Global Business |Update|
(A weekly update on Global Business )
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Issue 94
 

Global Business Update

(10th Dec.’08---16th Dec.’08)
 

Content
 

Global Corporate

1 Alitalia taken over by consortium

2 Woolworths arm slashes 700 jobs

3 Corus unions reject pay cut deal

4 Boeing postpones Dreamliner again

5 Electrolux set to cut 3,000 jobs

6 HBOS shareholders back takeover

7 Santander to shed 1,900 UK jobs

8 TCS not too worried by US auto
 

Global Outsourcing

 9 India's competitors catching up as outsourcing hotspots

10 BancTec Announces Sale of Information Technology Service Management (ITSM) Division to QualxServ 

11 'IT outsourcing to moderate in 2009'

12 Mumbai Named Second Most Dangerous Outsourcing Location

13 Total Attorneys Accelerates Launch of Legal Process Outsourcing

14 Genpact Chief Says Outsourcing Growth to Drop by Half

15 Genpact eyes Govt contracts, outsourcing deals
 

Global Economy

16 WTO abandons plan for trade talks

17 Japan doubles size of rescue plan

18 UK says Merkel backs fiscal boost

19 Growth fall jolts Indian economy

20 IMF sees world slowdown next year

21 World Bank to lend $14 bn to India banks
 

Global Market

22 Oil slips to USD 45 per barrel

23 Auto shares down as US auto bailout plan fails

24 Rupee appreciates to 47.88 against dollar

25 Stocks open negative, turn flat

26  Realty stocks slump, Unitech falls 10 pct

Global Corporate

1 Alitalia taken over by consortium
Alitalia, Italy's troubled national flag-carrier, has been taken over by the Italian Air Company (CAI), a consortium of investors. The long-running deal had been delayed by opposition from employees, but the two major unions representing flight attendants backed the deal on Friday. The consortium also bought Alitalia's smaller rival Air One on Thursday and will now merge the two carriers. The new owners may now link up with with Lufthansa or Air France-KLM. Chairman of CAI Roberto Colaninno said a new partner would be proposed to the board by the end of the year. Alitalia filed for bankruptcy in August, weighed down by high labour costs, strikes, surging oil prices and political interference.
12th December 2008, www.bbc.co.uk

2 Woolworths arm slashes 700 jobs
Administrators at Entertainment UK, Woolworths' distribution arm, have made 700 staff redundant after failing to find a buyer for the business. The job cuts will affect staff at the "company's head office and distribution centres in Middlesex", administrators Deloitte said in a statement. They said moves to sell the business as a going concern were being scaled down. Woolworths, along with Entertainment UK (EUK) and other subsidiaries, went into administration on 27 November. Entertainment UK will continue its wholesale distribution operations with a reduced workforce of 375 employees. The company delivered up to 30% of music CDs in the UK, as well as film and TV DVDs.
11th December 2008, www.bbc.co.uk

3 Corus unions reject pay cut deal
Unions representing the 25,000 UK workforce of steelmaker Corus have rejected the firm's proposal that staff take a 10% pay cut. While the Community, Unite and GMB unions said talks would continue with Corus, they said they needed more details of the firm's plans for 2009. With Corus saying it needs to cut costs due to falling steel sales, the impasse raises the fear of job losses. There are concerns that Corus' Llanwern facility in South Wales may close. This site near Newport employs 1,000. The company's proposals for a 10% pay cut were one of a range of options which so far have been rejected by the unions, said Community, Unite and GMB in a joint statement. Before there is an agreement on the future of the 25,000 employees, the unions are demanding that Corus makes clear its intentions for 2009.A Corus spokesman told the BBC that talks were ongoing and everything is still on the table. Michael Leahy, general secretary of the Community union, told the BBC earlier in Thursday that Corus was committed to avoiding closures and job losses, if at all possible.
13th December 2008, www.bbc.co.uk

4 Boeing postpones Dreamliner again
Boeing has delayed again the launch of its 787 Dreamliner aircraft, blaming a strike by machinists and persistent production problems. The 787's first test flight is now expected to take place in the second quarter of 2009, a few months later than planned. Boeing still aims at delivering the first Dreamliner in 2010. The aerospace giant expects its financial outlook for 2009 to be affected by the new delay. We will overcome this set of circumstances as we have others in the past, and we understand clearly what needs to be done to move forward, said Pat Shanahan, Boeing's general manager for the Dreamliner program. It is the fourth major delay on the 787, which is now about two years behind schedule. Boeing has struggled with late design changes and parts shortages for the carbon-composite aircraft. A 58-day strike by machinists hit US-based Boeing factories in September and October. The Dreamliner is Boeing's first completely new aircraft since 1995.
13th December 2008, www.bbc.co.uk

5 Electrolux set to cut 3,000 jobs
Home appliance maker Electrolux has said it is to cut 3,000 jobs worldwide amid falling demand. The Swedish company, whose brands include AEG and Zanussi, also said in a statement that it would fail to meet its earnings forecast for 2008. The firm said demand for appliances in Europe and North America had declined considerably since mid-November. It had originally forecast 2008's operating profit to be 3.3bn-3.9bn kronor ($413m-$488m, £276m-£326m). However, Electrolux said it would miss this target as its operating profit for the 11 months to November had only reached about 2.7bn kronor. As a result of weakening demand for appliances in the two last weeks of November and in December, Electrolux will not reach its outlook for the full year of 2008, the company said. In light of the sharp market decline, Electrolux is reducing the number of employees by more than 3,000 in the fourth quarter of 2008 and in 2009.
15th December 2008, www.bbc.co.uk

6 HBOS shareholders back takeover
Shareholders at Halifax Bank of Scotland (HBOS) have overwhelmingly agreed a takeover deal with Lloyds TSB. Lloyds shareholders had backed the deal in November, and HBOS shareholders had been widely expected to follow suit. Meanwhile, HBOS shares fell almost 23% as the bank said it was operating in "increasingly difficult market conditions" and bad debts were rising. Lloyds fell almost 18% and Royal Bank of Scotland lost 15% on fears the sector shared HBOS's problems. HBOS said that bad debts and losses on assets had risen to £8bn ($11.9bn) in the first 11 months this year, up from £4.8bn at the end of September.
12th December 2008, www.bbc.co.uk

7 Santander to shed 1,900 UK jobs
Spanish bank Santander has said it will cut 1,900 jobs in its three UK businesses - Abbey, Alliance & Leicester and Bradford & Bingley. The bank said that the jobs would be cut in 2009 to reduce costs and did not rule out compulsory redundancies. Unions reacted with dismay to the announced cut, which represents 8% of Santander's British workforce. Santander is one of eurozone's largest banks by market capitalisation and second-biggest in the world after HSBC. Today's announcement shows we are on track to fulfil the commitment we made at the time of the Alliance & Leicester acquisition to grow our UK business whilst ensuring we meet our cost-saving targets, said Antonio Horta-Osorio, chief executive of the combined UK business.
15th December 2008, www.bbc.co.uk

8 TCS not too worried by US auto
Tata Consultancy Services, India's top outsourcer, is not too worried about the impact on its business from the failure of the $14 billion US auto bailout package. We are not unduly worried about it at this time, CEO S. Ramadorai told reporters at an industry conference, even though he said the exposure of Indian outsourcing firms to the global manufacturing and automotive sector was fairly sizeable. TCS may defer some capital expenditure based on demand, but would would honour all employment offers made to college graduates, he said. If the demand is not there, then we will not go ahead with some projects, Ramadorai said.
15th December 2008, www.financialexpress.com

Global Outsourcing

9 India's competitors catching up as outsourcing hotspots
One of India's key advantages as an offshore outsourcing location was its lower cost. But it may be losing this advantage to countries like Pakistan and Vietnam, which now offer staff at far lower costs than in India. Vietnam, with a significant French-speaking population, is also at an advantage as French-speaking countries in Europe embrace offshore outsourcing, said Arup Roy, senior research analyst at Gartner, on Thursday. India still has an edge over these locations if clients consider the maturity of the staff in the area of outsourcing, and their ability to hire more staff in India, Roy said. A number of countries have positioned themselves as credible alternatives to Brazil, Russia, India and China, popularly referred to as the BRIC countries, Gartner said. Mexico, Poland and Vietnam have continued to strengthen their position against leading alternatives, while others are making their debut in the top 30, according to Gartner. These countries will be seeking to take advantage of the opportunity created by the increased focus that many organizations now have on cost optimization, as a result of the current economic crisis, it added.
11th December 2008, www.networkworld.com

10 BancTec Announces Sale of Information Technology Service Management (ITSM) Division to QualxServ
BancTec, Inc. a global provider of advanced, high-volume document and payment processing services and solutions, today announced that it has reached an agreement to sell its Information Technology Service Management (ITSM) division to QualxServ, LLC a leading provider of technology deployment and field delivered support services. The sale allows BancTec to sharpen its strategic focus around building a world-class business process outsourcing (BPO) practice, as well as to expand its business solutions offerings. Acquiring ITSM provides QualxServ with a large installed base of customers, as well as the benefits of increased scale and operating efficiency.
12th December 2008, www.tutorial-reports.com

11 'IT outsourcing to moderate in 2009'
Independent research firm Forrester Research has in its latest tech market report titled ‘US IT Market Outlook: Q4 2008’ revised its 2009 US IT spending forecast. It is now projecting 1.6 per cent annual growth as against 6.1 per cent in US IT spending in 2009, stating that the US IT market outlook is down but not as bad as the 2001-02 tech depression. On the other hand, the report notes that the IT consulting and systems integration services will hit the wall in 2009 and IT outsourcing growth will remain moderate in 2009 and 2010. While IT outsourcing will get a small lift from the economic slowdown in 2008 as companies turn to vendors that can help cut IT costs, the growth in IT outsourcing revenues will remain moderate. This will be owing to trends toward use of lower-cost offshore resources, smaller scale outsourcing deals and the 9-15 month lag from the decision to outsource. One area of growth is likely to be demand for managed network services offerings, which vendors are pushing and clients are increasingly adopting, the report said
13th December 2008, www.businessstandard.com

12 Mumbai Named Second Most Dangerous Outsourcing Location
Mumbai ranked second to Jerusalem on a list of the most dangerous places for outsourcing—even before the recent terrorist attacks plunged the city into chaos. In fact, India had two regions ranked among the top five most dangerous places for outsourcing, according to a survey of 448 corporate development and outsourcing destination specialists conducted by Black Book Research and Brown-Wilson Group. The survey ranked 50 of the largest established and emerging offshore locations—from the safest to most dangerous—based on threat of terrorism, crime, climate hazards, and other factors (locations in the U.S. and the U.K. were excluded). The results were not overly surprising. Jerusalem, Mumbai, Rio de Janeiro/Sao Paulo (Brazil), Manila/Cebu/Makati (Philippines) and Delhi/Noida/Gurgaon (India) were ranked as the most dangerous places for outsourcing in the report. The terror attacks in Mumbai, along with the prospect that President-elect Barack Obama could follow through with policies that could penalize outsourcers with tax disincentives, have many U.S. corporate executives rethinking their offshore outsourcing strategies.
The Most Dangerous 10
1. Jerusalem (Israel)
2. Mumbai (India)
3. Rio de Janeiro/Sao Paulo (Brazil)
4. Manila/Cebu/Makati (Philippines)
5. Delhi/ Noida/Gurgaon (India)
6. Kingston (Jamaica)
7. Kuala Lumpur (Malaysia)
8. Johannesburg (South Africa)
9. Bangkok (Thailand)
10. Bogota (Colombia)
14^th December 2008, www.workforce.com

13 Total Attorneys Accelerates Launch of Legal Process Outsourcing
Total Attorneys, the premier provider of managed services for small law firms, today announced that the launch of its legal process outsourcing (LPO) solution has been accelerated to January 2009 due to the success of this year's pilot program and rising demand for quality legal services. Economic factors are certainly increasing the need for professional legal work, especially in the area of bankruptcy, and lawyers see legal process outsourcing as an efficient way to handle the increasing workload without sacrificing the needs of their clients, said Kevin Chern, Total Attorneys President. The time-consuming administrative work of a small law office, such as hunting down and reviewing lengthy and complex documents to verify facts and other legal information, can overwhelm small law firms and distract them from other critical aspects of the practice, such as client consultations and courtroom appearances, Chern said. Attorneys can comfortably delegate this work and monitor progress on the Internet on behalf of their clients using Total Attorneys' Web-based platform with LPO tools.
15th December 2008, www.marketwatch.com

14 Genpact Chief Says Outsourcing Growth to Drop by Half
Genpact Ltd., the outsourcing company spun off from General Electric Co., said the industry’s growth rate will drop by half in the recession as customers curb spending on technology and software services. Revenue at outsourcing companies will grow in the middle teens, down from annual rates of about 30 percent in recent years, Genpact Chief Executive Officer Pramod Bhasin said today in an interview from Gurgaon, India. It will take at least a year for the companies to restore normal growth, he said. You see delays, you see postponements, you see a few cancellations, he said. You’re just seeing a lot of slowdown in decision-making. Genpact, which sold shares in an initial public offering last year, may face intensifying competition with larger rivals including Infosys Technologies Ltd. and Tata Consulting Services Ltd. as recession hurts demand. The industry will keep on growing because outsourcing services help clients cut costs, Bhasin said.
14th December 2008, www.tutorial-reports.com

15 Genpact eyes Govt contracts, outsourcing deals
BPO major Genpact will pursue Government contracts next year and also target outsourcing deals from large nationalised companies in China, its CEO, Pramod Bhasin, has said. The company is also planning to enter West Asia next year, particularly to bid for projects in sectors such as BFSI , oil and gas, manufacturing, and airlines. One huge area for us in the domestic market will be the Government contracts, whether it is railways, passport offices and licensing land records and health records…We have not done it so far and we are going to go after it in a big way now. We will go after transactional functions, Bhasin said.
15th December 2008, www.tutorial-reports.com

Global Economy

16 WTO abandons plan for trade talks
World Trade Organization (WTO) chief Pascal Lamy has abandoned attempts to restart the world trade talks. Mr Lamy has told ambassadors that he has decided there was not enough consensus among major economies to call new ministerial talks on a trade deal. The news came after the WTO held intensive consultations with US, India, China, Brazil and the European Union. The WTO was hoping to convene a meeting in December to try and revive the stalled Doha trade round. It had been urged to do so by the G20 summit of world leaders in November, who called for urgent trade talks by the end of the year. It is unclear how strongly the incoming Obama administration will back the trade talks. A spokesman for the US trade representative, Susan Schwab, said she was disappointed by the outcome, but added that there were still outstanding issues. There were more than a handful of issues on the table that needed to be resolved, all having the potential to stall the round, said USTR spokesperson Gretchen Hamel.
12th December 2008, www.bbc.co.uk

17 Japan doubles size of rescue plan
The Japanese government has increased by 23 trillion yen ($255bn; £171bn) its stimulus plan aimed at re-launching the country's economy. More than half the amount will be used to bring stability to the financial markets, said prime minister Taro Aso. The new economic plan comes after a 27 trillion yen package in October. On Friday, the Japanese yen surged to its highest level against the US dollar in 13 years, sending stocks plunging and hitting the country's exporters. The economic situation is worse than expected, so we are going to offer some measures, said prime minister Taro Aso. We will try to be the first to get out of the recession, at least among industrialized nations, he added. The new stimulus package also includes tax breaks and public financing projects worth 10 trillion yen.
13th December 2008, www.bbc.co.uk

18 UK says Merkel backs fiscal boost
The UK government has been defending its plans to boost the economy after attacks by two German politicians. Foreign Secretary David Miliband said that there was strong pan-European commitment to a fiscal stimulus plan. And he added that German Chancellor Angela Merkel was "fully engaged" with the European economic debate. European leaders are meeting at a summit in Brussels to try and agree an economic stimulus plan to revive Europe's flagging economies.
12th December 2008, www.bbc.co.uk

19 Growth fall jolts Indian economy
India's industrial growth has shrunk for the first time in more than a decade as the country witnesses the fallout of the global credit crunch. Factory output contracted by 0.4% in October compared with a rise of 12.2% in the same month last year and a 5.45% increase in September. Some experts say the immediate future for the industrial sector is bleak. India plans a second economic stimulus, after announcing $4bn in extra spending and interest rate cuts recently. Experts said the fall in factory output in October was worrisome. Car sales, for example, posted their biggest yearly fall in eight years, dropping by nearly 20%. Sales of commercial vehicles were down by nearly 50%. Many car companies have cut production and slashed prices in view of the declining demand. It is a shocking figure and only underlines the fact that the Indian economy is in a very bad situation, TK Bhaumik, economist at JK Industries Group, told Reuters news agency.
14th December 2008, www.bbc.co.uk

20 IMF sees world slowdown next year
The International Monetary Fund (IMF) has said the global economy may not begin to recover until the end of 2009. 2009 will be a very difficult year, IMF managing director Dominique Strauss-Kahn said at a conference on Spanish-IMF relations. Mr Strauss-Kahn said the fund would probably cut its 2009 global growth forecast next month. He also said the IMF could cut its 2009 forecast for China to around 5% amid an unprecedented global slowdown. He said that growth in emerging economies such as China was on the decline and would not compensate for recessions in developed countries. In November, the IMF lowered its global economic growth forecast to 2.2% from 3%.
15^th December 2008, www.bbc.co.uk

21 World Bank to lend $14 bn to India banks
A $14 billion World Bank lending plan for India, the biggest ever by the global lender to Asia's third-largest economy, will help recapitalize state-run banks facing liquidity strains and target the country's poorest regions, a senior Bank official said. Rachid Benmessaoud, the Bank's acting country director to India, said some $3 billion of the loan will focus on areas most affected by the global financial crisis, including state-owned and housing banks, small- and medium-sized enterprises and infrastructure. The capital market is drying up in India and we have seen that a number of commercial state banks are not able to access long-term financing, Benmessaoud said on Friday.
15^th December 2008, www.financialexpress.com