Archive for May, 2010

Asian shares lower after US holiday (AP)

Monday, May 31st, 2010 | Finance News

TOKYO – Asian stocks fell Tuesday in the absence of fresh cues following a market holiday in the U.S.

Japan's Nikkei 225 stock average fell 82.22 points, or 0.8 percent, to 9,686.48 and Australia's S&P/ASX 200 dropped 0.7 percent to 4,401.10.

In Seoul, the Kospi lost 0.6 percent to 1,630.41 and Taiwan's benchmark fell 0.9 percent to 7,307.16. Hong Kong's Hang Seng bucked the trend, rising 0.1 percent to 19,787.89. U.S. financial markets were closed Monday for Memorial Day.

Japanese exporters mainly fell as the yen strengthened.

Political uncertainty also dampened market sentiment in Tokyo, where Prime Minister Yukio Hatoyama faced mounting calls for his resignation after a small party left his coalition government in protest at the reversal of a campaign promise to move a U.S. military base off the southern island of Okinawa.

In currencies, the dollar fell to 91.05 yen from 91.21 yen late Monday. The euro slipped to $1.2266 from $1.2304.

Benchmark crude for July delivery was up 32 cents at $74.29 in electronic trading on the New York Mercantile Exchange.

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China’s shift away from cheap labor hard on all (AP)

Monday, May 31st, 2010 | Finance News

SHANGHAI – Global manufacturers struggling with life-or-death pressures to control costs are finding that the legions of low-wage Chinese workers they rely on have limits.

A strike at Honda Motor Co. and the official response to a spate of suicides at Foxconn Technology, a maker of electronics for industry giants such as Apple, Dell and Hewlett-Packard, suggests China's leaders are at least tacitly allowing workers to talk back.

Over the weekend, the top communist party leader in Guangdong province visited Foxconn's sprawling factory where 10 workers have committed suicide and urged the company to adopt a "better, more humane working environment" for its mostly young workers, state media reported.

"The 80s and 90s generation workers need more care and respect and need to be motivated to work with enthusiasm," said Guangdong party chief Wang Yang, who has backed efforts to shift Guangdong up the industrial ladder away from reliance on exports of low tech, cheap products.

That transition is taking hold across China. Manufacturers, under pressure to deliver low prices in home markets, are struggling to attract and keep young workers who, brought up in an era of relative affluence, are proving less willing than earlier generations to "eat bitterness" by putting up with miserable working environments and poor wages. The strike at Honda also reflects broader trends of growing dissatisfaction among China's long-suffering workers with lagging wages and generally harsh working conditions.

Employers in Shanghai complain of difficulties in finding and keeping young workers, both skilled and unskilled. Contractors were obliged to pay heavy bonuses to keep workers on the job during the lunar new year as they rushed to finish construction for the Shanghai World Expo, which runs for six months until Oct. 31.

"Our economy can no longer rely on squeezing labor benefits, because workers are unwilling to accept it anymore. I have to say the squeeze is very cruel now," said Chang Kai, a labor expert at Beijing's Renmin University.

Honda said late Monday that production at its auto factories in southern China would not resume until at least Thursday because of a strike at a crucial parts plant.

Honda's 21st century just-in-time manufacturing chain — a standard cost-saving strategy — left it vulnerable to supply disruptions as a shortage of transmissions and engine parts forced production halts at its four assembly plants.

"Most of the employees on strike at the plant have agreed to new wages, and some production started there from today," said Honda spokeswoman Yasuko Matsuura in Tokyo.

She said "almost all" of the striking workers have agreed to increasing the total starting wage by about 24 percent to 1,910 yuan ($280) per month.

Local reports said workers scuffled with police guarding the factory on Monday.

China outlaws unauthorized labor organizing, limiting such activities to the government-affiliated All China Federation of Trade Unions and to company branches of the ruling Communist Party.

But in recent years authorities increasingly appear to be tolerating sporadic, peaceful protests by aggrieved workers. In the Yangtze River Delta region, near Shanghai, sit-ins and other protests are common, though rarely reported in the state controlled media.

In the year after China's Labor Contract Law took effect in early 2008 the number of disputes doubled, according to a study by the International Labor Rights Forum. The law set standards for labor contracts, use of temporary workers, layoffs and other conditions and has raised workers awareness of their legal rights.

That study, released earlier this month, found that companies that had not been in compliance with earlier labor standards faced a 33 percent average increase in wages after the law's implementation. But a large share of workers — more than half in some areas — still did not have valid labor contracts.

"Wages have been rising in recent years, but compared with soaring prices they remain very low," said Li Qiang, founder of New York-based China Labor Watch.

"The government recognizes that problem, so even if strikes are still illegal some are tacitly condoned, though the strikes and protests have to stay within certain limits," he said.

Working conditions vary widely across China — from modern factories in full compliance with Western standards to slave labor brick kilns. Yet another of those was reported after 34 migrant workers were freed by a police raid in northern Hebei province, the state-run newspaper China Daily said Monday.

Foxconn says it is installing safety nets on buildings and hiring more counselors at its 300,000-worker factory in Shenzhen, the boomtown bordering Hong Kong in Guangdong province that became the epicenter of China's first waves of cheap-labor export manufacturing in the 1980s-90s.

The factory campus has air conditioned production lines, palm-tree lined streets, fast-food restaurants and recreation facilities. But labor activists accuse the company of demeaning and dehumanizing workers with a militaristic management style, excessively fast assembly lines and overwork that have overwhelmed some laborers in their late teens and early 20s and away from home perhaps for the first time.

Foxconn, the world's largest contract manufacturer of electronics and a supplier to Apple Inc., Sony Corp., Dell Inc., Nokia Corp. and Hewlett-Packard Co., denies those allegations.

For many in China, the troubles at Foxconn offer lessons for managers as they juggle the rising expectations of younger workers with the harsh competitive realities of the 21st century global marketplace.

"The Foxconn incident shows one big problem: people are not machines," Jin Bei, head of the industrial research institute of the Chinese Academy of Social Sciences, said in a commentary Monday in the China Business Journal.

Rising living standards and "individual dignity" mean that companies must find ways to treat workers well even under conditions of intense global competition, he wrote. "Otherwise, such tragedies and crises will be inevitable."

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Associated Press researcher Ji Chen contributed to this report.

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Relief for Gulf is 2 months away with another well (AP)

Monday, May 31st, 2010 | Finance News

NEW ORLEANS – The best hope for stopping the flow of oil from the blown-out well at the bottom of the Gulf of Mexico has been compared to hitting a target the size of a dinner plate with a drill more than two miles into the earth, and is anything but a sure bet on the first attempt.

Bid after bid has failed to stanch what has already become the nation's worst-ever spill, and BP PLC is readying another patchwork attempt as early as Wednesday, this one a cut-and-cap process to put a lid on the leaking wellhead so oil can be siphoned to the surface.

But the best-case scenario of sealing the leak is two relief wells being drilled diagonally into the gushing well — tricky business that won't be ready until August.

"The probability of them hitting it on the very first shot is virtually nil," said David Rensink, incoming president of the American Association of Petroleum Geologists, who spent most of his 39 years in the oil industry in offshore exploration. "If they get it on the first three or four shots they'd be very lucky."

The relief well drilling and temporary fixes were being watched closely by President Barack Obama, who planned to meet for the first time Tuesday with the co-chairmen of an independent commission investigating the spill. A senior administration official said the meeting will take place at the White House. The official spoke on condition of anonymity because the meeting had not been formally announced.

For the relief well to succeed, the bore hole must precisely intersect the damaged well. If it misses, BP will have to back up its drill, plug the hole it just created, and try again.

The trial-and-error process could take weeks, but it will eventually work, scientists and BP said. Then engineers will then pump mud and cement through pipes to ultimately seal the well.

As the drilling reaches deeper into the earth, the process is slowed by building pressure and the increasing distance that well casings must travel before they can be set in place.

Still, the three months it could take to finish the relief wells — the first of which started May 2 — is quicker than a typical deep well, which can take four months or longer, said Tad Patzek, chair of the Petroleum and Geosystems Engineering Department at the University of Texas-Austin. BP already has a good picture of the different layers of sand and rock its drill bits will meet because of the work it did on the blown-out well.

On the slim chance the relief well doesn't work, scientists weren't sure exactly how much — or how long — the oil would flow. The gusher would continue until the well bore hole collapsed or pressure in the reservoir dropped to a point where oil was no longer pushed to the surface, Patzek said.

"I don't admit the possibility of it not working," he said.

A third well could be drilled if the first two fail.

"We don't know how much oil is down there, and hopefully we'll never know when the relief wells work," BP spokesman John Curry said.

The company was starting to collect and analyze data on how much oil might be in the reservoir when the rig exploded April 20, he said.

BP's uncertainty statement is reasonable, given they only had drilled one well, according to Doug Rader, an ocean scientist with the Environmental Defense Fund.

Two relief wells stopped the world's worst peacetime spill, from a Mexican rig called Ixtoc 1 that dumped 140 million gallons off the Yucatan Peninsula. That plug took nearly 10 months beginning in the summer of 1979. Drilling technology has vastly improved since then, however.

So far, the Gulf oil spill has leaked between 19.7 million and 43 million gallons, according to government estimates.

In the meantime, BP is turning to another risky procedure federal officials acknowledge will likely, at least temporarily, cause 20 percent more oil — at least 100,000 gallons a day — to add to the gusher.

Using robot submarines, BP plans to cut away the riser pipe this week and place a cap-like containment valve over the blowout preventer. On Monday, live video feeds showed robot submarines moving equipment around and using a circular saw-like device to cut small pipes at the bottom of the Gulf.

The crews will eventually cut the leaking riser and place the cap on top of it, the company hopes it will capture the majority of the oil, sending it to the surface.

"If you've got to cut that riser, that's risky. You could take a bad situation and make it worse," said Ed Overton, a Louisiana State University professor of environmental sciences.

BP failed to plug the leak Saturday with its top kill, which shot mud and pieces of rubber into the well but couldn't beat back the pressure of the oil.

Meanwhile, the location of the spill couldn't be worse.

To the south lies an essential spawning ground for imperiled Atlantic bluefin tuna and sperm whales. To the east and west, coral reefs and the coastal fisheries of Florida, Alabama, Mississippi and Texas. And to the north, Louisiana's coastal marshes.

More than 125 miles of Louisiana coastline already have been hit with oil. "It's just killing us by degrees," said Tulane University ecologist Tom Sherry.

It's an area that historically has been something of a superhighway for hurricanes, too.

If a major storm rolls in, the relief well operations would have to be suspended and then re-started, adding more time to the process. Plugging the Ixtoc was also hampered by hurricane season, which begins Tuesday and is predicted to be very active.

Three of the worst storms ever to hit the Gulf coast — Betsy in 1965, Camille in 1969 and Katrina in 2005 — all passed over the leak site.

On the Gulf coast beaches, tropical weather was far from some tourists' minds.

On Biloxi beach, Paul Dawa and his friend Ezekial Momgeri sipped Coronas after a night gambling at the Hard Rock Casino. Both men, originally from Kenya, drove from Memphis, Tenn., and were chased off the beach by a storm, not oil.

"We talked about it and we decided to come down and see for ourselves" whether there was oil, Momgeri said. "There's no oil here."

Though some tar balls have been found on Mississippi and Alabama barrier islands, oil from the spill has not significantly fouled the shores.

Still, the perception that it has soiled white sands and fishing areas threatens to cripple the tourist economy, said Linda Hornsby, executive director of the Mississippi Hotel and Lodging Association

"It's not here. It may never be here. It's costing a lot of money to counter that perception," Hornsby said. "First it was cancelations, but that evolved to a decrease in calls and there's no way to measure that."

Yet there was fear the oil would eventually hit the other Gulf coast states. Hentzel Yucles, of Gulfport, Miss., hung out on the beach with his wife and sons.

"Katrina was bad. I know this is a different type of situation, but it's going to affect everybody," he said.

Attorney General Eric Holder plans to visit the Gulf Coast on Tuesday and meet with state attorneys general. Several senators have asked the Justice Department to determine whether any laws were broken in the spill.

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Associated Press writers Kevin McGill, Ben Nuckols and Greg Bluestein in Covington, La., Holbrook Mohr in Biloxi, Miss., and Darlene Superville at Andrews Air Force Base, Md., contributed to this report.

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