Breakingviews

Caterpillar’s Chinese lesson: dig below top line

By John Foley

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

As a company that makes excavators, Caterpillar should know the importance of digging. The U.S. machine maker has taken a $580 million write-down on a Chinese mining equipment producer it bought less than a year ago, erasing three quarters of that deal’s value. The accounting fraud that Caterpillar claims to have found at ERA Mining may not have been visible at the time of the purchase. But the low quality of its target’s rapid growth was.

JPMorgan flaws should ring alarms everywhere

By Richard Beales and Martin Hutchinson
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

JPMorgan was supposed to be among the best managers of bank risk in the world. This week it published an internal report into the failings which led to $6.2 billion of trading losses at its chief investment office in 2012. If the mix revealed – conflicting mandates, discredited theory, inadequate checks and primitive technology – is really as good as it gets, financial watchdogs and investors everywhere should worry. There are plenty of lessons for regulators and bank executives who want things done right.

What Nokia needs to do in 2013

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

What does Nokia boss Stephen Elop need to do this year? The ailing mobile giant he leads ended 2012 surprisingly strongly. But the market remains understandably wary. To convince sceptics, Elop’s biggest task is ensuring top-end smartphone sales really take off. The strategy for cheaper phones may need a rethink. Floating Nokia Siemens Networks, the revamped network-equipment unit, would help too.

Rio’s snap succession makes bad news look worse

By Kevin Allison

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It was time for Tom Albanese to go. But the snap succession at Rio Tinto which dismissed its chief executive on Jan. 17 as it took a $14 billion writedown on the value of its coal and aluminium businesses, makes a bad situation look even worse. Although Albanese’s successor, Rio iron ore boss Sam Walsh, is experienced and capable, the decision to install a new CEO immediately looks rushed.

Renault job cuts test France’s industry fetishism

By Pierre Briançon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Renault was known in the old days, as France’s “social laboratory”. The carmaker’s powerful unions and state ownership guaranteed high pay, generous benefits, and short working weeks, occasionally interrupted by legendary strikes. Then globalisation, privatisation and a five-year slump in European car sales made the lab’s experiment unaffordable.

Regulators must grab chance to bin EU capital ruse

By George Hay

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Regulators must seize the chance to ditch one of euro zone banks’ more absurd regulatory wheezes. In the first half of 2013, the Basel Committee on Banking Supervision will publish a comprehensive study assessing how global banks risk-weight their assets. The rule-setter should use its platform to name and shame the national regulators and lenders that are still getting away with holding no capital against their euro zone sovereign debt.

India in depth: Crying out for corporate bonds

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

India is crying out for corporate bonds. The country’s bank-dominated financial system is not well-suited to fund the $1 trillion infrastructure investment targeted by the government under its current five-year plan. Corporate bonds could be a helpful alternative, but the authorities are stifling the development of a genuine debt market.

Fiat pegs Chrysler as most undervalued carmaker

By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Fiat Chief Executive Sergio Marchionne seems to want Chrysler to be the most undervalued automaker. That’s the implication of his latest offer to buy a slice of the Motown manufacturer from the United Auto Workers’ retiree healthcare trust. Marchionne has put $198 million on the table for 3.3 percent, valuing 100 percent of Chrysler’s stock at $6 billion. It’s worth much more.

Europe brings the pain for UPS and TNT

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Acquisitive companies beware: Joaquin Almunia is not always interested in the bigger picture. The European competition commissioner has nixed his second transatlantic mega-merger in a year, signalling he would block TNT’s 5.2 billion euro takeover by U.S. rival UPS. He had consigned the Deutsche Boerse – NYSE deal to the scrapheap in February, 2012. Both times, the companies argued fruitlessly that they were subject to wider competitive forces than those considered in the commission’s analysis, which defined the markets in question rather narrowly. Both times, the EU competition czar failed to be impressed.

Shifting trade winds catch Li & Fung off-guard

By John Foley

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Once upon a time, manufacturing was relatively simple: China produced and America bought. That’s changing, and supply chain companies like Hong Kong-listed Li & Fung are doing their best to adapt. A Jan. 11 profit warning that wiped the equivalent of $2.2 billion from the company’s valuation shows there’s plenty of room for error.