News Archive

ThyssenKrupp cuts costs by 1 billion euros: CFO in paper

FRANKFURT German industrial group ThyssenKrupp (TKAG.DE) has cut costs by more than 1 billion euros ($1.12 billion) this year, beating its target, and plans to press ahead with renewed savings efforts, its chief financial officer told a German newspaper.

The company’s “Impact” efficiency program had aimed for 850 million euros in savings in the current fiscal year ending Sept. 30.

“We had also announced 850 million euros last year and reached 1 billion in the end; I don’t think we’ll do less than that this year,” Guido Kerkhoff told Boersen Zeitung newspaper.

ThyssenKrupp will continue to work on efficiency improvements in the years ahead, he said. “There is still a lot we could improve. We’ve just gotten started.”

These savings are expected to make a considerable contribution to earnings growth in the future, helping to boost group earnings before interest and taxes (EBIT) to well above 2 billion euros, he said, declining to give a firm timeline for the improvement.

The company has said it wants to reach an annual EBIT of at least 2 billion euros in the coming years and aims to achieve this goal as quickly as possible.

In its third quarter results published on Aug. 13, ThyssenKrupp stuck to its target of adjusted EBIT of 1.6-1.7 billion euros for the year to end-September, up from 1.33 billion a year earlier, although it also said it would probably reach the upper end of the range.

Kerkhoff played down the impact of slackening growth in China, where ThyssenKrupp makes about 6 percent of sales.

The group’s Elevator Technology business was stable with a share of around 10 percent in China, where 60 percent of the world’s elevators are installed.

“If this market has a stable level, you can’t really say that’s a bad thing,” he said.

The company was also working to expand its business supplying parts to Chinese car makers and the wind energy sector.

In Brazil, ThyssenKrupp was still dealing with the impact of sharply falling steel prices on its business. The company has been trying to sell its Brazilian steel mill, known as CSA, which has struggled with losses due to cost overruns and operational challenges.

“We will decide on a sale based on valuation considerations and will wait for the right moment,” Kerkhoff said.

“However, given the current price of steel in the Brazilian market, no one is thinking about any value-creating transactions,” he said.

(Reporting by Jonathan Gould; Editing by Mark Trevelyan)

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Volkswagen’s management reshuffle creates no momentum for change: analysts

BERLIN Volkswagen’s management reshuffle may fail to generate the momentum Europe’s largest carmaker needs to tackle stubborn structural problems that have been amplified by slumping sales in China, according to industry experts.

VW this week paved the way for Chief Executive Martin Winterkorn to serve two more years, until the end of 2018, and for finance chief Hans Dieter Poetsch to become chairman.

This ended the management uncertainty that has weighed on the carmaker since former Chairman Ferdinand Piech was ousted in April after a power struggle with Winterkorn over strategy.

But some analysts said the decisions represented a missed opportunity to bring outside expertise into the German group, where years of sales and earnings growth have masked a profitability gap with rivals and structural deficiencies.

The company is adopting a new structure to overcome underperformance abroad and is seeking 5 billion euros ($5.55 billion) of annual cost savings at its troubled core division.

“The choice of continuity (with CEO Winterkorn’s contract also extended) over fresh blood is surely not the radical change investors would have hoped for,” said Exane BNP Paribas analyst Stuart Pearson.

Although VW has eclipsed Toyota as the world’s biggest carmaker by sales, it has proven to be a difficult company to manage as reforms can be blocked by labor representatives, who hold half the seats on the 20-member supervisory board, and its home state of Lower Saxony, which controls a 20-percent stake in the company.

Analysts are also divided as to whether Winterkorn has emerged as a weaker or stronger figure following this week’s decisions, as he seeks to push through the reforms and take the carmaker into a new era that could be dominated by self-driving technology.

Poetsch’s appointment ensures that Winterkorn will not be subject to a chairman brought in from outside the firm – something preferred by Piech and many investors who have criticized centralization in management under the CEO’s eight-year tenure.

Company sources have said Winterkorn’s excessive personal involvement on product strategy and quality control has in the past delayed launches of models such as VW’s Golf and Lamborghini’s Aventador.

Buoyed by his contract extension, the CEO could seek to engage new VW brand chief Herbert Diess and Poetsch to push through cutbacks and restructuring at costly German sites which would be crucial to turning around the VW brand, analysts said.

This could mean Diess, a former BMW executive who only joined the company in July, would be vulnerable as VW’s labor representatives have a track record of ousting cost-cutters. Former VW CEO Bernd Pischetsrieder and ex-VW brand chief Wolfgang Bernhard were both forced out after clashing with labor leaders over cost plans.

Some analysts say, however, that 68-year-old Winterkorn’s position has been weakened as he retains limited operational duties after ceding the helm of the VW brand to Diess and may never attain his goal of becoming chairman if Poetsch were to serve out a full five-year term. The finance chief is due to be elected to the VW board in November.

One source familiar with VW’s thinking said on Friday the CEO could even leave before 2018, once the carmaker has achieved efficiency targets and implemented structural changes, adding that potential successors such as Diess and Porsche CEO Matthias Mueller were ready to take over.

“VW is looking for calm in tough times to solve its structural problems,” said Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne. “It remains to be seen whether the reshuffle will really help it going forward.”

(Additional reporting by Edward Taylor; Editing by Pravin Char)

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China emphasizes stability at G20, fiscal spending quickens

BEIJING China’s financial markets are expected to remain stable and the renminbi is not on course for a long-term devaluation, while fiscal spending will grow faster than expected this year, the country’s top financial officials told the G20.

Finance Minister Lou Jiwei said that central government spending will rise 10 percent this year, more than the 7 percent growth budgeted at the start of the year, according to a statement late Saturday on the People’s Bank of China website. China will raise dividend payments from designated state-owned enterprises to make up for any shortfalls.

China is headed for its slowest economic expansion in 25 years in 2015 and mainland markets have slumped 40 percent since mid-June, sending global financial markets skittering.

Ailing Chinese shares dragged down Hong Kong stocks to their lowest close in two years on Wednesday. China’s financial markets were closed on Thursday and Friday to commemorate the 70th anniversary of the end of World War Two.

China’s overall GDP growth will remain around 7 percent, as predicted earlier in the year, and the new economic normal may last for four to five years, Lou said. The government will not particularly care about quarterly economic fluctuations and maintain steady macro-economic policy, he added.

China can no longer rely on policy supports to achieve 9-10 percent growth, as it may already take several years to digest excess industrial capacity and inventories, he said.

It will go through “labor pains” in the next five years as it aims to complete main structural reforms by 2020, Lou added.

The quality of growth, however, is already improving with 7 million jobs created in the first half of the year, consumption overtaking investment in contributing to economic growth and the balance of payments becoming more even, he said.

Also at the G20, People’s Bank of China Governor Zhou Xiaochuan reviewed the massive run-up and crash of Chinese equities, acknowledging its global impact in August.

Financial leaders from the Group of 20 top economies met in Turkey on Friday and Saturday.

China’s efforts, including the central bank channeling liquidity into the market, averted a precipitous slide and systemic risks, Zhou said. Leverage has decreased noticeably and the real economy was not significantly effected.

The yuan-US dollar exchange rate is relatively stable, the stock market is already roughly where it should be and financial markets are expected to be stable, he said.

Earlier G20 officials said the Chinese devaluation of the yuan in August and the stock market plunge were all part of a difficult path to a more liberal economy.

(Reporting by Jake Spring; Editing by Himani Sarkar)

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G20 eyes faster economic reforms as cheap credit not enough for growth

ANKARA Financial leaders from the world’s 20 biggest economies agreed on Saturday to step up reform efforts to boost disappointingly slow growth, saying reliance on ultra-low interest rates would not be enough to accelerate economic expansion.

But they also said they were confident growth would pick up and, as a result, interest rates in “some advanced economies” — code for the United States — would have to rise.

“Monetary policies will continue to support economic activity consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth,” the communique of the G20 finance ministers and central bankers said.

“We note that in line with the improving economic outlook, monetary policy tightening is more likely in some advanced economies.”

The wording defied pressure from emerging markets to brand an expected U.S. rate rise as a risk to growth.

“We heard different opinions on the possible Fed decision. Some think the Fed needs to make a decision sooner rather than later, while others think it should delay,” Turkish Deputy Prime Minister Cevdet Yilmaz told a news conference.

To limit the volatility of capital flows from emerging economies into dollars — the reason for concern about a future Federal Reserve hike — G20 financial leaders said they would avoid any surprise or excessive moves.

“We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to minimize negative spillovers, mitigate uncertainty and promote transparency,” they said.

Concern about the turbulence that might be caused by a possible Fed rate hike was amplified by investor worries over an economic slowdown in China, the world’s second-biggest economy.

G20 officials said they discussed the devaluation by China of its yuan currency in August, a move some may see as a realignment to market rates rather than a move to help exports.

“Many supported the measures that China took… the ministers were very tolerant,” Russian deputy finance minister, Sergei Storchak told a news briefing.

The Chinese devaluation as well as the stock market plunge on growth jitters were all part of a difficult path to a more liberal economy, officials said.

“It’s an unbelievably difficult transformation and it’s not surprising that there are bumps, that it’s not a perfectly smooth process, and I think we had plenty of explanations, opportunity to ask questions, and it was a dialogue, and a very open one,” IMF head Christine Lagarde said after the meeting.

But some were less impressed.

“Their explanations weren’t very good. They should have been much clearer,” said Japanese Finance Minister Taro Aso about the Chinese.

U.S. Treasury Secretary Jack Lew noted that global economies were keen to see the world’s second-largest economy move to an exchange rate that reflected market fundamentals.

“When the world has called on China to move toward a more market-determined exchange rate, it’s in the context of doing so in an orderly way with clearly articulated policies that can be understood and that reinforce themselves in a positive way,” he said in a statement.


G20 officials welcomed strengthening activity in some economies but said that growth fell short of expectations because reforms were not being implemented quickly enough.

Last year, G20 leaders agreed to boost global output over the next five years by 2 percent above what was already expected at the time through coordinated reforms and investment.

But they were behind schedule, the G20 communique indicated.

“We are making progress toward our commitments (but)… more effort is needed for implementation,” the statement said.

Lagarde was even more explicit, making clear governments had for too long relied on the supply of cheap cash from central banks that have been running ultra-loose monetary policy.

“Monetary policy alone will not cut it. It is necessary. It is recommended from our perspective, particularly in Europe and in Japan still, but it will not cut it on its own,” she said.

“Clearly in the fiscal sphere as well as in the structural reforms sphere, more needs to be done, and it needs to accompany and eventually take the baton from the central bank governors.”

But, in what appeared to be a vicious circle, the reforms were made more difficult by the weaker global growth, Canadian Finance Minister Joe Oliver told reporters.

“We’re making progress, but the base that we hoped we would have, we haven’t arrived at, because the growth has been disappointing and the projections have been downgraded,” Oliver said, adding that one-third of the G20’s extra growth commitments have been implemented.

Boosting investment was key, the G20 financial leaders agreed. Governments will prepare their final investment strategies by November, when G20 leaders are to meet to discuss them in Antalya in Turkey.

While not a topic of the agenda, officials informally discussed on the sidelines China’s ambitions for its yuan currency to become part of the special drawing rights (SDR), a virtual currency used only by the IMF.

Washington’s Lew voiced an openness to that happening, as long as China carried out promised reforms.

“If they make the kinds of reforms that they have committed to and indicated they are prepared to make, there’s an openness to a positive outcome of the review.”

(Additional reporting by Dasha Afanasieva, Gernot Heller, David Dolan, Asli Kandemir, Orhan Coskun, Writing by Jan Strupczewski)

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U.S. Treasury official: G20 sees need to ‘double down’ against devaluation

ANKARA There is a shared belief among the members of the Group of 20 leading economies in the need to “double down” against competitive currency devaluation and avoid it in both policy and language, a senior U.S. Treasury official said on Saturday.

Speaking to reporters on the sidelines of the G20 meeting of central bankers and finance ministers in the Turkish capital Ankara, the official said the final communique from the meeting was expected to address competitive devaluation, where countries attempt to drive down a currency to boost exports.

“You can make policy decisions that lead to competitive devaluation, (or) you can say things that lead to talking down a currency,” the official said.

“There is a shared sense that the G20 needs to double down on its principle that competitive devaluation is a bad thing.”

Currencies have come into sharp focus at the G20 meeting, after China devalued the yuan in a surprise move in August, sparking market turmoil.

But Beijing appears to have learned about the importance of transparency in the communication of monetary policy from its latest market turmoil, the official said.

A draft of the communique obtained by Reuters on Friday showed that G20 members will likely to reiterate a promise to “refrain from competitive devaluations and resist all forms of protectionism”.

(Reporting by David Dolan; Editing by Nick Tattersall)

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IMF’s Lagarde says Fed should not rush its rate rise decision

ANKARA The U.S. Federal Reserve should not rush its decision to raise interest rates and should move only when it is sure the decision is unlikely to be reversed later, the head of the International Monetary Fund, Christine Lagarde, said on Saturday.

Many emerging market economies are concerned that a Fed rate rise would trigger large outflows of capital from emerging economies into dollar-denominated assets, creating market turmoil that would hurt growth.

Finance ministers and central bankers of the world’s 20 biggest economies discussed the issue thoroughly at a meeting in Ankara, Lagarde told a news conference after the talks.

“It should really do it for good, if I may say,” Lagarde said. “In other words, not give it a try and have to come back.”

“So, what we have said is, the IMF thinks that it is better to make sure that the data are absolutely confirmed, that there is no uncertainty, neither on the front of price stability, nor on the front of employment and unemployment, before it actually makes that move,” she said.

“And that would call for being in the curve, rather than necessarily ahead of the curve or indeed behind the curve.”

(Reporting By Jan Strupczewski and Randall Palmer)

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In Qatar, Venezuela’s Maduro pushes for OPEC heads of state summit

CARACAS Venezuelan President Nicolas Maduro has suggested to the Emir of Qatar a summit for heads of state of OPEC countries to defend oil prices, an idea he said the leader of the Arab Gulf state “liked”.

“I made the proposal, he liked the idea, he said he was in agreement with the idea, and as president of our organization for summits he will make the necessary consultations,” Maduro said in an interview with television channel Telesur on Saturday.

The Venezuelan leader, who met with the emir, Sheikh Tamim bin Hamad al-Thani during his visit to OPEC nation Qatar, added he had also suggested non-OPEC countries, which include Russia, take part.

“I also suggested that non-OPEC oil-producing countries could be invited to this summit because this is about us being faced with a new market situation, which has turned the market into a very unstable one with back-and-forths that hurt the global economy and hurt oil investments,” added Maduro.

The emir’s reaction to that part of the proposal was not clear.

It was not immediately possible to get comments from Qatar. Venezuela’s Oil Ministry did not immediately respond to a request for further details.

Cash-strapped Venezuela has for months been pushing for an emergency OPEC meeting and joint coordination with Russia to stem a tumble in oil prices.

However, the Organization of the Petroleum Exporting Countries’ relatively wealthy members in the Gulf drove the group’s strategy shift last year to allow prices to fall to defend market share.

The South American country is known as an oil price hawk, and a severe recession and product shortages have heightened Maduro’s need for a market recovery, especially ahead of a Dec. 6 parliamentary election.

(Reporting by Eyanir Chinea; Writing by Alexandra Ulmer; Editing by Ros Russell)

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Piech stopped Winterkorn becoming VW chairman: media

FRANKFURT Ousted Volkswagen (VOWG_p.DE) chairman Ferdinand Piech prevented Chief Executive Martin Winterkorn from fulfilling his ambition to become chairman, showing the patriarch’s continuing influence behind the scenes, two respected German publications reported.

Weekly magazine Spiegel and the Frankfurter Allgemeine Sonntagszeitung said the Porsche-Piech clan, which controls Volkswagen’s 51 percent shareholder Porsche SE, had agreed to propose Winterkorn as chairman before Piech’s intervention.

Volkswagen announced this week that its Chief Financial Officer Hans Dieter Poetsch — seen as a peacemaker — would step into Piech’s shoes as chairman, while Winterkorn’s CEO contract was extended for two years.

In response to the unsourced media reports on Saturday, Volkswagen said its executive committee had already decided in April to propose the extension to Winterkorn’s contract, and declined to comment further on what it termed “speculation”.

Porsche SE, contacted for a comment from Piech, referred to its statement from Thursday, in which it said Poetsch had the “unequivocal support” of its entire supervisory board, which includes Piech. It declined to comment further.

Piech, the 78-year-old grandson of the inventor of the Volkswagen Beetle, was forced to quit as chairman in April after being thwarted in an attempt to discredit Winterkorn, ending an era at the German carmaker.

Under Piech’s chairmanship, Volkswagen built an empire spanning fuel-efficient city cars to 40-tonne trucks. Winterkorn is now promising a new structure it is hoped will help VW improve profitability and address troublespots.

(Reporting by Jan Schwartz; Writing by Georgina Prodhan; Editing by Mark Potter)

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Ferrari CEO will not leave post before IPO: Marchionne

MONZA, Italy Ferrari Chief Executive Amedeo Felisa will not leave his post before the luxury sportscar maker’s initial public offering (IPO) planned for later this year, the boss of parent company Fiat Chrysler Automobiles (FCA) said on Saturday.

Felisa, who is nearly 70, is planning to retire soon and the listing would be a good time to do so, but no final decision has been made, a source familiar with the matter told Reuters last week.

“He (Felisa) will not leave before the IPO and the question of succession is one we have to deal with not only with Felisa but with other key positions inside the group,” FCA Chief Executive Sergio Marchionne told journalists on the sidelines of the Italian Formula One Grand Prix in Monza.

“At the right time we will provide the right solution,” he said.

Sources have said Marchionne is preparing to step into the chief executive role, but the FCA boss said it was too early to say. He also refused to be drawn on whether FCA Chairman John Elkann could become chairman of the sportscar maker.

“We are not at that stage yet. Everything else I can tell you would be pure conjecture,” Marchionne said.

If Marchionne were to make the move, it would not make much difference to Ferrari, where he is already chairman and effectively in command.

FCA, which owns around 90 percent of Ferrari, is planning to boost its coffers by listing up to 10 percent of its stake publicly and distributing the rest to its shareholders.

Marchionne said he hoped Felisa, who joined Ferrari as an engineer in 1990, would stay at the company in some capacity.

“Continuity in an environment like this, especially for a company that has had a successful run commercially, as it has had, is important. He (Felisa) has done a great number of things for the development of Ferrari.”

Marchionne has said Ferrari should be worth at least $11 billion.

(Reporting by Agnieszka Flak; Writing by Isla Binnie; Editing by Mark Potter)

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