March 12, 2009

The UK government today approved a grant of £27 million (Rs 192 crore) to Tata Group-owned Jaguar Land Rover (JLR) for producing a new eco-friendly car based on the Land Rover’s LRX Concept that was first showcased at the 2008 edition of Geneva Motor Show.

The company is yet to officially announce if it would go ahead with this project and therefore will use this grant. Earlier this month JLR had managed to secure a major three-year deal to supply 13,000 cars to China worth £ 600 million (Rs 4400 crore) and later secured a pay freeze deal with its workers that will help save £68 million a year.

“We welcome the government's support for this project, which would form a key part of our future product plans and which we very much want to put into production,” said Phil Popham, managing director of Land Rover. The overall cost of this new project to produce the new car based on the LRX Concept is expected to be £400 million.

“It would be the smallest, lightest and most efficient Range Rover that we've ever built," Popham added. “Despite the current economic challenges, we remain committed to investing for the future, to continue to deliver relevant vehicles for our customers..." he added.

A JLR spokesperson later added, “It (new project) still has a number of approval gateways to go through in our product development process before we can give it the go ahead and that process won’t be completed until later this year.” The new model is expected to push the company a few steps closer to its goal to exceed a 20 per cent improvement in the CO2 emission.

The new product will be developed and produced from the company Halewood plant which employs 2000 people. The plant currently produces the Land Rover Freelander 2 and Jaguar X-Type models.

JLR workers accept pay freeze

S Kalyana Ramanathan / London March 07, 2009

Workers at Tata Group-owned car-maker Jaguar Land Rover (JLR) have agreed to a pay freeze until 2010 to avoid compulsory redundancies in the non-management workforce over the next two years.

Around 70 per cent of the workers, who participated in a ballot that lasted over one-and-a-half week, agreed to the new deal that will also help JLR save around £68 million annually. Around 12,000 people work at JLR units spread over six locations in the UK.

JLR’s chief executive officer David Smith said in a statement: “This is an important step for us as a standalone business. It also confirms our determination as a team to steer JLR through these extraordinary and challenging times, so that our business is ready to take advantage when the downturn finally ends. I am also pleased that the company and trade unions have been able to work together so constructively when dealing with such sensitive issues.”

A separate statement by GMB and Unite, the two unions representing JLR workers, said, “We did not want our members in JLR to be faced with the same fate as the thousands of others who have been dismissed in other companies. Our members in JLR deserve better — much better.

The management agreed with our view that, when this unprecedented recession ends, the retention of a skilled and loyal workforce is an integral part of the ongoing success of this business.”

Key elements of the package include a pay freeze until 2010, no compulsory redundancies in the non-management workforce in the UK over the next two years, a four-day week at the plants (from a two-hour reduction in the working week for hourly-paid employees, but with only a one-hour reduction in pay) and a 40-hour working week for salaried employees (as opposed to the current 37 hours) with no increase in pay.

The new deal also gives JLR’s management the option to move its workers across the JLR’s West Midlands sites.

Further, JLR will not have to pay bonus to 2,400 salaried employees, which was scheduled for 2009. However the company has agreed to an increase in employee pension contributions and introduction of a salary sacrifice scheme.

All these measures are expected to achieve savings of around £68m, which will make a significant contribution to the company’s crucial cost reduction targets, the JLR statement said.

The company will continue to keep open the option of offering voluntary redundancy and sabbatical programmes. Over the last few months, the company has been saving costs, partly by offering voluntary redundancy programmes which when completed will result in reduction of the total workforce by 2,000 in the next few months.

Other companies in the UK, like Nissan and Honda, have either announced job and production cuts or temporary plant closure to overcome the fall in global demand for automobiles.

Indian, UK bodies plan norms for Darjeeling tea

S Kalyana Ramanathan / London March 04, 2009

Darjeeling tea may finally find its legitimate place in the European market with well defined parameters put in place, stipulating what blend of tea will qualify as genuine Darjeeling tea. The Tea Board of India, along with The United Kingdom Tea Council, is in the final stages of discussing an appropriate system that would define Darjeeling tea and the mechanism to ensure that the Darjeeling tea planters get the right price in the European markets.

For the last few years, tea planters in India through the Tea Board have been seeking a conclusive definition of Darjeeling tea in the global market. The most recent proposal from the Tea Board to its European counterparts has suggested the blend must consist at least 90 per cent of Darjeeling tea to qualify to be called so.

Though the UK Tea Council and the EU Tea Committee are not opposed to the idea of finding a clear definition of Darjeeling tea, there has been some apprehension on the implementation of such a definition. “We support this completely. What the Tea Board of India is doing is a laudable effort. But the procedures need to be simple and benefit all parties,” said William Gorman, executive chairman of The United Kingdom Tea Council. The council has been vested with the task of representing the 27 EU trading partners on this subject. The trading rules not just in the UK but in other European countries would be considered, said Gorman.

India has every reason to protect the integrity of Darjeeling tea, which is considered as the ‘Champagne of Tea’. This variety, according to Tea Board statistics, accounts for 1.24 per cent of India’s annual tea production. However, it fetches nearly twice the price of any competitive variety of tea, commonly consumed in the UK (like the typical English breakfast tea), according to trade sources in the UK.

In 2007-08, India produced 8.05 lakh tonnes of tea and the estimated production in the current year is 8.32 lakh tonnes. Between January and November 2008, India exported 1.76 lakh tonnes of tea.

“It is like the Scotch Whiskey or Champagne. We are quite aware of what the Tea Board is trying to do,” Gorman said. The concern among the EU trading partners is the “policing” of the proposed system. They are seeking an efficient, intelligent and yet a simple mechanism for qualifying a blend as Darjeeling tea. Interestingly, the real challenge for Darjeeling tea comes from much closer home than one would expect. Certain varieties of tea grown in Nepal manage to pass on as Darjeeling tea. “Even tea tasters at times find it difficult to distinguish between these two and hence they (Nepalese tea) pass on as Darjeeling tea,” said Gorman.

Proposals from the Tea Board have been vetted by the legal councillors for The UK Tea Council. Their response and suggestion will be considered by the board of The UK Tea Council on April 22. The UK Tea Council believes that the new system to evaluate and price Darjeeling tea should be in place this year, said Gorman.

The UK Tea Council along with other members in the EU are taking extra care to put in place a system to evaluate a specialty tea such as Darjeeling tea so that other similar teas can benefit from this. Other varieties such as Assam, Nilgiri and from various countries Sri Lanka, Rwanda and China can emulate this model to ensure that the planters get the right price and buyers get what they are paying for, said Gorman.

The UK is the largest consumer of tea in the western world while most other parts are large coffee consuming nations. It imports nearly 160,000 tonnes of tea every year.

In per capita terms, the UK is the second largest tea consumer (per capita consumption at 2.5 kg) in the world after Ireland (2.6 kg). Though India China and Kenya are large tea growing nations, their per capita consumption ranges between 0.3-0.4 kg.

'Tata affirms its reputation for fair dealing with workers'

Q&A: Des Quinn, Regional Industrial Organiser, Unite (Midlands), UK
S Kalyana Ramanathan / London March 03, 2009

UK-based union leader Des Quinn was the pointsman at Unite, the workers’ union that welcomed the Tata Group to Jaguar and Land Rover when Ford Motors had to choose between two front runners to sell JLR. Unite is the largest union in the UK with over two million members across 24 different industries.

Quinn, the lead negotiator for JLR workers in the Conventry region (Midlands), says though the current turmoil in the global automobile industry has been a testing time for all Tata Group stakeholders, the Indian conglomerate has lived up to its reputation for fair dealing with workers. He tells S Kalyana Ramanathan why his experience with the Tata Group has been unique in many ways and showers praise on JLR’s Indian owners.

Q: It has been nearly a year since the Tata Group took over JLR and the union had backed its offer. Does the current situation (including job losses) make you wonder whether you had backed the right suitor?

A: When Ford decided to sell JLR, three groups showed interest — Tata, Mahindra & Mahindra and a consortium led by Jack Nasser, a former CEO of Ford. But the union had supported the Tatas as its preferred buyer.
We were quite aware of its (Tatas’) reputation for fair dealing with its workers and it seemed to be the only one who was interested in protecting and further developing the Jaguar and Land Rover brands. Nasser was talking about a turnaround strategy with an exit through market in five to six years. Mahindra seemed to be more keen on Land Rover and with its four-wheel drive technology, the company was not too keen on taking over Jaguar. Hence, the union backed the Tata and it has been a good experience so far.

Q:Good experience despite the job losses at JLR?
A: The job cuts so far have been voluntary and not compulsory. It has been quite painless (with nine months severance pay). At the time of taking over JLR, Tatas had agreed on a few things with the union and Ford: the management would remain the same, business would continue and no (compulsory) job losses for 5-6 years. The company has stuck to this so far. This apart, it has managed to keep JLR at arm’s length till now. The only communication I get from them is a routine Tata UK newsletter.

Q:What has been the status on voting on the pay freeze at JLR that would guarantee no compulsory job cuts for two years?
A:The voting is going on and we will announce it on March 6. From what I hear, we are likely to accept it. It would be disappointing if the workers refuse to accept it.

Q:When Tata took over JLR the global economic situation was not as bad as it is today, and since then the automobile industry has gone from bad to worse.
A:The agreement with Tata though allows them to revoke some of the clauses should the automobile industry break from below, which they have not. We were right about the Tatas. Ratan Tata gave his commitment personally. He even asked us to come to Mumbai to meet the union leaders there, which was not necessary.