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European Automakers Hope Technology Can Lure Younger Buyers

September 6, 2013 by

With sales at their lowest level in two decades, auto industry managers gathering for the Frankfurt auto show next week will be doing their best to focus on shiny new technologies rather than on the European car market, which, in contrast to the thriving market in the United States, is in a terrible state.

The buzz at the show, which opens to the public on Wednesday, is likely to be about new battery-powered cars and vehicles that are able to drive themselves. Those are more cheerful topics than auto sales, which have fallen 20 percent in Western Europe since the financial crisis began in 2008 and are at their lowest level since 1993.

Only European carmakers with substantial sales in the United States or China — BMW, Mercedes and Volkswagen — have escaped relatively unscathed.

The emphasis on technology is more than just a distraction from market misery. Carmakers are desperate for ways to excite young buyers, who are increasingly apathetic about car ownership. The push toward cars that are rechargeable and loaded with software is part of a search to make automobiles as essential to young adults as smartphones. Otherwise, there is a big risk that auto sales may never reach their previous peaks even if the European economy keeps improving.

“There are products that are hipper for young people than cars,” said Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen in northern Germany and an industry analyst. “The car companies are still using the old marketing pitch — more horsepower. That doesn’t speak to young people any more.”

Interest in battery-powered cars has faded after disappointing initial sales, but it could pick up again this year with the market introduction of the BMW i3. The vehicle has perhaps the most revolutionary new design by an established carmaker in years, not only because of its electric propulsion system but also because the passenger compartment is made of carbon fiber rather than steel, to save weight and extend the distance the car can travel between charges.

There is also speculation that Continental, a German parts supplier, will announce an alliance with Google next week to further develop self-driving cars. A spokesman for Continental, which will hold a news conference at the auto show on Tuesday, declined to comment.

As such initiatives illustrate, it is no longer enough for a car to take a person from one place to another without breaking down. A car must be green, so the owner does not feel guilty driving it. And being in the car should not interrupt the perpetual connectivity that many younger people take for granted.

BMW is going to extremes to make the i3 the most carbon-neutral car on the road. A wind turbine outside the BMW factory in Leipzig provides power for the i3 assembly line, and the carbon fiber for the passenger compartment comes from a factory in Washington State that uses hydropower. And of course the i3 itself has no tailpipe emissions (unless buyers choose a range-extender version that has a small gasoline motor).

With a price of about $42,000 in the United States, the i3 will be an option only for higher-end buyers when it arrives in showrooms by the middle of next year, though government incentives could lower the price by more than $7,000. But since BMW’s clientele already tends to be wealthy and urban, the company may be in a better position than other carmakers to find a market.

“What the mobile phone did for communication, electric mobility will do for individual mobility,” Norbert Reithofer, the chief executive of BMW, said during an introduction event for the i3 in New York in July.

Despite Mr. Reithofer’s enthusiasm, no one expects battery-powered cars to sell in large numbers soon, and certainly not to solve the industry’s deep-seated problems. About 77,000 electric vehicles were sold in the United States in the last 12 months, far more than in any other country, according to Roland Berger Strategy Consultants in Munich. That number, which includes cars like the Chevy Volt that have range-extender motors, is tiny compared with the 14.5 million cars of all types sold in the United States last year.

Modest expectations may also be in order for self-driving cars. Cars are coming on the market that can relieve drivers of some of the tedium of driving in traffic or on the highway. The latest edition of the Mercedes-Benz S-Class, introduced this year, can steer and brake autonomously in traffic or on the autobahn.

Article source: http://www.nytimes.com/2013/09/07/business/global/carmakers-hope-technology-lures-younger-buyers.html?partner=rss&emc=rss

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Euro Zone Economy Shows Further Signs of Growth

August 22, 2013 by

A survey of purchasing managers conducted this month by Markit Economics, a data and analysis firm in London, pointed to a broad, though tentative, recovery in the 17 nations of the euro zone. Markit’s composite output index rose in August to 51.7 from 50.5 in July, the highest in 26 months and above market expectations for a reading of about 50.9. A number over 50.0 indicates growth.

The data comes just a week after official data showed Europe breaking out of recession in the second quarter of the year, helped by a rebound in French and German household spending.

Markít’s index of manufacturing sector purchasing managers rose to a 26-month high of 51.3, up from 50.3 in July. A comparable survey in the services sector showed a rise in activity to 51.0, up from 49.8 in July, the highest in 24 months.

The data “provide further evidence that the currency union continued to expand in the third quarter, albeit at a pretty modest pace,” Jonathan Loynes, an economist in London with Capital Economics, wrote in a research note. “On past form, the index is now consistent with quarterly growth in euro zone G.D.P. of about 0.2 percent,” equivalent to an annualized rate of about 0.8 percent.

The world economy could well use a European economic renaissance at a time when global markets have been unnerved by signs of a slowdown in emerging markets and anxiety about the timing and impact of the American Federal Reserve’s monetary stimulus policies.

Still, there is little sign that the tepid recovery will be enough to address the main problems weighing on the euro zone, an unemployment rate at record levels and a crisis of confidence in public sector finances.

Once again, the largest European economy, Germany, led the way, with output expanding at its fastest pace since January, with manufacturing at a 25-month high, according to data from Markit.

Carsten Brzeski, an economist in Brussels with ING Bank, said Germany was benefiting from a combination of strong domestic demand and improvements across the European economy.

“It looks as if new growth hopes for the rest of the euro zone are stimulating German confidence,” he wrote in a note to clients, “which in turn could lead to higher German economic growth and could eventually become growth-supportive for the euro zone.”

French purchasing managers reported a contraction, with the index coming in at 47.9 in August compared with 49.1 in July. That suggests that France’s second-quarter growth spurt of 0.5 percent, or about 2.0 percent at an annualized rate, might prove a one-off affair.

Jack Kennedy, a Markit economist, said that although the French index had been disappointing, there were “encouraging signs from some of the more forward-looking indicators,” including the first small increase in new manufacturing orders in more than two years.

Article source: http://www.nytimes.com/2013/08/23/business/global/euro-zone-economy-shows-further-signs-of-growth.html?partner=rss&emc=rss

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In Effort to ‘Rebalance,’ Europe Appears Committed to Austerity Plan

April 9, 2013 by Leave a Comment

BRUSSELS — Jacob J. Lew, the United States Treasury secretary, urged European officials to adopt more growth-friendly policies on Monday. But there was little indication that the recession-plagued European Union was moving away from the austerity path it has pursued to deal with the debts and imbalances that emerged in the financial crisis of 2008-9.

At the outset of a joint news conference with Mr. Lew, Herman Van Rompuy, the president of the European Council, emphasized the difficult climate that both economies faced.

“We continue to rebalance and rebuild our economic potential to ensure strong, sustainable and inclusive growth and jobs going forward,” Mr. Van Rompuy said. “It is a long and difficult process, but one we stick to with determination on both sides of the Atlantic.”

But despite Mr. Van Rompuy’s reassuring words, it was clear that deep divisions remain between the American and European approaches to the crisis, which have contributed to the divergent paths the economies of Europe and the United States have followed in its wake.

“Our economic recovery is gathering strength,” Mr. Lew said. “The U.S. economy has expanded for 14 consecutive quarters, and although the pace of job creation is not as fast as we would like, the private sector has added jobs for 37 straight months.”

In contrast, the euro zone continues to struggle with shrinking economies and rising unemployment, with Germany, France and Spain all contracting in the fourth quarter of 2012. That has made meeting Europe’s goals of reducing fiscal deficits even harder.

The question that Mr. Lew came to Europe to raise is how to strengthen the European economy — for the Continent’s sake, as well as for the global economy’s. The United States has an investment in Europe’s growth, American officials have said repeatedly, because of the deep financial and trade ties between the countries.

“We have an immense stake in Europe’s health and stability,” Mr. Lew said. “I was particularly interested in our European partners’ plans to strengthen sources of demand at a time of rising unemployment.”

The Obama administration has urged countries with stronger economies, like Germany, to slow their pace of fiscal retrenchment and ease off on demands for tougher cutbacks in hard-hit countries like Greece, Spain and Portugal. In the last few years, such advice has often fallen on deaf ears, given the political constraints in Europe and many officials’ belief in budget balance as a prerequisite to growth.

Mr. Van Rompuy mentioned the “vivid debate” over “fiscal policy and the pace of fiscal consolidation” in his remarks. He pointed out that some countries have been given additional time to meet the euro zone’s deficit goals. But Mr. Van Rompuy reaffirmed the Continent’s strategy, rather than indicating a change in direction despite the rising unemployment and worse than expected contraction.

“The European economies face a high level of debt, deep structural medium-term challenges and short-term economic headwinds that we need to confront,” he added. “There is no room for complacency.”

The trip is Mr. Lew’s first to Europe as Treasury secretary. Earlier this year, he visited Beijing in his first trip abroad in the post. Though he worked for a time in the State Department in the Obama administration, Mr. Lew is primarily known as a domestic budget expert.

In contrast, his predecessor, Timothy F. Geithner, was an international finance specialist who had previously worked at the International Monetary Fund and as Treasury under secretary for international affairs. During his tenure, Mr. Geithner repeatedly pressed his counterparts in Europe to ease up on austerity, though without much success.

On Monday, the French government canceled a meeting between Mr. Lew and his counterpart, Finance Minister Pierre Moscovici, with a scandal over a former budget chief’s offshore accounts brewing. But late Monday evening, the meeting was rescheduled for Tuesday afternoon in Paris, the Treasury said.

Later on Monday, Mr. Lew also met in Frankfurt with Mario Draghi, president of the European Central Bank. He is scheduled to travel to Berlin on Tuesday to see Wolfgang Schäuble, the German finance minister.

Earlier on Monday, Mr. Lew met with other European officials, including José Manuel Barroso, the president of the European Commission, the executive arm of the European Union.

A Treasury official said they, too, discussed the need for Europe to generate more demand, as well as the situation in Cyprus, a cross-border banking union and a prospective free-trade agreement.

Article source: http://www.nytimes.com/2013/04/09/business/global/us-treasury-chief-talks-of-growth-in-europe.html?partner=rss&emc=rss

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Many States Say Cuts Would Burden Fragile Recovery

February 23, 2013 by Leave a Comment

Some states, like Maryland and Virginia, are vulnerable because their economies are heavily dependent on federal workers, federal contracts and military spending, which will face steep reductions if Congress allows the automatic cuts, known as sequestration, to begin next Friday. Others, including Illinois and South Dakota, are at risk because of their reliance on the types of federal grants that are scheduled to be cut. And many states simply fear that a heavy dose of federal austerity could weaken their economies, costing them jobs and much-needed tax revenue.

So as state officials begin to draw up their budgets for next year, some say that the biggest risk they see is not the weak housing market or the troubled European economy but the federal government. While the threat of big federal cuts to states has become something of a semiannual occurrence in recent years, state officials said in interviews that they fear that this time the federal government might not be crying wolf — and their hopes are dimming that a deal will be struck in Washington in time to avert the cuts.

The impact would be widespread as the cuts ripple across the nation over the next year.

Texas expects to see its education aid slashed hundreds of millions of dollars, which could force local school districts to fire teachers, if the cuts are not averted. Michigan officials say they are in no position to replace the lost federal dollars with state dollars, but worry about cuts to federal programs like the one that helps people heat their homes. Maryland is bracing not only for a blow to its economy, which depends on federal workers and contractors and the many private businesses that support them, but also for cuts in federal aid for schools, Head Start programs, a nutrition program for pregnant women, mothers and children, and job training programs, among others.

Gov. Bob McDonnell of Virginia, a Republican, warned in a letter to President Obama on Monday that the automatic spending cuts would have a “potentially devastating impact” and could force Virginia and other states into a recession, noting that the planned cuts to military spending would be especially damaging to areas like Hampton Roads that have a big Navy presence. And he noted that the whole idea of the proposed cuts was that they were supposed to be so unpalatable that they would force officials in Washington to come up with a compromise.

“As we all know, the defense, and other, cuts in the sequester were designed to be a hammer, not a real policy,” Mr. McDonnell wrote. “Unfortunately, inaction by you and Congress now leaves states and localities to adjust to the looming threat of this haphazard idea.”

The looming cuts come just as many states feel they are turning the corner after the prolonged slump caused by the recession. Gov. Martin O’Malley of Maryland, a Democrat, said he was moving to increase the state’s cash reserves and rainy day funds as a hedge against federal cuts.

“I’d rather be spending those dollars on things that improve our business climate, that accelerate our recovery, that get more people back to work, or on needed infrastructure — transportation, roads, bridges and the like,” he said, adding that Maryland has eliminated 5,600 positions in recent years and that its government was smaller, on a per capita basis, than it had been in four decades. “But I can’t do that. I can’t responsibly do that as long as I have this hara-kiri Congress threatening to drive a long knife through our recovery.”

Federal spending on salaries, wages and procurement makes up close to 20 percent of the economies of Maryland and Virginia, according to an analysis by the Pew Center on the States.

But states are in a delicate position. While they fear the impact of the automatic cuts, they also fear that any deal to avert them might be even worse for their bottom lines. That is because many of the planned cuts would go to military spending and not just domestic programs, and some of the most important federal programs for states, including Medicaid and federal highway funds, would be exempt from the cuts.

States will see a reduction of $5.8 billion this year in the federal grant programs subject to the automatic cuts, according to an analysis by Federal Funds Information for States, a group created by the National Governors Association and the National Conference of State Legislatures that tracks the impact of federal actions on states. California, New York and Texas stand to lose the most money from the automatic cuts, and Puerto Rico, which is already facing serious fiscal distress, is threatened with the loss of more than $126 million in federal grant money, the analysis found.

Even with the automatic cuts, the analysis found, states are still expected to get more federal aid over all this year than they did last year, because of growth in some of the biggest programs that are exempt from the cuts, including Medicaid.

But the cuts still pose a real risk to states, officials said. State budget officials from around the country held a conference call last week to discuss the threatened cuts. “In almost every case the folks at the state level, the budget offices, are pretty much telling the agencies and departments that they’re not going to backfill — they’re not going to make up for the budget cuts,” said Scott D. Pattison, the executive director of the National Association of State Budget Officers, which arranged the call. “They don’t have enough state funds to make up for federal cuts.”

The cuts would not hit all states equally, the Pew Center on the States found. While the federal grants subject to the cuts make up more than 10 percent of South Dakota’s revenue, it found, they make up less than 5 percent of Delaware’s revenue.

Many state officials find themselves frustrated year after year by the uncertainty of what they can expect from Washington, which provides states with roughly a third of their revenues. There were threats of cuts when Congress balked at raising the debt limit in 2011, when a so-called super-committee tried and failed to reach a budget deal, and late last year when the nation faced the “fiscal cliff.”

John E. Nixon, the director of Michigan’s budget office, said that all the uncertainty made the state’s planning more difficult. “If it’s going to happen,” he said, “at some point we need to rip off the Band-Aid.”

Fernanda Santos contributed reporting.

Article source: http://www.nytimes.com/2013/02/23/us/politics/many-states-say-cuts-would-burden-fragile-recovery.html?partner=rss&emc=rss

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A Proposal for E.U.-Wide Data Protection Regulation

November 29, 2011 by Leave a Comment

PARIS — A top lawmaker on Tuesday proposed harmonizing European Union privacy rules so that an Internet company could operate across the 27-country bloc as long as its data protection policies had been approved by a single member state.

Viviane Reding, vice president of the European Commission, said unnecessary hurdles created by privacy rules that date to 1995, when the Internet was in its infancy, were costing companies €2.3 billion, or $3.1 billion, a year as regulators in 27 different nations applied their own rules.

Ms. Reding acknowledged the apparent incongruity of discussing the harmonization of E.U. rules at a time of extreme discord within the bloc over economic policy, with debt woes straining the ties that bind together the euro zone. But she said an overhaul of the privacy regulations was crucial to increasing the competitiveness of the European economy to help it surmount the crisis.

“I think I am persuaded that while bringing member states out of their debt crises, we have to do everything we can to help our companies grow,” Ms. Reding said during a speech to privacy lawyers and other data protection professionals in Paris.

Ms. Reding said she planned to detail her plans in January in what is expected to be a sweeping overhaul of the 16-year-old Data Protection Directive. Internet companies, which would be most immediately affected by the new rules, have been urging E.U. lawmakers to simplify the existing practice, and mostly welcomed her proposals Tuesday.

“Even more important than the specific regulations is that they need to be the same across the E.U.,” said Peter Fleischer, global privacy counsel at Google.

While praising this aspect of Ms. Reding’s approach, U.S. Internet companies are worried about some of the specifics.

During a separate speech, Ms. Reding said Tuesday that she wanted to give users of social networks and other Web services greater control by, for example, letting them delete personal data or move it to other sites more easily. Companies like Facebook have generally resisted such proposals, fearing this could undermine the development of services like targeted advertising, which relies on the mining of consumer data.

“Individuals should be well informed about privacy policies and their consent needs to be specific and given explicitly,” Ms. Reding said.

Ms. Reding said that under her proposal for uniform, E.U.-wide privacy rules, the data protection officials in individual countries would have to be granted greater power to enforce these laws and to impose penalties on violators. Under the existing system, privacy officials in some countries can only make recommendations.

Jacob Kohnstamm, chairman of a panel that advises the commission on privacy issues, said the Union needed data protection authorities that were “able to bark and bite.”

Mr. Kohnstamm urged the commission to draft the new privacy rules through regulation, a measure that would give E.U. member states little wiggle room in their implementation of the law, rather than via a directive, like the current law, which creates more latitude.

Ms. Reding did not address this issue, but she did reiterate that the new rules would apply to any company operating in the Union, even if it were based outside the bloc. This could create conflicts between the rules in the Union and other jurisdictions, like the United States, where data protection regulations are also under review.

“It does not seem logical to say that data held by a European company is adequately protected while it is inside the borders of the European Union, but not when it is transferred to a different part of that same company in Asia or South America, even if safeguards are put in place,” Ms. Reding said.

Ronald Zink, chief operating officer for E.U. affairs at Microsoft, said that harmonizing policies internationally might be just as important as doing it within the Union, but added: “I think the E.U. data protection laws can be a beacon for the U.S. and around the world. They do a lot of things right.”

Article source: http://feeds.nytimes.com/click.phdo?i=259dbd493d2bed8b5bed7891ae7f834e

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Stocks and Bonds: Nagging Fears on Europe Slow a Wall Street Rally

September 28, 2011 by Leave a Comment

Stocks rose on Tuesday, extending a global rally into a third consecutive day, as investors anticipated a more ambitious plan by European leaders to deal with the euro zone debt crisis. But they were unable to hold on to their sharpest gains.

After jumping 2.5 percent on Monday, the Dow Jones industrial average added 1.33 percent Tuesday, rising 146.83 points, to 11,190.69. Earlier in the day, the Dow was up as much as 325 points. But the markets lost steam in late trading on concerns that a second bailout for Greece could be scuttled by countries that wanted banks to shoulder more of the burden.

The euphoria at the start of the week centered on talk of a plan to give extra firepower to Europe’s proposed 440 billion euro (about $600 million) bailout fund for troubled nations and banks. Under a possible new plan, the fund could be enhanced to insure as much as a couple of trillion euros in loans.

Even if leaders manage to eventually expand the war chest, it is far from certain that the larger crisis in Europe will be contained. For one thing, the money might not be enough if the already weakened European economy falls into a prolonged recession. Recent data show that manufacturing and services activity there are sliding toward contraction, and that the region’s economy probably stagnated in the third quarter.

As it is, Greece, Portugal and Spain are looking at lengthy economic downturns as a result of harsh austerity measures adopted to straighten their finances. In Italy, economists are increasingly worried that that a 45 billion euro ($61 billion) austerity package recently rushed through Parliament could tip the economy into a downturn.

Germany and France also have started to show signs of a slowdown, a more worrisome development since they are considered engines of the European economy.

“They are buying time,” said Jens Nordvig, an economist at Nomura in New York. “But it only postpones the problem. Growth is slowing in countries like Italy. They may be too late.”

The immediate hurdle for each of the 17 countries in the euro currency zone is to approve the 440 billion euro fund proposed in July. So far only seven have done so. Slovenia signed off on Tuesday and there are critical votes set for Wednesday in Finland and in Germany on Thursday.

European leaders say the process should be completed by mid-October but already investors judge it insufficient to cope with the scale of problems in Greece and other troubled nations.

As a result, a new plan is emerging in Europe that would let the European Central Bank or another European institution, like the European Investment Bank, buy troubled sovereign debt or loans from euro zone banks with the backing of the fund.

Timothy F. Geithner, the Treasury secretary, turned up the heat on Europe in the last few days to expand the war chest exponentially by leveraging its resources, possibly by running it like a bank that could borrow additional money.

The governor of Canada’s central bank, Mark Carney, said last week that Europe should make about one trillion euros available to “overwhelm” the crisis.

Lorenzo Bini Smaghi, a member of the executive board of the European Central Bank, offered cautious backing to the idea on Tuesday, saying leaders “need to look at possible leverage.” The bank’s support would probably be essential to such a plan.

But critics said that using it to buy distressed government debt held by banks would only shift the problem to Europe’s taxpayers. That would worsen the region’s sovereign debt crisis and potentially compromise even relatively strong nations like Germany and France.

Other Europeans are grumbling that the United States is hardly in a position to lecture them on how to manage a crisis, and it is not clear how quickly or easily the fund could be expanded. Germany, for one, does not want the independent central bank to be involved in the fund’s operations.

Still, no politician wants to pump even more taxpayer money directly into the fund, which would anger voters and put the AAA ratings of Germany and France at risk. Wolfgang Schaüble, the German finance minister, on Tuesday derided the idea as “silly.”

The prospect of a new plan, which emerged during a weekend of meetings of world leaders in Washington and after some urging by the United States, seemed to represent a realization that Europe had to do something to bring itself back from the brink. For weeks, global markets had lurched downward and investors had become increasingly concerned that Europe’s failure to act was disrupting confidence and growth around the world.

On Tuesday in Europe, the Euro Stoxx 50 index, a barometer of euro zone blue chips, closed up 5.3 percent.

Later, the United States markets gave up some of their gains after The Financial Times reported that some countries were demanding that banks take a bigger hit in Greece’s debt restructuring and that Greece needed deeper financing than was thought two months ago. The Standard Poor’s 500-stock index rose 1.07 percent, or 12.43 points, to 1,175.38, and the Nasdaq composite index gained 1.2 percent, to 2,546.83.

Earlier Tuesday, Mohamed A. El-Erian, chief executive of Pimco, who has long been pessimistic about Europe’s efforts to solve its crisis, expressed optimism for a solution. “They recognize they have deep problems and they recognize they need to do something about it,” he said in a Bloomberg radio interview. “This was a very important wake-up call for Europe.” He added that European leaders “finally get it.”

But skepticism remained.

“It is not clear to me that, though they may have ‘got it,’ anything has actually happened,” said Carl Weinberg, an economist at High Frequency Economics. “At this point, you have got to show me the money.”

Joshua Brustein contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=bd62772a11b062080fbc6b08416eec84

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