CORPORATE NEWS
FORD announced 10 weeks production freeze at its plant near Bordeaux. Salaries will be paid with 50% reduction as per unions rules, and employees blockaded the plant's entry demanding to be paid fully
PEUGEOT PSA announced an "exceptional plan" to face the ailing automobile sector as sales are forecasted to fall -17% in Q4. The Group plan includes "massive production cuts" at plants in Mulhouse, Sochaux and Rennes on the same period and forecasts that revenues will decrease by 3.5% in 2008 compared with +5% previously announced. Sales forecast in Europe are expected down -20% and in the Mercosur region unlikely to top 10%
AIR FRANCE- KLM announced cost reductions of € 700mn to € 800mn between 2011 and 2012 to face the global economic slow down
RENAULT Group reported September yoy sales up +1% to 195 647 units while Renault sales fell - 2.6% to 165 952 . Per brand, Renault-Samsung Motors declined the hardest -12.5% while sales of Dacia jumped +53.4% Per region, and on the same September yoy period, total sales rose the fastest in Asia-Africa +20.9% followed by the Americas +18.3% and France +13.9% In Europe (excluding France) however, sales dipped -17.8% and including France slid -5% The group restructuring plan includes axing 3000 while collars jobs and 1000 employees are to be laid off at the Sandouville plant. The Group further announced that two weeks production cuts will be necessary in anwser to global slow down and employees at the Sandouville plant demonstrated to express discontent with the cuts
State aid of a total € 10bn will be loaned to major banks including CREDIT AGRICOLE € 3bn, BNP PARIBAS € 2.5bn and SG €1.7bn at 8% interest rate for a ten year period with the obligation for financial institutions to grant loans to private individuals and small medium companies so as to restart the ailing economy amid the financial crisis
President Nicolas SARKOZY announced the creation of €100bn Strategic Investment Fund, managed by Caisse des Dépôts, (CDC) and dedicated to companies deemed strategic due to their innovative edge or sector, in need of cash inventories. The fund will play the role of a gate keeper against potential foreign takeovers due to the loss of valuation that has been affecting household names and lesser known companies since the financial crisis begun. The President also announced that companies who invest will be exonerated from the company tax (Taxe Professionnelle) up to 2012. In addition, a Credit Mediator will be appointed to verify company credit loans applications as it appeared that Banks keep denying loans to small and medium companies despite having agreed to ease the credit freeze upon a € 10bn loan granted to them for the purpose of jump starting the economy
Groupe CAISSE D’EPARGNE (CNCE) announced that it has suffered a "major market incident" in it equity derivatives activity, resulting in a loss of €690 million, attributed, according to the savings banks, to the extreme volatility of the financial markets and the stock market crash in the week of October 6. The incident was revealed within the framework of routine control procedures. The loss was exclusively related to the proprietary trading activities pursued by CNCE, (activities independent of its treasury department) and with more than €20 billion in capital base it " has no effect on the financial strength of the Group and will have no impact on its customers" according to the Group . Necessary measures were taken immediately to close this position and discontinue this activity. Disciplinary actions were taken and the supervisory authorities AMF informed. The Group’s President, Charles Milhaud, resigned under accrued pressure to take full responsibility for the incident
Bedlam hit European bourses on October 7th as the financial crisis and fear of a global recession spread. Paris CAC 40 dived -9% on Black Monday. European Union leaders official statement that « each of them will take whatever measures are necessary to ensure the stability of the financial system – whether by injecting liquidity from central banks, by measures targeted at certain banks or by enhanced measures to protect deposits » left investors unconvinced as each day heralded more European banks bailout including in Belgium, in Germany, in Italy, in the UK, and in Iceland. The PARIS exchange plummeted a week later -9.68% on opening following mayhem on Asian markets. By 9.27am the index had nose dived -9.85% at 3103.66 points and collapsed -11% by mid day. The CAC 40 remained in the red until closing time at -7.7% at 3176 points. That same week the CAC 40 fell -6.31% within the first half trading hour at 3177.57 on Wednesday and Thursday -1.55%. European bourse tumbled upon recession fears as well, the DAX -6.12% at 4564.3 and the FTSE -5.13% at 3870.33 On October 17th Wall Street rally brought relief to European Bourse, short lived, as the following week, volatility engulfed anew global exchanges. The CAC 40 was bludgeoned again on October 24th and fell -8% below 3000 points for the first time since 2003 as company results confirmed a major economic slow down
The Commission announced a proposal to review EU rules on banks capital requirements to reinforce the stability of the financial system, reduce risk exposure and improve supervision of banks that operate in more than one EU country. Under the new rules, banks will be restricted in lending beyond a certain limit to any one party, while national supervisory authorities will have a better overview of the activities of cross-border banking groups. The proposal, which amends the existing Capital Requirements Directives, reflects extensive consultation with international partners, Member States and industry. It now passes to the European Parliament and the Council of Ministers for consideration . The European Council has expressed a strong sense of urgency emphasising that the measures should be adopted by April 2009
In a concerted action, major Central Bankers announced 0.5pt rate cuts: the ECB rate fell to 3.75% the Bank of England to 4.5% and the Federal Reserve to 1.5%
OPEC announced that oil production will be reduced by 1.800 million barrels a day as crude oil prices have been declining susbtantially due to lesser demand
In less than a week LONDON Brent Crude Oil dipped below USD 64/b prior to a roller coaster ride from USD/b 80.96 to USD/b 77.79 to USD/b 69.43 due to fears that recession will impact demand
The Euro-USD exchange rate (€ 1.2861; €1.2789 and €1.2680 ) reached its lowest level in two years at € 1.2531 or -22% compared with a record high €1.6038 in mid July
GDP in Q3 and in Q4 is forecasted to remain in the red -0.1% on each period or three consecutive negative quarters of growth (-0.3 in Q2) according to Insee's national forecast. The office of statistics also expects unemployment to rise to 7.4% in 2008
The IMF revised down its forecast for France's GDP in 2008 to 0.8% and in 2009 to 0.2%
France was slapped with INFRINGEMENT of reimbursement of the cost of cross-border medical treatment: The European Commission announced that is has decided to bring actions before the European Court of Justice against France with regard to cases where the cost of medical treatment received in another Member State has not been reimbursed. The Commission has also criticised France for failing to implement the Court’s ruling in Case C-368/98 (Abdon Vanbraeckel and others v Alliance nationale des mutualités chrétiennes). French legislation runs contrary to Article 49 of the EC Treaty, in that it does not allow patients treated in a hospital in another Member State to be reimbursed at levels at least equivalent to what they would have received had they received treatment in a French hospital. The Court of Justice has on several occasions expressed its opinion on the reimbursement of medical expenses incurred in another Member State and recognised patients’ rights not granted in these countries
European companies outpaced their American counterparts in R&D investment growth: for the first time in five years, R&D investment by EU companies has increased by +8.8% compared to +8.6% by US companies according to the 2008 edition of the European Commission's annual Industrial R&D Investment Scoreboard. Three EU companies feature in the top ten: Nokia in 5th place (up from 17th), with an R&D investment of €5.3 bn, Volkswagen in 9th (up from 14th) and Daimler in 10th (down from 5th). The world's biggest investor in R&D in 2008 is Microsoft, with €5.6 bn. Trends show increased sales and profitability for EU companies and for the first time since records began in 2004, R&D investment growth in the EU companies is greater than that of their US counterparts.
EUROPEAN UNION MEASURES on GLOBAL FINANCIAL CRISIS
EUROPEAN UNION COUNCIL SUMMIT OCT. 15-16: The European COUNCIL announced that it unanimously approved the EuroGroup decision to guarantee inter bank loans nearing €1700bn . The Council also approved the initiative of its president, President Nicolas SARKOZY, for a Bretton Woods II plan, a reform of the global financial system and a new world governance. In this context, President SARKOZY and the President the European Commission, José Manuel BARROSO will meet with the President of the United States as of the end of this week. The Council adopted the reinforcement of the supervision system and prudential standards at European level;
+ it welcomed the adoption of accounting norms reflecting the fair value of assets;
+ it adopted the European Pact on Immigration and Asylum, which will henceforth form the basis of a common policy on immigration and asylum for the EU and its Member States;
+ it approved the composition of the group to reflect on the future of Europe, proposed by the president of the group, Felipe Gonzalez, and the two vice-presidents. Working groups will be set up to analyze the industrial sector and make recommendations as regards constrained sectors;
+ it reaffirmed the objective of reaching an overall agreement on the energy-climate change package for the December European Council and agreed on the Presidency and the Commission intensifying work towards this end. On energy security, the Council adopted a series of specific guidelines which will be implemented in the coming months;
The Council reviewed Russia's implementation of the agreement of 8 September, the situation in Georgia and the EU's relations with its eastern neighbours. The EU-Russia summit on 14 October in Nice will provide an opportunity for in-depth dialogue with Russia.
