The Irish Independent reports that the State-owned Great Southern Hotels Group is to be sold.
Dublin Airport Authority has been given the green light for the sale of the ailing hotel group.
The authority has spent several months lobbying the Government to be allowed sell it but has faced stiff resistance from trade unions.
A spokesman for Transport Minister Martin Cullen said he informed his Cabinet colleagues of the decision at yesterday's meeting.
Great Southern Hotels (GSH) made a loss of approximately €3m in 2004, but it is understood this rose to €6m last year. Just before Christmas, the DAA, which was formerly known as Aer Rianta, gave the GSH board until the end of this month to come up with a viable survival plan.
In a statement last night the company said: "A decision has been taken by the board of Great Southern Hotels to engage advisers to assist with the disposal of its hotel assets. It is intended the hotels will be sold as going concerns.
"Early meetings will be arranged with staff and trade union representatives to engage with them on the difficulties faced by GSH.
"The board of the Dublin Airport Authority (DAA) fully supports and endorses this decision and has kept the Government, as shareholder, fully informed."
Although Mr Cullen's spokesman said that the minister had not formally approved the sale, it is unlikely that the airport authority would have proceeded with yesterday's announcement without at least the tacit approval of the Government.
One of the trade unions' strongest supporters has traditionally been Taoiseach Bertie Ahern, who holidays regularly in the Parknasilla property in Kerry.
The hotel group suffers from a number of disadvantages relative to its peers, the greatest of which is its cost of labour. While most hotel groups rely on non-Irish labour to keep down costs, many of the staff within the group enjoy relatively high wages. Some 46pc of Great Southern's turnover is taken up by staff costs, compared to an industry norm of 34pc.
The other disadvantage for the group of nine hotels is that although it has a number of prestigious properties, including the Killarney Great Southern, these are expensive to maintain.
Although all options will be open to the consultants appointed to advise on the sale, it is more likely the group will be broken up and sold to individual buyers.
The Irish Independent also reports that Ireland has made little response to recommendations from the OECD think-tank designed to make the economy more productive, a new report from the Paris-based organisation shows.
The report compares the extent to which its 30 member countries have implemented proposals for reform published a year ago. It says governments have been more effective at improving labour productivity than increasing the number of people at work.
Competition
Ireland has moved on suggestions that it strengthen competition in services, setting up the National Consumer Agency and abolishing the Groceries Order, which bans some below-cost selling.
But the Government has still to move on most of the recommendations of the Consumer Strategy Group, including an end to price controls in energy and telecoms and more enforcement powers for the Competition Authority.
The report notes that the continuation of mortgage tax relief and the latest change in stamp duties may be adding to house prices.
Exempting first-time buyers from stamp duty may lead to some sellers raising the price of their houses to the threshold, so that first-time buyers can take advantage of the exemption," the report says.
'Ireland ranks well behind the OECD average in terms of private research and development
"It introduces OECD benchmark indicators in the area of innovation, which the organisation considers one of the main engines of long-term economic growth. It says Ireland ranks well behind the OECD average in terms of private research and development, despite a significant contribution from foreign firms.
Its most controversial recommendation is the introduction of student fees and a student loan scheme, to help pay for adequate research in colleges.
"Industry-science linkages should be strengthened by concentrating on the development of a small number of centres based around major universities," it says.
In general, the OECD report says there has been little progress in increasing the number of people at work in member states.
"Reforms to remove tax incentives for retiring early have been limited.
"Legislators have shown little enthusiasm for easing employment protection in those countries where it is seen to hamper job creation."
However, the report notes greater progress in reforming sickness and disability benefits in Austria, Britain, Denmark, Hungary, Netherlands, Norway, Sweden and Switzerland.
The Irish Times reports that advisers to Babcock & Brown Capital are believed to have met advisers to the Eircom employee share ownership plan (Esop) as the Australian investment group mulls a bid for the telecoms company.
Market sources said yesterday that Babcock & Brown had been active in preparing a takeover proposal and was ready to move with a full bid.
As yet, there have been no formal meetings between Babcock & Brown and the Esop, whose support would be critical to the success of any takeover proposal. But the parties are thought to have engaged through their advisers on a preliminary basis.
It is believed that full funding is in place for a takeover, although it is still possible that the investment firm could look to join forces with another party.
Some believe a domestic or industry partner could make an approach from Babcock & Brown more palatable to the trust that holds 21 per cent of Eircom for current and former staff.
Without this, the investment firm's lack of industry expertise could be seen as a problem for the Esop, one source suggested.
The latest indications suggest a bid is not due imminently, since any buyer would almost certainly try to win the trust's approval before proceeding with a takeover move.
Babcock & Brown is said to want to split Eircom into two parts, separating the firm's network operations from the rest of the business, including the recently-acquired Meteor mobile business.
Shares in Eircom added a further two cent, or nearly 1 per cent, to €2.05 yesterday, although trading in the stock was more muted than in recent days.
In Dublin, just under four million shares traded while in London, close to nine million shares changed hands as the stock gained 1.5 per cent. Babcock & Brown currently owns 12.5 per cent of Eircom, but has refused to comment on reports that it is planning to launch a bid at €2.35 per share for the company.
It has also declined to say whether or not it has been adding to its stake in Eircom in recent days. However, given the size of its existing shareholding in Eircom, the Australian firm is obliged to notify the Irish Stock Exchange of any change to its stake in the coming days.
Eircom has been the subject of persistent takeover speculation since an abortive move on the company last year by Swisscom.
Despite its high debt levels, the potential in its mobile business, allied to the strong economic factors underpinning its fixed-line business are seen as attractive to would-be purchasers.
The Irish Times also reports that health insurance company Bupa has told the High Court it faces liabilities of €161 million over three years and will be forced out of the Irish medical insurance market if the Minister for Health Mary Harney goes ahead with the introduction of the risk equalisation scheme.
Opening Bupa's challenge to the legality of the scheme, Paul Sreenan SC said risk equalisation would involve Bupa paying a subsidy to its main rival VHI to compensate for the VHI having a greater number of high-risk, older and more expensive subscribers.
This would expose Bupa to losses of €11 million this year and, over three years, would involve liabilities of €161 million compared to an expected revenue of €64 million.
"Looking at the figures one can see there is no realistic prospect of Bupa remaining in the Irish market nor would they do so. These liabilities would force Bupa out of the Irish market," he said.
Mr Sreenan said the VHI's gross premiums in the 12 months to the end of June 2005 were €890 million, while their gross underwriting surplus for that period was €25 million. If risk equalisation was introduced, Bupa would have to transfer €31 million, bringing VHI's profits up to €56 million.
Bupa, with 417,000 members, earned premiums of €163 million and its gross underwriting surplus was €22 million. If risk equalisation was introduced Bupa would have to transfer €33 million, causing a loss of €11 million, counsel outlined.
In an action expected to last six weeks, Bupa Ireland Ltd and Bupa Insurance Ltd are challenging the legality of the risk-equalisation scheme under Irish and European law.
Bupa claims the imposition of the risk-equalisation charges is an interference with the right to private property under Article 43 of the Constitution and is a barrier to carrying on its business.
Bupa also claims the imposition of the scheme is contrary to Articles 43 and 49 of the EC Treaty because it limits the company's right of establishment and the freedom to provide services.
In opposing the case, the State claims the risk-equalisation scheme is constitutional and in accordance with European law. Ms Harney announced on December 23rd last that the scheme would commence on January 1st.
Yesterday, Mr Sreenan said that, under the 1994 Health Insurance Act, the Minister was given the power to introduce the risk-equalisation scheme. Despite recommendations from the Health Insurance Authority, she had refused to do so until December 23rd last year.
He said the Minister was also responsible for the VHI, which is Bupa's main competitor in the private medical insurance market and which is the dominant player in that market.
It was Bupa's case that the scheme was unconstitutional and a breach of EU law because it breached fundamental directives on competition.
The risk-equalisation scheme created machinery that would allow the Minister to take the entirety of Bupa's profits and give it to its main competitor to ensure its own position and its ability to compete with any new entrant in the market, counsel argued.
Counsel said the State was the guardian of fundamental freedoms under European treaty law which Bupa was seeking to exercise, and the State was breaching Bupa's rights.
There was nothing unique or special about the market for private medical insurance and the State would have to have something exceptional and compelling for the Minister to distort competition within the market, he argued.
Bupa employs 300 people at Fermoy in Co Cork and its customers would be seen as highly price-sensitive. Bupa's case was about important legal concepts, such as property rights, competition, the freedom to establish and the freedom to provide services and the power of a Minister to take away profits.
It was not in dispute that VHI was the dominant player, he said.
The case is continuing before Mr Justice Liam McKechnie.
The Irish Examiner reports that the world’s leading provider of business software solutions has selected Belfast as the location for its first research centre in Ireland or Britain, it was announced yesterday.
German headquartered international company SAP AG is setting up a centre for research in the emerging field of grid computing.
Invest Northern Ireland is providing 50% of the £1.8 million (€2.62m) project cost under a programme which aims to increase industrial research in the North.
Seven research jobs at PhD level will initially be created in the research centre.
Grid computing is the linking of computers, data and application software to provide computing power that far exceeds what is available on a single PC.
Jeremy Fitch, managing director of Business International at Invest NI, said the new project was highly innovative and the knowledge developed in Belfast would put the North in a very strong position to attract similar foreign ICT investments.
The Financial Times reports that Pfizer is considering selling or spinning off its large over-the-counter medicines and health products group in its latest move to adjust to a changing pharmaceuticals market and counter investor disappointment in the world's largest drugmaker.
Pfizer's announcement of the plan came ahead of Friday's meeting with investors to detail its financial outlook this year and strategy to reignite profit and sales growth hit hard by generics. Investors have anxiously awaited the meeting since Pfizer unexpectedly withdrew its profit forecasts in October, prompting concerns over its future and denting management's credibility.
A sale or spin-off of Pfizer's consumer business, including well-known brands such as Listerine mouthwash, Sudafed cold medicine and Bengay pain ointment, follows similar steps by some rivals who have fetched lofty sale prices.
It also could raise questions for other big drugmakers who have held on to consumer over-the-counter businesses. They face a choice of participating as a consolidator in these slower-growing businesses or selling their units too.
Recent deals included Reckitt Beckinser's purchase in October of the UK's Boots OTC business for £1.93bn ($3.38bn), nearly four times annual sales of £500m.
In July, Novartis, the Swiss drumaker, bought Bristol-Myers Squibb's OTC unit for about $660m, or about twice annual sales. Johnson & Johnson has also added to its consumer portfolio.
But Pfizer's move will place a much bigger portfolio of medicines on the auction block. It cautioned, however, that it could still decided to keep its consumer business.
Its OTC business has annual sales in the range of $4bn, meaning a deal could be worth as much as $10bn based on prices paid for similar assets in the sector.
Pfizer's OTC sales grew 11 per cent last year to $3.9bn, from $3.5bn in 2004. Its pre-tax income in 2004 was $667m.
"The objective of the review is to unlock the value of the business for Pfizer shareholders at a time when market valuations are attractive for large, high-qality consumer businesses," the company said in a statement
"Given the shear shize of Pfizer's operations, a buisness like this gets hidden," said one person familiar with the matter.
It is also the latest in a string of moves by Pfizer to reassure investors that it can reclaim high growth rates, in spite of an increasingly challenging landscape. Pfizer increased its dividend this year by 26 per cent. It also won key patent victories for its biggest drug Lipitor, and made moves to get the most out of newly approved inhaled diabetes drug Exubera.
Its new drug pipeline is also beginning to reap promise.
The group is entering a period of transition in the next few years when profits will fall or remain weak due to patent expirations on some of its biggest drugs.
Last year it posted a 7 per cent fall in profits and 2 per cent decline in sales.
The move follows similar steps by some of Pfizer's rivals, including Bristol Myers Squibb, which last year agreed to sell its over-the-counter medicines to Novartis of Switzerland in a $660m deal.
But Pfizer's move will place a much bigger portfolio of medicines on the auction block. Its OTC business has annual sales in the range of $4bn, meaning a deal could be worth as much as $10bn based on prices paid for similar assets in the sector.
The FT also reports that Peter Mandelson, European Union trade commissioner, on Tuesday attacked the “populist” politicians he claims are holding back the continent’s economy, as Brussels steps up its campaign against protectionism.
Mr Mandelson warned of a “swing against openness and a drift towards populism”, reflected in attempts to defend national industries, the closure of borders to migrant workers and the debate over the opening of the EU’s services market.
His comments come at a tense time for Europe’s economic reformers.
Although Tony Blair, Britain’s prime minister, said on Tuesday that supporters of an “open” Europe were winning the debate, Mr Mandelson’s remarks suggest he is less sure than the premier.
The European Commission is fighting on several fronts, including tackling France in its attempt to defend 11 sectors from foreign takeovers and Poland in its fight to protect its banking sector from the consequences of Italian bank UniCredit’s takeover of Germany’s HVB.
The outcry in France and Luxembourg over Mittal Steel’s hostile takeover approach for Arcelor, the European steelmaker, has also been watched with concern by liberals in Brussels.
Mr Mandelson said the Commission would resist “the emotion of economic nationalism”.
This week is expected to provide a clear signal of the extent to which the economic debate in Europe is shifting towards what José Manuel Barroso, European Commission president, calls the “paradigm of openness”.
Mr Barroso’s Commission will on Wednesday urge western European countries to open their borders fully to workers from the new EU members of eastern Europe.
A Commission report will seek to dismantle the arguments used by 12 “old” members for the use of temporary restrictions – lasting up to seven years – on the free movement of workers from the east.
It will argue that Britain, Ireland and Sweden – the only countries to open their labour markets entirely to eastern European migrants – have benefited, while countries applying restrictions have seen workers from the east disappear into the underground economy.
Austria and Germany are among the countries likely to extend them the restrictions when they come up for renewal in May.
Mr Mandelson, speaking in Prague on Tuesday, criticised France for its “obsession” with eastern workers.
He told political leaders: “Put away your fears. Celebrate the opportunities that all fellow Europeans now have as a result of enlargement.”
Thierry Breton, French finance minister, on Tuesday re-asserted the French government’s right to express forceful views on the Mittal bid for Arcelor and sharply criticised the work of the bidding company’s investment bankers, writes Chrystia Freeland in New York.
“All the stakeholders need to speak, not to vote, but to speak,” Mr Breton, a former businessman, told journalists in New York.
“We need to listen to them and not only to the position of financial advisers.”
The New York Times reports that General Motors, under pressure to show its blue-collar workers that investors and executives are also prepared to give up something in order to help overcome the company's deepest losses in more than a decade, said Tuesday that it would reduce pay for top officials and cut its stock dividend by half.
G.M., still clinging to its status as the world's largest auto company, also announced changes in the pension and health care plans for its retired salaried workers as it struggles to turn around its operations and avoid a potential bankruptcy.
The executive pay reductions — including 50 percent for G.M.'s chief executive — affect only a small number of people and save relatively little compared with the dividend cut and the reductions in health care contributions.
But even as executives played down their significance, the moves are important symbolically to go along with the givebacks G.M. has already won from its union workers and to set the stage for more concessions it intends to seek from the United Automobile Workers in contract negotiations next year.
Leaders of the U.A.W. said that union workers had already given enough and that they would not discuss any more concessions ahead of the contract talks.
The moves are eventually expected to reduce the company's annual structural costs by more than $900 million, with the dividend cut helping preserve $565 million in precious cash each year. Over all, the company is aiming to cut about $7 billion from its annual structural costs.
But two big steps that have been widely anticipated by G.M. were not part of the company's announcement.
G.M. did not disclose any developments in the long-awaited sale of a portion of its G.M.A.C. finance unit. Nor did it disclose an agreement concerning the U.A.W. and the Delphi Corporation, G.M.'s former parts unit, which is operating under bankruptcy protection.
As a result, many analysts said the troubles at G.M., which lost $8.6 billion in 2005, were far from over.
"We believe that there is more to come," John Murphy, an industry analyst with Merrill Lynch, wrote in a research note. "Ultimately, we believe that an active downsizing of the company to a defensible market share will be necessary."
On Tuesday, G.M. shares fell 53 cents, to $22.81. Before Tuesday, G.M. last cut its dividend in 1992, amid a deep financial crisis that resulted in the ouster of its top management team.
Along with its losses, G.M.'s market share in the United States fell to just over 26 percent last year, its lowest since 1925. In November, G.M. said it would close all or part of 12 plants and eliminate 30,000 jobs through 2008.
Yet, its biggest shareholder, Kirk Kerkorian, wants the company to do more — and G.M. is at least partly listening. Its latest moves were announced a day after the company gave a seat on its board to Jerome B. York, an adviser to Mr. Kerkorian.
Mr. York, in a speech in Detroit on Jan. 10, called for many of the steps that G.M. took, saying the company needed to move more swiftly on the turnaround effort that began late last year.
But the company also rejected several of Mr. York's recommendations, like broader cuts in executive pay and paring back its car and truck divisions.
Moreover, G.M.'s chief executive, Rick Wagoner, declined at a news conference Tuesday to predict when G.M. would return to profitability, resisting Mr. York's call for the company to set clear financial goals.
"We will let you know when we think we are ready to do that," Mr. Wagoner said, citing more "big issues" that G.M. needs to address.
As recently as Jan. 6, Mr. Wagoner did not seem ready to take even the actions G.M. announced today. At that time, he said that shareholders had suffered enough, given the 52 percent decline in the value of G.M. shares last year.
As part of the turnaround effort, Mr. Wagoner, who received $2.2 million in 2005, will take a 50 percent pay cut, to $1.1 million. a
A vice chairman, Robert A. Lutz, who earns $1.55 million a year, will take a 30 percent cut, as will John Devine, another vice chairman, and the chief financial officer, Frederick Henderson.
G.M.'s chief counsel, Thomas Gottshalk, will take a 10 percent cut. Cash compensation for G.M. directors, now $60,000, will fall by half. The directors also receive $140,000 in shares each year.
Mr. York wanted G.M. to do more, calling for a sliding scale of cuts affecting executives, managers and salaried employees. Such steps have taken place at bankrupt airlines like Delta and Northwest.
At Delta, for example, Gerald Grinstein's annual salary was set at $500,000, substantially below market levels, when he took over as chief executive in 2004 and he forfeited half his salary that year.
In 2005, Mr. Grinstein's salary was cut by 10 percent to $450,000 in line with the across-the-board reduction applied to all nonpilot employees.
At Ford Motor, the chief executive, William Clay Ford Jr., whose family-controlled company lost $1.1 billion in North America last year, said last year that he would not accept compensation until Ford was back on its feet.
In 1978, Lee A. Iacocca, then chief executive of the beleaguered Chrysler Corporation, reduced his pay to $1 a year, after union members took a $2 hourly pay cut. Both moves came in the wake of a federal bailout effort.
Union members have also contributed to the G.M. recovery effort, voting last year to accept a plan that would require them to pay for part of their health care coverage, which had been virtually free.
On Tuesday, G.M. said it was capping health care coverage for 100,000 retired salaried workers, and 26,000 active employees who joined the company before 1993. G.M. no longer offers health care coverage for its salaried retirees.
Retirees are also going to be called on to pay higher monthly contributions, deductibles, and prescription drug payments. G.M. said it also could make changes in retirees' medical, dental, vision and prescription drug plans. Eventually, G.M. said the move would save it $900 million a year, although its savings will begin only in 2007.
Including U.A.W. members, the G.M. health care plan covers 1.1 million retired workers, spouses and family members.
G.M. estimates that it spent $5.4 billion on its health care plan last year, or the equivalent of $5,090 a person. But a G.M. spokesman, Jerry Dubrowski, said the automaker could not estimate how much more its retired salaried workers would pay.
The company said it planned to freeze its retiree pension program, and introduce a defined-benefit plan or cash balance plan, as well as make other changes in its retirement program for future retirees. Current retirees and surviving spouses will not be affected, G.M. said. Details will not be made available until next month.
On Tuesday, the U.A.W.'s president, Ron Gettelfinger, said G.M. was doing "the right thing." Like Mr. York, Mr. Gettelfinger has called for shared sacrifices across the company.
But asked at a union conference in Washington whether his workers might contribute more, Mr. Gettelfinger said: "Absolutely not. We've done our share. We're ready to move forward."
For his part, Mr. Wagoner tried to play down suggestions that the company's moves were meant as a message to the U.A.W.
"This is the kind of thing we need to do," he said. "I don't have a big scoreboard in my office" depicting which groups had taken cuts, Mr. Wagoner said. "I think you can say the whole family is participating in the effort to turn G.M. around."
Mr. Wagoner said the auto company was approaching its problems "as systematically and aggressively as we can."
He said it was on track to reduce its structural costs by about $7 billion a year, including Tuesday's moves, or about one-sixth of its annual expenses. Yet, G.M. has estimated that it may have to pay as much as $12 billion to cover its liability from the bankruptcy of Delphi, a part of G.M. until 1999.
About 4,000 Delphi workers have the right to come back to G.M. if jobs are available for them, making G.M. responsible for the cost of their benefits. On Tuesday, the U.A.W. vice president, Richard Shoemaker, said the three parties — G.M., the U.A.W. and Delphi — were not making progress in their discussions.
Until the Delphi situation is resolved, analysts said, G.M. would have trouble completing its sale of a stake in G.M.A.C., the credit unit, a deal that would generate much-needed cash. While Tuesday's cuts will help the automaker save money, "these important wild cards have gotten lost in the shuffle," Mr. Murphy said.
The NYT also reports that to European leaders worried that Europeans are not as entrepreneurial as Americans, Margaret C. Whitman, the chief executive of the online trading site eBay, has this to say: You have not been watching people doing business on eBay.
On an average day in France, according to eBay, a comic book is put up for sale on its site every minute. In Germany, someone buys a bulldozer every three hours, while in Britain, a teddy bear changes hands every two minutes on the Web site, which is part auction room, part bazaar.
"Markets evolve at different rates but there's no difference in people wanting to better their lives," Ms. Whitman said in an interview on a visit to Brussels to meet European Union policy makers. "I see more similarities than differences" between European and American entrepreneurs, she added.
About 170,000 people in the 12 European countries where eBay operates make a living selling on the Web site and 50 million Europeans use it to buy or browse, according to research commissioned by the company. Trading activity in Europe generated sales worth $947 million in 2004.
In comparison, 724,000 Americans make a living selling on eBay and buyers and browsers in the United States total roughly 90 million, eBay said. EBay's home market generated 55 percent of the $4.55 billion in global sales last year.
"Europe is one of our fastest-growing markets," Ms. Whitman said. Italy, where someone sells a car or motorbike every 10 minutes on an average day on the Web site, was eBay's fastest-growing market at the end of last year, she added.
These signs of entrepreneurial life will be reassuring to the lawmakers Ms. Whitman plans to see. The European Union has been agonizing over how to become more entrepreneurial. Since 2000, Europe has slipped further behind the United States, using measures like the number of patents issued and the number of new small businesses. Last month, the European Commission, the European Union's executive body, warned that it would take Europe 50 years to catch up with America.
Ms. Whitman's advice is to create a single tax system for all 25 countries in the union. "Harmonization can only help," she said, adding that the small and medium-size businesses that trade on eBay are among the most affected by the complexity of trading across borders.
But efforts to harmonize tax rates have been thwarted until now as any country can veto a unionwide initiative concerning taxes.
