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European Business News (EBN), 97-06-10

European Business News (EBN) Directory - Previous Article - Next Article

From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated Tue, June 10 6:01 PM CET


CONTENTS

  • [01] British Airways plans $10 billion makeover during the next three years
  • [02] Pharmacia, Amersham to create world's largest research-based biotech supplier
  • [03] Dassault says Aerospatiale merger still on agenda
  • [04] Rexrodt warns EMU delay could over-strengthen Deutsche mark
  • [05] C.B.I. calls for $3 billion tax levy in U.K. budget
  • [06] Renault said to be on the point of delaying Vilvoorde closure
  • [07] Eurotunnel shares jump on expectation of debt restructuring
  • [08] German retail price inflation up to 1.6%
  • [09] IBM to close down World Wide Web shopping mall
  • [10] Corporate and Economic Briefs
  • [11] World News Briefs

  • [01] British Airways plans $10 billion makeover during the next three years

    British Airways unveiled a three-year, $10 billion makeover that involves a new corporate identity and new services, products, aircraft, facilities and expanded employee training.

    The UK airline, at a news conference in New York, said it will add 43 new aircraft to its fleet over the period: 29 Boeing 747-400s, nine 777s and five 757s. It also intends to spend hundreds of millions of dollars developing new routes, new services and products, and a new approach to customer service.

    During the past two years, the carrier has invested $320 million in its premium brands - First, Club World and Club Europe.

    British Airways said it will review every aspect of service it currently offers.

    The airline also plans to explore opportunities to expand into new areas of business, such as a major redesign of World Traveller and Euro Traveller economy services; a re-evaluation of Concorde, First and Club brands to be carried out early next decade, and more partners linking to the Executive Club rewards program; and a complete refurbishment of the domestic check-in area and Executive Club at Heathrow Terminal One, currently underway.

    Other plans for improved service include $100 million of improvements at British Airways' terminal at New York's JFK Airport, including new and easier road access; a wider range of destinations served by airlines in the alliance centred on British Airways; more choice of departure and arrival points at London, with Gatwick being developed as a second hub; wider use of electronic ticketing and the company's Internet Web site to offer on-line reservations.

    The news follows an announcement today that British Airways has returned to the traditional red, white and blue of the Union Jack when it unveiled its new livery and corporate identity.

    The company has given its new image an added flourish with plans to decorate the tail fins of its fleet of 300 aircraft with specially commissioned designs from artists from around the world.

    The makeover, which will cost about £60 million ($98.1 million) over three years, will be the first overhaul since BA swapped the national flag for its rather sombre livery of dark blue, red and grey in 1984, when the airline was being prepared for privatisation.

    The new design cost BA about £2 million but it will have to spend far more making the changes.

    [02] Pharmacia, Amersham to create world's largest research-based biotech supplier

    Pharmacia & Upjohn said it plans to link forces with Amersham International to create the world's largest research-based biotech supplier.

    Sector watchers here gave the marriage their blessings, but their counterparts in Sweden were more sceptical, pointing out that the deal does little to address Pharmacia & Upjohn's broader problems.

    The companies said they will fold their life-sciences units into a new company, Amersham Pharmacia Biotech Ltd., which will have annual sales of about £430 million ($704.3 million). The new organization will be 55% owned by Amersham, a U.K. health-sciences group privatized in the early 1980s.

    ''The deal looks a perfectly sensible one,'' said Dresdner Kleinwort Benson pharmaceuticals analyst Stephen Putnam. Although the companies last month confirmed they were in talks, he said ''it's nice to see the deal actually happening.''

    However, the reaction in Stockholm is more muted. P&U shares rose just 1.5 krona to 270.5 kronor ($34.9). Analysts there said the merger will have little impact on the drug giant's bottom line.

    ''P&U will still have the same problems as before, with a product portfolio that is too broad and that demands great management resources,'' a Stockholm pharmaceuticals analyst said. She added that the company's main objective must now be to streamline its portfolio.

    [03] Dassault says Aerospatiale merger still on agenda

    Dassault Aviation's planned merger with state-owned Aerospatiale will need to be discussed with the new Socialist government, the company said.

    A Dassault spokeswoman said that reports that the merger, seen by the former conservative government for 1997, had been cancelled, were overstated.

    'Serge Dassault declares that contrary to comments attributed to him, the merger between Aerospatiale and Dassault is still on the agenda and will be the subject of discussions to come between the government and himself,' the company said.

    Dassault met French transport minister Jean-Claude Gayssot on Monday, the spokesman said, but gave no further details. Further meetings were planned but had not yet been arranged, he added. The merger plan was due to have been announced at the Paris Air Show, starting June 14, Aerospatiale executives said.

    The Socialists said during their campaign that all privatizations must be reviewed and, in theory, should not take place. Prime Minister Lionel Jospin is expected to reveal his position on privatization during his general political speech on June 19 to the new National Assembly.

    Dassault has long been opposed to the merger of his private group with the public entity, which would be privatized. Dassault had also made a privatisation of the merged Aerospatiale Dassault group a condition for agreeing to the merger, otherwise it would mean an effective nationalization of family-controlled Dassault Aviation .

    Under the merger plan presented to the previous conservative government, Dassault was expected to hold around 20% of the capital of the enlarged aerospace group, which would have annual sales of 70 billion francs ($12.1 billion).

    The Aerospatiale Dassault merger was announced by President Jacques Chirac in April 1996, as part of a consolidation of France's fragmented defence industry.

    [04] Rexrodt warns EMU delay could over-strengthen Deutsche mark

    German Economics Minister Guenter Rexrodt said that a delay to Europe's planned 1999 currency union could well cause an unwelcome rise in the value of the Deutsche mark against other currencies, and subsequently damage the German economy.

    A delay to currency union would cause ''the risk of an appreciation of the mark with negative consequences for German exports and jobs,'' Rexrodt said at a meeting of the German construction industry in Bonn.

    This follows earlier remarks from Yves Thibault de Silguy, European Union commissioner for monetary affairs, who called on EU leaders to agree a pact for the single currency at their summit next week despite a request for more time from France's new left-wing government.

    And German Foreign Minister Klaus Kinkel said that he perceived no basic change in France's new position on the stability pact intended to underpin European economic and monetary union, despite France's calls for time to consider the stability pact.

    De Silguy said the E.U. needed to stick by the agreed schedule if the single European currency were to be credible. 'There must be an agreement now...The road to the single currency needs a clear view,' he told France Inter radio.

    'Sticking to the schedule is important, otherwise we will signal a backtracking that would be very harmful for everyone, particularly for France,' said de Silguy, himself a Frenchman.

    Meanwhile, the German press has accused Paris of thwarting EMU. The German media cautioned that a call by France's new left-wing government to delay the stability pact intended to underpin European monetary union seriously jeopardised plans for the euro.

    French Finance Minister Dominique Strauss-Kahn threw plans for European economic and monetary union into confusion.

    At a meeting of EU finance ministers in Luxembourg he asked for time to study a previously agreed 'stability pact' to keep budget deficits tight after EMU is launched.

    [05] C.B.I. calls for $3 billion tax levy in U.K. budget

    The Confederation of British Industry called on Chancellor of the Exchequer Gordon Brown to raise taxes in his July 2 mini-budget by up to £2 billion ($3.2 billion) in order to keep a lid on inflation.

    In its budget submission to the Treasury, the CBI said it's wary about relying only on higher interest rates to curb demand because this could push sterling higher and further damage British exports.

    CBI Director-General Adair Turner said signs that Britain's fiscal position is improving mean that only modest tax measures are needed in the mini- budget.

    'But with consumer spending set to grow strongly this year and next, some small action is needed to prevent inflationary pressures emerging,' he added. 'We mustn't risk an unwelcome return to the boom and bust of the past.'

    Turner added that tax rises should target the personal, rather than the business, sector if they are to be effective in cooling consumer demand.

    The CBI attacked Brown's plans to introduce a windfall tax on the excess profits of privatized utilities, calling them 'retrospective' and 'arbitrary.' However, it accepted that the tax will form the centrepiece of the budget and urged the Chancellor to consider the following guidelines:

    -the windfall levy should be a one-off action, and not repeated;

    -the government must set out which companies are to be taxed, how each tax bill will be calculated and how much revenue will be raised;

    -the amount raised should be no greater than the amount needed to fund the employment programme for which the tax has been earmarked; and

    -the tax should be confined to that part of a business operating in regulated markets and should not distort competition.

    The CBI also called on the government not to restrict or abolish tax credits on dividends payments.

    'Such a move would raise money at the expense of both business and shareholders, cutting funds available for investment,' the CBI said. 'It would also cut the actuarial value of pension funds, and therefore might trigger the need for increased employer contributions and thus costs.'

    [06] Renault said to be on the point of delaying Vilvoorde closure

    French car maker Renault is set to announce today that the planned closure of its plant in Vilvoorde will be delayed, according to Belgian and France newspaper reports.

    Meanwhile 1,000 to 1,500 workers of the assembly plant, which is scheduled to be closed on July 31, will go to Paris today to join a march for jobs. Renault's board and shareholders, including the French state, are due to meet later today.

    French Economy Minister Dominique Strauss-Kahn said in Paris that he foresaw a positive outcome to the controversial plan, but gave no details.

    Aides to Jospin have been in contact with Renault over the fast few days and have said Renault could disclose results of the talks possibly on today. From Paris a Renault spokesman said it had no comment on the planned closure of Vilvoorde.

    Renault's announcement in February that it would close the plant with a loss of 3,100 jobs sparked angry demonstrations in Belgium. The protest spread to other plants when the company announced further jobs cuts to curb overcapacity and costs and restore profitability.

    It turned into a Europe-wide call on governments and the European Union to redirect part of their attention to dealing with unemployment and other social affairs and concentrate less on the single currency and economic and monetary union.

    [07] Eurotunnel shares jump on expectation of debt restructuring

    Eurotunnel shares jumped as investors bet that the final debt restructuring deal will be better for shareholders than originally expected, especially if the concession is extended this week.

    Paris-based traders said that investors are betting that the shareholders will be able to pressure the banks and Eurotunnel into accepting some changes to the debt plan ahead of the July 10 shareholders meeting.

    The restructuring plan for Eurotunnel's £8.7 billion ($13.9 billion) debt needs approval from the shareholders and the creditor banks or Eurotunnel risks entering bankruptcy proceedings. Eurotunnel stopped interest payments in September of 1995.

    Sophie L'Helias of Franklin Global Investor Services said that on behalf of institutional investors she was demanding several modifications to the plan. These include a 25% debt write-off by the banks, the creation of a different class of shares for the banks, and for the banks to give up the right to appoint another operator of Eurotunnel as allowed in the plan.

    Institutional investors and minority shareholders together could block the plan. French investors hold 60% of Eurotunnel's capital, U.K. investors hold 18%, U.S. investors hold 6.0% and the remaining 16% is spread between several others.

    Furthermore, investors are speculating that the Channel tunnel operator will receive this week an extension of the concession to run the tunnels to 2086 from its current expiration in 2052, said Christian Cambier, a portfolio manager and head of a minority shareholders association.

    Cambier said that he believed discussion of extending the concession is on the agenda of meetings Wednesday in Paris between U.K. Prime Minister Tony Blair and French President Jacques Chirac. It isn't clear whether or not Blair will also meet with French Prime Minister Lionel Jospin.

    [08] German retail price inflation up to 1.6%

    German retail price inflation rose in May to post an annual rate of 1.6% after prices increased by 0.4% from the previous month.

    The rise in year-on-year inflation followed a three-month of falls, but was still below a January high of 1.8%. Prices had risen in April by 1.4% on a year earlier, but were unchanged month-on-month.

    The Statistics Office said that its earlier estimates for consumer price growth for economically dominant western Germany had been confirmed. West German prices were up 1.5% compared to a year ago, and also rose 0.4% from April.

    In the formerly-communist east, prices were up by an annual 1.8%, and also rose by 0.4% from April. Significant west German price gains in May came in fresh meat, up 1.3 % from April, coffee (+3.8 %) and voluntary health insurance contributions (+3.7 %).

    The price of package holidays also jumped, as is typical for the time of year, by 8.1 %, the Statistics Office said.

    [09] IBM to close down World Wide Web shopping mall

    A shopping mall in cyberspace is about to face the wrecking ball.

    World Avenue, the grandly titled shopping mall on the World Wide Web that International Business Machines announced with much fanfare a year ago, is quietly preparing to close its doors.

    Only last autumn, IBM Chairman Louis V. Gerstner Jr. hailed World Avenue as a highlight of the company's third quarter, a showplace that demonstrated 'secure, industry-leading technology.'

    So what happened? When it came to shoppers, World Avenue was more like a deserted street, producing minimal revenue not only for mall tenants like department-store chain Gottschalks, but also for IBM, which had planned to make money by taking a cut of every World Avenue transaction.

    The mall's untimely demise raises vexing questions about what is the right approach for on-line retailing. Should stores join on-line malls as gathering places where Internet shoppers will converge, or should they stay independent with stand-alone Web sites of their own?

    For IBM, the flop of World Avenue underscores the challenges IBM faces as it attempts to carve out a profitable niche on the Internet. Big Blue has fancied itself as a behind-the-scenes enabler of commerce conducted by others.

    By contrast, Microsoft has aggressively built sites featuring its own content, such as information about cars or travel, and has then invited merchants to come along for the ride.

    Now IBM says it will limit itself to supplying technology for shopping ventures operated by others. 'We do not want to get in between our customers and their customers,' says a spokesman for the Armonk, New York, computer maker. Even so, he adds, 'we feel the concept of a mall is a viable one.'

    Merchants are less sanguine. 'Malls on the Internet are just not doing that well,' says Eli Katz, vice president of sales and marketing at Fragrance Counter, a Brentwood, New York concern selling perfume on World Avenue. Katz now favors going it alone - that is, marketing to Internet consumers with a Web site devoted solely to his company.

    World Avenue's screens will go dark for good on July 9. IBM says it expects to get plenty of business from on-line commerce but sees most retailers clamoring for independent sites instead of malls.

    As these new cyberstores are built, IBM will content itself with the role of construction company instead of mall manager. 'We don't want to be in the position of generating traffic,' IBM's spokesman says. 'That's not our strength.'

    [10] Corporate and Economic Briefs

    Finnish food packaging and confectionery group Huhtamaki, reporting higher four-month profits, said it was actively seeking acquisitions after a wave of divestments last year and that full-year 1997 earnings per share would improve on 1996. 'Sales in emerging markets will gain momentum, and further acquisition opportunities are under active study,' Huhtamaki said. It reported four-month profits after financial items up 8.3% to 117 million markka ($22.8 million) from 108 million and, repeating an earlier outlook, said it expected an improvement in full-year earnings per share from 10.29 markka in 1996.

    British chemicals group BTP, posting a rise in annual profits, said it expected further growth at its divisions this year despite the impact of sterling's strength. BTP's pre-tax profits rose 8.0 percent to 48.2 million pounds ($78.8 million) in the year to March 31, excluding exceptional charges in the year-ago figures.

    British water and sewerage company Severn Trent turned in a rise in year pretax profits and dividend and boosted shares with plans to complete a share buyback announced last year. Severn Trent said year pretax profits rose to 391 million pounds ($639.3 million) from 373 million previously before an exceptional charge of 20 million for restructuring, and paid out a dividend of 36.5 pence per share compared with 32.37 pence.

    German insurance group Colonia aimed for higher earnings in 1997 after its sales advanced 5.9% in the first five months of the year. Colonia said its premium income from January through May rose to 1.6 billion Deutsche marks ($941.1 million).

    Northern Foods' pretax profit for the year ended March 31 rose 7.1% to £128.3 million ($205.3 million) in the year ended March 31, up from £119.8 million a year earlier. Chairman Christopher Haskins said in a press statement that the prepared foods business made excellent progress, despite the impact of Bovine Spongiform Encephalopathy, or 'mad cow disease.'

    France's household confidence index slipped in May to a -34 compared with a -32 in April. Consumer confidence as measured by the index, hit its nadir in May 1996, when confidence was at -38, but had been improving steadily until March.

    French electrical equipment company Schneider reaffirmed an earlier projection of a 'significant rise' in net profit in 1997. Addressing a shareholders meeting, chairman Didier Pineau-Valencienne also reaffirmed the company's objective of 5% sales growth for the year, excluding acquisitions, divestitures and exchange rate fluctuations. Schneider also said it expects its operating margin to rise to 10% in 1997 from 9.3% in 1996 and to continue rising to 12% by 2000. The 1996 figure doesn't take into account Schneider's former construction unit, Spie Batignolles. The company also told shareholders it may engage in some 'moderate' share buy- back activity at some point this year, to show to the market its interest in preserving shareholder value.

    [11] World News Briefs

    Laurent Kabila's Democratic Republic of the Congo said a shell which landed in Kinshasa from fighting in Congo's capital Brazzaville was a deliberate act of provocation. 'We consider this act as a provocation and an aggression by a foreign country,' Foreign Minister Bizima Karaha told a news conference in Kinshasa. 'We warn the two warring parties of the conflict in Congo that any repetition will be considered as an attack on the security and sovereignty of the Democratic Republic of the Congo.'

    Haitian Prime Minister Rosny Smarth resigned after months of criticism of government economic policies that have sparked violent unrest in the poverty-stricken nation.

    Indonesia attacked U.S. Congressman _Patrick Kennedy_ for saying that its government is responsible for recent bloodshed in the former Portuguese colony of East Timor. Kennedy's statement 'only reflects his lack of understanding and knowledge of the issues at hand and merely echoes the views of those parties who do not wish to find a solution to the East Timor question,' Foreign Office spokesman Ghaffar Fadyl said.

    Sierra Leone's Kamajor civilian militia says it is prepared to give military support to a Nigerian-led regional force if it intervenes to crush a coup in Freetown and restore the elected government. Meanwhile, civil servants deal another blow to the military junta's attempts to assert control, refusing orders to return to work.

    Hundreds of Tamil rebels infiltrated government lines in northern _Sri Lanka_, destroying a military ammunition store and a bridge, military officials said. The army said many rebels were killed. The attack north of Vavuniya town was 'repulsed by troops inflicting a large number of casualties among the guerrillas,' said Maj. N.B. Dayananda, a defence ministry spokesman. Independent accounts are not available since government has barred journalists from visiting the area. First reports said four government troops and three civilians, including a 7-year-old girl, were killed. The number of rebel casualties was not immediately known.


    From the European Business News (EBN) Server at http://www.ebn.co.uk/


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