Year: 2019

Fiat Chrysler pays $77m penalty for breaching fuel regulations

Posted on by ashton

Italian-American carmaker Fiat Chrysler Automobiles (FCA) revealed to Reuters on February 8 that it paid $77m in US civil penalties last year, after failing to meet Corporate Average Fuel Economy (CAFE) requirements for the 2016 model year.

Paid in the final quarter of 2018, it was the largest fine amassed by a single company for at least five years. Compared to previous years, recent civil penalties have resulted in far larger charges for the industry. In 2014, for example, the automobile sector paid just $2.3m in total.

Chrysler’s fine provides the first signal that carmakers are struggling to meet more stringent emission rules

FCA, along with fellow US carmakers, had appealed to the Trump administration to freeze 2020 model year requirements until 2026. In particular, it argued that a fall in petrol prices and a rise in demand for SUVs have made the existing regulations, which came into effect in 2012, no longer appropriate for current market conditions.

Shane Karr, Head of External Affairs at FCA for North America, said in a statement: “We at FCA are committed to improving the fuel efficiency of our fleet and expanding our US manufacturing footprint. Ultimately, both goals are better served by a CAFE programme more closely aligned to the US market, than by requiring companies to make large compliance payments because assumptions made in 2011 turned out to be wrong.”

In 2012, the Obama administration approved a policy requiring car manufacturers to almost double their fleet-wide fuel efficiency to more than 50 miles per gallon by 2025. US President Donald Trump has proposed relaxing future regulations, and last August the Environmental Protection Agency and the National Highway Traffic Safety Administration suggested capping efficiency standards at a fleet average of 37 miles per gallon between 2020 and 2026. Environmental groups have threatened a legal challenge in response.

Chrysler’s fine provides the first signal that carmakers are struggling to meet more stringent emission rules. However, with Trump ever sceptical of the risks posed by climate change and pressure from US automakers building, a loosening of environmental standards could be on the horizon.

Rovio receives investment in its ‘Netflix for gaming’ subsidiary

Posted on by The New Economy

Rovio – best known for creating Angry Birds – has received a boost as it looks to diversify its business offering. On February 6, the Finnish company confirmed that it had received investment in its subsidiary, Hatch Entertainment, from Japan’s leading mobile operator NTT Docomo.

Hatch Entertainment will offer subscribers a rotating mix of games from a range of publishers

The move brings 5G gaming a step-closer for Japanese consumers. Set for a soft launch on Android in Japan later this month, Hatch Entertainment – self-proclaimed as the ‘Netflix of gaming’ – will offer subscribers a rotating mix of games from a range of publishers. New users will be afforded a free 90-day trial membership of Hatch Premium.

So far, the cloud gaming platform is available in the Nordics, the UK and Ireland for Android devices but not iPhones. At present, Apple does not allow streaming services on its app store. However, Rovio is eventually looking to bring the service to all platforms.

“Docomo’s leading contributions to 5G technology and infrastructure, and commitment to amazing new 5G-enabled services, make the company an ideal strategic partner in Japan,” said Juhani Honkala, founder and CEO of Hatch.  “We look forward to a long and fruitful collaboration.”

The size of the investment has not yet been disclosed, with the partnership simply being described as “strategic”. Gaming is an essential part of Japanese culture – the country represents the world’s third largest global gaming market – and many predict that cloud computing to be the next big thing in the industry. In particular, 5G technology is expected to enable gamers to stream AAA titles to their smartphones.

The launch of Hatch Entertainment should also help Rovio stimulate its floundering growth. Having relied heavily on Angry Birds up to this point, and with the gaming sector became ever more competitive, Rovio’s new forward-thinking strategy could slingshot the company to the next level.

Apple to repay 10 years worth of tax in France

Posted on by The New Economy

Tech giant Apple has reached an agreement to repay a reported €500m ($570m) worth of tax, dating back 10 years. According to an article published by French magazine L’Express on February 5, a deal was struck in secret late last year.

France has previously pushed for a Europe-wide digital tax on tech giants

It follows a similar agreement made in the UK in early 2018, which recuperated £136m ($176m) in taxes from the iPhone maker. While Apple failed to disclose the size of the settlement, it released a statement: “The French tax authority recently concluded a multiyear audit of our French accounts and the adjustment will be reflected in our publicly filed accounts.”

France has previously pushed for a Europe-wide digital tax on tech giants. However, the proposed law has encountered opposition from Nordic countries, which has led to the French government working on a domestic bill instead. The so-called ‘GAFA tax’ will include a charge levied on all digital service providers with a turnover of more than €750m ($855m) worldwide and €25m ($28m) in France. The legislation will likely be voted on next month.

Companies such as Apple tend to base their headquarters in low-tax countries such as Ireland. In 1991, Ireland and Apple made an agreement that enabled the US company to pay between 0.005 and 0.05 percent tax on global sales. The EU, in 2016, classified the scheme as illegal state aid and slapped Apple with a €13bn ($14.8bn) penalty – a ruling that is still being contested today.

In response to the EU’s decision, Apple CEO Tim Cook penned an open letter that read: “Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.”

Despite the ongoing wrangling in the Ireland case, the recent agreement between Apple and France represents a victory for European governments fighting for multinational companies to pay a fair contribution. It comes two years after Google successfully challenged the French government regarding €1.12bn ($1.27bn) worth of tax.

Hellman & Friedman agrees $11bn acquisition of Ultimate Software

Posted on by ashton

On February 4, an investment group led by Hellman & Friedman confirmed that it had agreed to purchase cloud-based HR developer Ultimate Software in an $11bn deal. The group, which also includes Blackstone, CPPIB, GIC and JMI Equity, has committed to a cash transaction that values Ultimate Software at $331.50 per share.

Reuters reported that the agreement will be heavily financed with equity and will use a moderately small quantity of debt compared with typical leveraged buyouts. Ultimate Software, which generated over $1.1bn in revenue last year, expects the deal to close in mid-2019.

Speculation of a rival bid, which could now be accepted during a 50-day shopping period, saw the company’s shares surge by 19.5 percent

Speculation of a rival bid, which could now be accepted during a 50-day shopping period, saw the company’s shares surge by 19.5 percent.

Ultimate Software CEO Scott Scherr said, “Our customers will benefit from our ability to bring new features and services to market more quickly. Hellman & Friedman is in full alignment with our vision to serve the global HR market, while preserving our unique company culture and mission.”

Scherr and his senior management team will stay in their positions following the acquisition.

Florida-based Ultimate Software was founded in 1990 and is the second-fastest growing provider in its sector. The company’s customers include Subway and Red Roof Inn. It offers packages to manage payroll and benefits, as well as subscription-based analytics tools that track a full range of HR solutions.

Hellman & Friedman makes regular market ventures in the communications, technology, health care and industrial sectors. The private equity fund already owns another HR software firm, Massachusetts-based Kronos, suggesting that it views workforce management as a potentially lucrative market.

The cloud computing sector looks set for continued growth. The technology has applications far beyond HR and has been embraced by numerous business seeking flexibility, efficiency and scalability benefits.

Goldman Sachs leads $20m investment in fintech app Bud

Posted on by ashton

Goldman Sachs, along with HSBC, has led a $20m investment in British fintech app Bud. The investment takes Bud’s total backing to date to $32m.

In addition to the financing, HSBC’s head of digital banking, Raman Bhatia, will join Bud’s board.

Other lenders include Australia’s ANZ, South Africa’s Investec, Spain’s Banco Sabadell and Silicon Valley’s 9Yards Capital.

The start-up is one of a number of companies taking advantage of Britain’s newly introduced Open Banking rules

Bud enables banks to more easily integrate products and services into their mobile apps, giving customers a network of world-class digital products to choose from. The technology also allows banks to better analyse customer spending data, helping them come up with cost-effective business strategies.

The start-up is one of a number of companies taking advantage of Britain’s newly introduced Open Banking rules, which are designed to promote competition while allowing users to view all their financial services in one place.

Bud co-founder Edward Maslaveckas wrote: “This investment by HSBC, Goldman Sachs, Banco Sabadell, ANZ and Investec – as well as some fantastic VC partners in the form of 9Yards Capital and Lord Fink, the former CEO of the hedge fund Man Group – is proof that we’re going in the right direction.”

The fintech industry is currently enjoying a boom in funding. Last year saw the largest growth in fintech investment since 2014, with financial firms increasingly looking to provide their customers with new flexible services.

Bud has confirmed that it will use the latest cash injection to double its staff numbers from 62 to more than 120 by the end of the year. With a wide geographical spread of seasoned investors, Bud has access to a broad spectrum of expertise that will surely prove vital as the start-up looks to expand into global markets.

Hyundai Heavy Industries to acquire majority stake in rival Daewoo

Posted on by ashton

Hyundai Heavy Industries, the world’s largest shipbuilder, has signed a conditional share swap agreement to take over second-ranked Daewoo Marine, creating an industry behemoth with a near 20 percent market share.

State-funded Korea Development Bank (KDB), which owns 55.7 percent of Daewoo, announced on January 31 that it had signed a memorandum of understanding signalling that it will transfer its entire stake, worth an estimated $1.94bn, to Hyundai.

The global shipbuilding industry is in the midst of recovery from an economic downturn that led to mass losses and widespread job cuts

In exchange for its Daewoo shares, KDB will receive new shares issued by Hyundai, which will provide $1.3bn in liquidity to Daewoo.

The combination of these two shipbuilding heavyweights will ease competition and excess capacity, which have dragged down ship prices in recent years, KDB Chairman Lee Dong-gull said at a news conference.

The deal will “raise the fundamental competitiveness of Daewoo, at a time when the threat from latecomers in China and Singapore is growing”, Lee added.

Hyundai, Daewoo and Samsung Heavy Industries currently dominate the shipping industry, which accounts for around seven percent of both exports and employment in South Korea.

KDB added that it would contact Samsung to evaluate its interest in purchasing Daewoo before signing sale terms with Hyundai.

Hyundai, along with its affiliate Hyundai Samho Heavy Industries, occupied around 11.5 percent of the global shipbuilding market last year, according to figures from market research firm Clarksons. Daewoo, meanwhile, held 6.3 percent, while Samsung Heavy’s market share stood at 3.4 percent.

The global shipbuilding industry is in the midst of recovery from an economic downturn that led to mass losses and widespread job cuts, culminating in 2017 with the $2.6bn bailout of Daewoo Marine by two of South Korea’s state-run banks.

Korea’s top three shipbuilders have undertaken extensive restructuring programmes over the past few years, cutting thousands of jobs, but all are expected to return to profitability in 2019.

Their recovery has been aided by a growing demand for high-end vessels, of which Korean shipbuilders are the leading makers, capturing 42 percent of new commercial orders between them in the first three quarters of 2018. While the triad faces some competition from low-cost Chinese firms, they are miles ahead in terms of ecological and environmental capabilities, which has allowed them to retain a strong market position.

Yahoo’s proposed data breach settlement rejected by judge

Posted on by ashton

Yahoo’s proposed compensation package for millions of customers who had their email addresses stolen has been rejected by a US judge.

The internet services provider has been seeking to put an end to action relating to three data breaches it experienced between 2013 and 2016. It had suggested a $50m payout plus two years of free credit monitoring for around 200 million people in the US and Israel who were affected by the breaches. These funds would be paid out to lawyers acting on behalf of the users.

Under the terms of the agreement, lawyers acting on behalf of the plaintiffs could claim up to $35m in fees

The plan, however, was rejected by US District Judge Lucy Koh, who said she could not declare it “fundamentally fair, adequate and reasonable” as it did not clarify exactly how much victims could expect to reclaim.

Under the terms of the agreement, lawyers acting on behalf of the plaintiffs could claim up to $35m in fees, which the court said “may be unreasonably high”. The exact amount that would be paid out to victims, along with the costs of ongoing credit monitoring, was also slated for being too vague.

Yahoo has been criticised for being too slow to disclose data breaches in 2013, 2014 and 2015-16, which resulted in users’ email addresses and other personal information being compromised. The 2013 event allowed hackers to gain access to all three billion Yahoo accounts, while the 2014 attack affected 500 million users. In the most recent breach, plaintiffs are alleging that data collected in the earlier hacks was used to access specific accounts.

The full scale of all breaches was revealed in July 2016, after Yahoo’s internet business was sold to Verizon for $4.48bn. Two Russian intelligence agents and two hackers were charged, with one hacker later pleading guilty to having carried out the cyber attack.

Koh cited this history of secrecy as one of the reasons for rejecting the deal, saying: “Yahoo’s history of non-disclosure and lack of transparency related to the data breaches are egregious.”

“While preliminary approval of the settlement was not granted, we’re confident that we can achieve a viable path forward,” a spokesperson for Verizon told Reuters.

Yahoo must now draw up a new agreement with the plaintiffs to settle the case.

All Nippon Airways set to order Boeing and Airbus aircraft

Posted on by ashton

All Nippon Airways (ANA), Japan’s largest airline, announced plans to order 20 Boeing 737 MAX aircraft on January 29, as part of the company’s new growth strategy. ANA also placed an order for 18 Airbus A320neos to be used by its budget subsidiary Peach Aviation and confirmed that it had an option to purchase another 10 Boeing 737 MAX jets.

The announcement comes at a good time, with President Donald Trump recently increasing pressure on Japan to reduce its trade surplus with the US.

ANA’s order of Boeing’s latest 737 model is the first to come from Japan.

In a press release, ANA – which operates a mixture of Airbus and Boeing narrow-body jets – said: “The decision was based on the economic growth of Asia and emerging countries, with demand in the Asian aviation market and inbound demand on the rise. ANA HD and Peach Aviation Limited each selected its optimum aircraft to fit its strategy to further grow.”

With Japan’s industrial output decreasing in recent years, the order of the Boeing aircraft will come as welcome news to the country’s aerospace firms

With Japan’s industrial output decreasing in recent years, the order of the Boeing aircraft will come as welcome news to the country’s aerospace firms, such as Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Subaru, which currently build major portions of Boeing’s jets.

After the US agreed a trade truce with China, the US president’s crosshairs turned to Japan. In December 2018, Trump claimed: “I tell [Shinzō Abe] all the time that Japan doesn’t treat the United States fairly on trade: They send in millions of cars at a very low tax. They don’t take our cars.”

The Boeing purchase is a smart move by ANA. While the company vice-president Hideki Mineguchi said the deal “has nothing to do with trade friction”, it will undoubtedly impress the US president.

In addition, the involvement of Japanese companies in building Boeing jets will provide a boost for the domestic economy.

Soros uses Davos speech to urge US crackdown on Chinese tech firms

Posted on by The New Economy

On January 24, Hungarian-US investor and philanthropist George Soros used his annual Davos address to launch a scathing attack on Chinese President Xi Jinping. Soros labelled Xi as “the most dangerous opponent of open societies”.

Soros has long found himself at odds with populist and anti-globalist figures due to his support for liberal causes

The billionaire, known for making his fortune betting against pound sterling in 1992, has frequently used his speeches at the World Economic Forum to denounce those he sees as opponents to an open society. Soros, who founded the Open Society Foundations, has long found himself at odds with populist and anti-globalist figures due to his support for liberal causes.

In particular, Soros focused on the facial recognition systems used in China along with the superpower’s social credit system, which grades people based on their behaviour. Soros believes “the database would give Xi total control over the people”.

He added: “China isn’t the only authoritarian regime in the world, but it’s undoubtedly the wealthiest, strongest and most developed in machine learning and artificial intelligence.”

Having last year used his speech to criticise Donald Trump, Soros offered the US president some words of advice: “My present view is that instead of waging a trade war with practically the whole world, the US should focus on China. Instead of letting [the Chinese tech companies] ZTE and Huawei off lightly, it needs to crack down on them.”

However, the Budapest-born investor could not avoid taking a swipe at Trump. “Regrettably, Trump seems to be following a different course: make concessions to China and declare victory while renewing his attacks on US allies. This is liable to undermine the US policy objective of curbing China’s abuses and excesses.”

Earlier in the conference, Huawei chairman Liang Hua warned that he would shift his business to nations “where we are welcomed”. The Chinese tech giant has had a challenging few months that have strained relations with a number of western governments. In December, Meng Wanzhou, the daughter of Huawei’s founder, was arrested in Canada as part of a US extradition request.

Huawei, which is developing its own 5G technology, has already been blocked by governments in the US, New Zealand and Australia, with others (such as Germany) also considering a ban. While the company faces an uncertain future in the West, it is reported that more than 20 other countries have signed 5G commercial contracts with the firm.

Events at Davos this year have highlighted the growing tensions between China and the West. Although issues surrounding trade continue to be a focal point for disagreements, it is technology that is increasingly driving a wedge between Xi Jinping’s government and the rest of the world.

IBM cloud services drive higher-than-expected Q4 revenues

Posted on by The New Economy

On January 22, IBM posted above-expectation earnings and revenues for the final quarter of 2018, prompting a seven percent hike in the company’s share price. Recording an income of $21.8bn, the news has boosted investor confidence, with the company looking to move into a new period of growth.

The optimism surrounding the Q4 earnings report owes much to IBM’s cloud computing business

Though revenue did decline for the third consecutive quarter, it still exceeded predictions. “In the quarter we expanded both gross margin and pre-tax income margin,” said James Kavanaugh, Senior Vice President and Chief Financial Officer at IBM. Earnings per share of $4.87 surpassed estimates by five cents.

Over the course of 2018, takings of $79.6bn reflected an increase of one percent year-on-year – though this translated to a flat year when adjusted for currency fluctuations. It marks the first time in a number of years that the company has managed to expand revenue, operating income and earnings per share all at the same time.

The optimism surrounding the Q4 earnings report owes much to IBM’s cloud computing business, which along with social, mobile and analytics made up half of the company’s revenue in 2018. Alone, cloud income of $19.2bn was up 12 percent compared with 2017.

During the final quarter of last year, IBM announced its plan to acquire Red Hat in a deal worth $34bn, incorporating the software company into IBM’s Hybrid Cloud division – a deal that “propels IBM as a leading cloud provider,” according to KeyBanc Capital Markets’ analyst Arvind Ramnani. Back in December, Big Blue also struck a partnership with Samsung to manufacture 7nm chips for the firm’s future technology developments.

IBM has followed last year’s positivity with a lively start to 2019, striking several deals connected to the company’s cloud network. Accompanying the release of the US firm’s Q4 results was the news that BNP Paribas has agreed to extend its contract for a further eight years to continue developments to its cloud strategy.

“Major clients worldwide, such as BNP Paribas, are turning to the IBM Cloud and our unmatched industry expertise to transform their businesses and drive innovation,” commented Ginni Rometty, IBM Chairman, President and CEO.

In January, IBM also confirmed a partnership with Vodafone in support of the next-generation of technological advances. The deal sees Vodafone pay $550m to IBM under an eight-year managed-services agreement. In addition, a $325m contract with Juniper Networks will see IBM assist in managing the technology giant’s existing infrastructure.

Times have been tough for IBM shareholders in recent years. Up until the fourth quarter of 2017, they had to put up with more than five years of falling revenue. The latest earnings report, however, as well as the company’s decision to embrace cloud computing, provides plenty of cause for optimism.

Google fined €50m following first breach of new EU data laws

Posted on by The New Economy

Google has become the first US tech giant to fall foul of newly introduced EU privacy laws. French data protection watchdog CNIL fined the company a record €50m ($56.8m) on January 21, citing Google’s lack of transparent and comprehensible guidance regarding its data use policies.

The watchdog raised concerns over Google’s “diluted” approach to seeking consent for targeted adverts. According to the regulator, information on how the company uses harvested data is spread across several pages and documents that use “vague” language.

“The general structure of the information chosen by the company does not enable [it] to comply with the [General Data Protection Regulation (GDPR)],” read a CNIL statement. “Essential information, such as the data processing purposes, the data storage periods or the categories of personal data used for the ads personalisation, are excessively disseminated across several documents, with buttons and links on which it is required to click to access complementary information.”

According to CNIL, information on how Google uses harvested data is spread across several pages and documents that use “vague” language

CNIL stated the size of the fine was due to continuous violations, adding that the substantial revenues Google generates from advertising resulted in a larger penalty. In response to the fine, Google reiterated that it takes user privacy extremely seriously.

“People expect high standards of transparency and control from us,” said a company spokesperson. “We’re deeply committed to meeting those expectations and the consent requirements of the GDPR. We’re studying the decision to determine our next steps.”

While the €50m fine is the largest handed to a tech company by a European regulator, it still falls well short of the maximum limit Google could have faced: four percent of its annual turnover.

The investigation and fine came about after two European pressure groups, None Of Your Business and La Quadrature du Net, filed complaints in May 2018. The groups accused Google – and other large online companies, including Facebook – of having no legal basis to process the personal data of the users of its services.

The decision to penalise Google is likely to heighten the concerns of fellow tech companies using similar ad-driven business models. Ultimately, it may force them to reconsider how they acquire user consent for data collection.

The president of Zimbabwe is being sued over internet shutdown

Posted on by The New Economy

A group of top Zimbabwean lawyers has asked the country’s high court to declare the closure of the internet illegal after the government blocked access to social media services on two occasions last week.

The shutdown was triggered by ongoing protests against a surge in fuel prices

The Zimbabwe Lawyers for Human Rights and the Zimbabwe outpost of the Media Institute of Southern Africa together filed a petition on January 18 against President Emmerson Mnangagwa and the country’s three internet providers. The legal group is arguing that the move was unconstitutional, inhibiting business operations and even threatening the lives of Zimbabweans.

Internet access in the South-East African country was cut on the morning of January 15 and again on January 18 by the three telecoms firms operating in the region, at the request of Zimbabwean President Emmerson Mnangagwa. According to Reuters, Econet, the country’s largest mobile operator, told its customers by text: “We are obliged to act when directed to do so and the matter is beyond our control.”

Econet said later on January 18 that it had received an instruction from the government to restore internet access, with the exception of some social media applications. It has also said that it will reimburse customers for mobile data that they were unable to use during the shutdown.

The shutdown was triggered by ongoing protests against a surge in fuel prices that have taken the lives of at least 12 people, according to local rights groups. It is alleged that the government is seeking to limit access in order to prevent the transmission of images showing violent action taken by security forces to dispel protestors.

The UN has urged the Zimbabwean Government to end the “excessive use of force” by security forces, which reportedly includes door-to-door searches and the use of live ammunition. “This is not the way to react to the expression of economic grievances by the population,” UN spokesperson Ravina Shamdasani said in a statement on January 18.

The Zimbabwe Human Rights NGO Forum, whose members include MISA and Amnesty International, said in a statement that it had recorded at least 844 human rights abuses during the internet shutdown. It described the blockade as “unwarranted, unjustifiable in the circumstances and… a tool of repression meant to mask the massive human rights violations which the state was preparing to commit.”

The president’s spokesman, George Charamba, told the state-controlled Sunday Mail newspaper that the shutdown was “just a foretaste of things to come,” playing on rising concerns that the country is reverting to dictatorial rule.

Many, including the opposition MDC party, see parallels between the actions of President Mnangagwa and his predecessor Robert Mugabe; this latest restriction of access to the internet and to unbiased information is likely to augment those concerns.