Financial life in a big town

Nokia Corp., battered by the popularity of smartphones, is abandoning the Japanese market, after a brief foray with luxury cell phones costing as much as 20 million yen ($250,000).

The Finnish handset maker is closing by the end of July its last store selling high-end Vertu cell phones in Ginza. Previously, it had four such stores in Japan, according to Tomoko Morinari of Sunny Side Up, a Tokyo public relations company that has Nokia as its client.

She declined to say when the decision to leave Japan was made or how many Vertu phones Nokia had sold in Japan.

Vertu said in a statement Wednesday that it was “withdrawing from the Japanese market” to better focus on priority businesses. It thanked business partners, said its Tokyo office will fold by the end of this year, but promised to continue to do work with Japanese craftsmen in its business elsewhere.

Nokia phones have never been that popular in Japan, where the iPhone from Apple Inc. is hugely popular in addition to offerings from Japanese electronics makers such as Sharp Corp payday loan lenders.

Vertu handsets were billed as luxury items including one of lacquer by a Japanese craftsman decorated as a National Treasure that went for 20 million yen ($250,000), Morinari said.

Last month, Nokia warned its second-quarter sales and margins are expected to be much lower than anticipated because of global competition in both the high- and low-end markets.

Since 1998, Nokia has been the world’s biggest seller of cell phones, but in the first quarter of this year Apple overtook it as the world’s top handset vendor in revenue. Nokia’s market share continues to fall, and at 29 percent in the first quarter, is at its lowest level since the late 1990s.

Even more damaging has been Nokia’s inability to meet modern challenges of the smartphone market, the lucrative sector in the handset industry.

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Caprice Lam took 90 minutes to close his first luxury-yacht sale, from the time the customer stepped aboard the 62-foot (19-meter) vessel on China’s Hainan Island to the moment the bank wired the 35 percent deposit.

“I don’t even have his name card,” said Lam, hours after the 13 million-yuan ($2 million) deal on April 2 at a boat show in the tropical resort of Sanya. “He just gave me his cell phone number, called his bank and paid the deposit.”

The sale shows how China’s industrial base is breaking into the most expensive luxury markets. While wealthy Chinese typically entered markets for jewelry, clothes, cars and planes through U.S. and European brands, Lam works for Xiamen Hangsheng Yacht Building Co. Ltd. in Fujian province. It’s one of at least half-a-dozen Chinese yacht builders competing in the country’s nascent nautical market with Azimut Yachts, Ferretti Yachts, Princess Yachts International and Brunswick Corp.

“This is a sign of China’s own industrial confidence,” said Ryan Swift, Hong Kong-based editor-in-chief of Asia-Pacific Boating magazine. “A yacht is a very complex product requiring all the engineering of a house, which has to float, survive waves and have a fine finishing on the inside.”

Spiral Staircase

This time, Chinese companies are entering a luxury market early. While China now has as many as 400 dollar billionaires, there are only about 100 Chinese-owned yachts longer than 60 feet, according to Rupert Hoogewerf, who compiles the Hurun Report of wealthy Chinese. In the U.S. there were more than 7,000 yachts that size in 2006.

In Zhuhai, two hours from Hong Kong by ferry and car, Sunbird Yacht Co. Ltd. is building two vessels it plans to ship to Italy in July. The buyer, a Milan boatyard, plans to unveil the craft at the Genoa boat show in October.

Sunbird’s boatyard is operating seven days a week to meet the deadline. On a recent afternoon, about 20 Chinese laborers were working on the first of the yachts, a 70-footer. Workers sanded the teak decks by hand and sealed tubes of electrical wires. Carpenters assembled the wooden, spiral staircase leading to the bridge from the deck below.

Sunbird’s staff of 400 workers is capable of making about 20 boats per year. Large-yacht building is new to China, and workers lack skills and experience of their Western counterparts, said Filippo Bertoni, a naval architect from Perugia, Italy, who designed the export boats for Sunbird.

“That first boat was like a school boat for them,” said Bertoni, who expects the vessel will require 100,000 man hours to make in China, a task that would take an Italian crew 35,000 hours. “For the next boats, they will be faster.”

Higher Wages

The yacht builders show how Chinese companies are moving into higher-value products as inflation and rising wages pare the country’s competitiveness for cheap manufactured goods and assembly plants.

Sunbird pays unskilled workers at least 2,000 yuan per month including overtime, rising to three times that for electricians and carpenters, according to Charles Luo, vice president of international business. While that’s more than double the average provincial wage, it still allows the company to build its boats for about 30 percent less than foreign competitors.

With 43 percent duties on boats imported into China, “we have a huge advantage over foreign brands,” Luo said.

European Competition

Still, some Chinese buyers are willing to pay a premium for a European yacht. Wang Da-fu, chairman of developer Shenzhen Visun Real Estate Group, bought a 72-foot Pershing made by Forli, Italy-based Ferretti to entertain clients and help add cachet to his marina in Sanya.

“If I don’t buy a foreign boat, how can I ask others to?” said Wang, who is also a Ferretti dealer.

“There’s a lot of interest for boats bigger than 30 meters,” said Robert How, general manager of Princess Yachts Asia. “China is really, really coming on here.”

Plymouth-based Princess, owned by LVMH Moet Hennessey Louis Vuitton SA, has sold five yachts since entering China in 2009.

Luxury yacht builders also have to tailor boats differently for the Chinese market. For many local customers, out with the big sun decks and water-sports facilities popular in the U.S., and in with mahjong salons, karaoke machines and large galleys.

Karaoke Lounge

“Europeans go on cruise for 10 days or two weeks,” said Gordon Hui, managing director of Sunseeker Asia, which sells the Poole, U.K.-built boats. “The Chinese use the boat for a few hours per weekend to entertain clients, family and friends. They use boats no differently than they would a karaoke lounge in the city.”

Boat owners need special permits to travel on their yachts from one province to another and are restricted to China’s coastal waters.

The largest Chinese-built boat so far is a 45-meter (144- foot), steel-and-aluminum hull vessel under construction at Hong Kong-based Kingship Marine Ltd.’s shipyard in Zhongshan, Guangdong province, that carries a price tag of nearly 18 million euros ($27 million), about one-third less than it would cost if built outside China, said Diana Liang, director at Kingship.

That’s still dwarfed by some of the giants coming out of Germany. The world’s largest yacht is the 557-foot “Eclipse,” built for Russian oil billionaire Roman Abramovich by Blohm + Voss Shipyards, a subsidiary of Hamburg-based ThyssenKrupp AG. (TKA)

Oracle Corp. (ORCL) Chief Executive Officer Larry Ellison owns a 447-foot boat built by Lürssen Bardenfleth in Bremen.

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Global stocks sank Monday after a leading credit ratings agency warned of a deteriorating U.S. financial position and investors fretted over a debt default by bailed-out Greece.

Though Standard & Poor’s reaffirmed its triple A rating on the U.S., it downgraded its credit outlook to negative from stable, citing a “material risk” that policymakers won’t be able to agree on a plan to deal with the “very large” budget deficit.

“While it has been widely recognized that the U.S. credit rating may have been at some risk of a downgrade for years, S&P’s action still comes as a major wake-up call for policymakers, and investors,” said Douglas Porter, deputy chief economist at BMO Capital Markets. “This may well prompt more forceful action on the deficit in the next two years, which in turn will act as a more forceful drag on the economic recovery.”

The markets were certainly shocked by the announcement and stocks fell sharply.

In Europe, the FTSE 100 index of leading British shares closed down 2.1 percent to 5,870.08 while Germany’s DAX slid 2.1 percent to 7,026.85. The CAC-40 in France ended 2.4 percent lower at 3,881.24.

On Wall Street, the Dow Jones industrial average was down 1.7 percent at 12,132 around midday New York time while the broader Standard & Poor’s 500 index fell 1.5 percent to 1,299.59.

Stocks in Europe had already been trading lower amid mounting concerns over a possible Greek debt default. In addition, huge election gains for a nationalist euroskeptic party in Finland added to the tensions over Europe’s debt crisis. Portugal also began discussions on a financial bailout and Spain had to pay much higher interest rates to borrow in the markets.

The renewed focus on Greece’s debts came after suggestions the country would be better off looking for a way to renegotiate its debts

A restructuring would reduce Greece’s debt pile and possibly bring a quicker end to the painful austerity measures, but it would entail huge costs to Greece’s future ability to borrow money. It also would risk a massive blow to the country’s banks, which are big holders of Greek bonds, and hurt many German and French banks too.

There’s also fear that a Greek default would motivate Ireland and Portugal to seek a similar way out from their debt stranglehold.

As Greek officials continued to deny that restructuring was an option, Portugal began its quest for its own financial assistance Monday, with the finance minister meeting delegations from the European Commission, the European Central Bank and the International Monetary Fund. A key topic will center on the interest rate charged for Portugal’s expected euro80 billion ($114 billion) bailout.

Investors’ debt concerns swelled following the news that a euroskeptic party in Finland had made big gains in Sunday’s election.

“The victory of the True Finns party in yesterday’s general election in Finland will make further bailouts much more difficult to achieve,” said Gabriel Stein, an analyst at Lombard Street Research. “Conversely, it makes sovereign defaults far more likely.”

The raft of debt crisis news hit the euro hard, though the S&P warning _ perhaps counterintuitively _ helped the dollar post gains. The U.S. currency is often considered a safe haven in times of uncertainty.

By late afternoon London time, the euro was down 1.4 percent at $1.4215, a little above its earlier low of $1.4157.

Earlier in Asia, the main focus was on China’s latest monetary tightening in response to figures Friday showing inflation running at a 32-month high in March. On Sunday, the People’s Bank of China announced that the deposit reserve ratio for most banks would be raised _ the fourth reserve increase this year.

Beijing’s failure to cool prices and growth have frustrated communist leaders who also face mounting foreign pressure to allow China’s yuan to rise in value and narrow its swollen trade surplus. Premier Wen Jiabao last week called for authorities to step up the anti-inflation fight.

China’s weekend moves weighed on markets across the region.

Japan’s Nikkei 225 index fell 0.4 percent to close at 9,556.65, while Hong Kong’s Hang Seng dropped 0.7 percent to 23,830.31, and South Korea’s Kospi slipped 0.1 percent to 2,137.72.

However, mainland China’s Composite Index rose _ 0.2 percent to 3,057.33, its highest close in five months. The smaller Shenzhen Composite Index was up marginally to 1,281.99.

Benchmark crude for May delivery was down $2.80 to $106.87 a barrel in electronic trading on the New York Mercantile Exchange.

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Prime Minister Stephen Harper targeted his first campaign pledge at Canadian families with children, as he seeks to boost support in a bid to form a majority government.

Harper said yesterday his Conservative Party would let families with children under 18 split up to C$50,000 ($51,250) of their income for tax purposes, which would lower the combined burden for 1.8 million families in a country of 34 million people.

Harper won Canada’s last two elections after promising tax reductions aimed at families, including tax credits tied to the cost of public-transit passes and children’s sports fees, rather than broad-based reductions in income tax rates favored by previous governments. In the budget that opposition parties rejected last week, which preceded the government’s defeat, the Conservatives announced tax credits for children’s arts programs.

“Harper tends to pick the policies that have a clear and obvious benefit,” Jonathan Malloy, associate professor of political science at Carleton University in Ottawa, said in a telephone interview. Allowing couples to split income “could certainly swing some votes, particularly in key suburban areas” and among women, he said.

The Conservatives won 38 percent of the vote in 2008 elections, which gave them 143 seats in the 308-member House of Commons.

After Deficit Eliminated

Income splitting wouldn’t take effect until after the country eliminates its budget deficit, expected by 2015. The measure would cost about C$2.5 billion in foregone revenue a year, Harper said.

“Since coming to office in 2006, our government has placed lower taxes on families among its highest priorities,” Harper said in the backyard of a suburban house near Victoria, British Columbia. He mentioned other initiatives his party has taken, including a monthly C$100 benefit for all children under the age of six, and a C$2,000 tax credit for each child younger than 18 years of age. They also cut the rate of the federal value-added tax, the Goods and Service Tax, from seven percent to five percent.

Liberal leader Michael Ignatieff told reporters the promise can’t be counted on because it wouldn’t occur for five years, adding that the Conservatives are planning to continue tax relief for companies next year.

“It’s like he’s saying to middle-class families: ‘Take a number,’” Ignatieff said yesterday in Toronto. “That’s the policies that you get if you put banks, insurance companies and oil companies first and leave Canadian families at the back of the line.” He did not say whether the Liberals would adopt a similar policy.

‘Cynical Move’

New Democratic Party Leader Jack Layton yesterday said the delay in the tax measure wouldn’t help families dealing with rising bills today.

“This is exactly the sort of cynical move Stephen Harper used to denounce,” Layton said in a statement.

Opposition parties joined together March 25 to topple Harper’s government by passing a no-confidence motion. They rejected Finance Minister Jim Flaherty’s budget last week and said Harper’s government was in “contempt” of Parliament by withholding the cost of some of its legislation, including plans to buy new fighter jets and build prisons. Harper said the election was unnecessary.

Flaherty presented a fiscal plan last week that forecast the government may eliminate the deficit as early as 2014 if it manages to generate savings from a review of program spending that begins this year. The review will aim to save at least C$4 billion annually, according to the March 22 budget document.

‘Wasteful Spending’

Ignatieff said yesterday a Liberal government would halt Harper’s “wasteful” spending on new fighter jets and prisons that will squeeze out money needed in the future to pay for programs such as health care. He said he will present a platform in the next week that will be paid for in part by rolling back past corporate tax cuts.

“We have a great contrast to make between the fiscal responsibility which has been the brand of the Liberal Party, and the wastefulness of the Conservative government,” Ignatieff said.

Today, Ignatieff will be in Oakville, Ontario, about 25 miles southwest of Toronto, then fly to British Columbia. Harper will begin campaigning in Regina, Saskatchewan.

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The nuclear plant disaster in Japan has focused the spotlight on Ontario’s nuclear program in recent days, as it should.

It’s easy for nuclear regulators and operators in this country to grow complacent and start believing their own arrogant assurances that it could never happen here

Every parent likely has a shoebox or dresser drawer stuffed with gymnastics registrations, daycare receipts and a leaky mug or two lovingly crafted at pottery class. It

BHP Billiton said Tuesday it agreed to buy a stake in a substantial shale field in the United States for $4.75 billion _ the first move by the world’s biggest miner into the U.S. shale gas business.

The shale assets form all of Chesapeake Energy Corp.’s interest in the Fayetteville shale field, in Arkansas, including the field’s midstream pipeline system.

Shale deposits were previously considered uneconomic to extract gas from but innovations in technology and higher energy prices over the past several years have seen drillers tapping the vast amounts of natural gas in such deposits. More recently they have learned to adapt the new technology to also produce oil.

BHP said in a statement that it would fund the acquisition from its cash reserves. The company’s shares rose 1.6 percent in Sydney to Australian dollars 46.58 ($46.63).

“This transaction marks BHP Billiton’s entry into the U.S. shale gas business,” BHP Billiton Petroleum chief executive Michael Yeager said. The deal will immediately make BHP Billiton a major North American shale gas producer, he said.

BHP Billiton will become the operator of Chesapeake’s current production activities from the field, which covers 487,000 acres (197,086 hectares). The company described it as the second-largest position in one of the world’s largest gas fields.

The field currently produces more than 400 million cubic feet (11 million cubic meters) of gas a day and includes development options that would substantially increase output over its estimated 40-year life.

Chesapeake said earlier this month that it would sell the assets as part of a plan to reduce debt and focus on more profitable regions.

Chesapeake says it hopes to bring in more than $5 billion, before taxes, from asset sales. The Oklahoma City-based company is aiming to reduce its debt by 25 percent by 2012.

The move will allow Chesapeake to focus more on higher-margin oil assets as oil prices spike and natural gas prices remain low. The Fayetteville shale is not as profitable as several other major U.S. natural gas fields.

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As the deficit debate in Washington grows increasingly noisy, a research group said Monday that a tax on financial "speculation" could help resolve some of the nation’s thorniest fiscal problems.

The Center for Economic and Policy Research, a left leaning group, said that a tax on trades of stocks, options, futures and other financial instruments could generate $150 billion this year, or over 1% of U.S. gross domestic product.

While the idea of taxing financial transactions is not new, it has gained some traction overseas in the wake of the global financial crisis.

French President Nicolas Sarkozy, in comments Monday, said a financial transaction tax is one of his top priorities as leader of the Group of 20 nations this year, according to press reports.

The CEPR study looks at a 0.25% tax on stock trades in the United Kingdom and estimates that an equivalent tax in the United States could raise $40 billion a year for the Treasury.

"This is not hypothetical," said Dean Baker, co-director at CEPR and author of the report, in a statement. "The UK has used an FST to collect large amounts of revenue," he said, adding that the International Monetary fund "is currently advocating the tax in recognition of the enormous amount of waste and rents in the financial sector."

Baker argues that taxing speculation will put more of the burden on more sophisticated investors such as hedge funds, and will not hurt individual investors, who will simply make fewer trades.

He says the money generated from the tax could be used to cover the cost of extending benefits for the unemployed, the projected Social Security shortfall and provide much needed aid for cash-strapped U.S. states.

The CEPR also argues that big institutional investors, which use trading algorithms to gain an advantage in the market, do not contribute any "obvious benefit to the economy."

The financial services industry, of course, disagrees.

Scott Talbott, spokesman for the Financial Services Roundtable, said taxing stock trades would hurt individual investors by driving up fees on their 401(k), college fund or pension plans.

"The fund managers would simply pass the tax down to the average Americans who are trying to save," he said.

Kent Smetters, a professor at the University of Pennsylvania’s Wharton School of Business, said he understands why some are calling for the tax.

Some think big investment funds that use sophisticated trading software are middlemen gaming a flawed system. But others argue that a tax would be unfair because traders provide a benefit in the form of efficient pricing and liquidity in the market.

Smetters added that a "small tax" would probably not hurt individual investors, though he said 0.25% "seems steep."

The proposal is one of many being discussed in Washington as the nation’s swelling deficit and growing demand for social services from a rapidly aging population loom large.

Republicans in Congress have been calling for drastic spending cuts across a range of government programs. President Obama is widely expected to emphasize "investments" in key areas when he delivers the State of the Union address Tuesday. 

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WASHINGTON

Chemical maker DuPont Co. will pay $70 million and fund long-term medical monitoring for residents of a West Virginia town who sued over pollution from a zinc smelter and its 100-foot-tall pile of waste.

A state judge approved the settlement Tuesday that ends years of court battles by residents of Spelter against Wilmington, Del.-based DuPont. The zinc smelter closed in 2001 after operating for 90 years.

The settlement was reached last year by DuPont and lawyers representing 8,500 current and former residents payday advance. It would wipe out a $196 million punitive damage award DuPont has been fighting.

A jury in 2007 found DuPont deliberately downplayed and lied about possible health threats.

The $70 million is to cover payments to plaintiffs, legal fees, cleanup costs and other expenses.

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