French auto workers threaten to blow up factory

aid-off auto-parts workers huddled Thursday around gas canisters tied to an electrical cable, threatening to blow up a factory in the latest example of extreme French resistance to cost-cutting in the economic downturn.

Other French workers have kidnapped their bosses, blocked ports and barricaded factories to try to save jobs in France's worst recession since the 1940s.

Some 200 workers at the New Fabris factory outside the southwest city of Chatellerault, are each demanding 30,000 euros ($42,267) from Renault and PSA Peugeot-Citroen, accusing the carmakers of killing their livelihoods.

If they don't get it by July 31, they say they will blow up the factory, about 190 miles southwest of Paris. They are taking turns guarding 20 canisters of acetylene and butane, once used for gas-operated tractors and now spaced out on both sides of the plant and attached by a cable. Guy Eyermann of the CGT union said half of them are full, though that was impossible to verify.

"We are at the end of the line," Eyermann said. "A lot of people worked here for 25, 35 years. Many have given their lives to the company." He called on "all factories in Europe that are closing to protest and do what the workers are doing here."

New Fabris closed down June 16 and all its 366 workers are being gradually laid off. They blamed Peugeot-Citroen and Renault for canceling contracts that represented the bulk of the company's sales, and began their protest June 20.

On the gates out front, laid-off workers put up black cardboard cutouts in the shape of coffins noting workers' name, year of birth, and "2009" — the year they were let go. A workers' empty blue uniform hung from the gate. Enormous machines hauled from inside the factory stood in the courtyard, gutted and charred after employees torched them.

The shuttered factory still holds parts and costly machinery, and the workers are trying to keep Renault and Peugeot-Citroen from collecting any material.

The workers are meeting with officials at Renault headquarters on Thursday, and are asking for 15,000 euros each from the company. The workers met with officials at Peugeot-Citroen last week, also asking for 15,000 euros apiece.

PSA Peugeot Citroen spokesman Pierre-Olivier Salmon said the company rejected the demand.

"It's the world upside down," Salmon said. "It's not our job to replace the company's shareholders or the state. Why should PSA pay for this?"

Salmon said PSA had offered to buy New Fabris' remaining inventory for 1.2 million euros, even though PSA had no need for the spare parts.

Renault spokeswoman Gita Roux said the possibility of buying the factory's remaining inventory is a possible topic of negotiations at Thursday's meeting. As for the workers' demand for compensation, Roux said, "It is not for us as clients to pay redundancy packages" for a supplier.

Ping pong, petanque
The workers on Thursday's "morning shift" guarding the gas canisters whiled away hours playing ping pong, petanque or simply chatting. No police were in sight, though local officials say police are monitoring the situation.

"I got a severance package of 3,500 euros, about two months of salary. With the economic downturn if I don't find another job this isn't going to get me very far," said Marc Pinardon, 41, a machine operator who worked at the factory for nine years.

Several car-related factories in the region are laying off workers — along with thousands of auto workers losing their jobs worldwide as the industry undergoes its worst slump in decades.

Pinardon and a colleague, Bruno Perre, a 50-year-old technician at the factory for 29 years, walked through the shutdown factory.

"They throw us away like Kleenex," Perre said.

Their action prompted a copycat event at a factory of Canadian telecoms firm Nortel Networks. Workers at the factory in Chateaufort west of Paris briefly installed gas canisters at their plant before removing them Thursday.

Labor Minister Xavier Darcos said he "understood the anger" of the workers but warned against such "incredible violence."

The factory's outgoing director Pierre Reau walked briskly past workers Thursday without interacting with them.

"It worries everyone because some people are uncontrollable," he told The Associated Press.

Anne Frackowiak, top aide to the local governor in Chatellerault, said she thinks the workers' gas canisters are empty but that "we are watching."

"The biggest risk is a gigantic fire, but the fire department is on permanent alert," she said.

Marcus Named as South African Reserve Bank Governor

Gill Marcus, chairwoman of Barclays Plc’s Absa Group Ltd., was named as governor of the South African Reserve Bank to succeedTito Mboweni, who has been criticized by labor unions for not cutting interest rates faster.

Marcus, a former deputy central bank governor, will take over the post on November 9 after Mboweni indicated a desire to leave the position, PresidentJacob Zuma told reporters in Pretoria today.

Mboweni, 50, who was appointed as governor in August 1999, has been criticized by unions and businesses over his approach to interest rates and for failing to weaken the rand as the economy entered its first recession in 17 years. The Congress of South African Trade Unions, the labor union federation that backed Zuma’s bid to become president of the ruling African National Congress, has said Mboweni should be replaced.

“I wouldn’t read into the appointment that there will be a policy change,”Andre Roux, head of fixed income at Investec Asset Management, said after her appointment was reported in Mail & Guardian newspaper. “I think Gill Marcus will do a fine job.”

Marcus, 59, left the central bank in 2004, and was appointed chairwoman of Absa, South Africa’s largest retail bank, in March 2007. She is a senior member of the ANC and sat on the National Executive Committee, the party’s top decision-making body, between 1991 and 1999, before moving to the Reserve Bank.

Inflation Targeting

Under Mboweni, the central bank adopted a target range for inflation of 3 percent to 6 percent. He raised the benchmark interest rate 10 times to 12 percent between June 2006 and June 2008, as surging food and oil prices kept inflation above the target. Since then, the bank has cut the rate five times to 7.5 percent as economic growth plunged and inflation eased.

Mboweni left rates unchanged on June 25 when 21 out of 24 economistssurveyed by Bloomberg predicted he would lower it by half a percentage point. The governor cited rising energy costs as the main risk to inflation, which slowed to 8 percent in May.

Cosatu said the decision to leave the rate unchanged reflected the “gross incompetence” of the Monetary Policy Committee, which sets interest rates. The union federation has demanded that the central bank’s inflation-targeting policy be revised and members of an affiliate have demonstrated outside the central bank.

Unemployment

Economists and labor unions expected the Reserve Bank to continue cutting interest rates as Africa’s biggest economy shrank an annualized 6.4 percent in the first quarter, the most in almost 25 years. The country shed 179,000 non-farm jobs in the same period, pushing the unemployment rate to 23.5 percent, the highest of 62 countries tracked by Bloomberg.

Mboweni has also been criticized for not doing more to weaken the rand, which has surged 18 percent against the dollar this year, the second-best performer of 16 major currencies tracked by Bloomberg after Brazil’s Real. A stronger rand crimps profits for the country’s export industries including gold and platinum mining.

Home Resales, Leading Index Probably Rose: U.S. Economy Preview

Home resales in the U.S. probably rose in June and a gauge of the economic outlook improved, signaling the recession may soon be over, economists said before reports this week.

Purchases of previously owned homes climbed to an annual rate of 4.83 million, the highest level since October, according to the median of 57 estimates in a Bloomberg survey before the National Association of Realtors’ report on July 23. Figures tomorrow may show the index of leading indicators climbed for a third consecutive month.

Mounting evidence that housing is stabilizing is bolstering forecasts that government stimulus efforts will gain traction in coming months and lift the economy from the worst slump in five decades. Other reports may show rising joblessness is weighing on Americans’ moods, tempering optimism about any rebound.

“The end of the recession could be pretty close,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “We’re getting near the bottom in housing. It’ll still be a very gradual recovery for the economy, with a labor market that’s very weak.”

Reports last week corroborated that the housing slump, now in its fourth year, is dissipating. Housing starts unexpectedly jumped in June to the highest level since November as construction of single-family dwellings climbed by the most since 2004. Building permits, indicating future construction, rose the most in a year.

Signs of Stability

The National Association of Home Builders/Wells Fargo index of builder confidence increased this month to the highest level since September.

One reason for the projected increase in home resales is that prospective buyers are taking advantage of the plunge in prices caused by the foreclosure crisis. Filings reached a record in the first half of 2009, according to RealtyTrac Inc., an Irvine, California-based seller of default data. More than 1.5 million properties got a default or auction notice or were seized by banks in the six months through June.

The New York-based Conference Board’s leading index, which points to the direction of the economy over the next three to six months, rose 0.5 percent last month after a 1.2 percent increase in May, according to the survey median.

The jump in building permits was probably one of the biggest contributors to the predicted gain in the leading index, economists said. Fewer jobless claimsand higher stock prices were also likely drivers.

Stocks Rise

Stocks have gained on optimism an economic recovery is at hand. The Standard & Poor’s 500 Index is up 39 percent since reaching a 12-year low on March 9.

A July 24 report may show the Reuters/University of Michigan final index ofconsumer sentiment fell in July after four consecutive gains, economists predicted. A preliminary reading dropped to the lowest level since March.

The U.S. has lost about 6.5 million jobs since the recession began in December 2007. Economists in a separate survey taken by Bloomberg this month predicted the jobless rate will reach 10 percent by year-end from 9.5 percent in June.

Federal Reserve officials thought the economy was “still quite weak and vulnerable to further adverse shocks,” according to minutes of their June meeting released last week. Even so, the report also said “the economic contraction was slowing and that the decline in activity could cease before long.”

Companies seeing an improvement include CSX Corp., the third-largest U.S. railroad. Jacksonville, Florida-based CSX reported second-quarter profit that topped analysts’ forecasts, and said demand for hauling most freight is stabilizing. Railroad traffic is considered an economic bellwether.

“We’re seeing pretty good stabilization in our markets,” Chief Executive OfficerMichael Ward said in an interview last week. “We don’t see any further deterioration, and we see some incremental improvement in the near future.”

U.S. MBA Mortgage Applications Index Rose 4.3 Percent Last Week

Mortgage applications in the U.S. rose for a second week as the lowest borrowing costs since May propelled a surge in refinancing.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 4.3 percent to 514.4 in the week ended July 10, from 493.1 in the prior week. The group’s refinancing gauge jumped 18 percent, while the index of purchases fell 9.4 percent.

“We will see more refis as rates come down,” Robert Dye, a senior economist at PNC Financial Group in Pittsburgh, said before the report. “It’s nice to see mortgage rates coming down; that’ll be a linchpin for the recovery.”

Lower monthly mortgage payments will help limit the damage to household finances caused by mounting unemployment and sinking home values. Economists are incorporating an easing in the housing slump, now in its fourth year, in their forecasts of an economic recovery in the second half of 2009.

Today’s report showed the mortgage bankers’ refinancing gauge increased to 2,009.4 from the previous week’s 1,707.7. The purchase index fell to 258.8 from a three-month high of 285.6 the prior week.

Combined sales of existing and new homes climbed to a 5.1 million annual pace in May, the highest level so far this year. Purchases slumped to a 4.8 million pace in January, the lowest level since comparable records began in 1999.

Pending Sales

In another sign the housing slump may be bottoming out, a July 1 report from the National Association of Realtors showed the number of Americans signingcontracts to buy previously owned homes rose in May for a fourth consecutive month.

The share of applicants seeking to refinance loans climbed to 54.9 percent of total applications last week from 48.4 percent.

The average rate on a 30-year fixed-rate loan fell to 5.05 percent, the lowest level since the week ended May 22, from 5.34 percent the prior week. The rate reached 4.61 percent at the end of March, the lowest level since the bankers group’s records began in 1990.

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $539.88, or about $74 less than the same week a year earlier, when the rate was 6.22 percent.

The average rate on a 15-year fixed mortgage fell to 4.59 percent from 4.83 percent the prior week. The rate on a one-year adjustable mortgage decreased to 6.47 percent from 6.58 percent.

‘Unwilling’ Buyers

New-home sales in the U.S. likely will remain little changed in coming months because of low consumer confidence and the difficulty would-be buyers have getting loans, Pulte Homes Inc. Chief Executive Officer Richard Dugas said at an investor conference in late June.

“Buyers are unwilling and unable to take on new mortgages,” Dugas said at a conference in Boston. “Despite the record fall in prices and the tremendous deal that consumers get relative to the 30-year mortgage rates where they are today, we’re still having difficulty convincing people to get into the market.”

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.

U.K. Public Unions Step Up Strikes on Spending Cuts

J Strikes by British government workers this summer, protesting a squeeze on public spending, may end up costing at least 400 million pounds ($658 million), with the latest action by postal workers starting today.

About 12,000 members of theCommunication Workers Union walked out at Royal Mail Group in a dispute over jobs and work rules following a three-day strike by the union last week. Protests in 2007 at the government-owned mail carrier cost the London economy 300 million pounds, according to the city’s Chamber of Commerce. In June, a two-day London Underground strike cost the economy 100 million pounds, the chamber said.

“These things go in waves, and there tends to be a greater willingness to engage in labor activity during a downturn,” said Peter Samuel, an industrial relations professor at Nottingham University. “People feel scared, insecure, frightened and that they have no power.”

Britain is experiencing its most severe economic contraction in five decades, and Prime Minister Gordon Brown’s government plans to cut public spending to reduce a ballooning deficit, putting public-sector jobs in the firing line. The number of unemployed people rose to 2.38 million in May, the most since 1995, while wages grew at the slowest rate since records began in 2001, the government said July 15.

Brendan Barber, general secretary of Britain’s Trades Union Congress, an umbrella group, also said July 15 that calls for “deep” cuts in public spending “will make the recession far worse” and threatens the jobs of 200,000 government employees including nurses and teachers.

Cuts ‘Inevitable’

More than 250,000 government-funded jobs in the U.K. may be lost by 2014 because of “inevitable” public-spending cuts, according to a report published yesterday by the Centre for Cities, a London-based research institute.

A protest over the use of foreign workers at a Total SA site in eastern England cost the company 100 million euros ($141 million) in extra costs after a June settlement, said the company, Europe’s largest oil refiner.

In the year through May, 352,000 workers went on strike, continuing a surge that began last year as government-funded workers challenged a clampdown on pay increases. In the year to May 2008, 638,000 workers took industrial action, according to the Office for National Statistics. That compares with the annual average of 201,600 through the 1990s, it said. That’s below the 1980s annual average of 1.04 million.

Staff Under Pressure

While the Royal Mail dispute centers on a so-called modernization agreement reached between the company and the Communication Workers Union in 2007, the union says the company is squeezing workers to be more efficient by cutting jobs without adding automation equipment.

The company “is set on piling more work and pressure on already-stretched staff,” Dave Ward, the union’s deputy general secretary, said on July 14.

The union held three days of strikes in London earlier this month. To avert even more strikes before a general election, which must be held by next June, the government has delayed plans to sell the company to private buyers.

Mail volume in central London has fallen by 20 percent in two years, as the company, which began delivering mail in 1635, lost ground to rivals such as Bonn, Germany-based Deutsche Post and Hoofddorp, Netherlands-based TNT NV, and business dropped off because of the Internet.

“This strike will be another blow to businesses, especially small business, that depend on Royal Mail,” said Sam Turvey, a spokesman for the British Chambers of Commerce in London. He didn’t have a cost estimate for the walkouts.

Falling Union Membership

U.K. union membership peaked in 1979 at 13.2 million, or around 50 percent of the workforce, and fell to 7.5 million in the next 25 years, according to the London School of Economics.

Currently, 29 percent of workers belong to a union, including three in five workers in the public sector and one in five at private companies.

Job security is also a key issue for the 10,000 members of the National Union of Rail, Maritime and Transport Workers, who walked off their jobs last month on the publicly owned London Underground railway. Bob Crow, the general secretary of the union, called the action that forced the 3 million daily travelers off the railway “a fantastic success.”

The two sides still haven’t reached an agreement on pay or the union’s demand that the company guarantee that it won’t fire workers and instead use voluntary means to cut around 1,000 jobs. Members of another union representing London Underground workers, Unite, are voting on whether to authorize another strike on the railway over pay.

Strikes Threatened

There are threats from other public sector unions as well, including lecturers at London Metropolitan University and workers at the government’s tax collecting agency, Her Majesty’s Revenue and Customs, where the Public and Commercial Services Union has held a series of short strikes over work rules.

The walkout by union employees of a Total contractor at the Lindsey desulphurization plant triggered a series of sympathy strikes across the U.K., fuelled by concern that migrant workers are squeezing local people out of jobs.

Some unions, such as the British Airline Pilots Association, are less confrontational, said Ben Read, a managing economist at the Center of Economic and Business Research in London. Association members at London-based British Airways Plc approved a cost-cutting package on July 13 that will cut pilots’ wages by 2.6 percent.

Rising unemployment may dampen labor unrest because union members will be worried about keeping their jobs, said Alex Bryson, senior research fellow at the National Institute of Economic and Social Research in London.

Nottingham University’s Samuel disagreed, saying cuts in public spending will cause “pain” that may trigger more strikes in Britain.

Japanese Stocks Gain on Barclays Real Estate Call; NEC Slumps

Japan stocks rose, led by property developers, after Barclays Plc gave the industry a “positive” recommendation. Companies that generate most of their revenue domestically climbed as investors shied away from global risk.

Mitsubishi Estate Co., Japan’s biggest property developer by market value, surged 4.4 percent after Barclays gave the company its top “overweight” rating.Nomura Holdings Inc., Japan’s largest brokerage, advanced 2.8 percent after the Nikkei said investment-banking revenue is rebounding at brokerages. NEC Corp., Japan’s largest personal-computer maker, plunged 8.9 percent after the Yomiuri newspaper said it will raise capital.

The Nikkei 225 Stock Average added 51.16, or 0.6 percent, to 9,395.32 at the close of trading in Tokyo. The broader Topix index gained 6.04, or 0.7 percent, to 878.29.

“Investors are not interested in taking on risk at the moment, which is why defensive, domestic stocks are getting a second look,” said Tomomi Yamashita, a Tokyo-based fund manager at Shinkin Asset Management Co., which oversees about $5.5 billion.

Trading was light, with a total value of 1.02 trillion yen ($10.9 billion) for the main board of the Tokyo bourse, the lowest level since Feb. 17. Japan’s market will be closed on July 20 for a holiday.

Comments from New York University professor Nouriel Roubini that the recession will end this year helped propel U.S. shares higher in the final hours of trading yesterday. The economist later said in a statement that his quotes were taken out of context and don’t accurately reflect his bearish view.

Roubini Comments

“I see instead a shallow, below-par and below-trend recovery,” Roubini said in a statement on his Web site.

For the week, the Nikkei has gained 1.1 percent, while the Topix added 0.6 percent. Both measures were headed for their first weekly climb this month.

In New York, the Standard & Poor’s 500 Index reversed a loss of as much as 0.6 percent to finish 0.9 percent higher. International Business Machines Corp., the world’s biggest computer-services provider, led gains prior to announcing an increase to its full-year earnings forecast on improving profit margins. The statement was made after markets closed.

Mitsubishi Estate jumped 4.4 percent to 1,478 yen, the steepest rise in three weeks. NTT Urban Development Co., which manages properties for Japan’s former phone monopoly, added 6.1 percent to 90,900 yen. Sumitomo Realty & Development Co., the country’s No. 3 developer, climbed 4.1 percent to 1,646 yen. A measure of real estate companies had the biggest gain on the Topix.

Brokers Gain

Takashi Hashimoto, an analyst at Barclays in Tokyo, assigned “overweight” recommendations to all three companies in new coverage.

“Money has started flowing in capital markets again, overseas investors are returning to Japanese property and real estate investment trusts are raising funds and on the recovery path,” Hashimoto said by phone today. “The news flow on property is set to be positive for the time being.”

Nomura rose 2.8 percent to 734 yen. Daiwa Securities Group Inc., Japan’s second-largest brokerage, advanced 3 percent to 520 yen. Investment banking commissions in Japan rose 90 percent in the latest quarter, the Nikkei reported today, citing research firm Dealogic.

Retail and telecommunications companies that generate their sales within Japan also climbed. Aeon Co., Japan’s second- largest retailer, rose 2.9 percent, while KDDI Corp., the No. 2 mobile-phone operator, surged 4.2 percent. Aeon shares have lost 5.3 percent this year, and KDDI is down 18 percent, compared with a 2.2 percent gain by the Topix.

NEC, Sony

“The mood of the market has been moving to a more optimistic bent, bringing funds into risk assets, and laggard domestic economy stocks are now being bought as a result,” said Isao Kubo, a stocks strategist at Nissay Asset Management Co. which oversees $52 billion in Tokyo.

NEC plunged 8.9 percent to 288 yen after the Yomiuri newspaper said the company may raise as much as 150 billion yen in new capital to invest in lithium battery production.

Sony Corp., the maker of the PSP portable game console, Vaio computers, and Cyber-shot digital cameras, lost 0.9 percent to 2,265 yen. The company’s mobile-phone joint venture with Ericsson AB posted a 213 million euro ($300 million) net loss for last quarter as demand weakened.

Sony and Nintendo Co., the maker of Wii game consoles, also dropped as total U.S. revenue from gaming hardware, software and accessories tumbled 31 percent. Nintendo declined 1.2 percent to 25,630 yen.