World Briefs

Bid for Daewoo up

Creditor banks of South Korean conglomerate, Daewoo, in an effort to recover some of the US$ 82 billion owed by the conglomerate, are planning to auction off 22 Daewoo affiliates that produce cars, trucks, ships, textiles and pesticides.

General Motors, which already has a foothold in Asia with partial stakes in Subaru, Suzuki and Isuzu is said to bid Ford Motor Co., which controls Mazda’s operation, for the ailing Daewoo. If Ford wins the bidding for Daewoo, it could challenge General Motor for world leadership in auto-making, according to experts. General Motor sells over 8 million vehicles around the world each year while Ford’s sales almost touch 7 million. Daewoo’s 17 factories produced 758,500 cars and trucks in 1999.

Daimler Chrysler, Fiat, Volkswagon and Hyundai Motor-which possesses 10 percent of the South Korean car market with its sister company Kia Motor - have also expressed interest in Daewoo, according to South Korean media.

Daewoo Motor has factories in China, India, Vietnam, Iran, Uzbekistan, Poland and Romania besides some other countries.

Tata Tea to Buy Tetley

India’s largest tea group Tata Tea, has stated that it is buying the world’s second biggest tea-bag maker, Britain’s privately owned Tetley Ltd., for 271 million pounds (US$ 432 million).

Tata Tea said in a statement that it would set up a wholly owned subsidiary in Britain and make a formal offer for obtaining all the shares of Tetley Ltd.

The statement also said that the acquisition - the largest ever by an Indian company - would be financed through a combination of equity and debt. Of the 70 million pounds of equity fund, 60 million pounds will come from Tata Tea and 10 million pounds from its New York based subsidiary Tata Tea Inc while the debt component of 20 million pounds would be raised in four parts spread out over seven and a half years to nine and a half years, the statement explained. The interest would average 11 percent per year, the statement added. A Tata official was also quoted as saying that venture capitalists who presently owned the Tetley brands and wished to exit the business, have given a high-cost loan of 21 million pounds to Tata.

PSA Peugeot Profits Rise

French carmaker PSA Peugeot Citroen has reported a 51 percent jump in net profit for 1999 to 729 million euros from 484 million euros in 1998.

The company said in a statement that the figure included a provision of 431 million euros set aside for a five-year plan of job cuts through early retirement. The PSA group plans to shed 13,200 posts and replace a third of those with younger recruits.

Nissan Profits Plunge

The operating profit of Nissan Motor Co. Ltd. Japan, according to report published in the Nishon Keizai Shimbun, is expected to fall to 30 billion yen (US$ 280 million). The report says that Nissan’s revenue is expected to fall 9 percent from the previous fiscal year to 6 trillion yen, owing to plunge in Japanese vehicle sales and a stronger yen.

Indian Cellphone Merger

Tata Industries, and A.V. Birla Group of India and AT & T of America have signed an 'in principle' agreement to merge their cellular phone businesses in India.

The Chairman of Tata Group, Ratan Tata said that the alliance is a significant step in the process of consolidation in the telecom sector in which the group intends to be a major player.

The merger is expected to give a boost to the fledging cellular phone business in India.

Alliance & Hana Form Alliance

Alliance AG, insurance giant of Europe, announced that it would buy 12.5 percent stake in Hana Bank of South Korea for US$ 150 million, as the two are going to form a joint-venture asset management firm to be named Hana Alliance Investment Management. Alliance will be Hana Bank’s largest shareholder.

The joint-venture company, whose initial capital will be 30 billion won, will have access to Alliance’s international research network while Alliance wins greater access to South Korea’s financial service market. The new company is said to manage asset from local joint venture insurer Alliance First Life - Alliance AG had acquired South Korea’s First Life Insurance Co. last year - as well as a share of Hana’s assets and will offer equity and bond products and also mutual funds to consumers.

Airbus to Edge Out Boeing

Europe’s Airbus Industries said that it was confident it would edge out American rival Boeing Co. despite forecast of worldwide slowdown in new plane orders.

The European aircraft constructor revealed that the average demand for commercial aircraft was 750 airplanes a year. Last year, Airbus and Boeing won a total of 867 firm orders. While Airbus acquired 476 of those orders, orders for 391 planes went to Boeing.

Airbus estimates between 300 and 350 new orders this year. Having captured 60 percent of Asian market share last year, Airbus feels that it has an edge over Boeing this year as well.

As compared to total 68 new orders from Asia in 1998, Airbus and Boeing received collective 84 orders in 1999.

SAD Indian Budget

Increasing the allocation for defense spending by a record highest 28.2% to US$ 12.5 billion, the Indian central government budget for the year beginning April 1, 2000, has levied special administrative duty (SAD) making imports costly. It is expected to hamper Nepali exports. The new budget has also raised taxes on export earnings and dividend income, but left the vehicles sector largely untouched.

Some of the highlights of the budget included the introduction of central value added tax (CENVAT) which replaced MODVAT. Also, the peak rate of customs duty was reduced from 40 to 35 percent.

The budges has also announced removal of the 100 percent tax exemptionon on export earnings. The removal will take place over five years with additional 20% of export earnings being taxed each year.

Customs duty was slashed on the imports of hardware for IT and telecom sectors as well as the entertainment and film industry.

Tax on dividents distributed by domestic companies was raised from 10 to 20 percent. Tax on income distributed by debt-oriented mutual funds and UTI was also raised from 10 to 20 percent.

The minimum shareholding of the government in private sector banks was reduced to 33 percent. The budget said that in order to retain government control, shares would be widely held by the public. Excise duty on cigarettes was raised by 5 percent.

The automobile sector was left largely untouched with a marginal 2 percent excise hike in multi-utility vehicles (7-12 seaters) to 32 percent, while excise duty on commercial vehicles remained unchanged at 16 percent.

- By Business Age Reporters