Posts Tagged ‘shipbuilding’

European losers in new Iranian sanctions game

August 5, 2018

US President Donald Trump’s decision to pull the United States out of the 2015 nuclear accord with Iran and reimpose a raft of sanctions will hit European businesses working in Iran.

Here is an overview of how firms stand to be affected when the sanctions kick in Monday:

– Auto –

French automakers Renault and PSA have taken different approaches publicly.

PSA, behind the Peugeot, Citroen and Opel brands, said in June it was preparing to suspend activities in the Islamic republic, its chief foreign market by volume, noting those units account for “less than one percent of sales”.

The group, which is Europe’s second biggest carmaker, last year sold more than 445,000 vehicles in Iran, making the country one of its biggest markets outside France.

Renault says it intends to keep up activities in Iran albeit scaling them back. On July 16, the automaker announced a 10.3 percent drop in sales in Iran to 61,354 units.

Germany’s Daimler was teaming up with two Iranian firms to assemble Mercedes-Benz trucks.

Image result for Mercedes-Benz trucks, factory, photos

Volkswagen also said last year it would seek to resume sales in Iran for the first time in 17 years, yet the scale of its US activities could force the jettisoning of those plans.

German firms’ business with Iran was a modest $2.6 billion of 2016 exports rising to 3.0 billion last year.

Italy is Iran’s main European trading partner — but Germany is still the bloc’s biggest exporter to Tehran.

– Aviation –

Image result for airbus, ATR, photos

Aviation saw beefy contracts drawn up following the nuclear accord as Iran targets modernisation of an ageing fleet.

Airbus booked deals for 100 jets although to date only three have been delivered after having US licences bestowed upon them — a necessity given some parts are US-made.

The potential loss of business in Iran would not weigh overly heavily on Airbus as overall orders on its books at the end of June stood at 7,168 planes.

Franco-Italian planemaker ATR was fretting on the fate of 20 planes earmarked for Iranian delivery — though Iran Air said Saturday five ATR-72600 aircraft would arrive Sunday, creeping under the deadline to add to eight already delivered.

– Oil –

French energy giant Total has moved away from a contract to develop an offshore gas field at South Pars in what would have been the first project of its kind since the 2015 nuclear deal.

Image result for France oil company TOTAL, Photos

Because Total’s investment in the field had barely just begun, the company is avoiding incurring significant losses on a $5 billion project which Iran says Chinese group CNPC will now take up.

After a 30 percent jump in 2016 in exports of Italian-made goods to Iran, Italian exports grew 12.5 percent last year to 1.7 billion euros, according to official data.

But energy giant Eni has held back on returning to Iran, preferring to wait on the impact of the latest sanctions.

Britain’s BP, which started life as the Anglo-Persian Oil Company, has no presence in Iran. Although Anglo-Dutch giant Royal Dutch Shell signed a deal in 2016 to explore possible investments it does not currently have any operations on the ground.

– Railways and shipbuilding –

Italy stands to lose out in these sectors with national railway operator Ferrovie dello Stato Italiano having signed a deal to build a high-speed line linking Qom to Arak in northern Iran.

Image result for Ferrovie dello Stato Italiano, high speed rail, photos

Shipmaker Fincantieri, engineering firm Maire Tecnimont and gas boiler maker Immergas has also signed a string of deals with Iran which now are also threatened.

– Tourism –

British Airways and German carrier Lufthansa face having to stop only recently resumed direct flights to Tehran or face losing Transatlantic business.

Image result for British Airways, photos

The dilemma applies to French hotel chain AccorHotels, which opened an establishment in Iran in 2015, as well as to Emirati group Rotana Hotels, which has designs on its own Iranian operation.

Spain’s Melia Hotels International chain, which signed a 2016 deal to run a five star hotel in Iran, the Gran Melia Ghoo, says the establishment is under construction and that discussion of its future is “premature.”

– Industry –

Siemens returned to Iran in 2016 seeking to sell gas turbines and generators for electricity stations and has won a contract to sell compressors for a natural gas processor.

“The mega contracts hoped for when sanctions were lifted were never realised,” KPMG advisor Kaveh Taghizadeh was recently quoted as saying in Stern magazine.

“Siemens will continue to ensure it remains in strict compliance with relevant international export control restrictions and all other applicable laws and regulations, including US secondary sanctions,” Siemens spokesman Yashar Azad told AFP.

He added Siemens “will take appropriate actions to align its business with the changing multilateral framework regarding Iran.”

French industrial gas group Air Liquide says it will “cease all commercial activity” in the country although a spokesperson says the firm has “no investments” there.

– Pharmaceuticals –

Pharmaceutical giant Sanofi, in Iran for over a decade, remains operating “in full compliance with international regulations”, a spokesman said, while adding “it is still too early to comment on the potential impact” of sanctions.

– Banks –

Germany’s big banks, Deutsche Bank and Commerzbank, stayed clear of Iran after the US fined them hugely in 2015 for violating previous sanctions. Regional banks Helaba and DZ Bank pulled out of Iran after the US announced it was reimposing sanctions.

AFP

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China lowers tariffs, rejects US trade war escalation — Afraid of Trump?

May 31, 2018

China said Thursday it wanted to avoid an escalation of trade tensions with the United States, as the two sides held new talks and Beijing decided to lower some tariffs.

The overture came two days after the White House said its planned trade sanctions against China were still in the works despite the announcement of a truce following a previous round of talks earlier in May.

China has threatened to hit back with tit-for-tat tariffs on tens of billions of dollars in US goods.

© AFP/File | China has said it wants to avoid an escalation of trade tensions with the United States

A 50-strong US delegation arrived in Beijing on Wednesday for follow-up meetings, Chinese commerce ministry spokesman Gao Feng said, without proving more details.

“We hope that China and US economic and trade cooperation can benefit people in both countries, and we are not willing to see trade frictions escalate,” Gao told a regular press briefing.

The delegation is laying the groundwork for a weekend visit by US Commerce Secretary Wilbur Ross.

The Trump administration said Tuesday that US sanctions announced in March — including restrictions on Chinese investment, export controls and 25 percent tariffs on as much as $50 billion in Chinese tech exports — remain under development.

Gao slammed the proposal, saying US measures to implement investment restrictions and export controls against China “do not conform with the basic principles and spirits of the WTO (World Trade Organization)”.

“China will carefully evaluate the US measures and relevant impact and retain its rights to adopt relative measures.”

Separately, the Chinese government announced in a statement late Wednesday that it would further cut import tariffs on daily consumer goods from July 1.

The average tariff on clothing, shoes and hats, kitchenware, and sports and fitness supplies will be reduced from 15.9 percent to 7.1 percent.

The rate for home appliances such as washing machines and refrigerators will be lowered from 20.5 percent to eight percent.

– ‘No forced tech transfers’ –

Gao said China will also publish a “negative list” of foreign investment by June 30 to ease restrictions in fields including energy, resources, infrastructure and transportation. A negative list includes all the industries with foreign investment restrictions.

Beijing previously said it would relax restrictions on foreign investment in automobiles, shipbuilding and aircraft firms.

At a meeting Wednesday chaired by Premier Li Keqiang, the State Council — or cabinet — also decided that China would widen market access through more foreign investor-friendly measures, according to the official Xinhua news agency.

“We should raise our innovation capacity in the new round of opening up and see that all intellectual property be fully protected,” Li said.

“No forced technology transfer will ever be imposed on foreign-invested enterprises and IPR (intellectual property rights) infringements will be penalised to the full extent of the law.”

Donald Trump has accused China of forcing US firms to hand over their industrial secrets to Chinese firms in order to do business in the country, a charge that Beijing has rejected.

In other measures announced by Xinhua, overseas traders will be encouraged to participate in crude oil and iron ore futures trading.

Severe measures will be taken to punish infringements, counterfeiting, commercial secret violators and trademark squatters.

AFP

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China Cuts Tariffs on Wide Range of Consumer Goods From July

 Updated on 

China will reduce tariffs on a wide range of consumer goods from July 1, the State Council said in a statement.

The tariff cuts will apply to products including clothes, washing machines and makeup. The reduction was decided at the state council on Wednesday which was chaired by Premier Li Keqiang.

The announcement came after President Donald Trump decided to move ahead with additional tariffs on $50 billion of imports from China, a move that could potentially derail the truce reached last week between the world’s two biggest economies. China hit back at that, with a foreign ministry spokeswoman saying on Wednesday that China would respond accordingly if the U.S. insisted on unilateral measures.

Read the rest:

https://www.bloomberg.com/news/articles/2018-05-30/china-cuts-tariffs-on-wide-range-of-consumer-goods-from-july-1

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China Loosens Foreign Auto Rules, in Potential Peace Offering to Trump

April 18, 2018
Tesla would be the immediate big winner from the changes that China announced on Tuesday.Credit Johannes Eisele/Agence France-Presse — Getty Images

SHANGHAI — Beijing and Washington have threatened each other with tariffs for weeks, raising the prospect of a trade war. But on Tuesday, China took a step to lower tensions, offering to make it easier for foreign automakers and aerospace manufacturers to own factories in the country.

The Chinese authorities said that in the next five years they would ease rules that have long required carmakers like General Motors, Toyota and Volkswagen to link up with a local partner before building a factory in China. For manufacturers of electric cars, as well as for companies that make jetliners, helicopters and drones, Beijing plans to move even faster, eliminating foreign ownership limits this year.

Opening up the electric-car sector is a potential boon for Tesla Motors, which has already identified a site in Shanghai for a factory but has not wanted a partner for fear of losing control of its technology. Big automakers, especially Volkswagen, have also been preparing to set up large electric-vehicle subsidiaries in China as Beijing has made clear that it will use a mix of subsidies and penalties to shift the market sharply toward more electric cars.

Loosening limits for electric carmakers and aerospace manufacturers is notable because those are two areas where Beijing and Washington have been increasingly at loggerheads. The sectors are among 10 industries in Beijing’s Made in China 2025 plan, which calls for extensive government support to expand China’s production and self-sufficiency in everything from microchips to robotics.

President Trump’s trade officials last month accused the Chinese government of using bureaucratic licensing and approval procedures to compel American companies to give up valuable trade secrets. Chinese officials deny those claims.

Beijing’s offer on Tuesday to make it easier for foreign aircraft manufacturers to set up wholly owned factories in China might even increase worries in the national security community in Washington about further transfers of the technology needed to retain America’s military edge.

Easing electric car limits may not be enough to bring the Trump administration to the negotiating table, much less reach a deal. The White House has expressed more interest in creating jobs in the United States than in making it easier for American companies to build factories overseas.

It also isn’t clear whether the measures — part of a series of moves to relax trade rules for carmakers — will win over the auto industry.

China has previously said it will also reduce tariffs on imported cars, but it has not specified when or by how much. Much of the global auto parts industry has already moved to China to avoid those tariffs.

G.M., Volkswagen and others have learned to profit handsomely with their local partners, which have developed fairly few homegrown models attractive enough to win over Chinese customers. And foreign automakers may want local partners anyway to smooth potential political problems and to win access to Chinese subsidies.

The latest move, announced on Tuesday by China’s top economic planning agency, follows through on a long-promised effort by Beijing to further open its markets to foreign companies.

The planning agency, the National Development and Reform Commission, said in a statement that rules requiring a Chinese partner would be lifted this year for the electric-car industry, in 2020 for the production of trucks and other commercial vehicles, and in 2022 for all cars made in China.

China also said on Tuesday that it would eliminate foreign ownership restrictions this year on its shipbuilding industry. But that industry is in disarray, saddled with overcapacity and heavy debts after more than a decade of large loans from the state-controlled banking industry.

Read the rest:

NYT:https://www.nytimes.com/2018/04/17/business/china-auto-electric-cars-joint-venture.html

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Saudi Aramco launches ship manufacturing venture

December 31, 2017

Major production and services are expected to start in 2019 and the project will be fully operational by 2022. (Courtesy: saudiaramco)

DHAHRAN: Saudi Aramco on Friday launched a joint venture in marine international industries with Lamprell plc, the National Shipping Company of Saudi Arabia (Bahri), and Hyundai Heavy Industries Co. Ltd. to establish, develop and operate a world-class maritime yard.

The new project will provide one of the world’s largest maritime integrated service complexes, with completion expected by 2022.

The new joint venture will localize important workshops in Saudi Aramco’s supply chain associated with offshore drilling and shipping, reduce costs, response time and increase flexibility for the company and its partners.

The new facility will be able to manufacture four offshore drilling platforms, build more than 40 vessels, including 3 giant oil tankers, and annually service more than 260 marine products.

Saudi Aramco’s vice president for finance, strategy and development, and chairman of the International Marine Industries Company, Abdullah Al-Saadan, said: “The global marine industry will serve Saudi Aramco’s strategic goal of becoming the global leader in energy and chemicals by meeting the company’s needs in production and shipping.” He added: “The company offers a combination of technology, supply chain efficiency and sustainable partnership, enabling it to become a world-class company offering competitive services to customers.”

Al-Saadan noted: “The world marine industry is unique in its combination of industrial and operational leadership through a consortium of four global and regional entities in the field of energy and marine industries, and the International Maritime Industries Company has valid applications for the manufacture of more than 20 platforms and the construction of 52 ships over the decade.”

Major production and services are expected to start in 2019 and the project will be fully operational by 2022. The project will contribute to the development of national expertise in the field of marine industries and employment generation.

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Asia markets edge up as commodities rise, Apple fears ease

December 27, 2017

AFP

© AFP/File | Shares in Apple had slumped 2.5 percent Tuesday, following its Asian suppliers downward, but that slide was arrested in early trading Wednesday

HONG KONG (AFP) – Asian markets edged upward Wednesday in thin holiday trading, with investors shrugging off a negative Wall Street lead as fears over lacklustre iPhone demand eased, and commodities rose.

Shares in Apple, the biggest US company by market capitalisation, had slumped 2.5 percent Tuesday, mirroring a move by its Asian suppliers, after a report in Taiwan’s Economic Daily warned of weak demand for the iPhone X.

But that slide was arrested in early trading Wednesday, with Taiwan-based Apple suppliers Catcher Technology, Largan Precision and Hon Hai Precision Tech — better known as Foxconn — all rising.

“Selling of high tech shares is limited as the Apple news has already been factored in,” Toshikazu Horiuchi, a broker at Japan’s IwaiCosmo Securities told AFP.

Hong Kong rose 0.2 percent and Tokyo was up 0.1 percent, while Taipei added 0.5 percent.

Shanghai was trading flat, as profit growth at China’s major industrial firms slowed in the first 11 months of this year, Xinhua reported, citing the National Bureau of Statistics.

Seoul was down 0.2 percent as Hyundai Heavy, the world’s number two shipbuilder, suffered major losses after announcing a share sale to raise operating funds.

Oil-linked shares were boosted by crude prices that remained close to two-year highs, while copper hit a three-year high.

Oil prices in New York had jumped to a two-and-a-half year high Tuesday and briefly topped $60 a barrel due to a Libyan pipeline explosion and frigid weather in the US, before easing slightly in early Wednesday trade.

Saudi Arabian officials are forecasting their first budget surplus in a decade amid expectations of higher oil prices, Bloomberg News reported, citing unnamed sources.

“Strength on oil and metals markets, along with strength in gold markets has futures pointing higher this morning,” wrote Greg McKenna, chief market strategist at AxiTrader.

– Key figures around 0300 GMT –

Tokyo – Nikkei 225: UP 0.1 percent at 22,909.32 (break)

Hong Kong – Hang Seng: UP 0.2 percent at 29,626.90

Shanghai – Composite: FLAT at 3,306.26

Euro/dollar: $1.1866

Pound/dollar: $1.3377

Dollar/yen: 113.25 yen

Oil – West Texas Intermediate: DOWN 24 cents at $59.73 per barrel

Oil – Brent North Sea: DOWN 34 cents at $66.68

New York – DOW: FLAT at 24,746.48 (close)

London – FTSE 100: 7,592.66 (close)

Philippines, Japan sign $6B worth of business deals

October 31, 2017
Philippine President Rodrigo Duterte, left, and Japanese Prime Minister Shinzo Abe stand between the countries’ flags as they review a guard of honor at Abe’s official residence in Tokyo Monday, Oct. 30, 2017. Duterte is on a two-day visit to Japan. Nicolas Datiche/Pool Photo via AP
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TOKYO — At least 18 business deals that will yield $6 billion worth of new investments were signed here Monday by Philippine and Japanese firms in a development that officials said affirmed investor confidence in the Philippines.
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President Rodrigo Duterte witnessed the signing of the agreements, which are expected to pour in Japanese investments in manufacturing, shipbuilding, iron and steel, agribusiness, power, renewable energy, transportation, infrastructure, mineral processing, retailing, information and communication technology, and business process management.
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“President Rodrigo Roa Duterte met several Japanese companies and witnessed several B-B MOUs (business-to-business memoranda of understanding) and letters of intent on Investment plans, joint ventures and expansion of operations in the Philippines,” Trade Secretary Ramon Lopez said in a statement.
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“Total new investments (are expected to reach) $6 billion,” he added.
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A list of companies that signed the agreement was not available as of Monday but incoming presidential spokesman Harry Roque said the deals would be undertaken by “big multinational” and “Filipino giant” corporations.
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“If I’m not mistaken, there were at least 25 agreements that were witnessed by the president today,” Roque said in a chance interview here.
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“I think it’s because there is number one, commercial predictability, number two there is peace and order in the Philippines and there is conducive business environment where businesses are safe from unjust taking,” he added.
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Roque said the signing of business deals also highlighted the “very strong” relations between the Philippines and Japan.
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“It also proves that Japan continues to be one of our most active trading partners,” the incoming presidential spokesman said.
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Among the companies that signed business deals are the Steel Asia Manufacturing Corp. and Metro Pacific Investments, which forged agreements with Hitachi and Itochu. The group of businessman Manuel V. Pangilinan was also scheduled to meet with Japanese firms NTT, Rakuten, Itochu, Mitsui, Marubeni, Densan and Hitachi.
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Lopez said he also met with his Japanese counterpart Hiroshige Seko to discuss ways to improve market access and lowering tariff of Philippine agricultural products like banana, pineapple and mango.
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Asked about the Japanese trade minister’s reaction to his request to lower the tariff for Philippine agricultural exports, Lopez replied: “They took note of that and to be discussed in detail in the technical working groups under JPEPA (Japan-Philippines Economic Partnership Agreement).”
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JPEPA is the bilateral trade agreement between the Philippines and Japan.
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It was signed by former President Gloria Macapagal-Arroyo and then Japanese Prime Minister Junichiro Koizumi in Helsinki, Finland, in September 2006.
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The agreement assures zero duties for more than 90 percent of Philippine exports to Japan and is expected to enhance the access of Filipino service workers to the Japanese market. It also requires the removal of tariffs by both Japan and the Philippines on almost all industrial goods within 10 years from the date of its implementation.
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Lopez said he and Seko also discussed Japan’s support to reach a substantial conclusion of the Regional Comprehensive Economic Partnership.
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The two trade chiefs also tackled the Industrial Cooperation Dialogue and ways to improve the supply chain for Japanese companies to benefit Philippine small and medium enterprises.
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Saudi Aramco-Hyundai in $5.2 bn shipyard deal

May 31, 2017

AFP

© AFP/File | An Emirati man stands at the oil terminal of Fujairah during the inauguration ceremony of a dock for supertankers on September 21, 2016

RIYADH (AFP) – 

Saudi Aramco is to build the region’s biggest shipyard in a $5.2 billion joint venture with South Korea’s Hyundai Heavy Industries and others, the partners said on Wednesday.

The yard, to be constructed on the kingdom’s Gulf coast, will have the capacity to produce four offshore rigs and 40 vessels, including three supertankers, a year, the state-owned oil giant said in a statement.

Lamprell, a United Arab Emirates-based provider of services to the energy industry, and Bahri, the National Shipping Company of Saudi Arabia, have also signed on to the venture.

“The integrated maritime yard will be the largest in the region in terms of production capacity and scale,” Saudi Aramco said.

Located in the new industrial port city of Ras al-Khair, the yard will also provide maintenance services for rigs and vessels.

“Major production operations are expected to commence in 2019,” with full capacity reached by 2022, Aramco said.

In a separate statement, Lamprell PLC said the yard will cost an estimated $5.2 billion to build, of which roughly $3.5 billion will come from the Saudi government.

The rest will be funded by the joint venture.

It said the deal was conditional on approval by its shareholders.

Saudi Arabia has launched a programme to diversify its industrial base after its revenues were badly hit by a 50 percent fall in world oil prices since 2014.

Around five percent of Saudi Aramco is to be floated on the stock market next year to help form the world’s largest state investment fund.

German Navy Shipbuilding Dispute Apparently Resolved in Court

May 17, 2017

BERLIN — Germany’s federal cartel office has upheld a complaint filed by German Naval Yards after the defense ministry decided to skip an open procurement for five new military corvettes valued at over 1.5 billion euros, according to German media reports.

The ministry had no immediate comment on the reports in German newspapers Die Welt and Sueddeutsche Zeitung.

A spokesman for the cartel office declined to comment, saying only that a decision was likely to be announced on Thursday.

The ministry had argued that the quickest way to meet the navy’s urgent military needs in the Baltic and Mediterranean seas would be to buy more of the ships already produced by a consortium including Luerrsen Werft and Thyssenkrupp.

But the cartel office agreed with German Naval Yards that the need for competition trumped urgency in this case, and said the ministry should have opened the process to other potential bidders, the Sueddeutsche Zeitung newspaper reported.

No comment was immediately available from Luerrsen, which leads the consortium, or the German Naval Yards shipyard, which is owned by Privinvest.

The ministry will have two weeks to appeal the decision.

It told lawmakers on Tuesday that it was unclear given the complaint whether the planned corvette purchase — spending added to the 2017 budget after delays in another multibillion-euro warship program — could be presented to the budget committee before a general election in September.

The ramifications of the cartel office’s ruling were unclear. Sources familiar with the process said other options were possible, such as including German Naval Yards in the consortium, which could resolve the issue and keep the project on track.

The ministry had hoped to start using the first two of the five new ships as early as 2019.

The possible delay in the corvette program threatens to compound acquisition issues dogging the German military as it tries to rebuild after years of post-Cold War spending cuts.

Defence Minister Ursula von der Leyen took office in late 2013 vowing to rebuild the military after 25 years of spending cuts, but her three biggest arms programs — a 5 billion euro missile defense program, a new drone and the multi-role MKS 180 warship — have all been delayed in recent months.

South Korea Tries To Revive Shipbuilder Daewoo With New $6 B Lifeline

March 23, 2017

AFP

© DPA/AFP/File / by Park Chan-Kyong | South Korea has offered troubled Daewoo Shipbuilding & Marine Co. a new $6 billion bailout as the giant firm’s financial crisis worsens
SEOUL (AFP) – South Korea offered troubled Daewoo Shipbuilding & Marine Co. a new $6 billion bailout on Thursday, as the giant firm’s financial crisis worsens.

Daewoo is the world’s largest shipyard in terms of its order book and was previously given a 4.2 trillion won ($3.8 billion) aid package in 2015.

It is majority-owned by state-owned banks. Previously it was a subsidiary of the now-defunct Daewoo Group, once the country’s second-largest conglomerate but which collapsed in the 1990s.

The shipbuilding unit survived, only for the sector to suffer turmoil of its own in the face of a global glut of vessels and ferocious price competition from China.

It suffered a 2.7 trillion won net loss last year, with its debts 27 times greater than its capital.

The 6.7 trillion won ($6.0 billion) bailout envisages 2.9 trillion won in fresh loans from the Korea Development Bank (KDB), its largest shareholder and main creditor, and the Export-Import Bank of Korea, also a shareholder.

The deck of a container ship at the Daewoo DSME shipyard in Okpo, south of Busan, in a 2014 file photo.
The deck of a container ship at the Daewoo DSME shipyard in Okpo, south of Busan, in a 2014 file photo. PHOTO:AGENCE FRANCE-PRESSE/GETTY IMAGES

The money is conditional on other lenders and bondholders agreeing another 3.8 trillion won in debt-for-equity swaps and rollovers.

The new rescue plan sparked criticism that Seoul was backtracking on earlier promises to stop injecting fresh funds into Daewoo.

“We’re very sorry that we’ve failed to assess more conservatively the industry’s long-term slump and Daewoo’s latent downside risks,” said KDB CEO Lee Dong-Geol.

Daewoo was in “critical” financial condition and would face insolvency in April, when it has to repay large corporate bonds, unless “strong and comprehensive measures” were taken, he told journalists.

Economist Chun Seong-In at Hongik University lambasted the finance ministry for being “inconsistent, belated and unfair” in its dealings with the company, which has more than 10,000 employees.

The ministry “missed a chance for a radical corporate restructuring” in 2015, forcing the government to inject additional funds, he said.

– ‘Big Three’ –

The global shipbuilding slump is expected to ease from 2018, when according to Yonhap news agency the government hopes to sell a downsized and reborn Daewoo to reduce the country’s “Big Three” shipbuilders — which also include Hyundai Heavy Industries and Samsung Heavy Industries — to two, for better economies of scale.

The “Big Three” shipbuilders were once considered jewels in Korea Inc.’s corporate crown, controlling nearly 70 percent of the global market after seeing off their European and Japanese rivals in the 1980s and 1990s.

Year after year, they churned out massive cargo ships, oil tankers and offshore drilling rigs for shipping firms and energy giants around the world.

But a prolonged slump in oil prices and the global economic slowdown sapped demand for tankers and container ships, while overcapacity, regional rivalry and competition from cheaper Chinese shipbuilders squeezed profit margins.

The three racked up a collective loss of 8.5 trillion won ($7.4 billion) in 2015.

Daewoo Shipbuilding’s former head Ko Jae-Ho was in January sentenced to 10 years in prison for manipulating the company’s books in 2013 and 2014, and using them to raise bank loans.

Investors sustained serious financial losses as the company’s credit ratings and stocks plunged after the window-dressing came to light.

by Park Chan-Kyong
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South Korea’s biggest shipping line, Hanjin Shipping Co., filed for bankruptcy protection on in August as falling trade volumes claimed another victim. Shipping is a sectors in which South Korea is a global leader, so what does this recent collapse tell us about world trade? Photo: Getty Images

Grounded: Nearly two-thirds of U.S. Navy’s strike fighters can’t fly — 53 percent of all Navy aircraft can’t fly

February 7, 2017

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Congress’ inability to pass a budget is hurting the fleet, leaders say

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By February 6, 2017

WASHINGTON — The U.S. Navy’s F/A-18 Hornet and Super Hornet strike fighters are the tip of the spear, embodying most of the fierce striking power of the aircraft carrier strike group. But nearly two-thirds of the fleet’s strike fighters can’t fly — grounded because they’re either undergoing maintenance or simply waiting for parts or their turn in line on the aviation depot backlog.

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Overall, more than half the Navy’s aircraft are grounded, most because there isn’t enough money to fix them.
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Additionally, there isn’t enough money to fix the fleet’s ships, and the backlog of ships needing work continues to grow. Overhauls — “availabilities” in Navy parlance — are being canceled or deferred, and when ships do come in they need longer to refit. Every carrier overall for at least three years has run long, and some submarines are out of service for prolonged periods, as much as four years or more. One submarine, the Boise, has lost its diving certification and can’t operate pending shipyard work.

Leaders claim that if more money doesn’t become available, five more submarines will be in the same state by the end of this year.

The Navy can’t get money to move around service members and their families to change assignments, and about $440 million is needed to pay sailors. And the service claims 15 percent of its shore facilities are in failed condition — awaiting repair, replacement or demolition.

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The bleak picture presented by service leaders is in stark contrast to the Trump administration’s widely talked about plan to grow the Navy from today’s goal of 308 ships to 350 — now topped by Chief of Naval Operations Adm. John Richardson’s new Force Structure Assessment that aims at a 355-ship fleet. Richardson’s staff is crafting further details on how the growth will be carried out — plans congressional leaders are eager to hear. It seems to many as though the Navy will be showered with money to attain such lofty goals.

Yet, for now, money is tight, due to several years of declining budgets mandated first by the Obama administration, then Congress, and to the chronic inability of lawmakers to provide uninterrupted funds to the military services and the government at large. Budgets have been cut despite no slackening in the demand for the fleet’s services; and the Navy, to preserve shipbuilding funds, made a conscious choice to slash maintenance and training budgets rather than eliminate ships, which take many years to build and can’t be produced promptly even when funding becomes available.

Congress has failed for the ninth straight year to produce a budget before the Oct. 1 start of fiscal 2017, reverting to continuing resolutions that keep money flowing at prior year levels. CRs have numerous caveats, however, and many new projects or plans can’t be funded since they didn’t exist in the prior year. There is widespread agreement that CR funding creates havoc throughout the Pentagon and the industrial base that supports it — often substantially driving costs higher to recover from lengthy delays. Yet, like the proverbial weather that everyone talks about but no one can change, there seems to be little urgency in Congress to return to a more businesslike budget profile.

The current continuing resolution through April 28 marks the longest stop-gap measure since fiscal 1977 — outstripping 2011 by only a couple weeks, noted Todd Harrison, of the Center for Strategic and International Studies, in a post on Twitter. This also marks the first CR situation during a presidential transition year.

And while the talk about building dozens of more ships grabs headlines, it is not at all clear when or even whether Congress will repeal the Budget Control Act — sequestration — which, if unabated, will continue its restrictions to 2021.

Meanwhile, some details are emerging of the new administration’s efforts to move along the budget process. In a Jan. 31 memorandum, Defense Secretary James Mattis described a three-phase plan that included submission by the Pentagon of a 2017 budget amendment request. The request would be sent to the White House’s Office of Management and Budget by March 1.

Under the plan, the full 2018 budget request is due to OMB no later than May 1.

The third phase of the plan involves a new National Defense Strategy and FY2019-2023 defense program, which “will include a new force sizing construct” to “inform our targets for force structure growth,” Mattis said in the memo.

The services will make their case to Congress this week when the vice chiefs of the Air Force, Army, Navy and Marine Corps testify in readiness hearings before the House Armed Services Committee on Tuesday and the Senate Armed Services Committee the following day.

Navy Times

The vice chiefs are expected to make their pitches for money that can be spent right away, rather than funds for long-term projects that, with only five months left in the fiscal year even if Congress passes a 2017 budget, can’t be quickly put to use.

“If we get any money at all, the first thing we’re going to do is throw it into the places we can execute it,” a senior Navy source said Feb. 2. “All of those places are in ship maintenance, aviation depot throughput — parts and spares — and permanent changes of station so we can move our families around and fill the holes that are being generated by the lack of PCS money.”

The backlog is high. “There’s about $6-8 billion of stuff we can execute in April if we got the money,” the senior Navy source said. “We can put it on contract, we can deliver on it right away.”

Even if the budget top line is increased, Navy leaders say, the immediate need is for maintenance money, not new ship construction. A supplemental Navy list of unfunded requirements for 2017 that was sent to Congress in early January and is still being revised made it clear that maintenance needs are paramount.

“Our priorities are unambiguously focused on readiness — those things required to get planes in the air, ships and subs at sea, sailors trained and ready,” a Navy official declared. “No new starts.”

The dire situation of naval aviation is sobering. According to the Navy, 53 percent of all Navy aircraft can’t fly — about 1,700 combat aircraft, patrol, and transport planes and helicopters. Not all are due to budget problems — at any given time, about one-fourth to one-third of aircraft are out of service for regular maintenance. But the 53 percent figure represents about twice the historic norm.

The strike fighter situation is even more acute and more remarkable since the aircraft are vitally important to projecting the fleet’s combat power. Sixty-two percent of F/A-18s are out of service; 27 percent in major depot work; and 35 percent simply awaiting maintenance or parts, the Navy said.

With training and flying hour funds cut, the Navy’s aircrews are struggling to maintain even minimum flying requirements, the senior Navy source said. Retention is becoming a problem, too. In 2013, 17 percent of flying officers declined department head tours after being selected. The percentage grew to 29 percent in 2016.

Funding shortfalls mean many service members are unable to relocate to take on new assignments. So far in 2017, the Navy said, there have been 15,250 fewer moves compared with 2016.

Under the continuing resolution, the senior Navy official said, another 14 ship availabilities will be deferred in 2018 — one submarine, one cruiser, six destroyers, two landing ship docks, one amphibious transport dock and three minesweepers. Programs seeking to buy items that were not included in the 2016 budget can’t move forward, including CH-53K helicopters, Joint Air-to-Ground Missiles, Long-Range Anti-Ship Missiles and littoral combat ship module weapons. Many more programs that were to increase 2017 buys over 2016 levels can’t do so.

And with only five months left in fiscal 2017, even if a budget is passed in late April, there is some talk about a yearlong continuing resolution — a prospect at which the senior Navy official shook his head.

“The full CR is not a good situation at all,” he said.

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http://www.defensenews.com/articles/grounded-nearly-two-thirds-of-us-navys-strike-fighters-cant-fly
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Trump Administration, Congress Vow To Fix Defense Spending 
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on February 06, 2017 at 1:54 PM
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Can Congress finally break the logjam of the Budget Control Act and increase spending on defense? Yes we can, said the cautiously optimistic chairman of the House Armed Services Committee. Why are the chances any better this year than for all the failures since 2011? Because, Rep. Mac Thornberry told reporters this morning, Donald Trump is shaking up the status quo in a way that opens up new possibilities.

“I think we have a tremendous opportunity to do the right thing,” said Thornberry. “There’s more of the federal budget being looked at, in play if you will, than has been the case for many years.”

“Unlike previous years,” Thornberry explained, “you have a Congress and administration who are looking at the big budget picture”: repealing Obamacare, cutting Medicare, cutting Medicaid, reforming taxes (i.e. to raise revenue) — and, though the conservative Thornberry didn’t mention this option, increasing deficit spending. All these things intertwine because defense is a relatively small share of federal spending — only 14.7 percent, said Thornberry — so a small percentage cut to entitlements — or a small increase in taxes — could pay for a big percentage increase in defense.

At the Republicans’ recent retreat in Philadelphia, “there was no disagreement at all that we need to increase defense spending,” Thornberry said. Admittedly, “other people pointed out that we need to also pay attention to the bigger budget picture,” Thornberry said. “I would just say, we cannot wait to fix our airplanes until we get all our budget problems solved…There’s lots of agreement on that.”

The soft-spoken Thornberry is here downplaying the bitter divide within the Republican Party. The traditional Reaganesque defense hawks — like Thornberry or his Senate counterpart John McCain — have pushed to repeal the Budget Control Act spending caps, at least for defense. (The BCA does not cover entitlements). The new wave of Tea party deficit hawks — like Trump’s nominee for budget director, Mick Mulvaney — have seen the BCA as a bulwark against excessive federal spending.

Meanwhile, the Democrats have argued any increase in the BCA cap for defense must be met with an equal increase in non-defense spending, a stance which Thornberry called “one of the worst things that’s happened in recent years.” GOP deficit hawks might accept such a one-for-one compromise, but deficit hawks see it as just doubling the damage, so there’s never been the necessary 60-vote supermajority in the Senate to repeal the Budget Control Act.

“It’s got to be changed,” Thornberry said of the BCA. “I can’t tell you what date or legislative vehicle will do so.”

In the nearer term, Thornberry desperately wants to pass the defense spending bills for 2017; the ’17 fiscal year is already one-third over. “There is no reason in the world we need to wait till April,” when the current ad hoc spending measure expires, he said.

Thornberry is also looking forward expectantly to the Trump Administration’s promised request for supplemental spending in 2017, expected to come around March 1st. He’s already got an $18 billion wishlist.

“The place where I have suggested that the administration start is look at the items that were in the House-passed NDAA (National Defense Authorization Act) last year but that ultimately did not make into the final conference report that was signed into law,” Thornberry said. “My view is they should be at the top of the list.” The final 2017 bill focused on readiness and personnel plus-ups but demurred on the many modernization initiatives, like buying extra fighter aircraft, that make up most of the omitted $18 billion.

“One of the only ways we’re going to fix some of the readiness issues we have is modernization,” Thornberry said. “if you’ve got an F-18 that was built in 1980, you’re going to have a problem keeping that flying until you replace it with an F-35.” (Donald Trump has famously hammered the F-35 on Twitter and in pre-inauguration meetings with contractor Lockheed Martin).

Thornberry also pledged to keep pursuing defense reform, particularly streamlining Pentagon bureaucracy to encourage innovation. In Thornberry’s view, reforming the acquisition process isn’t just about saving money — though that’s important — but also about getting the best technology to US troops as fast as possible.

The Obama administration pushed hard for innovation too, particularly under Defense Secretary Ash Carter — who’s since departed — and Deputy Secretary Bob Work — who’s staying indefinitely to help with the transition. What about Carter and Work’s initiatives?

“Force of the Future got a bad rap and probably wasn’t thought through adequately,” Thornberry said of Carter’s effort to create more flexibility in Pentagon personnel practices — but the goal was good, he added. Likewise, other Carter-era innovation initiatives showed promise, even if specifics might need to change.

“I think the intentions and goals behind those things was absolutely right on,” Thornberry said. “Are the specific programs something that have to be preserved under that name, under that rubric? Well, maybe not necessarily.”

“I think the sorts of technologies we are looking at in Third Offset are some of the right ones,” Thornberry said of Work’s brainchild, which focuses on military applications of computer networks, robotics, and artificial intelligence. “I think outreach to Silicon valley and others is a good thing,” Thornberry continued. “There are a variety of ways to do that so we’ll look at DIU(X),” Carter’s Defense Innovation Unit (Experimental) outposts in Palo Alto, Boston, and beyond.

“I said when I became chairman (that) defense reform will be a central part of my agenda as long as I’ve got this job because the world is too moving fast, technology is moving too fast, for us to be complacent,” Thornberry said. “I really look forward to working with Sec. (James) Mattis and his new team there— once he has a team there — (but) I feel strongly that, many times, essential reforms will only come from Congress. There’s just a limit to how much an institution can do to reform itself.”

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Marine F-18 Hornet

“Nobody has more respect and admiration for Sec. Mattis than I do, but he’s got a messy world” to manage, Thornberry added.

And the US must play a leading role around the globe, Thornberry emphasized. “We have a unique role to play in the world,” he said. “There were elements in both presidential campaigns that implied we should walk back from that.”

“We have all come to take for granted the special contributions the United States has made” to global peace and prosperity, Thornberry said. “To walk away from that would be a dangerous, bad thing for us and for others.”

http://breakingdefense.com/2017/02/with-trump-congress-really-can-kill-sequester-thornberry/