Hedge fund Elliott says Hyundai Motor Group has too much capital

(Reuters) – U.S. hedge fund Elliott Management said on Tuesday Hyundai Motor Group was holding excess capital and that shareholder returns from the Korean automotive group were lagging industry standards.

In a letter to the directors of the group, the fund called for return of excess capital to shareholders, a review of any and all non-core assets and addition of new independent directors to its respective boards.

Elliott Management owns $1.5 billion worth of shares in three Hyundai group companies – Hyundai Motor Co (005380.KS), Kia Motors Corp (000270.KS) and auto-parts maker Hyundai Mobis Co Ltd (012330.KS).

The tussle between the hedge fund and the South Korean conglomerate over a potential revamp has been going on for long.

The fund had in September called for a committee to review its restructuring proposals with other investors and experts, which was rejected by the board.

Elliot said on Tuesday that non-conforming reporting of cash flows is distorting and hiding the group’s true income from operations.

Reporting by Sanjana Shivdas and Arunima Banerjee in Bengaluru; Editing by Sai Sachin Ravikumar and Arun Koyyur

Flipkart CEO Bansal resigned after sexual misconduct claim: source

(Reuters) – The investigation into Flipkart Group chief Binny Bansal that led to his resignation on Tuesday stemmed from an allegation of sexual assault that dates back a few years, a person familiar with the matter told Reuters.

“In late July … an allegation came to us. It was a claim of sexual assault against Binny,” the source said, adding the individual concerned was a former Flipkart associate who was not with the company at the time of making the allegation.

“The investigation could not corroborate the allegation. It did, however, surface a lack of transparency on Binny’s part.”

Bansal has strongly denied the allegation, according to a separate statement by Flipkart and its main shareholder Walmart (WMT.N).

He could not be reached for comment by repeated emails and phone calls from Reuters.

Reporting by Nandita Bose in New York and Aishwarya Venugopal and Nivedita Bhattacharjee in Bengaluru; editing by Patrick Graham

Johnson Controls sells its power business to Brookfield in $13 billion deal

(Reuters) – Johnson Controls International Plc (JCI.N) said on Tuesday it would sell its power solutions business, which makes car batteries, to investment firm Brookfield Business Partners L.P., in a cash deal valued at $13.2 billion.

Shares of Johnson Controls were up 3.5 percent at $35.40 before the bell.

The deal will allow Johnson Controls to focus on its building technologies and solutions business, which makes heating, ventilation and air conditioning systems, as well as building access control and fire detection systems.

Reuters had reported, late last month, that Brookfield and Johnson Controls were close to finalizing terms for the sale of the unit, whose batteries are used in about a third of cars globally.

The deal represents the biggest shake-up at Johnson Controls since its merger in 2016 with Tyco International.

Johnson Controls’ power solutions business, which makes and distributes about 154 million lead-acid batteries for passenger cars and light trucks annually, carries higher margins but has been capital intensive for Johnson Controls, analysts have said.

The company expects to deploy $3.0 to $3.5 billion of proceeds toward debt paydown and retain an investment grade credit rating, the company said in a statement.

More deals in the sector are likely, as industrial conglomerates continue to separate businesses that are too disparate in terms of financial performance.

The company expects the transaction to close by June 30, 2019.

Centerview Partners and Barclays were financial advisers to Johnson Controls, and Simpson Thacher served as legal advisers.

Reporting by Sanjana Shivdas and Rachit Vats in Bengaluru; Editing by Shailesh Kuber

Trump’s steel tariffs create big profits but few new jobs

SEDALIA, Missouri (Reuters) – Nucor Corp, America’s largest steelmaker, planned a new plant in Sedalia, Missouri, long before U.S. President Donald Trump imposed tariffs to protect the industry – and it does not need them to make money.

Although the firm helped lead the lobbying push for tariffs on imports, executives say they invested in Sedalia and two other sites to capitalize on an already profitable strategy that doesn’t depend on government help.

While Trump has played up the narrative of downtrodden steel workers losing jobs to unscrupulous foreign competitors, most of the benefit from his 25 percent tariffs are flowing to the already strong bottom lines of Nucor and other modernized and globally competitive U.S. steel firms, according to interviews with industry executives, experts and a Reuters review of company earnings.

Even if tariffs prompt such firms to expand, they are not likely to add large numbers of factory jobs because they have stayed competitive by slashing the amount of labor required to make steel.

(For a graphic on steel industry efficiency and job loss, see: tmsnrt.rs/2PLloLb )

The Commerce Department said in a statement to Reuters that tariffs will help the Sedalia plant and 12 other steel projects create about 3,405 jobs. That’s a 2.4 percent gain industrywide, according to the American Iron and Steel Institute.

About 1,400 of those jobs at six projects, including the three Nucor sites, were planned before tariffs or do not rely on them, according to some of the firms and a Reuters review of company documents. In addition, two other projects by Republic Steel, which would create 690 jobs by restarting previously idled operations, are not certain to go forward, the company said.

A Commerce Department spokesman did not comment on whether all the projects on the administration’s list depended on tariffs but pointed out that steel imports have declined recently and domestic production has increased. The department said broad tariffs on imports were needed because of rampant “chicanery” by foreign producers who evaded existing countervailing and anti-dumping duties, which are applied narrowly to specific products.

Nucor has led the sector’s transformation to labor-saving plants since the 1970s, replacing older blast furnaces with more efficient modern electric arc furnaces.

Trump’s tariffs may prove pivotal in extending the life of older, less efficient plants such as U.S. Steel’s Granite City plant near St. Louis, where the president held an event in July to tout tariffs. The company credits tariffs for its decision to add 800 jobs by restarting two blast furnaces it had idled in 2015. A total of 1,500 workers will now work in a factory where sparks fly and molten steel is still poured from giant ladles in a labor-intensive, multi-step process.

At Nucor’s plant in Sedalia, by contrast, 225 people will make steel with a high-tech furnace that shoots electricity through scrap metal to melt it into new products. That technology is now used to produce nearly 70 percent of U.S. steel – with a third less labor and energy, according to Charles Bradford, president of Bradford Research Inc.

Nucor CEO John Ferriola testified in Washington last year that tariffs would encourage steel-sector investment, but he emphasized in a statement to Reuters that the company’s own capital projects are “designed to be competitive even without tariffs.”

Although Nucor’s expansions don’t depend on protectionist policy, a company spokesperson said, tariffs make such investments easier by limiting the dumping of artificially low-priced steel on the U.S. market.

Nucor announced last month that it had nearly tripled its third-quarter profits, to $676.66 million, compared to a year ago. Earnings for steel companies in the SP’s steel index soared more than 75 percent in the first half of 2018 and are expected to jump 166 percent in the second half, according to I/B/E/S data from Refinitiv.

‘TRANSFORMATIVE’ JOBS

Nucor has led the way in slashing labor costs with modern factories, a trend driving industry job loss as the hours of labor needed to produce a ton of steel has been cut from nearly 10 to two since 1980, according to the American Iron and Steel Institute.

Nucor selected Sedalia because of its location on a main rail line, near ample scrap metal sources and major construction markets needing the plant’s steel rebar.

Although the plant will create few jobs compared to steel factories of the past, the positions – with salaries averaging $65,000 – are highly coveted in Sedalia, where home values average $86,000 and 15 percent of adults have a college degree, according to U.S. census data.

The desirability of the jobs underscores a political dynamic often lost in the debate over Trump’s trade policy. In places like Sedalia, where 70 percent of residents of the surrounding county voted for Trump, steel jobs are prized over other blue-collar work.

Sedalia assigned a team of 10 people to court Nucor for a year, and the state provided tax incentives that could total nearly $27.3 million over 15 years. Local economic development director Jessica Craig called the jobs “transformative.”

‘DEATH BY CHINA’

Nucor gets a warm reception in Washington, too, where it’s the biggest spender on lobbying among steel firms, laying out $1.25 million so far this year, down from a peak of $2.71 million in 2015, according to Nucor disclosures compiled by the Center for Responsive Politics.

Nucor’s political spending, which also includes millions of dollars in donations to political candidates, started under former CEO Dan DiMicco, who started in 2000 and stepped down in 2012. DiMicco went on to advise Trump on manufacturing during the presidential transition and is now a member of his Advisory Committee for Trade Policy Negotiations, a key venue for business leaders to influence U.S. trade negotiators.

Nucor also gave $1 million to a San Diego nonprofit in 2011, which was used by Peter Navarro – now a top Trump trade adviser – to make a film called “Death by China.” At one point, the film depicts a knife emblazoned with “made in China” plunging into an American flag as a voice-over intones: “China is the only major nation in the world that is preparing to kill Americans.”

DiMicco said his experience running Nucor shaped his views.

“My customers came to me and said, ‘China is killing us’,” he said in an interview, “so this turned into something much larger than the steel industry … You may have to put tariffs on every product from China to change their behavior.”

As they raise alarms about unfair competition, however, Nucor executives take pride in the company’s performance despite such headwinds. Nucor has been profitable since 1968 in every year but one – 2009, amid a global financial crisis.

Nucor has also sought to block other companies’ efforts to win exemptions from the tariffs through a Commerce Department process that awards them in cases where, for instance, a company can’t find the type of steel it needs domestically. Nucor said it filed objections to about 10 percent of the more than 42,000 steel exemption requests received as of October 22.

They included those from companies such as NLMK Pennsylvania LLC, which sought exemptions for imported slabs it uses to make steel coils.

“They don’t even make the kind of slabs we use,” CEO Bob Miller said of Nucor, who he believes wants to compete with him in selling coils. “It’s totally anti-competitive.”

The tariffs are boosting capacity of the slabs NLMK needs, Nucor said in a statement, so there should be “plenty of slabs available domestically.”

LOST PROFITS, JOBS

Tariff critics argue that rising profits for the steel industry come at the expense of its customers and their workers. Higher prices mean steel users – companies making everything from tractors to skyscrapers – could cut 16 jobs for every one added in steel manufacturing, according to the Trade Partnership Worldwide LLC, a pro-trade economic forecasting and consulting firm in Washington.

Tariff advocates call such worries overblown.

“What you see six months into the steel tariffs is that the manufacturing economy is strong,” says Scott Paul, president of the Alliance for American Manufacturing.

Steel consumers say their cutbacks will come over time, as higher steel prices erode their competitiveness.

Slideshow (25 Images)

Major automakers including Ford, Honda, Fiat Chrysler and General Motors have said the steel tariffs will mean billions of dollars in new costs for the industry, and GM recently announced cuts to North American white collar staff.

The impact reaches far beyond auto factories to anyone who uses steel. Joe Pecoraro, a project executive at Skender Construction, a Chicago builder, said the tariffs caused him to delay two projects that would have produced at least 130 construction jobs.

“The cost of everything made of steel,” he said, “has gone through the roof this year.”

Reporting By Timothy Aeppel; Editing by Joseph White and Brian Thevenot

UK earnings rising at their highest rate in a decade

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Brexit is already having an impact on Britain’s labor market, with the number of people from the European Union working in the country falling by a record amount.

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The Office for National Statistics said Tuesday the number of EU nationals working in Britain fell by 132,000 in the three months to September compared with the year before, to 2.25 million. That’s the largest annual fall since comparable records began in 1997.

Some decline would be expected given economic improvements elsewhere in the EU over the past couple of years. However, it appears that the vote to leave the EU in June 2016 has had an impact as well. Not only did it lead to a sharp fall in the pound, which made Britain a relatively less attractive proposition, it also created more uncertainty about the future status of EU workers in Britain.

“The sharp fall in EU migrant workers over the last year shows that Britain’s labor market is already changing ahead of Brexit,” said Stephen Clarke, senior economic analyst at the Resolution Foundation.

EU nationals in Britain have lived in uncertainty about their future work rights since the Brexit vote, which was largely driven by concerns over immigration. One of the main tenets of EU membership is the freedom for citizens to move and work anywhere within the 28-country bloc.

Discussions over Britain’s exit in March 2019 are still going on and there are doubts as to whether the British Parliament will back any deal Prime Minister Theresa May strikes. Though the government has sought to assuage concerns of EU citizens in Britain about their future, talk of Britain crashing out of the bloc without a deal on future relations is adding to uncertainty.

The departure of more EU nationals comes at a time when the U.K. labor market is doing well. The number of people in work was up by 350,000 on the year to 32.41 million, with British nationals working up by 448,000 to 29 million. Overall, the unemployment rate is super-low at 4.1 percent despite a 0.1 percentage point rise over the most recent period.

Wages are rising, too, with employers seemingly having to respond to scarce labor by giving workers more money. Average earnings over the three months to September, excluding bonuses, were 3.2 percent higher than the corresponding period a year earlier. That is the highest rate since a decade ago, before the global financial crisis pushed the economy into recession.

How the labor market performs over the coming few months will likely depend on what happens with Brexit. The government has insisted that EU citizens’ freedom of movement will end after a transition period currently expected to last for 21 months past March. What rights they will get after that is still unclear.

“Firms who employ a large share of migrant workers must think now about adjusting to a lower migration environment — in terms of the workers they employ, what they produce and how they operate,” said the Resolution Foundation’s Clarke.

Most forecasters think that a no-deal Brexit, which would see tariffs slapped on British exports to the EU, border checks reinstalled, and restrictions on travelers and workers, would damage the British economy.

The Standard Poor’s ratings agency last month said a no-deal Brexit could push the British economy into recession and cause unemployment to spike to 7.4 percent by 2021.

Homeowners are spending, Home Depot is winning

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Home Depot breezed past all expectations in the third quarter and raised its annual profit expectations again as Americans plow money into their homes, even amid hints that the housing market is cooling.

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Comparable-store sales, a key indicator of a retailer’s health, rose 4.8 percent, but it jumped 5.4 percent in the U.S., its dominant market.

Housing prices and mortgage rates are steadily increasing and home sales fell for the sixth consecutive month in September. Contracts to buy new homes, a forward-looking indicator, have been weak for months.

That is not all bad news for home-improvement retailers like Home Depot and Lowe’s, which posts earnings next week.

People who buy homes are a huge revenue generator, but so are those who are investing in the homes that they already own, for a multitude of reasons.

A strengthening economy and historically low unemployment have also created a significant tail wind for Home Depot.

“Home Depot’s numbers are particularly impressive given that the housing market did not play ball over the period, with a slump in sales of both new and existing homes,” wrote Neil Saunders, managing director of GlobalData Retail. “Over the longer term, we remain concerned that this trend will dampen some of the underlying demand for home improvement. However, we also recognize that there are a number of other factors that will elevate spending.”

Saunders cited the strong economy, the Sears bankruptcy filing, and rebuilding efforts after numerous natural disasters.

Home Depot raised its outlook for the year, and now expects annual earnings to climb about 33.8 percent, or $9.75 per share. Its previous outlook was for a 29.2 percent increase. Analysts surveyed by FactSet expect earnings of $9.56 per share.

For the period ended Oct. 28, the Atlanta company’s profit jumped 32 percent to $2.87 billion, or $2.51 per share, far exceeding per-share projections for $2.27 on Wall Street, according to a survey of analysts polled by Zacks Investment Research.

A year earlier Home Depot earned $2.17 billion, or $1.84 per share.

Revenue climbed 5.1 percent to $26.3 billion from $25.03 billion, beating Wall Street’s $26.21 billion prediction.

Revenue is now expected to rise approximately 7.2 percent, up slightly from its prior forecast for an increase of about 7 percent. Comparable-store sales are now anticipated to climb approximately 5.5 percent. Home Depot previous outlook was for the metric to increase about 5.3 percent.

Shares of The Home Depot Inc. rose 2 percent before the opening bell.

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Elements of this story were generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on HD at https://www.zacks.com/ap/HD

Report: Putin’s friend set to win lucrative new contract

A report says President Vladimir Putin’s childhood friend is set to win a massive seaport contract.

Respected business daily Kommersant reported Tuesday the firms controlled by Arkady Rotenberg are positioned to win the contract for a new cargo port on the Taman Peninsula. It cited officials familiar with the talks.

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Earlier this year, Rotenberg’s company, Gazstroymontazh, completed a $3.5 billion project to build the much-anticipated 19-kilometer (12-mile) bridge linking southern Russia and the Crimean Peninsula, which Russia annexed from Ukraine in 2014.

The contract for the port, which is just southeast of the new bridge, would allow Rotenberg’s companies to use the expensive equipment leased for the bridge project. The port contract is estimated at nearly $1 billion.

Rotenberg is Putin’s friend since both started practicing judo as teenagers in the 1960s.

Probe opens after report Polish regulator sought large bribe

Poland’s prime minister has called for an investigation after a newspaper reported that the head of the nation’s financial regulator sought a multimillion dollar bribe from a bank.

Government spokeswoman Joanna Kopcinska said Tuesday that Prime Minister Mateusz Morawicki has asked prosecutors and the security services to check allegations that Financial Supervision Authority chairman Marek Chrzanowski had sought the bribe.

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Kopcinska said Morawiecki was summoning Chrzanowski to a meeting Wednesday.

The daily Gazeta Wyborcza reported that Chrzanowski sought the bribe from the controlling shareholder of Getin Noble Bank, Leszek Czarnecki, in return for favorable treatment.

The regulator said the allegations were untrue and amount to blackmail attempts by the bank owner.

The chief regulator was appointed in 2016 by then-prime minister Beata Szydlo of the ruling Law and Justice party.

Johnson Controls selling power solutions unit for $13.2B

Johnson Controls International PLC is selling its power solutions division to Brookfield Business Partners LP for $13.2 billion.

The power solutions business, which makes and distributes advanced battery technologies for various vehicles, posted $8 billion in revenue in fiscal 2018.

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Johnson Controls CEO George Oliver said Tuesday the sale will let the company streamline its business, provide increased financial flexibility to strengthen its balance sheet, return capital to shareholders and create options in its buildings unit.

Cork, Ireland-based Johnson Controls anticipates using $3 billion to $3.5 billion of the $11.4 billion in proceeds from the sale to pay down debt.

The deal is targeted to close by June 30, 2019.