Wednesday newspaper round-up: GM/Vauxhall, Kraft/Cadbury, Marks & Spencer

Wed 04 Nov 2009

LONDON (SHARECAST) - GM has abandoned its planned sale of Opel to Canada’s Magna and Russia’s Sberbank The surprise move will be an embarrassment for the German government which has expended a lot of political capital on the controversial deal. After a six-hour board meeting on Tuesday, the US carmaker said it would hold on to Opel and start restructuring its European unit, which also comprises British marque Vauxhall. The decision marked a U-turn in GM’s strategy and reflects improved business confidence in the car sector, highlighted on Tuesday by another positive month of increased car sales in the US, the FT reports. Kraft, the giant American food company, said last night that it would “remain disciplined” in pursuing a bid for Cadbury, the British chocolate maker, even as it lowered its outlook for sales for the coming year. The US group’s statement of intent came as reports suggested that Kraft had obtained $9bn (£5.5bn) of financing for its bid from nine banks. The lead underwriters are understood to be Citigroup, Deutsche Bank and Barclays. Kraft declined to comment, the Times reports. Shares in Kraft fell more than 3% in after-hours trading in New York, to $26.90, taking Kraft’s stock down to levels seen after it unveiled its $16.7bn approach to Cadbury in early September. The sell-off came despite Kraft reporting earnings of 55 cents per diluted share, exceeding the 48c that Wall Street analysts expected. Kraft also raised its full-year earnings guidance to at least $1.97 per share in 2009, up from a previous projection of at least $1.93, adds the FT. The extra interest UK taxpayers will have to pay on the national debt in future years is equivalent to the entire Transport budget, the International Monetary Fund said in an unusual direct warning to Britain.The IMF singled out the UK as being at significant risk from the threat of rising debt interest costs as it absorbs the effects of the financial and economic crisis. It said that the proportion of UK taxes that will go towards financing the national debt will, in five years' time, be double what it was just before the onset of the crisis, the Telegraph reports. The battle of the bonuses between the authorities and the bankers reached a new pitch yesterday. Sir David Walker, the former investment banker charged by the Government with reviewing executive pay in the financial sector, promised to end the banks' "old boys' club" culture and said some City bonuses were still "egregiously high," the Independent reports. Marks & Spencer will announce a plan today to sell branded food at all its stores in an attempt to close the gap with Waitrose, as the upmarket grocers moved closer to a price war. M&S has been lagging its premium rival in sales growth since Waitrose introduced a value range to lure thrifty shoppers. M&S hit back this week with its first price comparison advertisements, pointing out products where its value “Wise Buys” were cheaper than Essential Waitrose, the Times reports. The Bank of England's Monetary Policy Committee is facing one of the toughest decisions in its decade-long history. Observers expect fireworks at its two-day meeting, starting today, with a split committee facing a crucial vote on whether to extend the Bank's policy of quantitative easing (QE), which has already injected over £150bn of potential spending power directly into the economy. The Bank Rate has been kept at 0.5 per cent since the spring, the Independent reports. Gold prices on Tuesday surged to an all-time high after India’s central bank bought 200 tonnes of the precious metal, swapping dollars for bullion as the country’s finance minister warned the economies of the US and Europe had “collapsed”. India’s decision to exchange $6.7bn for gold equivalent to 8 per cent of world annual mine production sent the strongest signal yet that Asian countries were moving away from the US currency, the FT reports. Oracle is braced for a formal objection from Brussels to its planned $7.4bn acquisition of fellow US technology company Sun Microsystems, escalating the company’s legal wrangle with Europe’s competition authorities. The US software company has refused to offer any concessions to European regulators to meet their concerns about the deal, according to one person close to the process, the FT reports. Toyota Motor has decided to follow Honda and BMW out of Formula One racing to save costs as the Japanese carmaker braces for its second straight annual loss, a person with knowledge of the situation said on Wednesday. Akio Toyoda, the Japanese automaker’s president, is expected to announce the move later on Wednesday, the FT reports.