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Last Updated: Dec 19th, 2007 - 13:17:15 |
The Irish Independent reports Government plans to outsource the work of public servants were dealt a crushing blow yesterday.
An arbitration hearing vetoed Transport Minister Martin Cullen's plans to temporarily hand over 40,000 driving tests to a private company.
The landmark ruling will have a knock-on effect across all government departments, the Irish Independent learned last night.
The ruling puts a major question mark over changes without union agreement.
These could include;
* The outsourcing of 600 mobile speed cameras. This is the key plank in the Government's Road Safety Strategy.
* Outsourcing of community nursing care to private agencies.
* The options for health service, education or local authority managements to hire-in long-term agency staff or to allocate permanent work to private contractors.
* Contracting of water treatment to private engineering firms.
In its ruling, the arbitration board said that under the Sustaining Progress deal driving tests were core civil service work and could not be outsourced to a private company.
The 113 testers are to get an extra €20,000 a year for 40,000 extra tests.
But they would not agree to a private company doing a further 40,000 which they do not have the capability to carry out.
Civil service unions have now managed to press the 'nuclear button' on outsourcing of public services in the row over hiring private driving testers.
They have invoked a pay deal clause which protects their main and basic work from being sub-contracted.
The Irish Independent also reports the EU has warned that a row over controversial American tax breaks could trigger a new transAtlantic trade war. Special sanctions will be imposed on US imports if Washington fails to lift the tax breaks, which the EU believes have given many American competitors an unfair advantage.
The move follows the approval by the World Trade Organisation in Geneva of a complaint taken by all 25 member states of the EU linked to Washington's controversial Foreign Sales Corporation tax.
In the long-running dispute, the EU has claimed that the facility which allows firms like Boeing and Microsoft to offset global transactions against domestic US tax amounts to indirect US subsidies.
European firms were not entitled to similar auditing techniques, the EU argued. The latest threat comes after a WTO panel of experts backed the European claim that changes to the US regime had not gone far enough.
The EU said transitional arrangements created too many loopholes. Washington has strongly rejected the EU case, insisting that it already phased out almost all supports. The dispute led to €4bn sanctions being imposed in 2004.
The Irish Times reports the closure of the Mallow sugar beet factory in Co Cork with the loss of 320 full- and part-time jobs and the end of a 155-year-old industry yesterday signalled the beginning of a scramble for EU compensation.
Greencore, which has owned Irish Sugar since it was privatised in the early 1990s, said the last remaining sugar processing plant in the State would close in May and would not be processing sugar in this or any subsequent year.
"The decision of the EU Council of Ministers on November 24th, 2005, effectively spelled the end of sugar beet-growing and processing in Ireland," said its statement.
However, it said that its board had taken independent legal, economic and financial advice and had determined that the group was entitled to 90 per cent, or €131 million, of the EU restructuring compensation, with the remaining €15 million being reserved for growers and machinery manufacturers.
The Irish Farmers' Association, which represents most of the 3,700 growers, reacted angrily to news of the closure, which will have a significant economic impact on Mallow and the surrounding region - the IFA had been negotiating the possibility of one more year's production up until late last week.
Its president, Pádraig Walshe, who last month said farmers were entitled to €106 million of the €146 million exit compensation, said much of the blame for the demise of the industry rested with Greencore.
The leader of the IFA growers' group, Peadar Jordan, said the Minister for Agriculture must not give Greencore a cent in compensation. He said it would be a travesty to pay EU money to a company that had squandered millions earned off the backs of farmers in bad investments.
However, the Minister for Agriculture and Food, Mary Coughlan, who expressed regret at the closure, said she would be seeking independent advice on the drawing down of compensation.
She said the total EU funding available in terms of compensation was €310 million in single payments, restructuring aid and diversification funds.
"The procedure stipulated in the reform regulations for drawing down these funds will now have to be followed," she said in a statement.
"In this context the company will be required to submit an application for restructuring aid including a restructuring plan to cover the economic, social and environmental aspects of the factory closure," she said. The Minister said she would be taking submissions from all the parties involved and "a fair and transparent" decision would be taken after July.
Siptu, the union representing most of the workers at the plant, said it would be seeking the maximum possible redundancy package and a substantial share of the €146 million compensation package to be provided to the workers whose jobs will be lost as a result of the closure.
Greencore's decision was a catastrophe, said Siptu's national industrial secretary, Gerry McCormack. He accused the Government of pandering to the farming lobby's demand for compensation at the expense of the workers. Siptu would "not stand idly by while Greencore and the beet farmers seek to pick the flesh bare on the corpse of the Irish sugar industry", he said.
He said farmers would continue to be paid subsidies and could grow alternative crops and would also receive compensation, while the sugar plant workers would be left with no jobs, little or no prospects of finding alternative work, and would have to rely on redundancy payments for their future.
The Irish Times also reports the Government needs to significantly increase spending on roads, rail and other infrastructure or a large number of exporting firms could go out of business, the Irish Exporters' Association (IEA) warned yesterday.
The IEA said at least €10 billion needs to be spent on the country's roads over the next five years, in addition to significant investment in the rail network, the ports and airport facilities if the Republic is to retain its position as a business destination.
The organisation said Baldonnel airport should be used for freight, instead of Dublin Airport, which was heavily congested.
"Our infrastructure here in Ireland is one of the worst in Europe and this is harming our exporters," Don Moore, president of the IEA, said at the launch of the group's submission to the Government's consultation on the second National Development Plan (NDP). He went on to criticise the Government's record during the first NDP, which concludes this year, saying its failure to make adequate investment had led to the loss of more than 36,000 manufacturing jobs between 2000 and 2006.
Mr Moore also said "something must be done" to ensure spending on research and development, which has fallen from 0.9 per cent of GDP in 1998 to 0.77 per cent in 2004, increases. He urged the Government to provide incentives to encourage investment in this area.
"We see this proposed NDP 2 (which will run to 2013) as an opportunity to address the problems facing our exporters," said Mr Moore. "We are already a high-cost location and don't want to add to that the fact that we have an appalling infrastructure. We are skating on very thin ice."
The deadline for submissions passed earlier this month, but a spokeswoman for the Department of Finance said it is still accepting documents.
In its submission, the IEA calls on the Government to open up Baldonnel airport to cater for the needs of exporters, which are not being met by Dublin Airport. Mr Moore also criticised the Government's failure to expand the State's port and road capacity, and urged the opening up of the rail system to competition. "The demands being placed on infrastructure mean that the problems are worsening and are not going to get better," he said.
In addition, Mr Moore also spoke of the need to address the country's energy policy. "Energy security is going to be one of the big issues going forward," he said. "We have no storage of gas here and we burn it as it comes through the pipeline. It's unbelievable that this has not been addressed to date."
He said something needs to be done to prevent future shortages should political disputes, such as those seen recently between Russia and the Ukraine, harm supplies. This in turn should help reduce energy costs, which rose 11 per cent last year.
Another issue that must be addressed is the slow rollout of broadband across the country, the IEA said.
The Irish Examiner reports that Goodbody Stockbrokers fears the Irish construction industry growth may have peaked.
It has based its predictions on negative sentiment coming from both the European Commission and the Central Statistics Office (CSO), which have both indicated slowdowns of late.
Goodbody’s chief economist Dermot O’Leary said: “There is no doubt that the Irish construction industry entered the year with a significant amount of momentum...
“However, there have been two tentative signs of a slowdown in growth in the sector as a whole early in the year. Firstly, the European Commission’s gauge of confidence in the sector dropped to its lowest level since June 2003, in February with the confidence index falling to zero.
That was down from 31 as recently as November. Secondly, the CSO released its latest gauge of employment in the sector earlier this week. This witnessed its lowest rate of growth since June 2004, in the first month of the year,” he said.
“It’s most likely the case that the prospect of higher interest rates for the first time in a long time has perturbed some firms within the construction industry.”
The Financial Times reports that Google is planning a big push into the European retail industry with plans to launch a service aimed at giving bricks-and-mortar retailers a base from which to market and sell goods online.
The US-based search engine is planning to develop Google Base, a product still in test, into an online retailing platform. The service is designed to give retailers direct access to Google's billions of users.
Nikesh Arora, head of Google's European arm, said in an interview with the Financial Times that Google wants companies in retail – and possibly other sectors, including real estate – to hand over private internal databases of goods and prices.
Google would index and package the information into a consumer-friendly search engine, giving its users a virtual supermarket across different brands.
"Google Base is going to have a huge impact on retailers," said Mr Arora, adding that the move reflected internal research by the world's biggest internet company which found that many leading retailers did not feel they were competitive enough online.
But it is unclear how companies will respond, given that many of the world's biggest retailers – Wal-Mart, the world's biggest retailer and Home Depot, the US home improvement company, and Tesco, the UK supermarket – have invested millions developing their own online operations. Meanwhile, some retailers have not yet set up their own internet operations.
A big retailer with no online presence said on Wednesday that Google's retail offer would be of interest – providing they could also arrange distribution. Marks and Spencer, the UK clothing and food retailer, and discounter Target and bookseller Borders in the US have contracted out their online operations to Amazon, the online books and CDs seller.
Online retail has been soaring in recent years, with sales up more than 30 per cent last year in the UK alone to £25bn. That represents 10 per cent of total retail sales.
Meanwhile, online sales hit €15bn in Germany last year, and are estimated to reach €62bn there in the next five.
Until now, Google had been vague about its ambitions for Google Base. The company is under pressure to develop new business lines amid fears its online advertising revenues have peaked.
Its European research reveals a high level of dissatisfaction among retail executives about their current online operations.
The FT also reports that Japan, Iran’s biggest oil customer, on Wednesday became the first country to reduce its imports of Iranian oil because of Tehran’s nuclear dispute with the west.
Nippon Oil, Japan’s largest refiner, will cut its purchases of Iranian crude oil by 15 per cent this year, Fumiaki Watari, Nippon’s chairman, said on Wednesday.
“We have started reducing the percentage of Iranian crude and (are) shifting to other grades,” he said in Tokyo. “Risks related to the country are getting higher.”
The move was announced as the permanent five members of the UN Security Council failed to agree a statement expressing “serious concern” about Iran’s nuclear programme.
US officials have been seeking “creative” ways of addressing the concerns of China, Japan and India about possible disruption to their supplies of Iranian oil in an effort to gain their support at the UN. Tehran has linked the nuclear dispute to its oil supplies., and there are growing worries in the oil industry that the dispute could eventually lead to an interruption in supplies or, at least, a review of contracts.
Several European and Asian oil companies, including Royal Dutch Shell, France’s Total and Japan’s Inpex, have contracts in Iran. “Because of this nuclear issue, Iran is starting to be seen as an unreliable supplier,” said Adam Sieminski, analyst at Deutsche Bank, who added that Nippon’s decision amounted to an “ad hoc sanction”.
So far it is unclear whether other customers – such as South Korea, Spain, France and Italy, which each import at least 100,000 barrels a day of Iranian oil – intend to follow Nippon.
Nippon’s decision, which would reduce Japan’s dependence on Iran by 4 per cent, was a company decision and did not represent an official position of the Japanese government, officials said. Japan buys one in every four barrels of Iran’s oil, importing about 580,000 barrels a day.
Iran is Japan’s third biggest supplier after Saudi Arabia and the United Arab Emirates, providing 14 per cent of Japan’s oil.
Nippon said that it would now rely on producers such as Saudi Arabia, Kuwait, the UAE, Russia and its Asian neighbours to make up the shortfall.
Nippon’s decision is unlikely to reduce Iran’s overall exports because other consumers would pick up the cargos, analysts said. Iran is China’s biggest supplier, with the world’s second largest consumer increasing its purchases to 445,000 b/d in January.
US crude oil futures fell $1.10 to $62 a barrel on Wednesday in early trade in New York after US crude inventories increased more than expected, indicating that there was more supply than consumers could use.
The New York Times reports that Governments worldwide have spent billions planning for a potential influenza pandemic: buying medicines, running disaster drills, developing strategies for tighter border controls. But one piece of the plan may be missing: the ability of corporations to continue to provide vital services.
Airlines, for instance, would have to fly health experts around the world and overnight couriers would have to rush medical supplies to the front lines. Banks would need to ensure that computer systems continued to move money internationally and that local customers could get cash. News outlets would have to keep broadcasting so people could get information that might mean the difference between life and death.
"I tell companies to use their imagination to think of all the unintended consequences," said Mark Layton, global leader for enterprise risk services at Deloitte & Touche in New York. "Will suppliers be able to deliver goods? How about services they've outsourced — are they still reliable?"
Experts say that many essential functions would have to continue despite the likelihood of a depleted work force and more limited transportation. Up to 40 percent of employees could be sick at one time.
Indeed, the return of the bird migration season has touched off new worries over how a serious outbreak could interrupt business in many parts of the world simultaneously, perhaps for months on end.
The World Health Organization has confirmed 173 cases of the avian flu virus in humans, most of whom had close contact with diseased birds. Of those, 93 people died, almost all of them in Asia. Vietnam has been particularly hard hit. In January, though, the first human cases were confirmed in Turkey — far from the origin of the virus in central China.
And in recent weeks, officials in several European and African countries have confirmed the virus in wild or domestic flocks of birds. While avian influenza does not now readily infect humans or spread among them, scientists are worried that the virus could soon acquire that ability through normal biological mixing, setting off a human pandemic.
Yet despite this threat, many companies have only rudimentary contingency plans in place. In a survey of more than 100 executives in the United States by Deloitte & Touche, released this January, two-thirds said their companies had not yet prepared adequately for avian flu, and most had no one specifically in charge of such a plan.
"Business is not prepared for even a moderate avian flu epidemic," the report concluded.
In contrast, corporations in Southeast Asia have made more headway, in part because the avian influenza virus has been circulating in birds in Asia for years. Also, Asian companies learned in the 2003 outbreak of Sudden Acute Respiratory Syndrome, or SARS, that even a small infectious outbreak could have devastating consequences, bringing commerce in Hong Kong, Singapore and Beijing to a near standstill.
A recent survey of 80 corporate officials at an avian flu seminar held by the American Chamber of Commerce in Hong Kong found that nearly every company had someone in charge of avian flu policy, and 60 percent had clearly stated plans that could be put in place immediately. These included provisions for employees to work at home to prevent the spread of disease in the office, and for relaying warnings to workers by text messages to mobile phones.
The lack of corporate preparedness elsewhere has "enormous implications," the Deloitte report said.
"A pandemic flu outbreak in any part of the world would potentially cripple supply chains, dramatically reduce available labor pools," the report said. "In a world where the global supply chain and real-time inventories determine most everything we do, down to the food available for purchase in our grocery stores, one begins to understand the importance of advanced planning."
Among the prepared, HSBC, a global bank that started as the Hongkong and Shanghai Bank and remains the dominant bank in Hong Kong, has an especially detailed plan for avian flu, drawing on its experience with SARS. The company has been making preparations for employees to work from home, but is also preparing to divide work among multiple sites, an approach that appeared in only 37 percent of the plans in the American Chamber survey.
The hope is that if the flu races through the staff at one site, another site may be spared. During SARS, the bank activated an emergency center at the opposite end of Hong Kong's harbor and sent 50 bond traders there with instructions that they were not to see anyone from the head office even at social occasions.
In the survey of companies conducted by the American Chamber of Commerce in Hong Kong, provisions of corporate contingency plans ranged from allowing some employees to work from home — the most popular strategy, included in 72 percent of avian flu contingency plans — to the outright closing of offices, included in 32.5 percent of plans.
Other methods to prevent spread include canceling face-to-face meetings in favor of teleconferencing, and installing germ-killing hand washes in offices. Many companies also proposed more stringent health monitoring of employees, families and company visitors. In Singapore, throughout the SARS outbreak, many businesses required temperature checks before entering buildings, as a way to screen out those who might be ill.
Some of the most important planning involves not employee health, but how to continue to deliver vital services in a crisis. Time Warner's Cable News Network is making preparations to stay on the air from different locations.
"If there should be something that quarantines the production center here in Hong Kong, we could hand off to London and Atlanta," Stephen Marcopoto, president of Turner International Asia Pacific, a Time Warner unit in Hong Kong, said.
Time Warner is also working to create a mechanized cart that could automatically load tape after tape into a satellite transmission system, so it could keep stations like Cartoon Network on the air — a boon if children were homebound for months.
But many corporate plans are painted in fairly broad brush strokes, part of general disaster planning. And many companies refuse to discuss details.
"As other global players, we have a global business continuity program in place that covers a wide range of contingencies, including flu pandemic," said Klaus Thoma, a spokesman for Deutsche Bank in Frankfurt, who said that details were privileged company information.
Likewise, FedEx, the express delivery service, has been "monitoring the situation for some time," said Sandra Munoz, a spokeswoman for the company in New York, noting that FedEx had "the flexibility within our system to make the necessary adjustments to minimize any impact to our customers, regardless of the situation." Without going into details, FedEx said that it had developed contingency plans "down to every district or market here in Asia Pacific," said John Allison, a company representative in Hong Kong.
But Mr. Layton says he is worried that many companies are not thinking about the problems that pandemic flu raises. "They are adapting existing risk-management strategies, which are fine, but they really have to go beyond that," he said.
But even in hot spots in Asia, not all companies are readying themselves for an outbreak. In Guangdong Province in south China, which was the epicenter of SARS and where avian flu is already widespread, a recent survey by the American Chamber of Commerce found that 54 percent of members had made no preparations.
"We're trying to push them to develop plans," said Harley Seyedin, the Guangdong chamber's president.
The NYT also reports that after postponing the release of its next-generation PlayStation video game console until November, Sony tried to put a good face on the move Wednesday by portraying it as a marketing decision. But analysts called it a potentially costly step that reflected delays in critical components and difficulties in containing prices.
The delay of the new console, PlayStation 3, analysts said, was a setback for the turnaround efforts of Sony's chief executive, Sir Howard Stringer, at a time when the company badly needed a new hit product. Sony, once a high-flying electronics maker and still perhaps the biggest name in the industry, has fallen on hard times as cheap competition from China has eroded earnings of bread-and-butter consumer electronics products like televisions. [In early trading in Tokyo Thursday, Sony shares were down 80 yen, at 5,380 yen ($45.86).]
"Sony cannot afford a big delay for this product," said John Yang, an electronics analyst in Tokyo for Standard & Poor's. "Making PS3 a success is critical for the company over all," he added, referring to PlayStation 3.
Ken Kutaragi, president of Sony's game division, apologized repeatedly during a hastily called meeting of game software developers, analysts and reporters for failing to have the console ready in Japan this spring, as originally promised. He said the delay was mostly a result of a strategic decision to give developers time to write game software, while still making a splash in Europe and North America before the Christmas shopping rush.
"Instead of rushing, we want to have a solid launch," Mr. Kutaragi said. "We wanted to have time to make the big sales season."
Mr. Kutaragi said Sony would be ready to produce a million consoles a month by November, and plans to make six million machines by March 2007.
But the delay could be costly for Sony. It means PlayStation 3 will not reach the market until nearly a full year after Microsoft's release of its competing machine, the Xbox 360. Moreover, some analysts question whether Sony will be able to keep up with demand and avoid the same troubles as Microsoft, which initially could not provide enough Xbox machines to retailers late last year. If not enough machines make it onto the shelves, game software makers could also get hurt.
Sony has been counting on PlayStation 3 to serve as a showcase for two new technologies upon which the company is betting its future: the Blu-ray high-definition DVD format and the powerful Cell processing chip, co-developed with I.B.M. and Toshiba.
In particular, Sony had hoped the new PlayStation would give a lift to the Blu-ray format, which is locked in a separate battle with a competing technology from Toshiba to become the global standard for next-generation DVD's. Sony has hoped that installing Blu-ray drives into PlayStation 3 consoles will help popularize the format, potentially giving it the upper hand in a fight over billions of dollars in sales and royalty payments.
Sony is also counting on these new technologies to make PlayStation 3 a success. With Blu-ray offering five times as much memory capacity as current DVD's, and Cell capable of processing speeds dozens of times faster than its predecessor, PlayStation 3 promises a leap in graphics and realism that Sony hopes will dazzle consumers into opening their wallets.
But Mr. Kutaragi said PlayStation 3's introduction was being pushed back because of delays in developing copyright protection technology for Blu-ray. (Compared with HD-DVD, the rival standard championed by Toshiba, the Blu-ray format includes an additional layer of copy protection.) But he said that this and other technical problems would be resolved by June, and that Sony could have introduced PlayStation 3 earlier had it chosen to do so.
"We were discussing selling it in September, and some even said put it out in July," Mr. Kutaragi said.
But some analysts were immediately skeptical of this explanation, saying Sony needed to get the console out as soon as possible to combat Microsoft's head start, and the expected release this year of Nintendo's next game console, Revolution.
They said Sony might be trying to buy time to bring down the production cost of crucial components, particularly untested devices like Blu-ray and Cell. While Mr. Kutaragi did not reveal a price on Wednesday, analysts said Sony would probably try to sell PlayStation 3 for about $500. While that is far higher than the $299 introductory price of its predecessor, PlayStation 2 — and $100 more than the Xbox 360 — analysts said that would probably be far below the new console's actual building cost.
Mr. Kutaragi only compounded such fears on Wednesday by announcing that PlayStation 3 would also include a 60-gigabyte hard drive, Linux operating software and the ability to handle high-speed Internet connections. These additional features will allow the game console to double as a home server, but that could further drive up production costs.
"Sony faces the prospect of swallowing several hundred dollars in losses per machine until production volumes get high enough to drive down costs," Mr. Yang of Standard & Poor's said. "It may take years to bring those costs down."
One point upon which Mr. Kutaragi and analysts seemed in agreement was the need to ensure a kink-free introduction for PlayStation 3. Loading the consoles with so many new technologies increases the chances of a potentially costly and embarrassing recall if something goes wrong, analysts said.
Sony needs a successful introduction to help the new console replicate the smashing success of PlayStation 2, which sold more than 100 million units over six years. Game consoles and related software have been Sony's most profitable products, contributing up to two-thirds of operating income in recent years.
Analysts also said Sony was unlikely to have delayed PlayStation 3 unless it absolutely had to, because of the console's prominent role in the DVD format war.
Blu-ray backers have continually emphasized how PlayStation 3 consoles are going to aid their cause by doubling as low-priced Blu-ray players. Toshiba has already announced that it will sell players this year using its HD-DVD standard at around $500. With most Blu-ray players expected to cost $1,000 or more, PlayStation had appeared the only hope for matching Toshiba's price.
Sony has already had a bad couple of weeks in its quest to ensconce Blu-ray as the next standard. In a sign of growing frustration with delays in the Blu-ray format, LG Electronics of South Korea said it might make machines capable of handling both formats instead of the Blu-ray-only players it originally planned.
Some analysts and people in the industry also said that the delay might reflect problems with the Blu-ray format that run beyond the copyright protection delays. Some companies have complained of difficulty finding crucial parts like the blue diode lasers used to read the discs.
Warren Lieberfarb, who helped create the first DVD format in the early 1990's while at Warner Brothers Home Entertainment, and who is now an adviser to Toshiba, said problems with Blu-ray's copy protection are "the tip of the iceberg."
"This is further evidence to anyone who has been through format wars that there is a repetition of premature and fictitious product announcements also known as vaporware," he said.
