Nissan cuts 20,000 jobs and warns on losses

Nissan, Japan's third-largest car maker, warned today of its first annual loss in 14 years and said that it would eliminate 20,000 jobs, mainly in Japan, to meet a 20 per cent cut in production next year.

The loss is the first since Carlos Ghosn, the chief executive, took the helm a decade ago, and its forecast of a 180 billion yen (£1.3 billion) loss for the year to the end of March comes only three months after he projected a Y270 billion profit.

Nissan said that the job cuts would come mostly through natural attrition in Japan and would be complete by the end of March next year.

It has already announced 1,200 job cuts at its UK plant in Sunderland

Last week Toyota tripled its annual operating loss forecast, citing a faster-than-expected sales slump in the US, Japanese and European markets.

Honda also cut its forecast last month; however, it expects to stay in the black.

Today's results are not good news for Renault, the French carmaker that owns 44 per cent of Nissan and in which, in turn, is 15 per cent owned by Nissan. Renault's own debts are rising.

As well as the global slump in demand for cars, hit first by rising fuel costs and then by inflation and the lack of consumer credit, Japanese carmakers have to battle with another problem, the soaring value of the yen against the dollar and most other currencies, that has made its cars seem relatively expensive.

Nissan’s shares have dived more than 70 per cent in the past 12 months, and Toyota and Honda are down 47 per cent and 30 per cent, respectively.

Nissan has shed $12 billion (£8 billion) in market value since Mr Ghosn arrived from Renault to rescue Nissan in 1999.

Nissan’s sales in the United States, its biggest market, fell 33 per cent last month, and by a similar rate in Japan.

For October-December, Nissan made an operating loss of Y99.2 billion and a net loss of Y83.2 billion.

A year ago, it made an operating profit of Y211.9 billion and net profit of Y132.2 billion.

Barclays halts directors' bonuses as profits fall

Barclays, Britain's third-largest lender, said that it would waive bonuses for its executive directors as it reported a 14 per cent fall in full-year pre-tax profits, announced £8.1 billion of writedowns and scrapped its dividend.

The bank reported a 2008 profit of £6.1 billion, ahead of analysts’ forecasts but down 14 per cent on the previous year.

Pre-tax profit fell from £7.1 billion in 2007 but ahead of an average forecast of £5.8 billion. The figures included a £2.2 billion gain that the bank made on its acquisition of a North American division of Lehman Brothers last year.

Barclays said that as a result of a “heavily negative” return on its shares in 2008 — its shares have fallen 76 per cent year on year — and the scrapping of its final dividend, “executive directors will receive no bonuses in 2008”.

However, is still paying about £600 million in bonuses below board level, which is nearly 50 per cent less than rewards paid in the previous year.

Barclays released its results as the dispute over bank bonuses continuted to rage.

Yesterday, Alistair Darling announced a review of how the British banking sector was run after an outcry over the level of bonuses that lenders, such as Royal Bank of Scotland, were proposing to pay after being bailed out by the taxpayer.

However, the review has drawn criticism because it is not scheduled to be concluded by the end of the year, while this morning, The Times revealed that the bankers who are managing the Government's £37 billion bailout of the banking sector will themselves receive bonuses.

Unlike RBS and Lloyds Banking Group, Barclays decided against taking government funds to boost its balance sheet, instead opting for funding from overseas investors.

This morning, Barclays revealed that its total staff costs had fallen 10 per cent on the year to £6.3 billion, with bonuses down 48 per cent, largely because of a lower level of performance-related payments at Barclays Capital and Barclays Global Investors, its two capital markets divisions.

The bank said that for this year and beyond it was reviewing its compensation policies and practices "to ensure that they evolve appropriately".

It will publish details in its forthcoming annual report. John Varley, chief executive, said that future performance payments were likely to contain a higher proportion of equity relative to cash and a greater element of deferred payments.

"I absolutely understand why this matter is the subject of scrutiny in the way that it is," Mr Varley said.

Barclays reaffirmed its intention to resume dividend payments in the second half of this year.

Its Tier 1 equity ratio, which is a key measure of a bank's financial health, was 6.7 per cent at the end of the year, up from 5.1 per cent a year earlier.

The shares rose nearly 10 per cent to 115.1p in early trading.

Gordon Brown says banks will not 'reward failure'

(David Moir/PA)

Gordon Brown says that banks should not "reward failure"

Gordon Brown insisted today that there must be “no rewards for failure” in Britain’s banks.

The Prime Minister's comments came despite reports that big banks that were bailed out with billions of pounds of taxpayer money are to pay more than £1 billion in bonuses to senior staff.

Speaking to an audience of economists in London, Mr Brown said that Britain was leading the way "in sweeping aside the old short-term bonus culture of the past and replacing it first of all with a determination that there are no rewards for failure and secondly that there are rewards only for long-term success”.

Mr Brown said that the policy not to reward failure would be pursued "aggressively", so that banks in which the state now holds a majority stake would pay no bonuses to board members and no dividends to shareholders this year.

He added: “I believe, as a society, we should support hard work, effort, enterprise and responsible risk-taking. We should not in any way condone, but should punish, irresponsible and excessive risk-taking.”

The Times reported this morning that the bankers recruited by the Treasury to manage the Government's £37 billion bank bailout are themselves in line for bonuses.

It added that UK Financial Investments Ltd (UKFI), the Treasury-run body created by Alistair Darling, the Chancellor, to manage the state's stake in the banks, is set to approve more than £1 billion in bonuses for banks that received bailout funding.

The Royal Bank of Scotland, which is 70 per cent owned by the state, wants to pay staff close to £1 billion in bonuses.

UKFI is also being asked to approve bonus payments in Lloyds Banking Group, another partially nationalised lender.

Mr Darling acknowledged public anger over bonuses yesterday and announced a review of the way that banks are run.

However, he said there was “nothing wrong with a bonus scheme that rewards success”.

George Osborne, the Shadow Chancellor, called for a fundamental change to bankers’ pay.

“The party is over for the banks," he said. "You can’t go on paying yourselves 20 times what a heart surgeon earns. That whole culture has to come to an end. I think the bankers, and indeed the Government, have to understand you can’t just reflate the balloon that burst,” he said.

The row has thrown the spotlight on to the arm’s-length body set up last November that must now decide how much banks can pay out in bonuses.

Since its creation UKFI has hired around a dozen senior bankers and other financial experts.

They include John Kingman, a senior Treasury official, John Crompton, formerly managing director of Merrill Lynch, and the banking analyst Tim Sykes. The Government has so far refused to say what UKFI’s staff are paid, but a spokesman yesterday admitted it intends to run a bonus scheme. The full details had yet to be finalised, he said.

Sources close to UKFI defended the proposed incentive payments. “If these guys sell RBS at a large profit for the taxpayer in a couple of years, who’s going to begrudge them a bonus?” said one.

Mr Darling was yesterday forced to defend Glen Moreno, UKFI acting chairman, after it was reported that he was a former trustee of Liechtenstein Global Trust, which has been at the centre of an international investigation into alleged tax evasion.

Barclays, which has taken advantage of government bailout schemes but has not accepted rescue capital from taxpayers, will today announce that bonuses for 2008 will be down by about half on average. Barclays Capital, its investment banking arm, is expected to pay out £600 million, while there will be additional bonuses for people in the retail and commercial arm of the bank.

French banks yesterday agreed a code of ethics to limit bonuses and peg them to long-term success rather than short-term profits. The code, the first of its kind in the world, comes after President Sarkozy blamed bankers for the global economic catastrophe.

UKFI staff will not be the first state bankers to be paid incentive payments. Bonuses worth 10 per cent of salaries were paid to Northern Rock staff last month because the lender hit targets to repay loans.

Bond market calls Fed's bluff as global economy falls apart

Global bond markets are calling the bluff of the US Federal Reserve.

The yield on 10-year US Treasury bonds – the world's benchmark cost of capital – has jumped from 2pc to 3pc since Christmas despite efforts to talk the rate down.

This level will asphyxiate the US economy if allowed to persist, as Fed chair Ben Bernanke must know. The US is already in deflation. Core prices – stripping out energy – fell at an annual rate of 2pc in the fourth quarter. Wages are following. IBM, Chrysler, General Motors, and YRC, have all begun to cut pay.

The "real" cost of capital is rising as the slump deepens. This is textbook debt deflation. It was not supposed to happen. The Bernanke doctrine assumes that the Fed can bring down the whole structure of interest costs, first by slashing the Fed Funds rate to zero, and then by making a "credible threat" to buy Treasuries outright with printed money.

Mr Bernanke has been repeating this threat since early December. But talk is cheap. As the Fed hesitates, real yields climb ever higher. Plainly, the markets do not regard Fed rhetoric as "credible" at all.

Who can blame bond vigilantes for going on strike? Nobody wants to be left holding the bag if and when the global monetary blitz succeeds in stoking inflation. Governments are borrowing frantically to fund their bail-outs and cover a collapse in tax revenue. The US Treasury alone needs to raise $2 trillion in 2009.

Where is the money to come from? China, the Pacific tigers and the commodity powers are no longer amassing foreign reserves ($7.6 trillion). Their exports have collapsed. Instead of buying a trillion dollars of extra bonds each year, they have become net sellers. In aggregate, they dumped $190bn over the last fifteen weeks.

The Fed has stepped into the breach, up to a point. It has bought $350bn of commercial paper, and begun to buy $600bn of mortgage bonds. That helps. But still it recoils from buying Treasuries, perhaps fearing that any move to "monetise" Washington's deficit starts a slippery slope towards an Argentine fate. Or perhaps Bernanke doesn't believe his own assurances that the Fed can extract itself easily from emergency policies when the cycle turns.

As they dither, the world is falling apart. Events in Japan have turned deeply alarming. Exports fell 35pc in December. Industrial output fell 9.6pc. The economy is contracting at an annual rate of 12pc. "Falling exports are triggering a downward spiral of production, incomes and spending. It is important to prepare for swift policy steps, including those usually regarded as unusual," said the Bank of Japan's Atsushi Mizuno.

The bank is already targeting equities on the Tokyo bourse. That is not enough for restive politicians. One bloc led by Senator Koutaro Tamura wants to create $330bn in scrip currency for an industrial blitz. "We are facing hyper-deflation, so we need a policy to create hyper-inflation," he said.

This has echoes of 1932, when the US Congress took charge of monetary policy. We are moving to a stage of this crisis where democracies start to speak – especially in Europe.

The European Central Bank's refusal to follow the lead of the US, Japan, Britain, Canada, Switzerland and Sweden in slashing rates shows how destructive Europe's monetary union has become. German orders fells 25pc year-on-year in December. French house prices collapsed 9.9pc in the fourth quarter, the steepest since data began in 1936. "We're dealing with truly appalling data, the likes of which have never been seen before in post-War Europe," said Julian Callow, Europe economist at Barclays Capital.

Spain's unemployment has jumped to 3.3m – or 14.4pc – and will hit 19pc next year, on Brussels data. The labour minister said yesterday that Spain's economy could not "tolerate" immigrants any longer after suffering "hurricane devastation". You can see where this is going.

Ireland lost 36,500 jobs in January – equal to a monthly loss of 2.3m in the US. As the budget deficit surges to 12pc of GDP, Dublin is cutting wages, disguised as a pension levy. It has announced "Rooseveltian measures" to rescue the foundering companies.

The ECB's obduracy has nothing to do with economics. It fears zero rates as a vampire fears daylight, because that brings the purchase of eurozone bonds ever closer into play. Any such action would usher in an EMU "debt union" by the back door, leaving Germany's taxpayers on the hook for Club Med liabilties. This is Europe's taboo.

Meanwhile, Eastern Europe is imploding. Industrial output fell 27pc in Ukraine and 10pc in Russia in December. Latvia's GDP contracted at a 29pc annual rate in the fourth quarter. Polish homeowners have had the shock from Hell. Some 60pc of mortgages are in Swiss francs. The zloty has halved against the franc since July.

Readers have berated me for a piece last week – "Glimmers of Hope" – that hinted at recovery. Let me stress, I was wearing my reporter's hat, not expressing an opinion. My own view, sadly, is that there is no hope at all of stabilizing the world economy on current policies.