Last week, the second largest American automobile manufacturer, the Ford Motor Company, announced plans to reorganize. It said it would close five factories and cut 35,000 jobs worldwide. Ford also said it would stop making four of its car models. Ford expects to be manufacturing about one million fewer cars by the year 2005 than it does now.
Most of the job cuts will affect workers in North America. Four of the factories that will close are in the United States. The other is in Ontario, Canada. Ford will end about 22,000 jobs in North America. The rest of the cuts will happen in Europe.
The company's Chief Executive Officer, William Ford, announced the cuts. He said the company is sorry that some of its plans will cause pain. But, Mr. Ford said he believes the reductions are necessary for the company to compete. Mr. Ford also said he would not accept any pay from the company, except in stocks. He said, in this way, he will only earn money if the reorganization succeeds.
On Thursday, Ford announced it had lost almost 5,500 million dollars last year. The loss includes more than 4,000 million dollars Ford will spend to reorganize. The last time the company had a yearly loss was in 1992.
In 2000, Ford recorded a profit of more than 6,500 million dollars. Mr. Ford says that great success may have led the company to underestimate the growing strength of competitors. He said Ford also underestimated the effect of the slowing of the economy.
News Item 2
Financial experts say all three large American car companies were hurt by the terrorist attacks in the United States. Sales of new cars dropped after September 11th. Car companies began to make limited special offers to get shoppers interested in buying new cars. These offers included interest-free loans to buy cars.
The offers did increase car sales. Yet, experts say the increase may have been too great. They say that some people who planned to buy new cars in 2002 bought them early in order to get the special offer. That means car companies lost the business of people who would have paid a higher price. American car companies were also hurt by foreign competition. Sales of Japanese and Korean made cars are increasing in the United States.
Ford had other increased costs last year after the media began reporting serious crashes of Ford Explorers. The crashes appeared to be caused by the sudden failure of tires made by the Bridgestone/Firestone Company. Ford had to replace the tires. Experts say this year will be difficult for the Ford Motor Company. But company officials hope the reorganization plan will lead to increased profits in the future.
News Item 3
With that commitment in hand, Donaldson and the rest of the SEC voted unanimously to approve a package of governance reforms Reed believes will help restore investor confidence in the Exchange in the wake of Dick Grasso's departure. Now the New York Stock Ex-change membership approved the reforms last month, but the SEC needed to sign off on the plan before it
could take effect.
The Reed's changes amount to the biggest reform of the Big Board in 30 years, the critics still question whether the plan goes far enough. It reduces the Exchange's 27-member board to a new 8-member group; it creates a new autonomous regulatory office and also creates a separate supervisory board representing Wall Street firms, Exchange members and institutional investors. In an interview, Donaldson praised Reed's efforts so far.
Donaldson: Well, I think that we, uh, we all agree that this is a ... a first step, and ... and I think is an extremely important step. Now, and I think we need to give the new structure an opportunity to... to work.
Other commissioners made clear that they expect additional reforms in the future after the SEC completes a full review of market structures in the U.S. That review will include the crucial question of whether the NYSE can continue to police itself.
Commissioner: For me, everything is on the table and particularly alternative regulatory models. There's much the other exchanges can learn from what's being done here. And yet, there's much more that may be needed, and we've got to think of all that with great care and concern about the national interest.
Donaldson says that market structure review begins in earnest in 2004.
News Item 4
The World Trade Organization reports international trade grew at a modest 2.5 % last year. The WTO says the global trade outlook for this year is uncertain, largely because of the effect of the war in Iraq and the severe acute respiratory syndrome, or SARS.
The WTO report views the global economic recovery as uneven. It says the United States, the advanced economies in East Asia, China and the transition economies of eastern and central Europe were the driving forces behind the global economic pick-up. In contrast, the economies of Western Europe and Japan continued to stagnate.
World Trade Organization senior economist Michael Finger says the conflict in Iraq has pushed up oil prices, which has had negative consequences on business worldwide. Also, he says the SARS crisis has caused a deceleration in growth in dynamic economies such as China, Hong Kong and Singapore. Although, he notes China came out better than the other countries.
\"Surprisingly, to some of us, the impact on China's economic growth was rather moderate. China's economic growth still in the first half expanded by more than seven percent, which is quite outstanding. Within Asia, good growth has also been reported for India. These two countries together are the most populous nations in Asia and support the activities in the region.\"
The WTO report predicts growth for developing Asia this year will be slightly less than last. However, it still will be stronger than in any other developing region.
The report says Africa's economic growth slowed down last year by about three percent, following an increase of more than four percent in 2001. But, WTO economists expect economic growth in the African region to pick up steam this year and expand by 4.2 percent.
Mr. Finger says there are huge regional differences in Africa. \"There are excellent economic growth in three countries where it exceeds 10 percent. These countries are Equatorial Guinea, Mozambique and Angola. On the other hand, there are economies, which record a decline in GDP [Gross Domestic Product] in 2002. In particular, Zimbabwe and Madagascar. The latter two
countries experienced civil strife and these are the main factors why these countries recorded negative growth.\"
Mr. Finger says agricultural subsidies in the developed countries tend to depress prices for African goods. And this is making it difficult for African farmers to export their products.
The report says U.S. exports continued to decrease in the first five months of this year, while imports increased. As a consequence, it says the U.S. deficit widened. While this is good for America's trading partners, the report says, it is not so good for the United States.
News Item 5
Other news today, the President reversed himself and scrapped the tariffs he had imposed on foreign steel imports. The tariffs were popular in steel-producing states that Mr. Bush wants to carry in the next election. What is still not clear is whether the tariffs helped the U.S. economy. The President portrayed his about-face as a matter of principle.
Bush: America's consumers, the American economy is better off with a world that trades freely and a world that trades fairly.
Mr. Bush's steel tariffs, which slapped new duties of up to 30% on imported steel, were the most protectionist action by an American president in decades. They were supposed to last for three years but today, 21 months later, administration officials claimed it was time to lift the tariffs because they had worked by giving the industry some breathing room to restructure itself.
Donald Evans (Secretary of Commerce): When you look at the consolidation, the labor contracts that are in place now, the lower production costs, you see that we now have an industry once again that is globally competitive.
But there was another reason for the reversal —— fears of retaliation from other countries. Europeans and others have threatened to impose tariffs of their own on products from politically crucial states, such as Florida citrus products and Michigan manufactured goods. Analysts say the administration caved into that pressure.
Dary Hufbauer (Institute for Int'I Ecnomics): I think it really concentrated the mind of the administration because if the tariffs had not been lifted this week, then next week we'd be in a trade war.
There is also a sharp controversy over whether the tariffs helped or hurt the U.S. economy. A government study found that tariffs actually cost about $30 million to the total economy. More important, the higher steel prices spurred job losses in other industries that use steel. By some estimates twenty to forty thousand workers lost jobs because of the tariffs. In Pennsylvania today, the people who make steel were not happy,
U.S. steelworker: He just threw a big blow to the steel industry. And I hope he knows what he's doing.
That's a question Democrats will be sure to raise here next year.
News Item 6
The United States, backed by Canada and Argentina, has formally complained to the World Trade Organization that the European Union's ban on genetically modified food is illegal.
Washington calls the European Union's refusal to import genetically modified food
discriminatory and illegal under international trade rules. It says no scientific evidence exists to show that the GM crops harm human health or the environment as the Europeans claim.
The EU's Trade Commissioner, Pascal Lamy, calls the U.S. move unnecessary litigation. He says the European rules governing GM food are clear, transparent and non-discriminatory.
Under WTO rules on the settlement of trade disputes, the EU is allowed to temporarily block investigation. However, the dispute panel will be automatically formed at the end of the month, when Washington is expected to repeat its request.
Last month, the EU ended a five-year moratorium on biotech products, but said these products had to be labeled as such. U.S. farmers say the labeling will be costly and an unfair trade barrier.
If the WTO dispute panel sides with Washington, the United States, as well as Canada, and Argentina, would be allowed to impose trade sanctions on Europe. American farmers estimate they have lost about $300 million a year because of EU restrictions on corn exports alone. The panel's decision can be appealed, and the whole process could take up to 18 months.
News Item 7
China and Japan have kicked off two days of talks in Beijing on how to resolve an escalating trade dispute. That dispute comes just as China enters high-level negotiations on its accession to the World Trade Organization. Chinese and Japanese officials are holding talks on how to prevent an all-out trade war between the two countries. But China is downplaying the threat posed by the dispute to long-term trade relations.
China's Foreign Ministry Spokeswoman Zhang Qiyue says it is natural for countries to have trade disputes, and that many countries have such problems. Speaking at a News conference Tuesday, she said Beijing is hoping that the negotiations will result in progress towards a resolution of the problem.
Last month, China slapped 100 percent tariffs on imports of Japanese cars, mobile phones and air conditioners. Beijing says these measures were in retaliation for Japan's decision in April to curb imports of Chinese mushrooms, spring onions and straw for tatami mats. Japan says talks on its import curbs will be separate from discussions of Chinese retaliatory acts.
Japanese Trade Minister Katsusada Hirose (Monday) said that Japan's curbs on some Chinese farm products comply with World Trade Organization rules, whereas China's measures do not. But China has in turn accused Japan of protectionism, which it says violates WTO rules.
China is not yet a member of the global trade body, which would provide a mechanism for resolving such trade disputes. High-level negotiations between China and WTO members are currently underway in Geneva, with the goal of securing China's entry to the trade body by the end of the year.
The Foreign Ministry spokeswoman says that the trade dispute between China and Japan will have no bearing on China's accession to the WTO.
News Item 8
Swiss authorities say they have frozen about $1.5 million in bank accounts linked to Liberian President Charles Taylor following his indictment for war crimes.
Swiss officials say the accounts, held in Zurich and Geneva, belong to two people associated with Liberian President Charles Taylor. They would not identify the account holders, but say they know of no bank accounts held by President Taylor himself.
Last month, the Swiss Ministry of Justice ordered that all bank accounts belonging to Mr. Taylor, his relatives and close associates be frozen.
The government acted on a request from the UN-backed war crimes court in Sierra Leone, which indicted the Liberian President for war crimes and crimes against humanity. He is accused of having funded rebel groups in Sierra Leone and of enriching himself off illegal gun and diamond trafficking.
According to figures released by the Swiss National Bank, Liberia has more financial transactions with Switzerland than any other African nation. Records show Liberia has $3.3 billion of assets in the country.
News Item 9
The anti-globalization campaign shifts from Genoa to the Tanzanian island of Zanzibar Sunday. Delegates from the world's poorest countries are holding a two-day summit to try to stop further liberalization by the World Trade Organization.
Senior officials from 49 Least Developed Countries, the LDCs, are meeting in Zanzibar to draw up a common strategy ahead of the forthcoming World Trade Organization conference in Qatar in November.
The meeting was organized by Tanzanian Trade Minister Iddi Simba. He is concerned that poor countries are being forced to open up their markets when they are not yet strong enough to trade with the West.
Agricultural exports are the main stay for many developing countries. Free trade rules force them to open up to unfair competition because they say the agriculture of wealthy countries in Europe and North America continue to receive subsidize.
News Item 10
November's WTO meeting will be the first since talks stalled in Seattle two years ago. Mr. Simba hopes to get agreement to block any further trade liberalization unless earlier promises are kept.
However, he says he would prefer the international community to listen to the demands of the poor. He says the fourth WTO ministerial is another opportunity for the international community to demonstrate its commitment to the welfare of the least developed countries.
Almost all the LDCs are in Africa. They are defined by the United Nations as having an average family income of less than $900 a year.
Africa is making concerted efforts to avoid being further marginalized in the global marketplace. At the G-8 summit in Genoa, Africa presented a recovery plan for the continent called a New African Initiative.
The new African Union was also launched this month to replace the 33-year-old Organization of African Unity.
Half the people in Africa live on less than a dollar a day. The number of African nations in
the list of the world's least developed countries has risen from 27 to 34 over the last five years.
News Item 11
A court in the United States has ruled that the hamburger chain McDonald's was not responsible for the health problems of overweight children who eat at its restaurants. The judge said lawyers acting for the children had failed to show that McDonald's products presented a danger unknown to consumers.
This is the first case of its kind to go through the American courts, the outcome is a victory for the fast food industry, which is braced for a wave of tobacco-style litigation over the health consequences of poor diet. The action was mounted on behalf of a group of overweight children suffering from diabetes, high blood pressure and other diet related ailments. They blame their problems on the fat laden hamburgers and chips they'd regularly eaten at McDonald's restaurants in New York. Among them was a fourteen-year-old girl weighing 170 pounds, although she is less than five foot high. The judge said that if consumers knew about the potential ill effects of eating at McDonald's, it wasn't the company's fault if they satiated their appetites with super size portions of McDonald's products. The judge noted that the Americans spend more than 100 billion dollars a year on fast food and that in any given day, one in four adults visits a fast food restaurant. He was aware that a ruling against McDonald's might lead to thousands of similar what were described as \"McLaw suits\". He believed the court had the duty to limit the legal consequences of righting wrongs and to protect against a crashing exposure to liability. The judgement will be greeted with relief in the fast food business. But at least three other similar legal actions are already in the pipeline.
News Item 12
The International Air Transport Association says the airline industry has turned the corner, and prospects for recovery are good. But airlines are expected to pile up billions of dollars in losses.
The International Air Transport Association says global airline traffic picked up sharply in June, but a full recovery is still some months away. IATA predicts the world's airlines will lose up to $6.5 billion this year. It says about $4 billion of that is due to SARS, the severe acute respiratory syndrome. The rest of the losses are largely linked to the war in Iraq.
IATA Assistant Director of Corporate Affairs Nancy Gautier says airlines in the Asia-Pacific region, which was hardest hit by the SARS crisis, suffered the greatest losses. But, she noted air traffic in the region was down nearly 39 percent in June compared to 55 percent in May.
\"Although they have a long way to go, they are coming right back up. It is a steep climb improvement, and we hope to see this trend continue and the signs look good... We are hoping that, if this progression continues, that by the end of the year, we will be able to say we are getting back to the levels that we were before all these crises began. We need to consider crisis as a part of everyday life.\"
Ms. Gautier said areas that were not affected by SARS did not suffer from a drop in air travel. She notes that the war in Iraq did scare travelers away, but only temporarily.
IATA figures show that Middle East traffic rose by four percent last month. Africa registered
an increase of 1.1 percent in June, and air travel to South America rose by 9.3 percent this year. However, Ms. Gautier acknowledges that tourism in general was heavily hit by SARS and the Iraqi war. \"It is not just the airlines. It is hotels, tour operators, everybody who works in the area. All of that is a great backbone to our economy. And, many countries depend so heavily, as you know. It has been a rough road for them. And, therefore, if the airlines are coming back, we hope that, in general for the industry, that they are beginning to all see that this pent-up demand is beginning to be let loose again and that both leisure travelers and business travelers are getting back.\"
Ms. Gautier says now is a good time for travelers to take advantage of special promotions the airlines are offering to lure them back.
News Item 13
The chairman of the U.S. Federal Reserve says the nation's central bank could cut interest rates even further if that's what it takes to jump-start the sluggish American economy. Alan Greenspan is concerned about an economy that has so far failed to rebound, as well as the risk of deflation.
Interest rates are already at their lowest point in nearly half a century, and Fed Chairman Greenspan tells Congress the nation's central bank is prepared to keep them at that level \"for as long as needed to promote satisfactory economic performance.\"
There have been 13 interest rate cuts in the past two years. In testimony to Congress, the Fed chief signaled the central bank may be ready to reduce them even further in order to boost a sluggish economy which is also being blamed in part for a projected U.S. government budget deficit expected to top $450 billion.
Democrats say the soaring deficit can be blamed on President Bush's failed economic programs, including a $350 billion tax cut. But White House spokesman Scott McClellan brushed aside the projected levels of red ink, saying the administration expects the deficit will be cut in half, provided the economy gets moving again.
\"Now, we had a recession. We also had declining revenues because of that and we had a war on terrorism. That's what led to the deficit that we're in today.\"
In his Congressional testimony Tuesday, Fed chief Alan Greenspan said he favors tax cuts as a way of boosting the economy but stresses any cuts in government revenue need to be offset by reductions in federal spending in order to get the deficit under control.
News Item 14
Boeing beats rival Airbus in an aircraft war that could be worth five billion dollars from Air Tran Holdings, a low fare carrier that wants to double its fleet by 2008. Details from our Chicago bureau.
Correspondent : The order could turn out to be as many as a hundred and ten planes, umm, over the next few years. What that translates into is about, in current orders at our firm, are 50 orders for the Boeing 737 and six orders for the 717 which are just smaller planes than the 737. So, umm, basically, what that comes down to is 56 of what we call \"firm orders\" which are basically contracted to buy and they can convert 40 or 50 more from options.
Any word on how much this transaction is worth given list prices for these aircraft? Correspondent: Well, the list prices based on calculations that we did from list prices at Boeing gives out is at least five billion. You have to keep in mind that often times Boeing will give the customers discounts, especially now when orders and deliveries are a little bit lower than they have been in the past.
AirTran is one of the few carders that's been able to turn a profit when many other bigger competitors are struggling. Why is AirTran able to make money in this environment? Correspondent: Well, they're kind of eating the bigger carders' lunch, so to speak, because they're doing it off of growth. They offer very low cost and so they offer lower fares than what the United Airlines and American Airlines and Deltas of the world are able to do and so they're able to gain market share. They're still a very small carrier in the bigger picture, however they're just doing it off of growth right now and you know, companies like AirTran and Southwesten and such are...JetBlue and easy Jet, are the ones that are growing now because...and they're buying airplanes now because they are profitable and they also have a so-called \"growing market\" in this discount kind of environment.
Boeing shares higher by 33 cents to 34.65. AirTran Holdings up 73 cents to 11.20.
News Item 15
Immigrants make up 10 percent of the U.S. population, but 25 percent of the entrepreneurs in Silicon Valley who started high-tech companies during the past two decades. Immigrants, in general, are more likely than native-born citizens to start their own businesses.
Perhaps it is because more immigrants than native-born Americans are between 25 and 44 years of age, the prime age category for launching a business.
Perhaps it is because more immigrants live in urban centers where there is greater access to customers and markets.
Yolanda Zambrano emigrated from Colombia 10 years ago and today is the owner of a thriving multi-million-dollar travel business. She believes the presence of large U.S. immigrant communities stimulates many immigrant entrepreneurs.
\"I think the Latino community is growing so much, and the Latinos, they like personal service, That is why my agency is not being affected too much by the Internet and all the technology, because people like service face to face. I would never win in the place that I am without them.\"
News Item 16
Ilya Talman, who emigrated from the Soviet Union in the 1970's believes the very characteristics that lead people to move to a new country make them especially suited to be entrepreneurs.
\"You have to be much more entrepreneurial than the average person to get up and go. You are leaving your country, you are leaving your customs, you are leaving your language.\"
In addition, Mr. Talman says, many immigrants feel a link between political and economic freedom.
\"Capitalism is a kind of implied to me, freedom. I still remember crossing the border from
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