Honda announces plans to cut 800 jobs

originally appeared in The Associated Press:

Japanese automaker Honda says it will cut about one in four jobs at its UK factory as it struggles with low demand in Europe.

Honda Motor Europe says poor sales across Europe due to the region's economic crisis are behind the loss of 800 positions among its 3,500 member workforce in Swindon. The plant makes the Civic, Jazz and CR-V models.

Honda has been making cars in Britain since 1992. About 165,000 cars were built in Swindon last year - though it has the capacity to build 250,000.

The decision comes despite some bright spots in the industry. The Society of Motor Manufacturers and Traders reported this week that new car sales in the UK topped 2 million last year, the best since 2008.

Sales for Robot Auto-Mowers Surge

Europe’s backyards have become the latest front in the robot wars.

With a quarter of lawn owners saying they dislike mowing the grass, sales of machines that will do the job for them are taking off, especially in Europe where landscaping services are more expensive than in the U.S.

That has spurred a legion of manufacturers to challenge market leader Husqvarna AB. (HUSQB) Robert Bosch GmbH, Deere & Co. (DE) and Global Garden Products Italy SpA this year started offering robotic mowers, which Husqvarna sells for as much as 5,000 euros ($6,487). Honda Motor Co. (7267) plans to enter the fray in 2013.

 Thomas Olsson, head of Swedish operations at privately owned Global Garden Products said they had to get on board.

The market for hands-free mowers, which expanded by more than 30 percent last year, offers a rare bright spot in Europe’s consumer climate. The European market may grow as much as 20 percent annually over the next five years, Olsson said. Most of the customers are in Sweden, Germany, France and Switzerland -- countries that have so far proven resilient to the debt crisis.

Demand for the garden robots has exploded the last couple of years, said Mats Gustafsson, owner of Moheda Jarnhandels AB, a hardware store in the southern Swedish town of Moheda. Gustafsson said he’s sold almost 60 robomowers this year, compared with fewer than 10 five years ago.

European Boom

Henric Andersson, head of product management and development at Husqvarna said robotic auto-mowers are still a niche market in Europe but growing incredibly fast in other markets, and that with time may be as big or bigger than regular mowers in some countries.

Six percent of all mowers sold in Germany are now robotic, and the country’s automatic mower market is growing in “double digits,” according to research company GfK Retail and Technology GmbH.

Husqvarna, the former Electrolux AB unit that produced the first robotic mower in 1995, has six models that can care for lawns ranging from 400 square meters (4,306 square feet) to 6,000 square meters. Outside of Europe, it mainly sells the mowers in Australia and New Zealand.

New Entrants

The Swedish company brought the product to North America in 2001, only to retreat a year later after concluding the market wasn’t ready. In addition to the greater use of landscaping services by U.S. homeowners, North American grass, especially in the southern U.S., is generally tougher than European varieties, making it difficult for the machine’s fine blades to work effectively, according to Husqvarna.

Bosch, the world’s largest supplier of car parts, entered the robotic mower market last month when it started selling its Indego machine in Scandinavia. Deere, based in Moline, Illinois, joined the rivalry earlier in the year with the John Deere Tango E5, which it sells in Austria, Belgium, Luxembourg, Norway and Switzerland.

Global Garden Products, based in Castelfranco Veneto, Italy, bought its way into the $170 million market in January when it acquired LiCo srl’s Lizard mower marque, and rebranded those machines under its Stiga brand.

Andersson declined to discuss Husqvarna’s market share.

Sensor Technology

The mowers use sensor technology to stay within a defined area of the yard, and are typically able to avoid obstacles such as trees and lawn furniture. Some of the mowers, including those made by Husqvarna, move around in random patterns, while others such as Bosch machines follow distinct lines. Unlike traditional mowers, they don’t collect the cut grass, as the clippings are so small they break down fast and act as fertilizer; instead the rechargable mowers are used frequently, often daily.

The price of robotic mowers may be barrier to their success. Husqvarna’s models start at 1,700 euros. Most electric walk-behind mowers sell for 300 euros to 900 euros.

Prices will come down, and when they’re inexpensive enough the market will become mainstream, according to Husqvarna’s Andersson. About 1,000 euros may be “a magical line for the customer,” he said.

Robots aren’t only gardening, they’re also cleaning the house. Sensor-loaded machines have grabbed a 6.1 percent share of the European vacuum-cleaner market, according to GfK. The market has grown about seven times over the last three years and is now worth about 205 million euros in the region, the researcher reports.

Robotic Vacuums

Their success also offers a cautionary tale for pricing. Electrolux AB, (ELUXB) the world’s second-biggest appliance maker, was first to introduce the robot vacuum cleaner in 2001 and after reaping little success stopped making the product in 2009.

Electrolux spokesman Erik Zsiga said the development costs kept the retail prices too high.

Companies that still make robot vacuums include Siemens AG, (SIE) Samsung Electronics Co. Ltd. and iRobot Corp., which raised its earnings forecast in July after sales beat estimates. An Electrolux Trilobite vacuum cleaner retailed for more than $1,500 before it got pulled from the market, while an iRobot Roomba can be bought on Amazon today for as little as $300.

Electrolux’s limited success with robotic appliances isn’t discouraging Honda from betting on auto mowers. The Tokyo-based company said in August it will start selling a machine called the Miimo in Europe next year.

Johan Dahl, an analyst at Erik Penser Bankaktiebolag in Stockholm, who has a hold recommendation on Husqvarna’s shares said even though the competition is getting stiff, there is room for more players to compete profitably.

Ukraine Boosts Natural Gas Production

Story first appeared in The Wall Street Journal.
Ukraine will increase its natural gas production by as much as 25% in the next three years in order to wean itself off costly Russian supplies and wriggle free of Moscow's influence, the Prime Minister said in an interview. On the eve of talks in Brussels Tuesday, he also accused European leaders of blocking Ukraine's efforts to integrate into the European Union over the jailing of an ex-prime minister.

The comments reflect the increasingly difficult balancing act for Ukraine's leadership as it attempts to steer the former Soviet Republic of some 46 million between its two powerful neighbors.

The Ukrainian President's attempts to integrate his country with the European Union have faltered in recent months amid accusations of authoritarian behavior and attempts by Moscow to cajole its neighbor to form tighter economic ties in return for cheaper natural gas supplies.

Ukraine consumes around 60 billion cubic meters of gas per year, around two-thirds of which is imported from Russia. Two new drilling rigs, one of which arrives on Ukraine's Black Sea shelf this month, will help boost production by three to five billion cubic meters by 2015. Natural Gas Expert Witnesses are expected to be on site.

He hailed recent agreements with Royal Dutch Shell RDSA and Chevron Corp. to explore two large shale natural gas fields as critical steps to increase the country's energy independence. He said shale gas could hold the key to eventually covering all of Ukraine's needs. Officials say they expect to start producing from five to 15 billion cubic meters of shale gas per year by 2020, depending on the results of exploration.

The U.S. Energy Information Administration estimates Ukraine has the third-largest shale gas reserves in Europe at 1.2 trillion cubic meters. Officials said more tenders are planned. Representatives of Exxon Mobil Corp., an unsuccessful bidder on one of the fields won by Shell and Chevron, will meet with the prime minister this week.

The exploitation of shale gas deposits could weaken the influence Russia attempts to exert on Ukraine's economy and politics. Analysts say Russia has used its control over natural gas supplies to its neighbor to try to enforce its political will. Russia has turned off supplies to Ukraine twice in recent years amid disputes over pricing and payment.

Ukraine has been trying for months to renegotiate a gas contract that will see it pay around $415 per thousand cubic meters this year, a price the Ukraine feels is unfair. But Russia has refused, demanding closer economic integration including joining a Moscow-led customs union. Many times the negotiations appeared complete, but every time some reasons were found to delay the matter on the Russian side.

The Ukranian president has so far rebuffed Russia's offers, instead taking steps to bring his country closer to the EU. But Europe has shelved a planned free-trade and political association deal over the jailing of the ex-Prime Minister, calling the prosecution politically motivated and demanding her release.

A Ukrainian court on Tuesday delayed the start of an appeal hearing on her conviction for abuse-of-office in connection with gas contracts signed with Russia when she was prime minister in 2009.

European leaders in recent weeks have intensified criticism of the president, whom they accuse of using the courts to sideline. The German Chancellor last week branded Ukraine a "dictatorship."

Several European leaders have threatened to boycott the European soccer championship, which Ukraine co-hosts with Poland next month, over the treatment of the ex-prime minister.

The current prime minister accused European leaders of using the case to slow down Ukraine's integration and called on them not to draw an "iron curtain" across Europe.

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Seven more US Banks Collapse on day of Europe's Stress Tests

Guardian UK

Hypo Real Estate was one of seven European banks to fail a health check on the day that seven US institutions were taken into federal receivership. Photograph: Diether Endlicher/AP

 

 

More than 100 banks in the US have now collapsed so far this year after another seven were taken over by regulators late on Friday – the same day that seven European banks failed a financial health check.

With rising bad debts tied to commercial and residential mortgages, the number of US bank failures this year is expected to exceed last year's figure of 140. The largest of the seven US banks just seized by the Federal Deposit Insurance Corporation – which acts as a receiver and protects depositors – was Crescent Bank and Trust Company in Georgia, with more than $1bn in assets. In all, the seven failed banks had total assets of $2bn.

In Europe, investors will have a first real chance tomorrow to react to the results of banking stress tests designed to ease concerns about institutions' financial strength and exposure to debt-laden countries such as Greece.

Regulators assessed how banks would stand up to a double dip recession and a sovereign debt crisis. But several analysts questioned whether the tests were tough enough, since, for example, banks were only required to simulate losses on sovereign debt held for trading purposes and not on bonds they might hold to maturity.

Five of the seven institutions that failed the tests were Spanish cajas, or regional savings banks, with Greece's ATE and Germany's Hypo Real Estate being the other two.

Christophe Nijdam at research firm AlphaValue said the failure rate was just 8% compared with 53% for tests conducted in America last year, when 10 of 19 banks tested needed to raise about $75bn (£48bn) in new capital.

Research firm CreditSights said it expected a benign market reaction to the European tests, given the amount of information divulged by individual banks: "Controversy remains over the treatment of sovereign risks, but private sector loan losses look to have been adequately factored in. [There was] better disclosure than we had expected, which allows observers to make further adjustments to the scenarios if they want to."

Britain's four biggest banks, Barclays, HSBC and the bailed-out Royal Bank of Scotland and Lloyds Banking Group, comfortably passed the tests.

World Stocks Sag on Renewed Europe Fears

Yahoo News

Asian markets were also hit hard by reports that North Korean leader Kim Jong Il ordered his military to be on combat alert amid rising tensions on the peninsula.

 

 

World stock markets and the euro tumbled Tuesday on fears Europe's debt crisis will cause a prolonged slump in the region and weaken the outlook for global growth.

In Europe, Britain's FTSE 100 closed down 128.93 points, or 2.5 percent, at 4,940.68 while Germany's DAX index dropped 135.64 points, or 2.3 percent, to 5,670.04. France's CAC-40 sank 99.64 points, or 2.9 percent, to 3,331.29. Markets in Spain and Italy, both carrying high debt levels, both fell around 4 percent.

Wall Street tumbled too — the Dow Jones industrials average slid 153.72 points, or 1.5 percent, to 9,912.85 by early afternoon New York time, while the broader Standard & Poor's 500 fell 16.46 points, or 1.5 percent to 1,057.19.

The euro slid a further 0.5 percent to $1.2277 — heading back toward last week's four-year low of $1.2146.

News of a bank failure in Spain and the prospect of more painful austerity measures across the region renewed investors' worries about growth in Europe and its impact on major trading partners like the U.S., Japan and China.

"Traders are still struggling to find any real conviction to buy into the market and it could take some time for this sentiment to recover," said Anthony Grech, head of research at IG Index.

Once again, Europe's debt crisis was the focus of attention.

The Italian government was due to announce public sector spending cuts to reduce the deficit by euro25 billion ($31 billion) by 2012 in a bid to convince markets that the country can handle its high debt load. On Monday, the International Monetary Fund said Spain, which has already passed tough austerity measures, needed to urgently and radically reform its labor market while consolidating the banking sector.

European officials also remained downbeat.

EU Economy Commissioner Olli Rehn predicted Tuesday that growth in the 27-nation bloc won't top 1.5 percent and the jobless rate will stay close to current highs without reforms over the next five years. He called for greater flexibility for the services sector and the labor market.

Analysts said the coming days will be important for market sentiment — whether investors believe the European Union's $1 trillion rescue package for eurozone countries can avoid a rapid fall in the euro and protect countries from bankruptcy.

"The test for markets over the rest of this week is whether the panic can pass, and a more measured appraisal return," said Daragh Maher, currency analyst at Credit Agricole CIB.

He noted that while the euro is likely to continue to weaken, the EU rescue measures have addressed the main market pitfalls — by giving Greece time to cut its debt and guaranteeing eurozone countries against the risk of default — which should help stymie any sharp sell-off in the short-term.

In Asia, stock indexes were hit hard by the escalating tensions in the Korean peninsula.

A group in South Korea that monitors events in North Korea said Tuesday that Kim Jong Il last week ordered the military to get ready for combat, shortly after South Korea officially blamed his regime for the March 26 sinking of one of its warships that killed 46 sailors.

South Korean officials and other North Korea monitoring groups could not immediately confirm the report by Seoul-based North Korea Intellectuals Solidarity, which cited unidentified sources in North Korea. The Defense Ministry and the Joint Chiefs of Staff said they have not obtained any signs suggesting unusual activity by North Korea's military.

South Korea's benchmark stock index dropped as much as 4.5 percent before recovering some to finish 2.8 percent down at 1,560.83 — its lowest close in more than three months. The South Korean won slid to its weakest level against the dollar in more than 10 months before paring some losses.

Japan's Nikkei 225 stock average shed 3.1 percent to 9,459.89 as the yen's strength against the common European currency hammered exporters.

Hong Kong's Hang Seng index fell 3.3 percent to 19,019.21 while benchmarks in Australia and Indonesia also lost more than 3 percent. Stock markets in India, Singapore and Thailand were down more than 2 percent and China dropped 1.9 percent.

Crude oil for July delivery slumped $2.03 to $68.18 a barrel on the New York Mercantile Exchange, dragging Middle Eastern shares down sharply. Saudi Arabia's Tadawul exchange closed down 6.75 percent while Dubai lost 4.6 percent.

Europe Goes on Strike

The Wall Street Journal

On Wednesday, a union-backed general strike shut down Greece. Roughly a million workers protested their government's plans to bring its 12.7% budget deficit under some semblance of control. Shipping, air traffic, trains, schools, and numerous private industries ground to halt. In the one country that can least afford to put an economic gun to its own head, the unions have decided to pull the trigger.

Nor were Greek workers alone. In Spain, tens of thousands of union members and fellow-travelers rallied in the streets. In France, air-traffic controllers and refinery workers have walked off the job. In Germany, a brief strike by Lufthansa pilots has left Europe's airports even more clogged than usual. Only in the U.K. do British Airways' cabin-crew members remain coy as to when exactly they will bring operations to a grinding halt.

What accounts for this Continent-wide outbreak of unrest at a time when Europe's economies can so ill-afford it? Call it the welfare-state mentality coming home to roost. For decades, European workers have been told that somebody else will provide for them. You want a shorter workweek? Paris is here to help—along with a laughable promise that the 35-hour law will reduce unemployment. Are fuel prices too high? Here's a subsidy, extracted from excise taxes that account for more than half the cost of other people's gas. You want more vacation, longer and better-paid family leave, more generous benefits? Your employer surely has the necessary funds stashed away somewhere or other.

In Greece, one union representative gave voice to the general mentality. "We understand the difficulties in the economy, but the average worker can't give anything more," said Stathis Anestis, a spokesman for a private-sector umbrella union. "If the EU wants more measures [to improve Greece's finances], the rich and those who evade taxes should pay for it."

Mr. Anestis is right that Greece has a serious tax-evasion problem. But it's equally clear that Athens has made promises to its public-sector employees that it cannot afford to keep even if it were to collect every euro cent owed to it by every tax cheat.

In a different world (or on a different continent) the anger and frustration now being vented on Europe's streets would be directed at government policies that have led to economic stagnation, anemic or nonexistent private-sector job creation and a welfare state that in many countries consumes half of all economic output for distribution to others. But a statist mentality has become so entrenched that few people even think to ask for greater freedom to provide for themselves. They demand, instead, that someone else provide for them.

This mindset is not immutable. It's the product of economic and political arrangements that tax the fruits of success at 50% and more. Change the incentives and you change the mentality. The question is whether there's a politician anywhere on the Continent willing to offer his countrymen a better bargain than welfare, unemployment and unrest.