Land Rover revisits its roots for better numbers

S Kalyana Ramanathan / London May 15, 2010 Sometimes old ideas could be the answer for new challenges. Tata Motors-owned luxury car marker Jaguar Land Rover has been reminded of this the hard way. The company is planning a 2WD (two-wheel drive) version of its new compact Range Rover car, that will go on sale from next year. The new model would be cheaper than its four-wheel drive peers, offer better fuel-efficiency and lower carbon emissions. A company spokesperson said that the company used to make a 2WD Land Rover right back at the start, in 1948. Land Rover Managing Director Phil Popham said: “This is good news for the company and for our customers. We are adding to the range and expanding our customer base. We will continue to make the ‘World’s Finest All-Terrain Vehicles’ for those customers who require 4WD but will offer an alternative to those that don’t. 2WD is also an important way to deliver improved vehicle efficiency.” The new model will come in a 4WD version as well. The company has not decided on the price options for the new models. The company spokesperson further said that against the present 42 miles per gallon fuel efficiency, the new 2WD version is expected to offer 50 miles a gallon. The vehicle will also emit less than 130g/km of carbon dioxide, making it the lightest, most fuel-efficient Range Rover ever. As part of the introduction of 2WD, Land Rover will be focusing on three main areas of technology to reduce the weight of these vehicles, reduce parasitic losses and increase power train efficiency. The use of hybrid technology is also part of the significant developments for the larger vehicles in the range, with a view to launching the first diesel hybrid by 2013. By the end of 2010, Land Rover will be testing the first diesel hybrid prototype, named the 'Range-e', being developed using a Range Rover Sport platform. Tests of this vehicle will use the existing 3.0 litre TDV6 diesel engine, featuring a ZF 8-speed automatic transmission. The positive sales trend continues for Land Rover globally, with sales up 29.7 per cent for April, with 14,263 vehicles sold and up 35.2 per cent in the year to date. Land Rover UK has seen its eighth consecutive month of improvement, up 54 per cent for April with 2,675 units and 61 per cent year to date, ahead of the rest of the sector. Popham added: "The investment in and the success of the latest 2010 model range, including comprehensive exterior, interior, power train and technology improvements, are integral to driving this momentum. Demand is, in fact, so strong that we have just announced 275 new jobs at the Company’s manufacturing plant in Solihull.”

Biyani suggests consumption stimulation as development option

S Kalyana Ramanathan / London May 14, 2010 Retail giant Future Group's CEO Kishore Biyani said more focus should be given to get Indian consumers to spend more. It would be a faster route to overall prosperity than to first develop infrastructure. His remark at a conference organised by India Business Forum at London Business School — "Spending is the way for India to prosper, not infrastructure", as he put it — sparked a heated debate which didn’t lead to any consensus. Biyani later admitted (after the meet) that his statement was more rhetorical, but then reiterated that India could spend its way to prosperity. His statement was a reaction to a statement by another panelist who was critical about the regulatory issues in the retail sector in India. Satyen Patel, former Nike Southeast CEO, suggested that if India opened its retail sector to foreign players like Walmart and Tesco, it would lead to more investments flowing into logistical infrastructure in the country and thus could be a possible driver for growth and overall prosperity. Asked for a reaction to Biyani's statement, retail sector expert and chairman of Technopak Advisors, Arvind Singhal (who was not present), said: “I am not sure what Mr Biyani said or in what context. I can only comment that if there is any single deficiency that can put a major speed-breaker to India’s growth, it will be infrastructure. Further, in infrastructure, we must consider both physical infrastructure as well as social. Physical is what we normally talk about (quality roads, steady and price-competitive power supply availability, especially for manufacturing industry, efficient public transport). The social infrastructure includes affordable, accessible (and accountable) healthcare, education, clean drinking water, and basic sanitation. Sadly, we talk even lesser about the enormous deficiency in this social infrastructure." Adding: "The way I would state is that if India reallocates larger quantum of its public money to bridge the current and actually increasing gap in such infrastructure, it will be a more prosperous nation in the future. Conversely, India cannot dream to be a prosperous country if it does not spend much more on infrastructure." Patel also contested Biyani’s statistics on his group’s growth. He questioned if Future Group would be as successful if foreign competition were given a level playing field in India. The government regulations in India do not allow multi-brand retail chains from foreign companies to operate in the country. India has to find a way to grow with other people's money, like the Chinese, Patel said. "This is not about India versus the West," he asserted. Biyani reiterated his point from another angle, by saying fruits and vegetables in India were grown closer to places where they were consumed to keep them fresh. He said only 70 per cent of the cold storage facilities in India are actually used, suggesting the need for improving infrastructure in the country on a war-footing might be an exaggerated, Western-influenced notion.

Cameron new British PM

S Kalyana Ramanathan / London May 13, 2010 After five days of intense negotiations, the Conservatives and the Liberal Democrats finally put in place yesterday a coalition government, the first in the last 70 years, which will consist of at least five ministers from Liberal Democrats, the smaller partner. Conservative Party leader David Cameron on Tuesday evening formally took charge as the 52nd Prime Minister of the UK with Liberal Democrat leader Nick Clegg as his deputy. Late Tuesday evening, standing outside 10 Downing Street, Cameron, 43, delivered his first speech as Prime Minister and said: “In terms of the future, our country has a hung parliament where no party has an overall majority and we have some deep and pressing problems — a huge deficit, deep social problems, a political system in need of reform. For those reasons, I aim to form a proper and full coalition between the Conservatives and the Liberal Democrats.” His speech did not even remotely resemble the rhetoric witnessed in the run-up to the elections, but was one that was sober and in parts even grave. Despite the intense rivalry with his predecessor, Cameron started his speech by paying rich tribute to Gordon Brown, who had only a few minutes earlier stepped down as Prime Minister. “Compared with a decade ago, this country is more open at home and more compassionate abroad and that is something we should all be grateful for and on behalf of the whole country. I’d like to pay tribute to the outgoing prime minister for his long record of dedicated public service,” Cameron said. At 43, Cameron is also the youngest prime minister since Robert Banks Jenkinson, the 2nd Earl of Liverpool in 1812. He is six months younger than Tony Blair when he had become the prime minister in 1997. Until noon on Tuesday, the situation continued to remain precarious, with Liberal Democrats resuming talks with Labour. However, by the same evening, order was restored when Brown tendered his resignation to the Queen, recommending that Cameron be invited to form the new government. With this, the 13-year-old Labour tenure came to an end. In the new government, the top two cabinet posts will be held by members of the majority partner (Tory) with William Hague as foreign secretary and George Osborne as Chancellor (finance minister). Vince Cable, the Liberal Democrat’s financial wizard, who for sometime was expected to grab the Chancellor’s job, had to content with a position of the man in charge of business and banking, which is a slightly modified version of what his predecessor Peter Mandelson had held. Cable became famous with his book “The Storm” that vividly explains the last economic crisis and often credited with the man who predicted the financial meltdown way back in 2003. Liam Fox and Andrew Lansley from the Tory side have also managed to grab two other important cabinet positions of defence and health, while Liberal Democrat MP Chris Huhne will be cabinet member in charge of energy and climate change. More announcements on the new cabinet are expected to follow soon. Probably as a gesture of his confidence that the new coalition government will survive its five-year term, Cameron’s first official announcement was that the next general election would be held on the first Thursday of May 2015. His optimism was, however, played down by several Labour leaders who do not expect the new government to live beyond 18 months. The sceptics in the Labour Party were in fact joined by a handful of MPs from both the Tories and Liberal Democrat as well, who from the beginning had opposed the Tory-Liberal Democrat coalition. In the coming weeks and months, the two coalition partners will have to iron out their differences on several key issues including government spending, political and electoral reforms and the UK’s policies towards Europe. Cameron and his supporters have been projected as strong Eurosceptics, a position that is unlikely to go down well with their new coalition partners.

Vedanta to buy UK firm's zinc assets for $1.3 bn

BS Reporters / London/Mumbai May 11, 2010 London-based minerals and metals major Vedanta Resources today announced it would buy UK-based Anglo American Plc’s zinc business for $1.34 billion (Rs 6,011 crore) in an all-cash deal. The acquisition substantially increases the Anil Agarwal-promoted company’s zinc and lead production capacity to 1,462 ktpa (kilo tonnes per annum) — boosting its production of lead and zinc by 37 per cent. Vedanta said the group would now have an 11 per cent share of the global zinc market. The deal also increases reserves and resources by 206 million tonnes, increasing Vedanta’s total reserves and resources by 76 per cent. HIGH FIVE Top five producers of Zinc - Q1 2010 Company Production* Country Hindustan Zinc 730 India Xstrata AG 690 Switzerland Glencore 356 Switzerland New Boliden 323 Sweden Teck 300 Canada *In kilotonnes Today’s acquisition further consolidates the company’s position as the world’s leading zinc producer. The acquisition will be handled by subsidiary Hindustan Zinc Ltd, in which Vedanta holds a majority stake (through Sterlite). In a statement issued today, Vedanta said Anglo American Zinc’s operations were highly profitable with long-term development potential. For the year ended December 31, 2009, the company generated, on an attributable basis, a gross revenue of $670 million, Ebitda of $213 million, operating profits of $154 million and had gross assets of $845 million. Chairman Anil Agarwal said: “These high-quality assets complement Vedanta’s existing portfolio, creating the largest zinc and lead producer in the world. We intend to rapidly develop Gamsberg, one of the largest high-quality zinc projects in the world, leveraging our world-class large project development expertise.” Anglo American said the sale of its zinc business follows its October 2009 announcement of its strategy to focus on commodities where it holds advantaged positions. Vedanta will buy the Skorpion mine in Namibia, the Lisheen mine in Ireland and a 74 per cent stake in Black Mountain Mining in South Africa, said Anglo American. Completion of the transaction is expected to be in stages and Vedanta has planned to complete the acquisition of all three within the next 12 months. Anglo American's zinc business produced 3,50,000 tonnes of zinc in 2009. Of the total consideration, $698 million relates to the Skorpion mine, $308 million relates to the Lisheen mine and $332 million relates to Anglo American's 74 per cent interest in Black Mountain Mining. The transaction is subject to customary regulatory approvals as well as competition clearance in the relevant jurisdictions. In addition, Exxaro Resources Limited, Anglo American's black economic empowerment partner in Black Mountain Mining, holds a 26 per cent interest in the company and has a pre-emptive right to match Vedanta's offer in respect of this asset. The $1.34 billion consideration agreed with Anglo American is based on effective economic ownership, including profits and cash flows, passing to Vedanta as of 1 January, 2010. "This agreement represents an important milestone in our strategy to focus on our core commodity businesses and on the delivery of our exciting near-term growth from our $17 billion of approved projects," said Cynthia Carroll, chief executive of Anglo American. With this acquisition Vedanta will be taking on board 1800 employees from Anglo American's zinc business. Rough estimates indicate that Vedanta would get nearly 4 per cent of Anglo American Plc's revenues but would be burdened with only 1.7 per cent of its workforce. "On enterprise value to Ebitda basis, the acquisition appears at a competitive valuation. However, the success of the acquisition will depend on how effectively they develop the undeveloped mines," said Alok Ranjan, head of portfolio management service, at domestic brokerage Way2Wealth. He was referring to the Gamsberg asset.

Uncertainty continues on next UK govt

S Kalyana Ramanathan / London May 10, 2010 Uncertainty on the formation of Britain’s next government continued even two days after general election results were declared. As this paper goes to print, senior leaders from the Conservative and Liberal Democrats’ parties are negotiating. If an agreement fructifies, it would put Tory party leader David Cameron in 10, Downing Street — the official residence of the UK’s Prime Minister. The results declared on May 7 gave the opposition Conservative Party 307 seats, the ruling Labour Party 258 seats and the Liberal Democrats got 57. A clear majority in the House of Commons would need 326 of the total 650. Smaller parties managed to corner 27 seats, with the election in one constituency yet to be held, due to the death of a candidate a day before before the election. Despite winning the least number of seats among the three major parties, at this stage, the form and shape of the next government depends on a decision from the Liberal Democrats. Party leader Nick Clegg, who won his seat from Sheffield Hallam, is holding the position of a king maker. PR now a key issue The negotiation between his party and the Conservaties hinges on one vital demand made by the Liberal Democrats. Mad even before the election, it is to seek constitutional changes to enable proportional representation, particularly the method known as the single transferable vote, in Westminster, instead of the “first past the post” system of MPs getting elected to the House of Commons. Under the current system (as in India), voters have to chose one candidate who they wish to be represented by in the House. A change to proportional representation would mean voters can rank their candidates in the order of preference. When votes are counted under this system, the runner up with the least number of votes will be knocked out and his votes distributed among the remaining candidates. This iteration will continue, until one candidate gets 51 per cent of the votes and declared winner. This electoral system is currently followed in the Council elections in the UK and is, thus, not entirely alien to the country. As things stand now, all is not over for Labour. As explicitly stated by Labour leader and Prime Minister Gordon Brown after the results were declared, the ruling party is still open to having the Liberal Democrats negotiate with them for a possible “Lib-Lab” coalition. Brown is also open to the idea of electoral reforms demanded by Clegg and his party. This scenario will however emerge only if the negotiations between Liberal Democrats and Tories collapse. WILL BROWN STEP DOWN? A possible Lib-Lab coalition, however, does not assure Gordon Brown his second term as Prime Minister. During election campaigning, Clegg had amply stated that he would not negotiate with Labour if Brown remained the latter’s leader. Hence as the Labour party awaits Liberal Democrats at the negotiating table, a few backbenchers in the former are demanding Brown step down and thus signal to the Liberal Democrats that they were serious about running the next government as dependable partners. So far, senior party members in Labour are completely backing Brown.

Tata-Corus basher loses election

S Kalyana Ramanathan / London May 09, 2010 Tata Steel can find reason to cheer this weekend from the results of the elections in the United Kingdom; more precisely from the north east corner of the country where Corus has a steel plant. Sitting Labour MP in Redcar Vera Baird has lost her seat in Westminster to Liberal Democrat rival Ian Swales. The latter won the seat by a massive majority, securing 18,955 votes against Baird’s 13,741 votes. Swales won by an unusual 22 per cent vote swing in favour of the Liberal Democrats. As the election date of May 6 neared, Baird had almost made the trouble and its resolution at the Corus plant in Redcar her single-point agenda. She provoked the bosses at Corus and Tata Steel with a persistent campaign to find a buyer for the beleaguered Teesside Cast Products plant. The Teesside plant has been in trouble for more than a year now and was mothballed in February 2010, leading to 1,700 job losses in the region that depends on the good fortunes of Corus for work and prosperity. Baird’s campaign was loud and vociferous. So much so that the usually mellow Tata executives were forced to write to her and ask her to mellow her views. When Baird’s criticism reached its crescendo weeks before the election, Tata Steel Vice-chairman B Muthuraman finally shot a letter asking her to pipe down. In April, Muthuraman asked Baird not to be over-critical about the company’s strategy in dealing with problems in Corus. He said her continued criticism of Corus was damaging the company’s efforts to find a strategic partner for Teesside. “Continued criticism of the company and of Corus CEO and MD, Kirby Adams, in particular, was unfair and unwarranted. Such criticism was unhelpful to the company and its workforce,” he had said. Baird had been seeking a one-on-one meeting with the bosses at Tata Steel. She was in particular keen to secure this meeting before the election date. Her meeting with Muthuraman was scheduled for April 29, a week ahead of the elections. According to Baird, this was rescheduled to May 20 due to Muthuraman's "flight availability." With the loss of her seat, it is not clear if she will still meet Muthuraman to discuss the future of Teesside. After losing the election, Baird said: “I am very disappointed but there is still work to be done. I don't think there is anything else I could have done in this campaign. The closure of Corus has had a massive effect on votes." The big question that might never get answered is if the senior management in Tata Steel in Mumbai had its finger on the pulse of the British election and expected Baird to lose, which could be the reason for pushing a painful meeting to beyond the election date. The bigger question would be if Tata Steel will find a less troublesome and more reasonable negotiator in Baird’s successor.

Al-Fayed sells Harrods for £1.5 billion

S Kalyana Ramanathan / London May 09, 2010 Harrods, the iconic London store, has been sold by Mohammed Al-Fayed to Qatar’s royal family for pound 1.5 billion. Al-Fayed, 77, had bought Harrods in 1985 for pound 615 million. According to media reports here, he will go into retirement once the sale is completed. According to The Sunday Times Rich List, Al-Fayed and his family are worth about pound 650 million and share the 94th position with three others in this coveted list of the 1,000 richest people in Britain. Clearly the windfall from this sale should push Al-Fayed and his family further up the list. Harrods is famous for luxury and premium products, and is the favourite shopping destination for the rich and affluent in the British society. For many who cannot afford to shop here, the sight of the dark green shopping bag with Harrods written in gold holds tremendous aspirational value. Harrods shares the same level of tourist interests as the Big Ben, Westminster and Madame Tussauds wax museum. Courtesy shopping at Harrods finds a place in most visitors’ itinerary, even if the value of shopping is modest. The reason for the sale is not clear yet. The store is spread over 4.5 acres and is estimated to have over one million square feet of selling space in over 330 departments and employs over 5,000 people. The economic downturn until last year hardly dented the fortunes of Harrods. The Knightsbridge store in south-west London reported a record pound 752 million in sales in 2008-09. The net assets of Harrods are worth pound 500 million, according to The Sunday Times Rich List 2010.