March 29, 2023

DealBook: Credit Suisse Said to Plan New Round of Layoffs in Europe

A branch of Credit Suisse in Basel, Switzerland. The I.R.S. asked for help in locating information on American account holders.Arnd Wiegmann/ReutersA branch of Credit Suisse in Basel, Switzerland.

LONDON – The Swiss bank Credit Suisse is planning to further reduce the size of its European investment banking department, according to a person with direct knowledge of the matter.

Credit Suisse, which announced plans last year to eliminate 3,500 jobs as part of an overhaul of its worldwide operations, may reduce the work force in its European investment banking division by as much as 30 percent, said the person, who spoke on the condition of anonymity because he was not authorized to speak publicly.

The new job reductions in that unit are part of the bank’s previously announced restructuring plans.

The cutbacks are expected to be focused in the bank’s advisory and capital markets businesses in Europe. Last month, the bank said it would let go 126 employees in the New York area by the beginning of August.

A spokesman for Credit Suisse declined to comment.

The new layoffs in Europe could take place over the next 12 months. In a progress report on its restructuring efforts, Credit Suisse said previously that it had eliminated 2,000 jobs by the end of March.

The prospect of layoffs in the bank’s European investment banking department comes soon after Switzerland’s central bank said Credit Suisse needed to increase its capital this year to prepare for a potential worsening of the European debt crisis

The Swiss National Bank singled out Credit Suisse in its annual financial stability report as a bank that needed to “significantly expand its loss-absorbing capital during the current year.”

In response, Credit Suisse said it was “comfortable” with its progress toward increasing capital reserves.

With a new round of layoffs in Europe, Credit Suisse is reacting to a broad reduction in deal activity and initial public offerings on the Continent prompted by market volatility and the debt crisis.

The total combined value of mergers and acquisitions in Europe has fallen 20 percent this year, to $382 billion, from the same period in 2011, according to the data provider Dealogic.

The total value of deals in Europe’s equity capital markets, including I.P.O.’s and rights issues, also fell 50 percent, to $60.4 billion, in the first half of the year.

Credit Suisse is not the only bank looking to cut back. A Swiss rival, UBS, has said it plans to cut 3,500 jobs, with about half of the layoffs expected within its investment banking division.

The French banks Société Générale and Crédit Agricole have also announced layoffs in response to a slowdown in the European economy.

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James Murdoch Has Quit Boards of British Newspapers

Media analysts in Britain speculated that the move by the younger Mr. Murdoch might presage the News Corporation’s eventual exit from British newspapers, once a core holding but now an increasingly marginal segment, in financial terms, of the company’s worldwide operations.

The younger Mr. Murdoch no longer sits on the boards of News Group Newspapers, which publishes The Sun, and of Times Newspapers, which publishes The Times and The Sunday Times of London, according to a statement released by the News Corporation’s News International unit, which oversees all Murdoch-owned businesses in Britain. All three papers are among the most influential in the country.

The statement, issued in response to reports in the British news media, said James Murdoch, 38, stepped down from the boards in September, but remained a director of Times Newspapers Holdings, the holding company of Times Newspapers that was established by Rupert Murdoch when he bought The Times titles in the early 1980s to honor his pledge to keep the papers editorially independent. James Murdoch will also remain chairman of News International and deputy chief operating officer, from a base in New York, of the News Corporation.

He will also continue as chairman of British Sky Broadcasting, Britain’s most powerful satellite broadcaster and one of the News Corporation’s most lucrative businesses.

The board changes appear to signal a significant gesture by the Murdochs, a step back from the family’s personal oversight of the newspaper properties in Britain that were the foundation for Rupert Murdoch’s emergence as an international media tycoon, after making his start as a newspaper proprietor in Australia. From Britain, Rupert Murdoch, now 80, moved his headquarters to the United States and vastly expanded his empire into film, television and other holdings.

Rupert Murdoch is said to have a passion for newspapering that James Murdoch, who has spent much of his career overseeing the News Corporation’s overseas television holdings, does not share.

News International spokesmen disputed suggestions that the Murdochs were walking away from the British newspapers, or seeking to distance themselves from the phone hacking scandal that ensnared The News of the World, a highly profitable tabloid that they closed this summer amid revelations about the newspaper’s role between 2001 and 2009 in the illegal interception of private voice mail messages of almost 6,000 people. The hacking victims included members of the royal family, sports and entertainment celebrities, and vulnerable families that had lost children to abduction and murder.

The News of the World had published continuously for 168 years, and James Murdoch has refused to rule out closing The Sun, the country’s largest daily newspaper by circulation, if it should become embroiled in the phone hacking scandal, as some of those who believe that their phones were hacked have alleged. At least 16 former News International employees, including Rebekah Brooks, the former chief executive, have been arrested in police investigations.

Two News Corporation officials, who spoke on the condition of anonymity in return for discussing internal company matters that they described as confidential, said the board moves were “housekeeping” measures. The decision was made, one said, because Mr. Murdoch “will be spending more time in the United States” in his role as a News Corporation executive. His position on the two boards was assumed by Tom Mockridge, the new chief executive of News International, who was appointed to the position after his predecessor, Ms. Brooks, resigned over the phone hacking scandal.

The news of Mr. Murdoch’s departure from the two boards, two months after the moves occurred, broke when a reporter for The Evening Standard, which is not a Murdoch property, examined filings at Companies House, the government agency where privately owned businesses in Britain file financial statements and other corporate documents.

Mr. Murdoch’s decision to step down from the two boards followed his appearance with his father in July before a House of Commons committee conducting televised hearings into the long-running scandal.

James Murdoch made a second appearance this month before the panel, known as the Culture, Media and Sport Committee, where he faced further questioning about his role in the scandal, in particular his approval of a $1.3 million financial settlement with Gordon Taylor, a soccer executive whose cellphone messages were among those intercepted by a private investigator working for The News of the World. Mr. Murdoch testified that the settlement was not a payment to cover up the extent of the wrongdoing at the newspaper, as some members of the committee suggested.

Although James Murdoch has rejected any hint of wrongdoing, it is widely expected that he will come in for criticism, and possibly harsher censure, when the parliamentary committee makes its report, expected before the year’s end.

Media analysts in the City of London financial district said they saw the board changes as part of a broader strategic repositioning by the News Corporation, and as a possible preliminary to a decision by the Murdochs to abandon their British newspaper holdings. “It feels like they’re loosening the ties,” said Alex DeGroote, an analyst at Panmure Gordon. “Over all, I don’t think News Corporation will own News International in the next 14 months or so. This is slowly withdrawing family interest from the U.K. titles, which are a marginal asset and increasingly became a distraction of management time.”

Julia Werdigier contributed reporting.

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Chasing Rare Earths, Foreign Companies Expand in China

Now, corporate executives say, it is using its near monopoly on certain raw materials — in particular, scarce metals vital to products like hybrid cars, cellphones and energy-efficient light bulbs — to make it difficult for foreign high-tech manufacturers to relocate or expand factories in China. Companies that continue making their products outside the country must contend with tighter supplies and much higher prices for the materials because of steep taxes and other export controls imposed by China over the last two years.

Companies like Showa Denko and Santoku of Japan and Intematix of the United States are adding new factory capacity in China this year instead of elsewhere because they need access to the raw materials, known as rare earth metals.

“We saw the writing on the wall — we simply bought the equipment and ramped up in China to begin with,” said Mike Pugh, director of worldwide operations for Intematix, who noted that the company would have preferred to build its new factory near its Fremont, Calif., headquarters.

While seemingly obscure, China’s policy on rare earths appears to be directed by Prime Minister Wen Jiabao himself, according to Chinese officials and documents. Mr. Wen, a geologist who studied rare earths at graduate school in Beijing in the 1960s, has led at least two in-depth reviews of rare earths this year at the State Council, China’s cabinet. And during a visit to Europe last autumn, he said that little happened on rare earth policy without him.

China’s tactics on rare earths probably violate global trade rules, according to governments and business groups around the world.

A panel of the World Trade Organization, the main arbiter of international trade disputes, found last month that China broke the rules when it used virtually identical tactics to restrict access to other important industrial minerals. China’s commerce ministry announced on Wednesday that it would appeal the ruling.

No formal case has yet been brought concerning rare earths because officials from affected countries are waiting to see the final resolution of the other case, which has already lasted more than two years.

Karel De Gucht, the European Union’s trade commissioner, cited the industrial minerals decision in declaring last month that, “in the light of this result, China should ensure free and fair access to rare earth supplies.”

Shen Danyang, a spokesman for the commerce ministry, reiterated at a news conference on Wednesday in Beijing that China believed its mineral export policies complied with W.T.O. rules. China’s legal position, outlined in recent W.T.O. filings, is that its policies qualify for an exception to international trade rules that allows countries to limit exports for environmental protection and to conserve scarce supplies.

But the W.T.O. panel has already rejected this argument for the other industrial minerals, on the grounds that China was only curbing exports and not limiting supplies available for use inside the country.

China mines more than 90 percent of the world’s rare earths, and accounted for 60 percent of the world’s consumption by tonnage early this year.

But if factories continue to move to China at their current rate, China will represent 70 percent of global consumption by early next year, said Constantine Karayannopoulos, the chief executive of Neo Material Technologies, a Canadian company that is one of the largest processors in China of raw rare earths.

For the last two years, China has imposed quotas to limit exports of rare earths to about 30,000 tons a year. Before then, factories outside the country had been consuming nearly 60,000 tons a year.

China has also raised export taxes on rare earths to as much as 25 percent, on top of value-added taxes of 17 percent.

Rare earth prices have soared outside China as users have bid frantically for limited supplies. Cerium oxide, a rare earth compound used in catalysts and glass manufacturing, now costs $110,000 per metric ton outside China. That is more than four times the price inside China, and up from $3,100 two years ago, according to Asian Metal, an industry data company based in Pittsburgh.

For most industrial products that are manufactured in China using rare earths and then exported, China imposes no quotas or export taxes, and frequently no value-added taxes either.

Companies do that math, and many decide it is more cost-effective to move to China to get cheaper access to the crucial metals.

Kantaro Suzuki in Tokyo and Jonathan Ansfield in Beijing contributed reporting.

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