Archive for the ‘factories’ Category

Russia’s Defense Industry Hit by Credit Crunch, Ivanov Says

November 11, 2008

Russia’s defense industry is facing difficulties in meeting orders from the state because of the global credit crunch, Deputy Prime Minister Sergei Ivanov said.

Sergei Ivanov
Sergei Ivanov

Many companies are suffering from cash-flow problems, Ivanov said in remarks carried on state television. The financial crisis is “hitting some defense companies quite hard,” and the situation could prove “troublesome” for the industry, he said.

This video grab from Russian NTV channel shows the Russian nuclear ... 
Above: This Russian submarine had an on board non nuclear accident that killed 20 this week.  She was on sea trials and scheduled to be tranferred to India.  She is now emblematic of Russia’s failing defense industry.

By Sebastian Alison, Bloomberg

Banks in which the state holds a large stake, including OAO Sberbank, Russia’s biggest bank, VTB Group, the second largest, and state development bank Vnesheconombank, should consider lending to defense contractors, he said.

Ivanov was speaking today at a meeting in Moscow of a government commission on strategic enterprises and the defense industry.

“We’re talking about an industry with a lot of expenses and not too much revenue,” said Masha Lipman, an analyst at the Moscow Carnegie Center. She noted that Russia has recently made major arms sales to countries like Venezuela on credit with no repayments due for years.

Lipman said Russia’s Defense Ministry has been sending out mixed signals, for example by announcing cuts in military staffing numbers. This will produce tens of thousands of unemployed officers and the cost of retraining them for civilian jobs will be high, she said.

“Probably we will see that no such cuts will be made, because if you cut expenses in one place, you create them in another place,” she said.

Georgia War

Russia approved 344 billion rubles ($13 billion) in new defense spending last month following its five-day war with Georgia in August, Ivanov said on Oct. 16.

“Additional funds will be spent on purchases of modern weaponry, especially aircraft,” Ivanov, a former defense minister, said during a meeting with President Dmitry Medvedev.

At the same time, Russian state revenue may slump as the price of oil, its biggest export, plunges and capital flight accelerates on concern the global economy is entering a recession.

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Can Washington save the Big Three automakers?

November 9, 2008

With the Big Three US automakers teetering on the edge of insolvency, it appears Washington may finally be ready to come to Detroit’s rescue.

Only hours after both General Motors and Ford Motor Co. announced large third-quarter losses — and stressed that they are both rapidly running out of cash — President-elect Barack Obama focused on the industry’s plight during his first news conference since Tuesday’s election.

Above: 1910 Ford Model T

“I have made it a high priority for the transition team to work on additional policy options to help the auto industry adjust,” Obama told reporters gathered in Chicago.


Just how bad a situation the automakers are facing was hammered home on Friday, when GM reported a 2.5 billion dollar net loss for the third quarter, bringing to nearly 57 billion dollars its losses since the beginning of 2005.

Ford’s 129 million dollar quarterly loss, meanwhile, brought to nearly 24.5 billion dollars the deficit it has run up since plunging into the red in 2006.

Yet the losses only partially state the true depth of the problem for the automakers.

Going into the third quarter, GM had 21 billion dollars on its books. By the end of September, that had plunged to 16.2 billion dollars, coming perilously close to the 11 billion to 14 billion dollars it says it needs on hand to keep the company operating.

GM logo
Ford burned through 7.7 billion dollars in the quarter, though its reserves are nearly twice as richer thanks to a massive line of credit it acquired last year.

Though it doesn’t report its full financial data, the privately-held Chrysler LLC is also thought to be fast running out of cash: one reason, analysts believe, why its parent, Cerberus Capital Management, was so eager to sell Chrysler to GM.

That deal, however, was scuttled by GM, and observers believe Cerberus may now rush to find another buyer as the economy continues to worsen.

“I doubt there’s anyone who challenges the fact that we’re operating in difficult times, perhaps as difficult as we’ve ever faced in the auto industry,” GM Chairman and CEO Rick Wagoner said during a Friday conference call with reporters and industry analysts.

Detroit’s situation has certainly worsened in the face of the current economic crisis that combines what many describe as a “perfect storm” of factors, such as high fuel costs, tight credit, job losses and rising commodity prices.


But the seeds of the current crisis date back to the last big oil shock, of 1979, which helped the Japanese gain a foothold for small, fuel-efficient products.

As gas lines faded from memory, the Asian automakers continued to gain ground by focusing on quality, something GM, Ford and Chrysler have only recently come to grips with — and with varying degrees of success.

Further compounding the situation, Detroit has been consciously slow to embrace changes in the American automotive marketplace, especially the shift from big trucks to small, fuel-efficient passenger cars.

And even where it has, lamented Consumer Reports’ auto analyst David Champion, it has needed “more models that were exciting for people to buy.”

Again, Detroit has begun to address that complaint, and a flood of more fuel-efficient — and exciting — models are on tap to debut over the next several years. The challenge now will be to keep that flow going.

GM President Fritz Henderson said Friday the automaker will have to cut back on some product programs in order to ensure liquidity.

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Economic and Fiscal Reality Closing In On China

October 19, 2008

Unemployed worker Wang Wenming was angry at his boss for shutting down a massive Chinese factory this week that made toys for Mattel Inc., Hasbro Inc. and other American companies.

By Associated Press Writer William Foreman

But the assembly line worker was also furious at the United States.

“This financial crisis in America is going to kill us. It’s already taking food out of our mouths,” the 42-year-old laborer said Friday as he stood outside the shuttered Smart Union Group (Holdings) Ltd. factory in the southern city of Dongguan.

A vendor sell vegetables on a street in Chongqing in China's ...
A vendor sell vegetables on a street in Chongqing in China’s Sichuan province. China’s strong economy appeared to put the nation on the global high ground when the financial tsunami first struck last month, but as the storm continues to rage, that position is looking less sure.(AFP/File/Peter Parks)

The company, which has struggled as global growth has slowed in recent months, employed 7,000 people in mainland China and Hong Kong. It wasn’t immediately clear how many have lost their jobs.

Economic upheaval in the U.S. is already changing and shrinking China‘s vast manufacturing hub in the southern province of Guangdong, long regarded as the world’s factory floor. However, factory closures won’t just be a China problem — shoppers will feel the effect in malls and stores in the U.S. and Europe.

“When these companies go bust, the outcome is higher prices,” said Andy Xie, an independent economist in Shanghai. “Labor costs have gone up 70 to 100 percent in the last three or four years. But these guys have not been able to raise their prices because Toys “R” Us, Home Depot and Wal-Mart are saying no price increase. How is that possible?”

File photo shows construction workers passing high rise commercial ... 
Construction workers passing high rise commercial buildings in Beijing. China’s economic growth has slowed to 9 percent in the third quarter as global financial woes started taking a toll on the country’s staggering development the government has said.(AFP/File/Teh Eng Koon)

For years, there were too many factories competing to win bids from foreign buyers demanding prices that were often unrealistically low. The winners were American and European consumers, who enjoyed rock-bottom prices.

But many factories were scrimping on materials and stiffing their suppliers just to survive, Xie said. The financial crisis will be the final culling factor that forces many wobbly factories to go belly up and end an unsustainable situation, he added.

Already, China’s toy industry is hurting. The official Xinhua News Agency reported this week that 3,631 toy exporters — 52.7 percent of the industry’s enterprises — went out of business in 2008. The causes: higher production costs, wage increases for workers and the rising value of the yuan, the report said.

Nor is Christmas likely to make much difference. Big toy giants generally put in their Christmas orders months in advance so toys can be shipped to them in time.

Even before the financial crisis, China’s exports were dropping because of the slowdown in America and Europe. For the first time in three years, the growth rate for Chinese exports in the first quarter of 2008 declined, according to customs figures.

Chan Cheung-yau, chairman of toy and games subcommittee under the Chinese Manufacturers’ Association of Hong Kong, agreed that the outlook was gloomy for toy makers. He predicted that thousands more factories would close in China next year.

“The tightening credit market has made it more difficult for manufacturers to raise funds,” he said. “It has created a huge cash flow problem.”

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On Vietnam factory floor, worries grow about global downturn

October 19, 2008

VAN LAM, Vietnam (AFP) – The whirr of 200 sewing machines fills a Vietnamese factory hall, where workers and bosses hope desperately that the wheels will keep spinning once the global downturn hits home.

Row upon row of workers, most of them women, are busy making handbags, backpacks and briefcases for customers as far away as Germany, Hungary and Mexico in this plant, set amid rice fields on the outskirts of Hanoi.

               File photo shows workers sewing on a production ... 
Workers sewing on a production line at a garment factory in Ho Chi Minh City. The whirr of 200 sewing machines fills a Vietnamese factory hall, where workers and bosses hope desperately that the wheels will keep spinning once the global downturn hits home.Photo:/AFP

They are the backbone of Vietnam’s post-war success story, part of an army of low-wage labourers who have transformed a poverty stricken command economy since Vietnam in the 1980s embraced the Asian model of export-led growth.

For more than a decade, textile and apparel exports have helped drive national economic growth rates above 7.5 percent — lifting the fortunes of businesses such as the Ladoda Company, whose staff grew to 400 from 15 in 16 years.

But now — with the dark clouds of recession gathering over the United States, Europe and many of Vietnam’s other export markets — many of the workers here have started to worry that tougher times may lie ahead.

“I heard on TV and the radio that the world economy is in bad shape,” said 33-year-old Nguyen Thi Thuy, who supports two children with her performance based wage of around 1.7 million dong (100 dollars) a month.

“I am sure it will affect Vietnam and our company in some way.”

It is a concern shared by the management of the company, although both Thuy and her boss said that through hard work and innovation this family-run business hoped to dodge the bullet of a global downturn.

“We are worried,” admitted deputy…

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China Still In Global Economy: Workers gather at shuttered China toy plant

October 17, 2008

DONGGUAN, China (Reuters) – Hundreds of workers gathered outside a shuttered toy factory in southern China on Friday, after a Hong Kong-listed toymaker closed amid tough times made worse by the U.S. economic slowdown.

“Because business is bad, we are unable to give you your salaries,” read a notice stuck on the main gate. About 10 riot police with batons and shields stood in front of the gate.

A shopkeeper, selling Chinese-made toys, talks to a customer ... 
A shopkeeper, selling Chinese-made toys, talks to a customer at a store in Beijing November 23, 2007.(Claro Cortes IV/Reuters)

Smart Union Group did not pay its 6,500 employees in Dongguan, an export-oriented Chinese city about an hour-and-a-half train journey north of Hong Kong, for the last two months, the China Daily reported.

On Friday, about 1,000 workers gathered for the second day at the gates of a Smart Union factory in Zhangmutou town.

The company in late September reported a loss of more than HK$200 million for the first six months of the year.

Its shares have lost 94 percent of their value since the beginning of the year. They closed at HK$0.099 a share on Wednesday, and did not trade on Thursday. Smart Union did not give a reason for its share suspension and could not be reached for comment on Friday.

Factories in the southern Chinese province of Guangdong have suffered over the past year-and-a-half from a credit crunch, rising labor costs and China‘s stronger currency, which makes their products more expensive.

Dongguan city earlier this month set up a 1 billion yuan ($146.4 million) rescue fund for small and medium-sized businesses hurt by the global economic crisis, which has reduced export orders sharply.

The number of Chinese firms exporting toys overseas halved in the first seven months of 2008, compared to the year before, the General Administration of Customs said on Monday.

The Canton Fair, the top trade fair which is a barometer for China’s foreign trade, saw visitor numbers fall sharply this week, indicating stiffer competition for export factories seeking buyers in the months to come.

(Writing by Lucy Hornby; Editing by Ken Wills and Valerie Lee)


China: Global Financial Turmoil Hits “World’s Factories”

October 15, 2008

By Tim Johnson, McClatchy Newspapers

GUANGZHOU, China — Global financial turmoil has sent gale-force winds across some factory floors in China , and barely a breeze across others. The differing fates of factory owners such as David Xu and James Jiang illustrate why China Inc. displays some resilience in the face of the global crisis.

Xu’s factory makes television sets of such low quality that they can’t sell in the United States and Europe . So he markets them in the Middle East , and sales are brisk.

“We don’t feel much,” Xu said of the financial turmoil. “I’m not worried.”

It’s a different story for Jiang. His factory makes low-cost musical keyboards for hobbyists and students. They sell in Target’s Australian stores and Fred’s Inc. , a discount store chain in America’s Southeast and Midwest. Orders now only trickle in.

“Nobody has money,” Jiang grumbled. “I think the orders may drop in half.”

Over the past few years, China has opened up vast new markets. Today, only half of its exports go to the United States , the European Union and Japan . The rest go to expanding markets in places such as South Africa , Russia , India and oil-rich Middle Eastern states. So in times of crisis, some factories may suffer severely while others escape unscathed.

A stroll Wednesday through the opening day of the Canton Trade Fair, the largest such fair in China and one of the biggest in the world, underscores the acumen of China’s strategy of diversifying markets. Arab merchants in dishdashas walked beside Russian vendors, German middlemen and Sudanese importers. Chatter occurred in a dozen languages. Translators were a hot commodity.

Some vendors reflected on the….

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China: 70% of waterways and 90% of underground water polluted

October 15, 2008

BEIJING (AFP) – Illegal factories pumping arsenic and other chemicals into rivers have left farmers in a heavily populated area of central China with skin problems and failing crops, state press reported on Wednesday.

A farmer tends to his crop at his farm near the town of Jianli ... 
A farmer tends to his crop at his farm near the town of Jianli in central China’s Hubei province. Illegal factories pumping arsenic and other chemicals into rivers have left farmers in Jianli and other areas of central China with skin problems and failing crops, state press reported on Wednesday.(AFP/File)

Thirteen illegal alloy smelting plants in Hubei that defied government efforts to close them down two years ago were finally shut this week, the China Daily reported.

“We removed the plants in 2006, but they came back strong this year,” the China Daily quoted Wen Qingsong, deputy head of the Hubei environmental protection bureau, as saying.

“We will investigate how many farmers were affected, who is responsible and whether there was misconduct by local officials.”

The China Daily reported that farmers in Hubei’s Jianli county, which has a population of 1.5 million people, suffered severe rashes and other skin ailments due to the waste being emitted by the factories.

The factories were illegally discharging arsenic as well as another highly toxic chemical, cadmium, into rivers, with the water then being used on cotton farms and other agricultural land.

“We can only leave the cotton to rot now,” farmer Shi Qiang said, according to the China Daily.

“Once we get in the field, we become itchy all over the body. Our skin even swells up and becomes rotten.”

Arsenic and cadmium can both cause cancer in humans, as well as other deadly conditions.

Pollution incidents such as the one in Hubei have become a disastrously frequent occurrence in China over the past three decades as the nation’s environment has been often sacrificed in the quest for economic growth.

More than 70 percent of China’s waterways and 90 percent of its underground water are polluted, according to previously released government figures.

Tainted China water sickens 450

China: World’s Factory Worries That Exports Will Fall With Demand

October 14, 2008

By JOE McDONALD, AP Business Writer 

BEIJING – As they prepare for China‘s biggest export fair this week, managers at Shunde Xiongfeng Electric Industrial Co. are anxious.

A worker checks timber outside a warehouse in Dalingshan, China's ...
A worker checks timber outside a warehouse in Dalingshan, China’s self-styled No.1 furniture export town, October 13, 2008. The cost of labour and raw materials has risen sharply in China in the past two years, while the currency has strengthened against the dollar and the government has lowered or eliminated many export tax rebates — all rendering exports more expensive. But one thing is certain: the outlook for exporters is worsening because of the global economic crisis, and many are now pinning their hopes on China’s burgeoning domestic markets. Picture taken October 13, 2008.To match feature CHINA-ECONOMY/EXPORTERS REUTERS/Bobby Yip (CHINA)

Sales of electric fans are down this year, and the financial crisis will likely further cut demand from overseas. The 5,000-employee company in the southern city of Shunde, near Hong Kong, sold 6 million electric fans abroad last year.

“We are worried that if our clients are short of capital, they might shut down,” said Shunde’s export manager, who would only give his surname, Zeng. “That’s certainly bad for us.”

China has been known as the world’s factory for everything from toys to T-shirts, and exports have powered its growth in recent years. But exports are taking a hit from the global financial crisis because of lower demand from overseas and tightening credit from state-owned banks.

A slowdown in Chinese exports would ripple through the world economy as China imports fewer raw materials, half-finished goods for assembly and supplies, such as Australian iron ore or factory equipment from the United States, Europe and Japan. Raw materials used for exports made up half of China’s nearly US$1 trillion in imports last year.

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China storms cause $7.5B in damages

February 1, 2008
By CHRISTOPHER BODEEN, Associated Press Writer 

BEIJING – Three weeks of crippling snow storms across China have inflicted $7.5 billion in damages, the government said Friday, as it announced a $700 million relief fund for farmers.

The freakish weather — the country’s worst in five decades — has paralyzed China’s densely populated central and eastern regions just as tens of millions of travelers were seeking to board trains and buses to return home for this month’s Lunar New Year.

The storms have killed at least 60 people, closed roads, disabled the rail system, destroyed crops and exacerbated a coal shortage, forcing power plants to shut down and factories to cut production.

At a news conference….

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Weak Dollar Fuels China’s Buying Spree Of U.S. Firms

January 28, 2008

By Ariana Eunjung Cha
Washington Post Foreign Service
Monday, January 28, 2008; Page A01

SHANGHAI — From his posh office in a coastal city in eastern China, millionaire Zhou Jiaru oversees more than 100 workers at an auto parts refurbishing factory he purchased in a struggling manufacturing town on the other side of the world.

Zhou’s new company is in Spartanburg, S.C.The Chinese entrepreneur bought it from Richard Lovely, a 56-year-old industrial engineer and mechanic who says his….