Bershidsky on Europe: Fiat to Swallow Chrysler
Here's today's look at some of the top stories on markets and politics in Europe.
Fiat to buy remaining shares in Chrysler.
Italy's Fiat will become sole owner of Chrysler, ending a bitter dispute with the owner of a 41.5 percent stake in the U.S. automaker, United Auto Workers' health-care trust. Fiat chief executive Sergio Marchionne took a long time to agree with the trust on the price of the stake and was forced for a while to prepare Chrysler for an unwanted IPO. The process helped: The trust agreed to sell its shares at a price valuing Chrysler at just over $10 billion, within the range set by underwriters for the public offering. Fiat will pay the trust $4.35 billion, the bulk of which will come from Chrysler itself, and the IPO will be called off. The deal represents a win for both parties. The trust will receive a fair price for its stake, which is all it ever wanted. Fiat will now be able to reorganize, fully integrating its European operations with Chrysler, on which the company now depends for profits. For better or worse, the Italian company has a chance to become a truly global automaker that can freely use all of its technologies wherever it operates.
Airbus wins orders race over Boeing.
The European aerospace group, called EADS until this year but now rechristened Airbus after its flourishing civil aviation unit, said it had raked up more than 1400 orders in 2013. It did not specify whether these were gross orders or net, after cancellations, but in either case it has probably left Boeing, with 1249 gross orders and 1074 net orders, lagging. For Airbus, 2013 was either the second best or the best trading year in its history -- it will become clear which after a more detailed announcement on Jan. 13. The company's lead in civil aircraft is a reflection of chief executive Tom Enders' strategy of relying on this line of business rather than military production, which is suffering from shrinking European defense budgets. As a "normal company" – Enders's slogan – Airbus is predominantly peaceful, and its ties to the founding governments, German and French, are further weakening.
Turkish corruption probe expands to large construction projects.
Turkish Prime Minister Recep Tayyip Erdogan said at a rally of his supporters that businessmen involved in a $30 billion airport project had been called in for questioning in the course of an expanding corruption investigation, which has already forced him to replace half the government. The prime minister called the prosecutors unpatriotic for meddling with the huge infrastructure project. They are, however, looking for corruption where it is most likely to be found: In the construction sector that, under Erdogan, has come to depend on government decisions for large projects. Infrastructure projects with large government involvement, such as high-speed railroads, new airports, canals and gigantic bridges have an obvious potential for graft. Erdogan is personally involved in construction regulation, making decisions on state companies' real estate transfers and public housing administration. The corruption probe is getting closer to Erdogan himself as his political rivals try to bring him down, attacking his reputation for clean governance.
U.K.'s Channel Five may be sold for $1.16 billion.
Publisher Richard Desmond, who turned around the U.K.'s Channel Five TV station after buying it from Luxembourg-based media group RTL in 2010, may sell it early this year for as much as $1.16 billion. Three years ago, Desmond only paid $171 million for the loss-making business. He has since re-energized the channel, bringing in popular shows such as Big Brother and returning it to profitability. Potential buyers include the U.K.'s ITV and U.S.-based Turner Broadcasting. The price Desmond reportedly wants for the asset is steep, though, at about 10 times projected pre-tax earnings for this year. Desmond may be able to extract it, because European free-to-air broadcasters rarely come on the market. More probably he will have to settle for a more modest profit: despite its recent success, Channel Five still has only a 4 percent weekly viewing share in the U.K.
Putin breaks silence on Volgograd terrorist attacks.
Russian President Vladimir Putin belatedly reacted to the Dec. 29 and 30 terrorist attacks in the southern city of Volgograd, mentioning them in a New Year address he re-recorded so suddenly that an older version was broadcast to the Russian Far East, which is eight hours ahead of Moscow. He then traveled to Volgograd on Jan. 1 to meet with officials and victims. New Year's is the biggest -- and heaviest drinking -- holiday of the year in Russia and Putin's burst of activity, coming two days after the attacks, was punishment in itself for security bosses and the scared Volgograd governor. "The crimes committed here in Volgograd are so disgusting they need no additional comment," Putin said as he began his visit. What does merit comment is that Putin's behavior is beginning to resemble that of secretive, erratic Soviet rulers.
(Leonid Bershidsky can be reached at firstname.lastname@example.org).