March 28, 2024

DealBook: 2 Aerospace Giants Say They Are in Merger Talks

A model of an Airbus A320 aircraft was on display during a company news conference in London in September.Jason Alden/Bloomberg NewsA model of an Airbus A320 aircraft was on display during a company news conference in London last year.

1:30 p.m. | Updated

PARIS – EADS and BAE Systems, Europe’s two largest aerospace and defense companies, said on Wednesday that they were in advanced discussion about a possible merger that would create one of the largest players in a fiercely competitive global industry.

Under the terms of the proposed deal, shareholders of European Aeronautic Defense and Space, as EADS is formally known, would own 60 percent of the combined company, while BAE would control the remaining 40 percent.

The combined company would surge ahead of Boeing in terms of revenue, said Guy Anderson, a senior defense industry analyst with IHS Jane’s in London. But he added, “there is no telling how much of the combined offering would have to be sold off to satisfy regulators.”

The combined market value of the two companies is roughly $49.8 billion, making the potential deal the largest aerospace merger since the acquisition of McDonnell Douglas by Boeing that was completed in 1997.

That older deal appears to be a model for the talks between BAE and EADS, which is the parent company of the commercial jet maker Airbus. In combining its huge commercial-airplane operations with McDonnell-Douglas’s military business, Boeing sought a more reliable revenue stream to offset the boom-and-bust cycles in passenger travel.

That worked out well after the terrorist attacks in 2001, when Boeing’s rapidly growing military business helped buffer it from a collapse in the demand for passenger jets. And over the last several years, Boeing’s commercial business has soared while its military operations have had to deal with budget cuts in many countries.

BAE, which is primarily a military company, is facing the same belt-tightening in its main markets, and it could benefit more in the short run from a combination than EADS, Boeing’s main competitor in building passenger jetliners.

EADS and BAE could also be seeking more lobbying muscle to compete with more vigorously with Boeing and other American military companies. BAE already has a strong presence in the United States, but EADS has had only limited success with American defense contracts. Last year, for example, the company lost a coveted $35 billion Air Force contract for aerial refueling tankers to Boeing. A merged EADS-BAE would likely derive about a -fifth of its sales from North America.

“On the face of it this will create one of the largest aerospace and defense organisations on the planet,” said Mr. Anderson, the IHS Jane’s analyst, who added that the combination would ”change the European defence market beyond recognition.”

In a statement made to the London Stock Exchange late Wednesday, BAE said the potential combination “would create a world class international aerospace, defence and security group with substantial centers of manufacturing and technology excellence in France, Germany, Spain, the U.K. and the U.S.A.”

EADS, which is incorporated in the Netherlands with headquarters in Toulouse, France, has sought for years to create a more equitable balance between its highly successful — but cyclically more volatile — commercial aircraft business and its much smaller defense and security activities, which include its Eurocopter helicopter unit, the Astrium space division, as well as Cassidian, which specializes in defense communications, security and surveillance systems.

Currently, Airbus currently represents about 65 percent of EADS revenue. But a combination with BAE, whose business is almost entirely focused on defense, would be expected to bring the split to roughly 53 percent commercial aerospace and 47 percent defense and security, said one person familiar with the details who spoke on condition of anonymity because the talks were ongoing.

According to the person with knowledge of the talks, EADS and BAE first began concrete discussions about a combination in June, about a month before Airbus announced plans for an assembly line in Mobile, Ala. — its first industrial foray in Boeing’s home market.

Both BAE and EADS have a long history of collaboration and are partners in a number of projects, including the Eurofighter jet. BAE also held a direct interest in the Airbus consortium for many years before selling it back to EADS in 2006.

Mergers of large companies that operate in more than one European country normally require the approval of the European Commission, which acts as the anti-trust regulator for the 27-nation European Union. The commission would not comment Wednesday on news of the talks.

Under British law, the two companies have until Oct. 10 to decide whether to pursue the merger.

Shares of BAE Systems rose 10.8 percent by the end of trading in London on Wednesday, while shares of EADS were down 5.6 percent. News of the merger talks was reported earlier on Wednesday by Bloomberg News.

Christopher Drew in New York and Mark Scott and Stephen Castle in London contributed reporting.

Article source: http://dealbook.nytimes.com/2012/09/12/bae-systems-and-eads-say-they-are-in-merger-talks/?partner=rss&emc=rss

Boeing Workers Approve 4-Year Contract Extension

SEATTLE (AP) — Unionized Boeing Machinists voted overwhelmingly Wednesday to approve a four-year contract extension in a deal that grants the company a long stretch of elusive labor peace and likely ends a federal complaint that had become a hot topic for Republican presidential candidates.

Dozens of union members erupted in applause and cheers Wednesday night as Tom Wroblewski, president of Machinists District Lodge 751, announced that 74 percent of voting members chose to approve the deal.

The union represents 28,000 workers in Washington, Oregon and Kansas.

Boeing promised that if workers approved the pact, the company would build the new version of the popular 737 in the Puget Sound region, while the Machinists said they’d drop their allegations that Boeing opened a nonunion assembly plant in South Carolina in retaliation for previous strike.

“This contract signifies jobs throughout the Northwest, throughout the region,” said the union’s aerospace coordinator, Mark Blondin. “The message of this contract is … Boeing is acknowledging we have the deepest pool of skilled aerospace workers in the country.”

Machinists went on strike in 2005 and 2008. The latter strike helped delay delivery of Boeing’s first 787, costing the company dearly.

“This contract will help secure a better future for our employees, our customers, our communities and our company,” said Jim Albaugh, president and CEO of Boeing Commercial Airplanes. “It reflects an effort on the part of the company and the union to find a better way to work together and achieve common ground.”

The deal guarantees Chicago-based Boeing a stretch of labor peace at a time when it badly needs it. Competition with European rival Airbus is tight, and looming budget cuts at the Defense Department are likely to cut into the company’s defense business.

In a lawsuit filed this year, the National Labor Relations Board claimed Boeing violated labor laws by opening the South Carolina line. The case became a political issue, with Republican presidential candidates using it to bash the Obama administration. South Carolina Gov. Nikki Haley and the state’s congressional delegation said the NLRB lawsuit threatened thousands of jobs and millions of dollars invested in the new Boeing facility in Charleston.

The labor board is an independent agency dominated by the president’s appointees. As part of the deal, the Machinists said they’d drop the matter. If the NLRB follows suit, it would remove a potentially damaging element for Obama in the 2012 campaign.

The deal extends the Machinists’ contract to September 2016. It calls for annual wage increases of 2 percent, cost-of-living adjustments, an incentive program intended to pay bonuses between 2 percent and 4 percent, a ratification bonus of $5,000 for each member, and improvements in the pension program. But it also would raise workers’ share of health costs.

Blondin said Boeing’s pension is the most generous in the country, and he hoped the fact that Boeing is retaining it for new hires would prompt other companies to do likewise: “As we all know pension plans have gone away,” he said. “We can get pensions back. They are affordable.”

Crucially for the union, it would ensure that jobs for Boeing’s updated 737 line — the 737 Max — stay in the Puget Sound region. Boeing said in July it was studying other locations for the new 737.

“It’s jobs for the people and not having to worry about a strike — it’s beautiful,” said Gabrielle Rogano, a third-generation Boeing employee who works at a shipping and receiving center in SeaTac.

Wilson Ferguson, a delivery mechanic, wore a Santa suit as he helped count votes Wednesday night — having come straight from volunteering to pose for photos with children of union members. The 24-year Boeing veteran has participated in the last four strikes, and said it’s a huge relief not to face another.

“Nobody wins, you never recover,” he said. “With this economy, it’s not the time to go on strike.”

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Gene Johnson can be reached at https://twitter.com/GeneAPseattle .

Article source: http://feeds.nytimes.com/click.phdo?i=acde7f2bf2182b61424dbc6544d77522

Portugal Faces Challenges in Meeting Bailout Terms

International lenders calling this week on Pedro Passos Coelho, who moved in just two months ago, will be looking, however, for more than superficial improvements to the country’s economy before writing their next check.

Three months after approving a €78 billion, or $111 billion, bailout for Portugal, officials from the International Monetary Fund, the European Commission and the European Central Bank are conducting their first review of progress toward meeting conditions set for emergency financing. Those include budget cuts and an economic overhaul intended to stimulate growth.

Portuguese officials and business executives expect a broadly favorable assessment following general elections that replaced a minority Socialist government with a stronger, center-right one. But they also worry that elements out of their control — a widening debt crisis in Europe and fears of a slowdown in global growth that have been rattling markets — could undermine Portugal’s efforts.

“To make the changes that we have agreed to is a necessary condition, but not a sufficient one” alone, said António Mexia, chief executive of EDP Energias de Portugal, the country’s largest utility.

“There are now a lot of things that no longer depend on Portugal but instead on Spain and Italy and other countries around us,” he said. “In this crisis not even bigger countries than ours can say that they control fully their destiny.”

Still, since his electoral victory in June, Mr. Passos Coelho, Portugal’s new prime minister, has struck a confident note, insisting that his government would reduce the budget deficit by more than a third this year, to 5.9 percent of gross domestic product from 9.1 percent in 2010.

Such drastic tightening would be a significant improvement on the performance of the previous government. It would also contrast with the situation in Greece, which remains on the brink of default more than a year after becoming the first euro zone country to be rescued.

The Finance Ministry in Athens reported last month that the budget deficit there had widened by almost a third in the first six months of this year — blowing its targets — as a deep recession exacerbated by budget cuts dampens government revenue.

“What we learnt from Greece is that it’s all about implementation,” said Carlos Moedas, a former Goldman Sachs investment banker named by the Portuguese prime minister to oversee the budget agreement with its foreign creditors. “The kind of implementation monitoring that we are putting in place is completely new in Portugal and I believe even ahead of what was done in past I.M.F. programs.”

As in the bailouts of Greece and Ireland, the lenders have set quarterly progress reviews. For Portugal, the outcome of the first review is expected as early as the end of this week.

When the I.M.F. was last called to Portugal’s rescue in the early 1980s, the intervention was widely unpopular, largely because it led to a sharp rise in interest rates.

This time, despite grumblings by Portugal’s powerful Communist party about foreign intervention and excessive austerity demands, “there is a real and widespread sense of relief that we are finally getting helped by qualified financial experts, because people here are completely fed up with mismanagement by our politicians,” said Pedro Reis, author of “Returning to Growth,” a recent book detailing Portugal’s economic woes.

Nuno Vasconcellos, who heads Ongoing, a family investment company that has several media businesses, as well as a significant stake in Portugal Telecom, said the arrival of the I.M.F. “must be seen as the perfect excuse to make all the reforms that Portugal has refused to consider for the past 30 years.”

Indeed, one of Mr Passos Coelho’s challenges is to lead by example and rein in spending in the country’s bloated public administration, as well as improve performance at state-controlled companies that have accumulated about €40 billion of debt.

Article source: http://www.nytimes.com/2011/08/10/business/global/portugal-faces-challenges-in-meeting-bailout-terms.html?partner=rss&emc=rss

You’re the Boss: This Week in Small Business: Are Small Businesses the Answer?

Dashboard

A weekly roundup of small-business developments.

What’s affecting me, my clients and other small-business owners this week.

The Deficit: Can Small Businesses Reduce the National Debt?

President Obama blogs about deficit reduction: go big! About that debt ceiling: Ezra Klein asks the question we’ve all been asking. A new poll reports that the president edges out the G.O.P. on helping small businesses. A Congressman says that small businesses are crucial to reducing this country’s debt. A massive deficit reduction plan is proposed by a staunch budget-cutter. Jared Bernstein says, “Consumer spending is way down, and it’s not getting much of a boost from jobs and paychecks. Which means that fiscal stimulus is about the only game in town, or it would be if policy makers weren’t spending practically every waking minute on budget cuts.”

The Data: A $300,000 Home Sells for $16

Mortgage refinancings surge but Wells Fargo reports a sharp decline in new mortgages. Existing home sales decline. Architectural billings fall. June housing starts, however, are at a six-month high and some economists think we’ve hit a housing bottom. A guy in Texas buys a $300,000 home for $16. American builders were slightly more confident in July, and the remodeling industry sets a record. Commercial property prices are increasing.

The Economy: A Slow Growth Decade Is Raging

As weekly jobless claims increase, here are nine signs the recovery might be losing momentum. Leading indicators grow slowly for the second month in a row. A well known forecaster says “a slow-growth decade is already raging. You feel it everywhere. And it’s going to get worse, much worse. A recession is virtually certain for 2012.” However, corporate cash is at an all-time high. David Beckworth concludes that the root of our problems lies in weak demand. The Hartford finds that we are optimistic about our personal finances, and (gasp) more are saving for retirement. A University of Helsinki study makes me re-think the benefits of gross domestic product growth. Borders is forced to liquidate, and Wharton’s Daniel Raff explains why this is bad for the entire publishing industry. Cisco cuts 6,500 jobs. Scott Grannis issues a money supply alert. Is Microsoft to blame for high unemployment?

Starting Up: Kauffman Wants Start-Up Legislation

The Kauffman Foundation proposes start-up legislation and laments that “start-ups are opening their doors with fewer employees and, once they get going, are hiring fewer people, regardless of the economic climate.” A microlender gives us eight crucial elements of start-up success, such as: “You want to raise enough money initially so that you can hit a major milestone and have something to show investors.” The founder of Cvent tells an inspiring story about his experiences as a start-up founder and dot-com era survivor. A 21-year-old sells her start-up for $21 million.

Marketing 1: Succeeding And Failing With Social Networks

Mediapost.com reports that Facebook scores low in customer satisfaction. Ever wonder which are the most expensive keywords for GoogleAds? Kristi Hines gives us four ways to increase traffic with Stumbleupon. Tim Hartford explains why social marketing doesn’t work. Example: “The first surprise, then, is that the typical Twitter cascade is both rare and tiny. Ninety per cent of Tweets are never re-tweeted, and most of the remainder are re-tweeted only by a person’s immediate followers, not by those at two or three removes.” More important: no new social networks were announced last week and, phew, a neuroscientist concludes that Google does not melt our memories.

Marketing 2: Men, Women, Cats and Dogs

New demographics contrast the shopping habits of men and women and dogs and cats. An infographic explains all of the ways to offer free shipping to customers. A research firm explains the five myths of selling to small businesses. Dan Ariely explains the tactics online companies use to get us to share more and spend more. Old Spice hires Fabio. American Express goes after Groupon.

Success Strategies: Anyone Know A Good Story?

Here’s how a bad economy can be the mother of invention. The Vancouver airport seeks a live-in storyteller for 80 days. Mark Perry explains why Wal-Mart is the most successful retailer in history. Chris Brogan creates “a private communication channel for aspiring Web entrepreneurs to learn how to build their businesses and grow their future.” New restaurant idea: build it under the sea. A video shares three lessons from Calvin Klein.

Your People: Come Out, Come Out Wherever You Are

CareerBuilder is forecasting a better job outlook. In a Rasmussen survey, 75 percent support tough penalties against employers who hire illegal immigrants. A survey claims that by granting staffers early access to a percentage of their pay, small businesses can improve productivity and retention. A Staples Advantage survey shows telecommuters are happier and healthier. Some federal workers are more likely to die than lose their jobs. Employers debate letting workers sleep on the job.  Sylvia Ann Hewlett, consultant and author, writes about the benefits of coming out: “L.G.B.T. employees who stay on track and make it into senior management are much more likely to be out than closeted: 71 percent compared to 28 percent of their closeted counterparts.”

Around The States and The World: Parking Tickets Mean Corruption

The Small Business Administration goes on tour. According to Urbanophile.com, our states give us a smaller scale model to find out what works and what doesn’t and can serve as test beds for new policy ideas. California’s mortgage defaults fall to a four-year low, but chief executives say it’s still the worst state for business. New York challenges Silicon Valley. A start-up hotbed in Cambridge fuels the Boston rental market. And yes, there is definitely a connection between unpaid parking tickets and corrupt governments. A brave man crosses the street in Vietnam like a boss. Manufacturing’s still weak in Philadelphia.

Finance: Happy Birthday Dodd-Frank!

The Dodd-Frank bill celebrates its first anniversary but is still under fire. The brand new consumer protection bureau faces a long debate. A venture capitalist says entrepreneurs need to understand the benefits of preferred stock: “Suffice it to say that this is an important term for investors, including me.” Steve Blank tells two awesome venture capital stories. Venture capital funding for Web start-ups hits a ten-year high, and Magic Johnson gets into the business. Ten banks own 77 percent of all American banking assets. Small businesses see a spike in loan approvals in June. Google plans (why not?) a credit card.

Technology 1: Hacking and Attacking Small Businesses

As the cell phone hacking scandal continues in the United Kingdom, Kurt Marko says yes, our voicemail can be hacked, too. Symantec says that 40 percent of targeted attacks are aimed at … small and mid-size businesses! Google warns of malware redirecting to its search results. Data loss affects half of small businesses. The S.B.A. is offering a free disaster recovery webinar. A Reddit founder has been indicted on fraud charges. The Internet survives a brief Lady Gaga outage. Businesspundit.com lists the top 10 online scams.

Technology 2: Should Apple Buy Goldman Sachs or Hulu?

Clint Parr explains how to use mobile apps to increase sales. Sprint waives long-term contracts. A $350 contract-free iPhone is on its way. Makeuseof.com lists five critical tools for a more productive virtual office. Apple could buy Goldman Sachs, but instead makes a play for corporate business (and maybe Hulu). New data shows that cloud computing is growing among small businesses. More than 50,000 businesses have signed up to try Microsoft’s Office 365 cloud application. ADP plans a mobile payroll app. Chris Pirillo offers five tips for creating better videos (Chris, can you please talk to this guy?). Adobe buys electronic signature provider Echosign. PCWorld’s Patrick Miller explains how to turn your gaming hobby into a small business.

The Week Ahead: Confidence? Growth?

Big numbers to watch: consumer confidence, new home sales, durable goods and advanced GDP predictions.

This Week’s Bests

Thoughts On Borders’ Liquidation: Kip Bodnar offers some marketing lessons from Borders’ bankruptcy: “Block off a couple of hours each day to really examine the disruption that is happening in other markets like music and publishing. What mistakes are being made? Why are the companies that are winning actually winning? Understanding the traits that make a successful business thrive during technology disruption will help to guide adjustments to your marketing strategy.”

Reason Technology Can Cripple Productivity: Matthew Might says to boost your productivity you may want to cripple your technology: “The productivity paradox, popularized by economist Erik Brynjolfsson, notes that computational power has advanced exponentially for decades, yet growth in labor productivity remains modest. While many factors explain the paradox, the one most relevant to modern knowledge workers is the dual capacity of technology to aid and to distract. To resolve this paradox, my guiding principle for productivity applies: Mold your life so that the path of least resistance is the path of maximum productivity.”

Philanthropy Idea: Tony Elumelu, investor and philanthropist, writes about the newly created African Markets Internship Programme: “At this moment, the A.M.I.P. is placing students from top African, European, and American business schools in highly structured programs with African companies. A.M.I.P. matches the unique skills of each intern with the particular needs of each host business to tackle their most pressing business problems.”

This Week’s Question: Does technology sometimes make you less productive? Do you know what I mean?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://feeds.nytimes.com/click.phdo?i=58f2d270cec58be16742e56ae40333cf